ECOP hits 'overkill' labor laws

By Max V. de Leon, BusinessMirror

Posted at Nov 18 2011 07:13 AM | Updated as of Nov 18 2011 03:13 PM

MANILA, Philippines - Employers are warning lawmakers against passing “overkill  labor laws” that mandate stiffer penalties for those who do not comply with minimum-wage laws as these would only force enterprises to go underground and drive away future investors.

Instead of increasing the jail term for businessmen who violate wage laws, Edgardo Lacson, president of the Employers Confederation of the Philippines (ECOP), said Congress should actually do the reverse and decriminalize it.

“Imposing fine is acceptable but imprisonment is an overkill. Who would want to do business in a country where you are at risk of losing your liberty? We already have enough safeguards to ensure compliance like the regular visits of labor inspectors. We don’t have to make it too difficult for businesses,” Lacson told the BusinessMirror.

ECOP, he said, is worried about House Bills 942, 1817, 1889 and 2884, authored by Reps. Reynaldo Umali, Emmeline Aglipay, Ben Evardone and Joseph Victor Ejercito, respectively.

The bills, Lacson said, propose to further increase the penalties, already severe under Republic Act (RA) 8188, by amending the Wage Rationalization Act (RA 6727) to raise the current two-year jail term to four years.

Lacson said these bills are dangerous signals to would-be and existing investors.

The Philippines, he said, is the only country in the region that puts violators of the minimum-wage law to prison.

Lacson said ECOP is pushing for an overhaul of the country’s labor code so it would not be “anti-business.”

Stiffer penalties against violation of the minimum-wage provisions, he said, will force more enterprises to go underground, thus, exposing workers to harsher conditions.

“Every time there is a new minimum-wage order, more companies are migrating to the informal sector where compliance to standards is lost. This will also result in revenue losses for the government,” Lacson said.

He said the minimum-wage provisions affect mostly small and medium enterprises, which comprise about 99 percent of total businesses in the country.

Lacson said the proposed laws would accelerate the contraction of the formal sector, as they would induce micro and small enterprises to go underground to escape the threat of the sanctions that the bills seek to impose.

This “adverse pattern of a shrinking formal sector and an expanding informal sector is confirmed by various independent studies” of the United Nations Development Program and the World Bank, Lacson said.

The findings indicate, among other things, that the number of unlicensed—and thus untaxed—local businesses is increasing as many traders avoid the high cost of regulation, which includes “onerous populist labor laws,” he said.