Gig Economy: Essential Aspects Of Contracting

• Published date: 07 September 2023
• Subject Matter: Employment and HR, Litigation, Mediation & Arbitration, Employee Rights/ Labour Relations, Trials & Appeals & Compensation
• Law Firm: Villaraza & Angangco Law Offices
• Author: Alejandro Alfonso E. Navarro and Rashel Pomoy

With rapid advances in technology and increasingly blurred borders, business organisations and individuals have adopted novel initiatives to better cater to and meet their demands. The challenges brought about by the covid-19 pandemic have further propelled people to adapt to new developments to thrive during these times.

Concept of contracting and applicable rules

Although already present locally for some time, the gig economy setup has become more prevalent in view of current circumstances. "Gig economy" is an umbrella term referring to those engagements that are not, strictly speaking, employment relationships. One of the more well-known examples of gig setups would be that of contracting.

In the Philippines, contracting refers to an arrangement where a person who carries on a distinct and independent business undertakes to perform a job, work or service themselves under their own responsibility, according to their own manner and method, free from the control and direction of the principal in all matters connected to the performance of the work except as to the results.¹

In Fuji Television, Inc. v Espiritu,² the Supreme Court outlined the two major forms of contracting arrangements:

• a trilateral relationship involving the principal, the agency and the employees; and
• a bilateral independent contractorship.

Trilateral relationships
These arrangements refer to one whereby a principal agrees to farm out to a contractor the performance or completion of a specific job or work within a definite or predetermined period, regardless of whether such job or work is to be performed or completed within or outside the premises of the principal.³ These usually involve three parties: a) the principal who engages the services of b) a contractor who, in turn, performs the farmed work through c) its employees.

Ultimately, this engagement still involves employees. Thus, the provisions of the Labor Code, particularly articles 106 to 109 and other relevant administrative notices (the most prominent being the Department of Labor and Employment's Department Order No. 174, series of 2017) govern these arrangements.

Individual contractors and bilateral relationships
Conversely, individual contractors are recognised in law as individuals with unique skills and talents that set them apart from ordinary employees. This is different from the previously discussed trilateral relationship as the independent contractor directly performs the work for the principal.⁴ At present...