What you should know about engaging in recruitment business

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Published — July 27, 2018

The following post does not create a lawyer-client relationship between Alburo Alburo and Associates Law Offices (or any of its lawyers) and the reader. It is still best for you to engage the services of your own lawyer to address your legal concerns, if any.

Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.

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Under the law, “recruitment and placement” refers not only to the act of hiring and selecting employees to a particular employment or position. It has a broad meaning, as it includes any act of canvassing enlisting, contracting, transporting, utilizing, hiring or procuring workers. It even includes referrals, contact services, promising or advertising for employment, whether for profit or not. It does not matter whether the said acts were done for purposes of filling up a vacancy locally or abroad [See: Art. 13(b), Labor Code].

Even those who offer or promises employment for free, as long as they make such offer or promise to two or more persons, shall be deemed engaged in recruitment and placement [Ibid].

Since recruitment and placement activities are subject to strict government regulation to prevent exploitation of workers and to minimize loss of employment opportunities, only individuals or entities who have been issued the appropriate authority or license may engage in recruitment or placement as defined above [Alcantara, Reviewer in Labor and Social Legislation].

License or authority to recruit

It must be clarified, however, that no license or authority shall be required when an employer directly hires his own employees. Only third persons who recruit for another shall be covered by the requirement of securing proper authority or license.

Take note also that the terms “authority” and “license” are not synonymous with each other. Though both documents are issued by the Department of Labor and Employment (DOLE), “authority” refers to a document authorizing a person or association to engage in recruitment and placement activities as a private recruitment entity, while “license” refers to a document authorizing a person or entity to operate a private employment agency [See: Art. 13(d) and (f)].

Qualifications and disqualifications

Before the required license or authority to engage in recruitment and placement of workers is issued, D.O. No. 141-14 requires that the applicant must possess the following qualifications:

1. Must be a Filipino citizen, or in case of corporations or partnerships, at least 75% of the authorized capital stock must be owned and controlled by Filipinos;
2. Must have net worth, or paid up capital, of at least P1,000,000.00; P5,000,000.00 if engaging in recruitment for overseas employment (Revised POEA Rules and Regulations).

Despite possessing the abovementioned qualifications, travel agencies and sales agencies of airline companies are prohibited from engaging in the business of recruitment and placement of workers for overseas employment, whether it is for profit or not [See: Sec. 26, Labor Code]. It is so because, by the nature of their business, travel agencies have the facility to circumvent the legal requirements on recruitment and placement.

For this reason, it is likewise prohibited for any individual engaged in recruitment and placement of workers to become an officer or member of the Board of Directors of any corporation engaged in travel agency, or to be engaged directly or indirectly in the management of a travel agency [See: Sec. 34(j), Labor Code].

Liability of private recruitment entity for money claims

The liability of the employer and the recruitment/placement agency shall be joint and several for any money claim arising from employer-employee relationship, or by virtue of the contract for overseas employment, including damages [See: Sec. 10, R.A. No. 8042].

Such liability is meant to assure aggrieved workers of immediate and sufficient payment of what is due them. Even if the placement agency and the principal has already terminated their agreement, it does not relieve the agency of its liability [See: G.R. No. 138193].

Prohibited practices

Under Article 34 of the Labor Code, it shall be unlawful for any licensee or holder of authority:

1. To charge or accept from the worker any amount greater than that specified in the schedule of allowable fees prescribed by the Secretary of Labor, or to make a worker pay any amount greater than that actually received by him as a loan or advance;
2. To furnish or publish any false notice or information or document in relation to recruitment or employment;
3. To give any false notice or information, or to commit any act of misrepresentation for the purpose of securing a license or authority to recruit;
4. To induce or attempt to induce a worker already employed to quit his employment to offer him to another employer, unless the transfer is designed to liberate the worker from oppressive terms and conditions of employment;
5. To influence or to attempt to influence any person or entity not to employ any worker who has not applied for employment through his agency;
6. To engage in the recruitment or placement of workers in jobs harmful to public health or morality or to the dignity of the Republic of the Philippines;
7. To obstruct or attempt to obstruct inspection by the Secretary of Labor or by his duly authorized representatives;
8. To fail to file reports on the status of employment, placement vacancies, remittance of foreign exchange earnings, separation from jobs, departures and such other matters or information as may be required by the Secretary of Labor.
9. To substitute or alter employment contracts approved and verified by DOLE from the time of actual signing thereof by the parties up to its expiration, without the approval of the Secretary of Labor;
10. To withhold or deny travel documents from applicant workers before departure for monetary or financial considerations.

Penalties for violation

In case of violation, administrative sanctions may be imposed such as suspension or revocation of the authority or license to engage in recruitment and placement of workers [See: Rule III, Revised POEA Rules]. A fine of P10,000.00 may also be imposed for every count of offense committed, in addition to suspension or cancellation of license [See: 52, D.O. No. 141-14].

Given the foregoing, engaging in recruitment and placement of workers is not as simple as hiring and selecting employees for another. Labor contracts are so impressed with public interest, and any arrangement that may potentially cause exploitation of workers merit stricter regulations by the government. Compliance with the law and rules would be the best way to go through this business, and thus, there is still no substitute to understanding all its requirements and consequences.

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Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding laws on recruitment of placement of workers, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.

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