| What Defines a Legitimate Contractor? |

By Arch. Kiko Fernandez | July 29, 2021

The word “contractor” is loosely thrown around. It’s easy to say “contractor ako” and you easily hear or see these words especially when inquiring through various online groups. However, how can you tell the difference between reputable contractors from 'fly-by-night' or shady contractors? A business registered within the law must have certificates from either the SEC or DTI, BIR, and LGU. In the construction industry, a PCAB license further ensures the contractor’s legitimacy. 

According to Alburo Alburo and Associates, contracting is defined as follows:

“Job contracting, legitimate job contracting, or subcontracting refers to an arrangement whereby a principal agrees to put out with the contractor or subcontractor the performance or completion of a specific job, work, or service within a definite or predetermined period, regardless of whether such job, work, or service is to be performed or completed within or outside the premises of the principal.

A person is considered engaged in legitimate job contracting or subcontracting if the following conditions concur:

·       the contractor carries on a distinct and independent business and partakes the contract work on his 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 his work except as to its result,

·       the contractor has substantial capital or investment; and

·       the agreement between the principal and the contractor or subcontractor assures the contractual employees’ entitlement to all labor and occupational safety and health standards, free exercise of the right to self-organization, security of tenure, and social welfare benefits.

Labor-only contracting, on the other hand, is defined under Article 106 of the Labor Code. It refers to an arrangement where the contractor, who does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, supplies workers to an employer and the workers recruited are performing activities which are directly related to the principal business of such employer.

Is there a significance of knowing the difference between Job contracting and Labor-only contracting? THERE IS.  Job contracting is valid and recognized by law while Labor-only contracting is a prohibited act. A finding that a contractor is a labor-only contractor is equivalent to a declaration that there is an employer-employee relationship between the principal and the employees of the labor-only contractor. In such a case the labor-only contractor shall be responsible to the workers in the manner and extent as if said workers were directly employed by him.”

Therefore, there is no such thing as a “freelance contractor”. Either he is a sole proprietor, or he is an illegitimate contractor. If you hire a "contractor" who claims to be a professional contractor but does not fall under any company or does not produce an official receipt, you may be working with an unlicensed or worse, a "fly-by-night" contractor. 

Of course, hiring illegitimate contractors comes with unnecessary and avoidable risks that will surely put a hole in your pocket. It’s not uncommon to hear horror stories from people who have had contractors take their money and never show up again, contractors not finishing works, contractors behaving unprofessionally and causing damages, and other inconveniences. If you want your hard-earned money to be protected, don’t look for “mura”, look for “sulit”, and always hire legitimate contractors.


Alburo Alburo and Associates Law. Job Contracting vs. Labor-only Contracting. Retrieved from Alburo Alburo and Associates Law Offices: https://www.alburolaw.com/job-contracting-vs-labor-only-contracting

Archadius Construction Corporation specializes in residential construction and remodeling as well as condominium and commercial fit-outs. For your construction needs, you may reach us through Facebook: https://www.facebook.com/archadiusconstruction. You may also email us at contact@archadiusconstruction.com or call/text us at 0916-321-6094 / 0969-277-4634.