Outlined below are some of the legal effects of choosing a labor-only contractor vis-à-vis a legitimate independent contractor like DBCCI. You will find out that as a principal, you will have so much to worry about when you deal with a labor-only contractor.

Relationships Established

In labor-only contracting, the law treats the contractor as the agent of the principal, hence, any representation that the former will make to the employees will bind the principal. Under the law, the act of the agent is the act of the principal and therefore, if the agent would carry out acts that are prejudicial to the interests of the principal especially when it comes to matters concerning wages and benefits, the latter might just be facing a lot of trouble in the event that the contractor vanishes from sight.

On the other hand, with a legitimate independent contractor, a tripartite relationship is established. There would be three personas involved in this type of contracting. First, there is the principal or the entity that wishes to engage the services of the contractor. Second, there is the independent contractor, and third, there is the employees that will carry out the work required by the principal from the contractor.

With independent contracting, there are two contracts that are executed. One is the service agreement between the principal and the independent contractor. The other contract is between the contractor and its employees. Here, you can see that there is no direct relationship between the employees of the contractor and the principal, thereby giving the principal minimal liability over the employees as compared to labor-only contracting where the employees are deemed to be directly employed by the principal.

Salary Woes

With labor-only contracting, since employees are deemed as directly hired by the principal through the subcontractor, which is considered as the agent of the former, the principal is solidarily liable with the contractor to the employees. This means that the principal is fully responsible to the employees in the same manner that the contractor is. Hence, employees can seek their claims directly from the principal without having to go after the contractor. In this setup, the principal is also liable for benefits that employees are entitled to under prevailing labor laws.

On the other hand, with independent contracting, the principal does not become the employer of the employees. And, in the event that the independent contractor fails to pay the wages and salaries, the principal’s only liability is up to the extent of actual work rendered by employees. It will not be responsible for any other benefit that an employee is entitled to.

With all these blatant differences between labor-only contracting and independent contracting, it will be very prudent for any entity to have an independent contractor carry out the work that it requires. So trust an independent contractor like Dynamic Builders and Construction in Bacolod, Philippines, and you will never go astray.