Forum on Labor and Other Laws for NGOs. Proceedings of

Caucus of Development NGO Networks (CODE-NGO)Proceedings of the

Forum on Labor and other Laws for NGOsJuly 27, 2006, Thursday, 8:30am to 4:00pm

ISO Room 5, Ateneo de Manila University, Loyola Heights, Quezon City

Executive Summary

Deemed as an urgent concern by the CODE-NGO Board of Trustees, the forum on labor and other laws was organized by CODE-NGO in an effort to jumpstart a continuing discussion among its members on finding the right balance between the NGOs’ desire to protect the welfare of its employees and their capacity given the resource and operational constraints of most NGOs.

More than 70 Executive Directors and Human Resource (HR)/Administrative managers and officers of 40 NGOs from the 10 Member Networks of CODE-NGO attended the forum.

Resource persons from the Sentro ng Alternatibong Lingap Panlegal (SALIGAN), the Bureau of Labor Relations (BLR) - Department of Labor & Employment (DOLE) and the Securities and Exchange Commission (SEC) provided pertinent information on what NGOs can and cannot do, as provided in the Labor Code and the Corporation Code.

SALIGAN legal officer Atty. Levy Edwin Ang and BLR-DOLE Mediator Atty. Joffrey Suyao discussed the types of employment, minimum working standards, benefits and wages and post-employment terms as provided by law.

Atty. Ferdinand Bryan Sales, Assistant Director of the Company Registration and Monitoring Department of the SEC discussed the provisions of the Corporation Code and recent SEC Memorandum Orders concerning NGOs. The purpose of these regulations is to protect the reputation of non-profits from illegitimate ones and protect the funds which go to them.

CODE-NGO Executive Director Dodo Macasaet gave a synthesis of the day’s events and summarized the follow-through activities suggested by the participants as follows:

- Review compensation and labor standards / experiences of NGOs - Lobby for specific labor rules governing NGOs (the way special groups have done

it, e.g. seafarers, SMEs, construction workers, and currently household helpers), taking into account limitations for the NGO sector, e.g. project-based funding

- Dialogue with DOLE for special rules governing NGOs, balanced with upholding the interest of workers, noting that human resource is the NGO’s key resource as service-oriented organizations

- Review global trends, ILO findings on related concerns for the NGO sector - Lobby for inclusion of Labor Code related administrative costs as critical

component of projects with regards to fund assistance from donors and partners to ensure proper compensation and benefits for project employees (This may be done on a one-to-one basis between an NGO and its donor(s), and/or as CODE-NGO/coalition).

- Explore providing further trainings on effective resource mobilization strategies, e.g. effective fund proposal writing, generating own income, etc., noting that NGO sustainability is key to ensuring good labor/HR practices.

Ms. Malou Capucao, Chairperson of the CODE-NGO Commission on Internal Reform Initiatives (CIRI) served as moderator of the forum.

____________________________________________CODE-NGO Forum on Labor & Other Laws for NGOsJuly 27, 2006, ISO-ADMU, of 16

Caucus of Development NGO Networks (CODE-NGO0Proceedings of the

Forum on Labor and other Laws for NGOsJuly 27, 2006, Thursday, 8:30am to 4:00pm

ISO Room 5, Ateneo de Manila University, Loyola Heights, Quezon City

Introduction

The forum started at around 9:00am with Roselle Rasay of CODE–NGO discussing the rationale of the forum. Deemed as an urgent concern by the CODE-NGO Board of Trustees, the forum was organized as a joint activity of the CODE-NGO Commissions on Internal Reform Initiative (CIRI) and Institution and Capability Building (CICB) to orient and update CODE-NGO members on what NGOs can and cannot do with regards to the provisions of the labor laws and corporation code.

RRasay introduced the key resource institution for the morning session, the Sentro ng Alternatibong Lingap Panlegal (SALIGAN). SALIGAN is an NGO that promotes the interest of the basic sectors by enabling them to understand the law, use the law and participate in legal processes. They train the marginalized sectors as paralegals, thus, “de-professionalizing” the legal practice. She then called on SALIGAN’s representative, Atty. Edwin Levi Ang, who gave a mini-lecture on what NGOs should know about the provisions of the Labor Code.

Module 1:The Labor Code & NGOs: What NGOs Must Know and Common Problems

Atty. Edwin Levi Ang, Legal Officer, SALIGAN

Resource person Atty. Edwin Levi Ang noted that SALIGAN usually conducts 2- to 3-day workshop sessions to discuss pertinent provision of the Labor Code for marginalized sectors and for both employees and management. But for purposes of today’s forum, they agreed to compress the discussions on the following topics:

1. Conditions for Employer-Employee Relationship

2. Kinds of Employees 3. Working Conditions 4. Non-diminution of Benefits5. Working Hours 6. Mandatory Leaves7. Wages 8. Post-Employment

Conditions for Employer–Employee Relationship

An employer-employee relationship exists where these conditions are met:• Right to hire • Right to fire • Payment of Wages


SALIGAN lawyer Atty. Edwin Levi Ang stressed on the key provisions of the labor code which NGOs must know.

• Control (most important condition).

An example of a situation where there is no existing employer-employee relationship: the invitation of CODE-NGO of a resource person for this forum, where CODE-NGO has no control over the content of the resource person’s presentation.

Kinds of Employees

1. Regular Employee • employees whose work is necessary and desirable in the usual trade or business

of employer (goes beyond 1 year)• casual employees who have rendered services at least for 1 year, whether

continuous or broken, e.g. in the case of a plumber, if the same plumber is being hired for the same nature of work, and cumulative working days have reached 365 days, the “employer” should not hire any other plumber except him on the 366th day. A project employee who performs activities that are necessary to the operations of a company is also considered a regular employee.

Probationary Period As a general rule, probationary period for a worker should not exceed 6 months. Exceptions include teachers whose probationary period is for 3 years as provided by laws governing the teaching profession, employees who have been given a second chance, and those whose nature of work requires longer probationary period, e.g. PLDT directory salesmen. On-the-job training (OJT) should be included in 6 months probationary period. If the employee did not perform well, but was not given a termination notice before the end of the 6-month period, then regular employee standards start to apply to his/her employment.

2. Project EmployeeImportant conditions for project employment are: • the task is for a specific project or undertaking and is time-bound• duration of the project is specified at the time the employee is engaged for the

project

Atty. Ang gave the following important clarifications governing project employment: • Definition of project employment as provided by labor code refers to the work

being done, and not the source of funds as commonly understood by NGOs• Employers are not obliged to give separation pay. It is goodwill on the part of

employer if separation pay is given • if an employee is given assignments or tasks outside of the project terms, s/he is

considered a regular employee• repeated hiring of project employee for the same task will convert him/her to a

regular employee.

3. Seasonal Employee – if work is seasonal in nature and employee is hired for the duration of the season, e.g. agricultural work. In case of repeated hiring, employment becomes regular, as in the case of project employment.

4. Casual employee – if work is not necessary or desirable to the usual trade or business of the employer, and the person is not a project or seasonal employee. However, if casual work is performed for at least a year, it converts to regular employment.


5. Fixed Term Employee – or contractual employees, who are contracted to work for specific period. E.g. case of Brent teacher, who filed a case against his employer when his contract was not renewed after 4 years. The case was dismissed because it was proven that his 4-year contract was clearly made known to the teacher prior to hiring and that his term ended. The employment arrangement for seafarers also falls under this classification.

Important requisites of contractual or fix-term employment:• equal bargaining position between the 2 parties• contract was entered into voluntarily• no coercion • no circumvention of labor laws.

Working Conditions Atty. Ang proceeded to discuss labor standards or minimum working conditions that are deemed included in every employment contract. These cover the ff:

• hours of work• overtime• night shift differential• rest day• holiday pay• service incentive leave

The above conditions apply to all employees in all establishments except:• government employees• managerial employees (including supervisors)• field personnel• members of the family of employer who are dependent on him/her for support • domestic helpers or individuals in the personal service of another

• workers paid by result (e.g. pakyaw or piece-rate).

Non-diminution of BenefitsAtty. Ang clarified that the perception that benefits are higher for regular employees is a myth. This may be true only if there’s an employees’ union in the organization, who are then able to negotiate benefits beyond what is provided by law under a collective bargaining agreement. Otherwise, the Labor Code provides for the same benefits (except separation pay) to all employees regardless of their classification.

Atty. Ang also stressed the principle of non-diminution of benefits. If benefits are being given by an organization, it becomes a demandable obligation and part of the contract, a company practice that could not be discontinued or withdrawn.

The benefits become demandable if:• Being given during a long period of time• consistent and deliberate• not due to error.

Working Hours Atty. Ang cited the following labor code provisions regarding working hours. 1. Normal working hours shall not exceed 8 hours per day. Studies show that this is the

optimum working hours. Beyond or below this, employment productivity declines.


2. Rest periods of short duration during working hours are counted as part of the work period.

3. Off-setting of overtime is a usual practice among NGOs. However, if an employee incurred an overtime in a specific working day, this cannot simply be offset by a leave or by working undertime in another day. There should be a premium if an employee is asked to work beyond 8 hours.

4. Overtime work should be voluntary, except:• In time of war or calamity• To prevent loss of life or property• Need for urgent work to be performed on machines to avoid loss or damage on

the part of employer• Necessary to prevent loss or damage to perishable goods• To prevent serious obstruction or prejudice to the business of employer

5. There should be night shift differential of 10% if employee is asked to work beyond 10pm

6. The labor code also prohibits women to work at night. The rationale for this is to provide extra protection for women. However, this is seen by some women as discriminatory and a loss of income opportunity. In the case of call centers, however, the DOLE has issued a special ruling allowing women to work at night.

7. Mandatory rest day after every 6 consecutive days of work period.8. Rest day premium – 30% of regular rate for work done on rest day and special

holidays. Premium is 50% of regular rate if work done falls on a rest day which is also a holiday.

In the case of NGOs, however, it is common for employees to work beyond 8 hours, usually out of commitment. This is acceptable as long as it is voluntary on the part of the employee.

Mandatory LeavesThe following are the leaves provided by law:

• Service Incentive Leave (Labor Code) – 5 days• Paternity (RA 8187) – 7 days (can be filed by a man upon giving birth of his

legitimate spouse with whom he is co-habiting). Atty. Ang shared that in Saligan, they are given beyond the mandatory 7-day paternity leave, by having a 60-day paternity leave (equivalent to maternity leave)

• Maternity (RA 1161) – 60 days • Parental (RA 8972) – 7 days; for solo parents• Anti-VAWC (Violence Against Women and Children) Law – 10 days, applies to

battered women, which provides 10 days additional leave for the woman to seek medical attention and/or pursue legal action.

Wages Atty. Ang cited that salary should be issued in cash. It requires consent of employees if it is to be issued through check or ATM, and the bank where to encash or withdraw it should be within 1 km radius of the workplace.

The law prohibits salary deduction, unless with the consent of employee or authorized by law, e.g. SSS, Pag-ibig, etc.

The formula for computation of 13th month pay is basic salary within the year divided by 12. It should be paid not later than December 24.

Household help and piece rate work are exempted from 13th month pay.


Payment of minimum wage is mandated by law. Minimum wage is set by either Congress or the Regional Tripartite Wage and Productivity Board. Currently, it is set at P350/day for the National Capital Region, which is composed of basic pay of P300 and cola of P50.

The following are exempted from the wage order:• household help• retail service company with less than 10 workers• barangay micro business, with asset of not more than 3 million• distressed employers

Exemption from minimum wage orders requires an application with the DOLE.

Atty. Ang observed that the minimum wage law seemed like a joke because of the exemptions. Most of the businesses in the Philippines are retail services with less than 10 workers and thus exempted from the wage order. He also noted that household helps are the least privileged of all the groups of workers because many exemptions on mandatory wage provisions apply to them. Thus, there is currently a bill being heard in Congress which proposes for special provisions in the labor code for household helpers.

Post Employment

Atty. Ang then proceeded to discussing the grounds for termination of services or the issue of security of tenure.

Just cause for terminating employee:1. serious misconduct, willful disobedience (must be work-related) 2. gross and habitual neglect of duties 3. fraud and willful breach of trust – loss of trust and confidence (only for rank and file

who holds position of trust and confidence – e.g. cashier, fund holder)4. commission of a crime against employer – conviction is not required, administrative

case is different from criminal case5. other analogous causes, e.g. sexual harassment – in RA 7877, this violation can only

occur in work, training or educational environment and is committed by superior. (If committed by a co-equal, the case is an act of lasciviousness and not sexual harassment). As mandated by law, every organization should have a anti-sexual harassment policy.

Authorized cause of (a regular employee):1. installation of labor-saving device 2. redundancy – determined after the fact 3. retrenchment – usually case of business loss or bankruptcy. Retrenchment should be

employed only as last resort. Financial statement audited by an independent external auditor should be submitted as proof of bankruptcy

4. business closure – employer has the freedom to go out of business, in good faith5. if closure due to business losses, the employer is not obliged to give a separation pay6. disease – if employee has a disease or illness that is prejudicial to his employment,

certified by competent public health authority, and expected not to get well within 6 months

In case of authorized cause for termination, separation pay should be given. For items 1 and 2, separation pay should be equivalent to 1 month salary per year of service. For the rest, it should be half a month of salary per year of service.


Procedure for termination

The following are the procedures for termination of employment:Just cause: 1. 2 notices required 2. intent to dismiss - chance to explain / letter is sufficient compliance3. decision to dismiss

Authorized causeNotice – 30 days• To employee• To DOLE

Remedies for the employee, if illegally dismissedIf no just or authorized cause• Reinstatement• Backwages• Separation pay• Damages – exemplary, moral damages

Retirement • CBA • Company retirement policy• Labor Code

o Voluntary: 60 yrs oldo Compulsory: 65 yrs old

• Separation pay: ½ month (22.5 days) pay for every year of service

Resignation• voluntary • 30 days advance notice• no separation pay

OPEN FORUM (11:15am)

After Atty. Ang’s presentation, CIRI Chairperson Ms. Malou Capucao, opened the opportunities for questions from the audience. Below are some of the questions raised:

Q: Can management terminate the probationary period ahead of 6 months? And if extended, can management extend the period, or should the employee ask for it? (Lolit Serrano, CFA)

A: If employee’s performance is not at par, management can initiate termination. Reasons for terminations should be clarified to the employee.

Q: After a 5-year contract with a project staff, we re-hired the staff for the same project


The Q&A sessions with the speakers generated a lot of inquiries from NGO managers, reflecting the need for further labor law education for NGOs.

but for a different program component, from community organizing to training. The new engagement is covered by a new contract. Is this (re-hiring) allowed? (Emmie Roslinda, PROCESS Bohol)

A: As long as the nature of work is different and that the terms of the contract is clear at the time the employee is hired.

Q: Bonus has been given for the past 4 years, but its release is subject to availability of funds. Can this be allowed? (Emmie Roslinda, PROCESS Bohol)

A: It can be allowed, as long as it is made clear from the beginning of employment that bonus shall be given subject to availability of funds.

Q: We have an on-call IT technical guy, but he does not need to report to work daily. We have a 1-year service contract with him, which usually gets renewed. What type of employment is this? (Dolly Corro, MINCODE, Davao City)

A: He can be considered a casual employee, his work is not necessary and desirable in the organization. But if he has served cumulative working days of more than 1 year already, you should not hire another IT guy to do the same work.

Q: In case of an out-of-town activity, which requires leaving on a Sunday, what type of compensation should be given? Does it merit overtime pay? (Ricky Santos, Knowledge Channel)

A: If attendance to the activity is part of work, the entire attendance including the time spent for travel is considered hours worked, but not considered as overtime.

Q: Is insurance coverage for employees mandatory?

A: No. If provided, it is goodwill on the part of employer.

Q: For our regular employees, we provide corporation/foundation benefits, beyond the mandatory benefits provided by Labor Code. Are we obliged to provide these same benefits to casual employees? (Knoy Bite, PBSP)

A: If there are different types of employees, i.e. casual vs regular, management may opt not to provide foundation benefits (more than what is provided by law) to casual employees. Problem will arise if you provide different benefits to different levels of regular employees. For any benefit beyond what is provided by labor code, the management can identify different levels of benefits depending on the type of employee, e.g. HMO coverage for regular employees, etc.

Q: Are project employees entitled to incentive leaves? Jenny Panganiban, Knowledge Channel

A. Yes, if for example the contract is for 2 years, management is obliged to provide all benefits provided by law within the term.

Q: We are part of the regular staff of the NGO, but we would like to be converted into project-based staff. Is this ok? (Loida, COMultiversity)

A: If you are already a regular employee, you will be a regular employee forever. You cannot be converted into a project employee. It provides you security of tenure.


Unless you are terminated for just or authorized cause. But again, it is up to the employee if s/he agrees to be converted into project employee.

Q: If, for example, the NGO employees formed a union, can a new set of policies be applied to the new set of employees (unionized) vs. the old employees?

A: Other lawyers may advise you that it is okay and it is management’s prerogative. But as a labor lawyer, I would say, it is discriminatory and cannot be allowed.

Q: How many days should vacation leaves and sick leaves be?

A: The minimum is 5 days. If it has been a company practice to give a 30-day leave, the company cannot change/reduce it anymore. It cannot go lower than what is prescribed in the labor code.

Q: If an NGO cannot afford to give OT pay, can it allow employees to off-set extra working hours?

A: The law says off-setting is not allowed. Beyond 8 hours, the employee should have OT pay. It’s up to the employee whether to complain or not, if OT work is not compensated.

Q: Who declares special holidays? What happens if employee reports for work on a special non-working holiday? (Ms. Moral, Notre Dame, General Santos City)

A: The President or the LGU may declare holidays. An employee should receive double pay if he reports for work on a regular holiday, a day’s wage + 30% premium for a special holiday.

Q: We have an employee who has been with us for 18 years now and recently became sickly. She has been in the hospital for 8 months now and the company covers for her hospital expenses. Can she be asked to resign? (Sister Celerina, CORDNET, Baguio City)

A: Illness is a valid ground for termination of employment. It must be certified by a public health authority, and that the employee is not expected to get well within 6 months. If terminated on this ground, the employee shall be given a separation pay.

Q: We have a project officer assigned/working abroad. Should we register the employee with OWWA? (Jane Baldago, Punla sa Tao)

A: Yes, so s/he can avail of special benefits for OFWs.

Q: Should benefits be included in the terms of consultancy engagements? (PRRM)

A: For consultancy engagements, the terms are the prerogative of management, because employer-employee relationship does not exist.

Q: We have pension coverage provided by the company that used to be paid in our name. A change in policy now gives us pension coverage, but being paid under company name. We were told it will be transferred to us. Is this ok? (Staff from Sugar Industry Foundation)

A: Was there a reduction in pension benefits because of the change? If there is, then it violates the principle of non-diminution of benefits.


Q: We were the first group to organize a union in an NGO, and were terminated from work. We call for partnership/MOA with CODE-NGO to promote the organization of employees unions in their member NGOs and encourage employees to enter into CBAs with their management to advocate for employee rights, as part of good labor and HR practice among NGOs (Rollie Hallig, Federation of Free Workers).

A: All employees have the freedom to create unions, whether in any kind of establishments, including NGOs. Employees can initiate organizing unions even without a MOA with management.

At 12:00NN the first session was concluded and Lunch Break was called after the Q&A with Atty. Ang. The participants took interest on the topic that a lot of them continued to consult with the resource person even during lunch break.

Module 2: The Labor Code & NGOs: Government PerspectivesAtty. Joffrey Suyao, Mediator Bureau of Labor Relations, Department of Labor & Employment

At about 1PM, sessions resumed upon arrival of the next resource person. CIRI Chairperson Malou Capucao introduced the speaker Atty. Joffrey Suyao, Mediator of the Bureau of Labor Relations- DOLE, who then gave a talk on pertinent labor laws that are relevant for NGOs on the point of view of government.

Atty. Suyao started by giving a background and definition of labor law as a body of statutes and doctrines that defines State policies on labor and employment, that govern the rights and duties of employees and employers by prescribing standards of employment, or by establishing a legal framework for which better working conditions can be obtained through collective bargaining agreement or other concerted efforts.

Atty. Suyao further cited that the Labor Code was enacted on May 1, 1974 for the following reasons:

1. afford full protection to labor 2. promote full employment and development of human resources3. ensure industrial peace based on social justice.

Labor PoliciesThe principles and guidelines that govern State policies on labor and employment are embodied in our Constitution (Article XIII Section 3) and in our laws (Book 6 of Labor Code).

Labor Standards LawsLabor standards statutes also provide for conditions and terms of employment to protect the rights and duties of both employee and employer, beyond that provided by the Labor Code i.e. Book 3 of Labor Code on Conditions of Employment, PD 525 on Cost of Living Allowance and PD 851 on 13th month pay. The purposes of these laws are either protective (e.g. setting


BLR-DOLE Mediator Atty. Joffrey Suyao gave a lecture on labor laws for NGOs from the government’s perspective.

the hours of work, weekly rest periods) or ameliorative (e.g. minimum wage laws, holiday pay).

Further, there are employment terms and conditions that enable workers to obtain from employers more than the minimum provided by labor laws, acquired through collective bargaining agreements and arbitral awards or decisions. Book 5 of the Labor Code has provisions for creating labor organizations, collective bargaining and negotiation.

Social Laws There are also social laws or welfare legislations aimed at promoting the general welfare of all individuals, those that require payment of benefits by government agencies to the worker or his family, when and while he cannot work by reason of sickness, disability, old age, death and similar hazards, e.g. SSS, GSIS.

Atty. Suyao then proceeded to reiterating the provisions of the labor code on classifications of employment, security of tenure and terms and conditions of employment, and grounds for termination. He stressed that the provisions provided by labor laws apply to all establishments, whether operating for profit or not. And that one’s job is a property right which should not be just taken away without due process.

Atty. Suyao then presented a matrix on the grounds for termination of employment:

By Whom:

Employer Employee

Grounds:

Just Cause (Art 282) Just Cause (Art 285)

1. Serious misconduct 1. Serious insult by employer or his/her representative on the honor and person of the employee

2. Willful disobedience of employer’s lawful order connected with work

2. Inhuman or unbearable treatment by the employer or his/her representative

3. Gross and habitual neglect of duty

3. Commission of a crime of employer or his/her rep vs the person and honor of the employee or any of his immediate family

4. Fraud and breach of trust 4. Other analogous causes 5. Commission of a crime against

employer, his/her family or relatives

6. Other analogous causesAuthorized Cause (Art 283-

284)No ground at all (Voluntary Resignation)

1. Installation of labor-saving device

2. Redundancy

3. Retrenchment to prevent losses

losure or cessation of business


months, and continued employment is prejudicial to his health or the health of his co-workers

Other Grounds

1. Retirement (optional / compulsary)2. Expiration of term of contract 3. Union security clause

Effects of Termination

Atty. Suyao enlivened his discussion on the effects of employment termination by asking the audience to determine whether actions are legal or illegal on these cases:

Cause With Due Process Without Due ProcessAuthorized cause Dismissal legal / valid, but

employee entitled to separation pay

Dismissal valid, but employee entitled to separation pay plus nominal damages

Not Authorized cause

Dismissal illegal; employee entitled to:ReinstatementSeparation pay in lieu of reinstatement Back wagesDamages and attorney’s fees if in bad faith

Dismissal illegal; employee entitled to:ReinstatementSeparation pay in lieu of reinstatement Back wagesDamages and attorney’s fees if in bad faith

With just cause Valid Dismissal Dismissal still VALID, but employee entitled to:Nominal Damages amounting to P30k [tempered]; (Agabon v. NLRC)

Without just cause Dismissal NOT legal; employee entitled to: Separation pay in lieu of reinstatementBackwagesDamages and attorney’s fees if in bad faith

Dismissal illegal, employee entitled to:ReinstatementSeparation pay in lieu of reinstatementBackwagesDamages and attorney’s fees if in bad faith

Q: Is there a computation formula for completion bonus (for projects employment)? (PRRM Representative)

A: Completion bonus for projects depends on the employer, management prerogative.

Q: Has there been labor cases filed in the DOLE against NGOs? If any, what is the nature of these cases? (Dodo Macasaet, CODE-NGO)

A: As far as I know, there has not been a labor case filed against an NGO yet.


Q: What are the statutory benefits we can give an individual? ( Punla sa Tao Foundation)A: SSS / GSIS benefits as mandated by law.

Q: We have a staff who was hired on a contractual basis, and after the completion of the contract, he was hired again by our NGO under another contract, this time by a different unit and doing a different task. Is there an irregularity in that situation? (Knoy Bite, PBSP)

A: There’s no irregularity if the staff is hired for a different task. However, it is to the disadvantage of the staff because he would not be able to complete his year(s) of service.

After the Q&A session with Atty. Suyao, moderator Ms. Capucao introduced the next resource person, Atty. Ferdinand Sales of the Company Monitoring and Registration Division of the Securities and Exchange Commission.

Module 3: Pertinent Provisions of the Corporation Code for NGOs By Atty. Ferdinand Sales, SEC

Atty. Sales discussed about the pertinent provisions of the Corporation Code in relation to NGOs.

He started with the definition of a Corporation and its classes, where NGOs or non-stock corporations are included. A non-stock corporation is one where no part of its income goes back as dividends to its members, trustees or officers.

The provisions of the law governing stock corporations generally apply also to non-stock corporations, except for some specific provisions. Non-stock corporations are formed for the following purposes: charitable, religious, educational, professional, cultural, fraternal, literary, scientific, social, civic service, trade or industry chambers or similar purposes.

He then proceeded to discussing the responsibilities of NGOs (as non-stock corporations) to clearly provide for and implement policies / by-laws on:

- election and term of trustees - regular conduct of meetings of

trustees and members - members’ right to vote - non-transferability of membership- procedures in amending the articles of

incorporation and by-laws - procedures in removing directors or

trustees - procedures in filling vacancies in the

office of director or trustee- compensation of directors - report of election of directors,

trustees and officers – (which should be submitted to the SEC within 30 days after the election)

- submission of the Annual Report of the corporation, together with financial statement certified by an independent public accountant, covering the preceding fiscal year


SEC lawyer Atty. Ferdinand Bryan Sales updated the crowd about the recent SEC policies concerning non-profits.

- effects of non-use of corporate charter or continuous inoperation of a corporation – where a corporation is deemed dissolved if it does not commence transaction of its business within 2 years of incorporation. The same case applies when it has started operations but became continuously inoperative for 5 years.

Aside from the above provisions, Atty. Sales updated the participants about the SEC Memorandum Circular No. 8 they recently released last June 22, 2006 which applies to Foundations. This circular aims to protect legitimate Foundations from illegitimate ones, especially those doing fund-raising activities for questionable projects. Among the key provisions in this circular are:

- definition of a “Foundation” as a non-stock, non-profit corporation established for the purpose of extending grants or endowments to raise funds for charitable, religious, educational, social welfare and other similar objectives

- for Foundation applying for SEC registration, submission of a Notarized Certification of Bank Deposit of not less than P1M, in addition to the requirements for non-stock, non-profit corporations, plus statement of willingness to be audited by SEC, and allow SEC to access pertinent documents for the preceding 5 years for audit purposes

- submission of General Information Sheet, Audited Financial Statement, source and amount of funds, and programs and activities certified by President and Treasurer

- Certification from the Mayor, Barangay Captain, DSWD or DOH head on the existence of the program/activity in the locality where the Foundation operates

- Fine of P10,000 for non-compliance of these provisions - Possible revocation of registration if NGO fails to comply for 2 consecutive years

after this Circular is approved.

Q&A session followed after Atty. Sales presentation:

Q: Do we need to get a permit from the barangay captains in areas where we operate/implement our projects? What if we have programs in several barangays all over the country? Getting the permit from all of them will be a logistical problem. (Consuelo Foundation Representative)

A: It is mandatory to get a permit. However, you may present to SEC other appropriate certification and then we can determine if it complies with the prescribed rules. The appropriate certifying body depends on who has jurisdiction over the area where you operate.

Q: If we operate in several barangays, or municipalities in a province, can we just get certification for our projects from the Governor? (Christopher Shaw)

A: We can allow the certification from the governor.

Q: Can we get certification from regional office from DSWD? Government agencies usually give accreditation to their partner NGOs. (Pauline Nayra, Leyte CODE)

A: Yes.

Q: Is it mandated for NGOs to submit the reportorial requirements to SEC regarding its programs, information sheet, etc.? (Pauline of Leyte CODE)

A: Yes you should. This will be our basis for monitoring and evaluating existing Foundations / non-profits.


Q: Are we required to get certifications for our volunteer programs? We are a foundation and we are sending volunteers to different areas of the country. (Jesuit Volunteers of the Philippines)

A: You just submit the required reports and then we can evaluate whether or not you are covered by policies of SEC on foundations.

Q: Are we entitled to engage in social enterprise? (PRRM) A: Yes you are entitled to do so. As long as income from operations go to the furtherance

of the programs of the institution, and not to stockholders. Examples of these are educational institutions which may operate canteens, printing press, and other services.

SYNTHESIS Dodo Macasaet, Executive Director of CODE-NGO, provided a synthesis of the day’s discussions. He cited that the discussions on labor laws are part of the efforts of the NGOs to find the right balance between protecting the welfare of their employees and the capacity of our organizations. While the discussion on SEC regulations is meant to give the NGOs an appreciation of how these regulations were being implemented to protect legitimate NGOs and foundations from “fly-by-nights” and safeguarding the funds that go to them.

Mr. Macasaet cited that this forum is just the start of CODE-NGO’s continuing efforts on the above issues, thus, he asked for suggestions on next action steps or future related activities from the participants. Among the suggestions were as follows: - Review compensation and labor standards / experiences of NGOs - Lobby for specific labor rules governing NGOs (the way special groups have done it,

e.g. seafarers, SMEs, construction workers, and currently household helpers), taking into account limitations for the NGO sector , e.g. project-based funding

- Dialogue with DOLE for special rules governing NGOs, balanced with upholding the interest of workers, noting that human resource is the NGO’s key resource as service-oriented organizations

- Review global trends, ILO findings on related concerns for the NGO sector - Lobby for inclusion of Labor Code related administrative costs as critical component

of projects with regards to fund assistance from donors and partners to ensure proper compensation and benefits for project employees (This may be done on a one-to-one basis between an NGO and its donor(s), and/or as CODE-NGO/coalition).

- Explore providing further trainings on effective resource mobilization strategies, e.g. effective fund proposal writing, generating own income, etc., noting that NGO sustainability is key to ensuring good labor/HR practices.

Mr. Macasaet mentioned that CODE-NGO will consider these suggestions in its plans for the coming fiscal year. He also said that other networks and NGOs present may also wish to take up some of these actions. This would be welcomed by CODE-NGO. He only requested that these actions be shared with CODE-NGO and the others present in this forum.

The forum was concluded at 4PM.


Annex 1. List of NGOs represented in the Forum:

Alterplan Meralco Foundation

Andres Soriano Foundation Mindanao Coalition of Development NGOs

Antipolo Seminary Foundation Muntinlupa Development Foundation

Association of Foundations National Confederation of Cooperatives

Ayala FoundationNorthern Luzon Federation of Cooperative Development Center

Cartwheel Foundation Notre Dame Business Resource Foundation

Child Hope Asia Philippines Pangopod Inc

Coalition for Bicol Development Philippine Development Assistance Program

Communication Foundation for AsiaPhilippine Partnership for Human Resource Development in the Rural Areas

Community and Family Services International Philippine Business for Social Progress

COMultiversity Philippine Rural Reconstruction Movement

Consuelo Foundation PROCESS Bohol

CORDNET Punla sa Tao Foundation

CRIBS Philippines Ramon Magsaysay Foundation

Emmaus Center Roxas Gorgollo Foundation

ERDA Foundation Sinag Arts

FAHAN Inc Sugar Industry Foundation

Federation of Free Workers Tan Yat Kee Foundation

Foundation for Adolescent Development Theosophical Order of Service

JVP Foundation Uplift Philippines

Knowledge Channel Women's Media Circle

Lorma Community Development Foundation

Leyte CODE

LMCG

CAUCUS OF DEVELOPMENT NGO NETWORKS (CODE-NGO)

The Caucus of Development NGO Networks was established in May 1990 by 10 of the largest NGO networks in the Philippines. Today, CODE-NGO, with its 6 national networks and 6 regional networks, representing more than 2,000 development NGOs, people’s organizations and cooperatives nationwide, is the country’s biggest coalition of NGOs working for social development.

CODE-NGO maximizes its scale and synergy to influence public policy, provide leadership in civil society and increase the effectiveness of social development work in the country. It focuses on policy advocacy and partnership building in the public arena, as well as on developing the capacity and accountability of its member networks and affiliated organizations.

Address: 69 Esteban Abada Street, Loyola Heights 1108, Quezon City, PHILIPPINESTel/Fax: (632) 4265938Tel.: (632) 4266001 local 4624 or 4625Email: [email protected]: www.code-ngo.org


mailto:[email protected]

http://www.codengo.org/

Forum on Labor and Other Laws for NGOs. Proceedings of

Documents

Transcript of Forum on Labor and Other Laws for NGOs. Proceedings of