PHILIPPINES Trends and Developments Contributed by: Clarence Darrow C Valdecantos and Gilyen Ezra Marie L Li-Nulud, ACCRALAW
• power to control the work of the employee. As may be gleaned above, the last element is the most critical determinant of the presence of an employer- employee relationship, and refers to the exercise of control, not just over the results of the work to be done, but also over the means and methods by which such work is to be accomplished. Thus, “badges of control” which would increase misclassification risks include the imposition of the worker’s work schedule, code of conduct, and other conditions of work, course corrections, periodic evaluations, training, and assign - ments, and furnishing of facilities and materials. In an EOR arrangement, not only is the power to con - trol relinquished to the foreign company, but the latter is also often allowed to scout for, vet, or even interview prospective employees for the EOR to hire, thereby effectively carrying out the selection and engagement process for itself. It is also allowed to participate, if not initiate, disciplinary actions for erring employees, practically because its own employees observe the contracted personnel’s performance on a day-to-day basis and are, thus, able to detect lapses or discover any misconduct. These further increase misclassifica - tion risks against the foreign principal, who may then be impleaded in a labour suit and held liable for pay - ment of salaries and benefits under the law or illegal dismissal, as the case may be. Even if the principal is willing to assume employee misclassification risks, it may face other challenges arising from the engagement of an EOR, such as the enforcement of restrictive covenants on confi - dentiality, non-competition, and conflicts of interest against employees with whom it does not have any contract. Furthermore, depending on the extent of its operations, the engagement of a local EOR and its Philippine-based workers may be construed as an expansion of its business, especially if the services performed result in the principal’s profit. This situation exposes the latter to risks associated with permanent establishment, which may result in the assessment of corporate income taxes, as well as fines and penal - ties. Additionally, it could be determined that the entity is conducting business without a license. In such a case, it will not be allowed to initiate or take part in any action in any court or administrative agency in the
Philippines. However, it can still be sued or subjected to legal proceedings for any valid cause of action under Philippine laws. Data Privacy Issues in Remote Work Arrangements Under Republic Act No 11165 or the Telecommuting Act, employers are free to offer a telecommuting pro - gram to their employees on a voluntary basis, and upon mutually agreed terms and conditions that do not dimin - ish or impair their existing benefits and that ensure their fair treatment vis-à-vis onsite employees. Under DOLE Department Order No 237, series of 2022 (“DO 237”), the said program shall contain provisions as are rea - sonably necessary to ensure its effective implementa - tion, including the minimum requirements of computer hardware and software, terminals, host applications, and internet connectivity and security, as well as the standards to protect personal and proprietary informa - tion under Republic Act No 10173 or the Data Privacy Act of 2012 (“DPA”) and the various issuances issued by the National Privacy Commission (“NPC”). To avoid disrupting their operations, employers use tools and software to monitor employees’ activity and productivity while working off-site. These measures curb the abuse of concessions afforded to employees under remote work arrangements, primarily caused by the employer’s lack of visibility over the actual performance of work. Nonetheless, while work sur - veillance effectively deters performance lapses and exacts accountability, it also gives rise to data privacy issues, thereby warranting the protection afforded to employees as data subjects under the DPA. In NPC Advisory Opinion No 2024-003, it was held that the installation of monitoring software in a com - pany-issued computer, wherein the web camera and microphone are turned on at random intervals to record short videos of the employee and his sur - roundings, as well as work-related meetings and train - ing sessions, is a form of data processing under the DPA, as it involves the collection of the employee’s personal information. The NPC opined that this pre - ventive monitoring of employees, if pursuant to the fulfilment of the employment contract and/or neces - sary for the legitimate interests of the employer, may be allowed under the DPA. In NPC Advisory Opin - ion No 2024-005, the use of an AI program to ana -
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