The Samsung case and contractualization

Published by rudy Date posted on April 12, 2011

THE Department of Labor and Employment really needs to reinforce the protection of workers against rampant labor-only subcontracting.

Labor only subcontracting is illegal. The Labor department reiterated this in Department Order 18-02, Series of 2002. And yet so many firms are defiantly resorting to it.

In labor-only subcontracting, the principal or employer assigns the work to another entity that merely recruits, supplies or places workers to perform the job or service for the principal.

There is really a growing trend towards agency-hires or labor-only contracting practices that include even jobs deemed essential to a company’s core operations and services.

Take this latest tiff between Samsung Electronics Philippines and its former service contractor Temps and Staffers Inc., which used to supply the giant electronics company with promo-merchandisers as well as other office staff. The case has been all over the papers.

TSI had accused Samsung and its officers of labor piracy, which is the act of attracting workers away from a firm through inducements. Labor piracy often occurs as another firm makes extremely attractive employment offers to employees who are in great demand. Under the Philippine Labor Code, any recruitment activity done by a person or a company not duly licensed to engage in such activity is deemed illegal and punishable. When done through large-scale means, it falls under economic sabotage. So the official charge in the complaint sheet of TSI against Samsung is Illegal Recruitment involving Economic Sabotage punishable under Article 34(d), in relation to Articles 38 and 39 of the Labor Code, Estafa and Theft.
But the real issue, as I see it here, is contractualization.

Samsung hired TSI to provide it with promo-merchandizers. These are the sales people we encounter in retail appliance stores like Abenson and SM. Their job is to sell us various products, in TSI’s case, Samsung products.

Can Samsung subcontract retail sales? The argument in its favor is that it is supposedly just a manufacturer of electronic products, and selling is not its main activity, so it can subcontract the selling aspect of its business, which it did to TSI. This is supposedly a common business practice.

TSI started off providing Samsung about 200 promo-merchandizers in 2005 and by 2010 they had 700 people working for Samsung, including office staff.

As the promoters deployed by TSI to Samsung increased, the sales of Samsung products likewise increased. In 2007, Samsung’s sales were approximately P2.8 billion. In the ensuing years, the sales increased to P3.9 billion and P5.7 billion for 2009. In 2010, Samsung sold close to P8-billion worth of products.

But TSI had also assumed operation of Samsung in areas not just of sales, but also administration, technical support, and customer services. TSI had virtually been turned into an outsourcing company from which Samsung derived their operations. TSI was no longer just a supplier of workforce, but more like a business process outsourced by Samsung.

Isn’t this a clear case of labor-only subcontracting, where the contractor merely recruits, supplies or places workers to perform a job, work or service for the principal, in this case Samsung?

Could Samsung still freely subcontract these jobs that are normally performed by regular employees to TSI? And if it makes billions out of selling electronics products, shouldn’t selling be considered organic to its main business as well? And as a consequence, shouldn’t they be hiring regular employees for these bulk jobs?

This is the same argument taken by Susan Ople when she protested against Memorandum Circular 268 of the Bangko Sentral ng Pilipinas, which allows the subcontracting to independent service providers of eight banking operations or divisions: credit investigation and appraisal, credit cards, information technology, clearing, security, messengerial, tax management, and financial accounting.

This is not just happening in banks. Nurses in some hospitals are now hired on a contractual basis, even as we complain about the exodus of our medical professionals to better-paying jobs abroad.

In telecommunication companies what were once regular jobs like installing lines, repair services, maintenance work are also contracted out. Crews are paid usually on piecemeal or on a per job basis.

What used to be permanent positions are being demolished wholesale, and regular employees and their families are losing their source of livelihood, or at least, the prospect of more stable employment.

The tiff between Samsung and TSI started after June 2010, when Samsung’s local executives disengaged from TSI because their head office in Korea wanted Samsung Philippines to hire a local agency that is run by Koreans, following the so-called “Thailand model.”

TSI claimed Samsung carried out a nationwide plan to induce its employees to leave TSI and transfer to the agency of Samsung’s choice, the one run by Koreans. Their case is now in court and I don’t need to comment on it.

Again, the real issue to me is contractualization. Should Samsung have been allowed to subcontract majority of its workforce for jobs that include sales, administration, technical support, and customer services? Isn’t a giant electronic company that earns billions of dollars capable of hiring regular workers for regular jobs? –ERNESTO F. HERRERA, Manila Times

Month – Workers’ month

“Hot for workers rights!”


Solidarity with CTU Myanmar,
trade unions around the world,
for democracy in Myanmar,
with the daily protests of
people in Myanmar against
the military coup and
continuing oppression.


Accept National Unity Government
(NUG) of Myanmar.
Reject Military!

#WearMask #WashHands

Time to support & empower survivors.
Time to spark a global conversation.
Time for #GenerationEquality to #orangetheworld!
Trade Union Solidarity Campaigns
Get Email from NTUC
Article Categories