Kentex to pay at least P7.8M to 'underpaid' workers – DOLE

DEATHS. Dozens of workers, examined here by police investigators, died in a May 13 factory fire in Valenzuela City. Photo by Ben Nabong/Rappler

DEATHS. Dozens of workers, examined here by police investigators, died in a May 13 factory fire in Valenzuela City.

Photo by Ben Nabong/Rappler

MANILA, Philippines – The Department of Labor and Employment is set to issue a compliance order to compel embattled footwear maker Kentex Manufacturing Corporation to pay at least P7.8 million in underpaid wages to  99 workers hired through a subcontractor.

"A compliance order will be issued against Kentex and CJC Manpower Services directing them to pay the amount due the workers under the Labor Code, as amended, and other labor laws," Labor Secretary Rosalinda Baldoz said on Saturday, May 23.

"Kentex will shoulder the liabilities as the direct employer, CJC Manpower Services, being a 'labor-only' contractor," added Baldoz, who said the order will be issued within May.

The P7.8 million does not include other unpaid law-mandated benefits to the 99 workers, including overtime pay, night shift differential, 13th month pay, holiday pay, vacation and leave pay, refund of cash bond, social security benefits, and others.

Under Department Order (DO) 18-A, which regulates job contracting and subcontracting, unpaid wages and benefits are subject to double indemnity or payment double the unpaid amount. 

The DOLE has already ordered CJC Manpower, Kentex's alleged  dummy, to stop its operations of hiring, deploying, and supplying workers to companies. 

Kentex's two-storey factory in Valenzuela City caught fire on May 13, killing least 72 people and and injuring others.

The deadly blaze is seen as a setback for the Philippine manufacturing industry. Labor groups have aggressively pushed for pro-worker reforms in the aftermath of the tragic fire. (READ: Deaths in PH factory fire show need for decent jobs)

Other penalties

Besides liabilities over the use of CJC Manpower, Kentex would also be liable for a separate amount in relation to the violations that will be outlined in a DOLE compliance order, based on a two-day mandatory conference held by the DOLE Metro Manila office. 

Union members are also entitled to death benefits, among others, based on a collective bargaining agreement (CBA)  that Kentex entered with its union, valid until 2017.

Under the CBA, the death benefits would amount to 15 days of a worker's salary multiplied by the number of his or her years of work. 

Kentex and CJC Manpower owners may be criminally charged under the Wage Rationalization Act, as amended, for failing to pay any of the prescribed increases or adjustments in the wage rates.

If found guilty, the company owners could be fined from P25,000 to P100,000, or imprisoned from two to 4 years, or both.

The DOLE is also looking into Kentex's violations on occupational safety and health (OSH) standards, which are not criminal acts under the Labor Code. Employers who commit OSH standards violations, even those leading to fatalities, are merely fined. 

On the heels of the Valenzuela fire which shed light on local sweatshops' non-compliance with OSH standards, Baldoz and labor groups renewed their call to criminalize grave violations of OSH standards.

Use of subcontractor

For being a mere "dummy," CJC was declared a labor-only contractor.

The use of a general contractor or subcontractor is allowed under Article 106 of the Labor Code, unless the subcontractor is not capitalized or is merely acting as an agent to hire workers.

Unscrupulous employers often misclassify workers as contracted from a subcontractor or at times as independent contractors to relegate them to casual status as opposed to regular employees who enjoy a host of workers' benefits.

This enables companies to reduce manufacturing costs, 40% often allocated for labor.

Family members of the fire victims interviewed by Rappler also attested to the pakyawan (package deal) system, where a handler is tapped by the owner to recruit factory workers without the necessary job contract and consequently without workers' benefits required under law.

In the wake of the tragedy, labor coalition Nagkaisa called for the passage of a security of tenure bill that would limit job contracting and subcontracting to positions not necessary in the day-to-day operations of a company.

Job contracting and subcontracting are subject to regulations in DO 18-A series 2011, which was issued by Baldoz after a stalemate in negotiations prevented legal reforms on job contracting to materialize.

A draft bill seeking to protect contractual workers' rights and address perennial issues raised by labor groups was stuck at the National Tripartite Industrial Peace Council headed by Baldoz, and has as members representatives of the labor and employers’ sectors. – Rappler.com