2015 Labor Law, Q1

A. Rocket Corporation is a domestic corporation registered with the SEC, with 30% of its authorized capital stock owned by foreigners and 70% of its authorized capital stock owned by Filipinos. Is Rocket Corporation allowed to engage in the recruitment and placement of workers, locally and overseas? Briefly state the basis for your answer. (2%)
B. When does the recruitment of workers become an act of economic sabotage? (2%)

Quick check

What is the minimum percentage of authorized capital stock required to be owned by Filipino citizens for a corporation to engage in worker recruitment?

Why is Rocket Corporation disqualified from engaging in the recruitment and placement of workers?

When does illegal recruitment constitute an act of economic sabotage under labor laws?

Under Article 38 of the Labor Code, how is a syndicate defined for the purpose of economic sabotage?

What constitutes illegal recruitment in large scale under Republic Act No. 8042?

Learn more about these topics

1. Recruitment Ownership Requirement
Under Article 27 of the Labor Code, no corporation or entity is permitted to engage in the recruitment and placement of workers, whether for local or overseas employment, unless at least seventy-five percent of its authorized and voting capital stock is owned and controlled by Filipino citizens. This mandatory equity threshold ensures that recruitment activities remain under effective domestic ownership and national control. Any corporate entity that fails to satisfy this seventy-five percent nationality requirement is strictly prohibited and disqualified from obtaining a license to operate as a recruitment agency in the Philippines.

2. Illegal Recruitment
Illegal recruitment refers to any act of recruitment, placement, or canvassing of workers undertaken by non-licensees or non-holders of authority. It also encompasses prohibited practices performed by licensed recruitment agencies, such as charging unauthorized placement fees, giving false information regarding employment terms, or inducing workers to quit current employment. Engaging in recruitment activities without proper authorization from government regulatory agencies violates statutory labor standards and subjects offenders to severe criminal penalties, administrative sanctions, and civil liabilities under Philippine labor legislation.

3. Economic Sabotage
Under Article 38 of the Labor Code and Republic Act No. 8042, illegal recruitment escalates to an act of economic sabotage when committed by a syndicate or in large scale. Illegal recruitment is committed by a syndicate when carried out by three or more persons conspiring or confederating with one another. It is committed in large scale when perpetrated against three or more persons, individually or as a group. Illegal recruitment constituting economic sabotage is considered a heinous offense punishable by life imprisonment and heavy criminal fines.

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The questions reproduced here are the official texts of the Philippine Bar Examinations, published by the Supreme Court. They are reproduced for study purposes.The suggested answers are the author’s own.

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Where a question comes from an earlier examination, the suggested answer applies the law as it now stands, which may differ from the law in force when the question was given, and may therefore differ from what would have been the correct answer at that time. Where the difference is material, the answer notes it.The practice scoring feature measures wording overlap with the suggested answer. It is not a grade, carries no official weight, and says nothing about whether your reasoning is sound.Errors are possible. If you find one, please tell me and I will correct it.Last reviewed: October 2026