Independent Contractor as Understood in D.O. 174

Independent Contractor as Understood in D.O. 174

Valid Job Contracting & Sub-Contracting Second Edition PDFIndependent contractors are those who exercise independent employment, contracting to do a piece of work according to their own methods and without being subjected to control of their employer except as to the result of their work.

The discussion below is based on the book, Valid Job Contracting and Sub-contracting, 2nd Edition Book (pages 30-32) by Atty. Villanueva. View the PDF Version of the book here.

A more comprehensive definition states that an independent contractor is one who undertakes “job contracting,” i.e., a person who: (a) carries on an independent business and undertakes the contract work on his own account under his own responsibility according to his own manner and method, free from the control and direction of his employer or principal in all matters connected with the performance of the work except as to the results thereof; and (b) has substantial capital or investment in the form of tools, equipments, machineries, work premises and other materials which are necessary in the conduct of the business.

Even D.O. 174 recognizes an independent contract with an individual which shall not be deemed as contracting in the context of the regulation.

Thus, D.O. No. 174, Series of 2017 does not also cover the contracting out of job or work to a professional, or individual with unique skills and talents who himself or himself performs the job or work for the principal. (No. V, Department Circular 01, Series of 2017.)labor hr editable templates triple bundle

The test to determine the existence of an independent contractorship is whether one who claims to be an independent contractor has contracted to do the work according to his own methods and without being subject to the employer’s control except only as to the results. (Polyfoam-RGC International Corporation vs. Concepcion, G.R. No. 172349, June 13, 2012; Acevedo vs. Advanstar Company, Inc., G.R. No. 157656, November 11, 2005 citing New Golden City Builders and Development Corporation vs. Court of Appeals, G.R. No. 154715, 11 December 2003, 418 SCRA 411; San Miguel Corporation vs. Aballa, G.R. No. 149011, June 28, 2005, 461 SCRA 392, 421.)

Criteria in determining the existence of an independent and permissible contractorship

The criteria in determining the existence of an independent and permissible contractor relationship are:

  1. whether or not the contractor is carrying on an independent business;
  2. The nature and extent of the work;
  3. The skill required;
  4. The term and duration of the relationship;
  5. The right to assign the performance of a specified piece of work;
  6. The control and supervision of the work to an- other;
  7. The employer’s power with respect to the hiring, firing and payment of the contractor’s workers; the control of the premises;
  8. The duty to supply the premises, tools, appli- ances, materials, and labor; and
  9. The mode, manner and terms of payment. (Polyfoam-Rgc International Corporation vs. Concepcion, G.R. No. 172349, June 13, 2012 citing San Miguel Corporation vs. Semillano, G.R. No. 164257, July 5, 2010, 623 SCRA 114.)

In another case, the Supreme Court reiterated the criteria holding that in determining the existence of an independent contractor relationship, the above factors may be

Each case of independent contracting must be determined by its own facts and all the features of the relation ship are to be considered.

Simply put the totality of the facts and the surrounding circumstances of the case are to be considered.

employment contract editable templatesAn independent contractor carries on an independent business and undertakes the contract work on his own account, under his own responsibility, according to his own manner and method, and free from the control and direction of his employer or principal in all matters connected with the performance of the work except as to the results thereof. This embodies what has long been jurisprudentially recognized as the control test to determine the exis tence of employer-employee relationship. (San Miguel Corporation vs. Semillano, G.R. No. 164257, July 5, 2010.)

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