1.

SOUTHERN PHILIPPINES FEDERATION OF LABOR (SPFL), petitioner,

vs.
HONORABLE PURA FERRER CALLEJA, Director, Bureau of Labor Relations, Department of
Labor and Employment, public respondent. MINDANAO MINERS EMPLOYEE UNION
SANDIGAN NG MANGGAGAWANG PILIPINO (SANDIGAN), forced intervenor-private
respondent. APEX MINING COMPANY, INC., employer-private respondent.

Proculo P. Fuentes, Jr. for petitioner.

Valeriano F. Pasquil and Ruben V. Abarquez for respondent Apex Mining Co., Inc.

Raul C. Nengasca and Antonio G. Jolejole for respondent Sandigan.

G.R. No. 80882 April 24, 1989

GUTIERREZ, JR., J.:

This petition for certiorari seeks to annul and set aside the Order issued by public respondent
Director Pura Ferrer Calleja of the Bureau of Labor Relations dated June 23, 1987 which certified
the respondent union, Mindanao Miners Employees Union-Sandigan ng Manggagawang Pilipino
(MMEU-Sandigan), as the sole and exclusive bargaining representative of the rank-and-file
employees of respondent Apex Mining Company (Apex) after the said public respondent denied the
motion of herein petitioner to exclude one hundred ninety-seven (197) employees from voting in the
certification election. The denial is based on the ground that they are rank-and-file employees.

As summarized by the Solicitor General in his Comment, the facts are as follows:

On December 29, 1986, petitioner Southern Philippines Federation of Labor filed a

petition for certification election among the rank-and-file employees of private
respondent Apex Mining Company, Incorporated with the Department of Labor in
Region XI, Davao City.

On February 6, 1987, Med-Arbiter Conrado 0. Macasa, Sr. issued an Order calling

for the holding of the certification election on February 23, 1987 among the rank-and-
file employees of APEX with the following choices:

l. Southern Philippines Federation of Labor (SPFL)

2. Mindanao Miners Employees Union-Sandigan ng Manggagawang Pilipino

(MMEU-Sandigan) and

3. No union.

On February 9, 1987, a pre-election conference was conducted among the petitioner

Union; private respondent Union, MMEU-Sandigan; and APEX to settle details in the
conduct of the election such as the venue of the election and the list of employees
qualified to vote in the election.

During the pre-election conference, the parties agreed to delete from the list of
workers prepared and submitted by APEX numbering One Thousand Seven Hundred
Sixteen (1,716), the names of nineteen (1 9) managerial employees and seventy-
three probationary employees who were statutorily disqualified from voting. Petitioner
Union objected to the inclusion in said list of the following: (1) employees occupying
the positions of Supervisor I, II, and III; (2) employees under confidential/special
payrolls; and (3) employees who were not paying Union dues. The petitioner Union
contends that the aforementioned employees were disqualified from participating in
the certification election since the Supervisors were managerial employees while the
last two were disqualified by virtue of their non-membership in the Union and their
exclusion from the benefits of the collective bargaining agreement.

In view of the lack of agreement among the parties on the list of qualified voters,
Med-Arbiter Macasa issued an Order on February 20, 1987, the dispositive portion of
which reads:

"Wherefore, premises considered it is hereby declared that the

following groups of workers be not included in the list of employees
qualified to vote in the consent election on February 23, 1987, as
follows:

1 Nineteen (19) managerial employees;

2 Seventy-three (73) probationary employees; and

3 Nineteen (19) Supervisors 1;

All other workers except the foregoing will be allowed to vote."

On February 23, 1987, the day of the certification election, petitioner Union filed a
Motion for Reconsideration of Macasa's Order dated February 20, 1987. The
certification election was nonetheless conducted, with the result as follows:

l. Southern Philippines Federation of Labor............. 614

2. Mindanao Miners Employees union

(MMEU- Sandigan)...................................................
528

3. No Union......................................................................... 9

4. Challenged Ballots......................................................197
5. Spoiled............................................................................25

TOTAL VOTES CAST............................................................1,373

On the basis of the foregoing results, respondent Union filed an Urgent Motion to
Open the Challenged Ballots, with the prayer, to wit:

"Wherefore, premises considered, it is most respectfully prayed of

this Honorable office that this instant motion be given due course and
that an order be issued to open and count the challenged ballots in
order to determine, once and for all, the winner in the certification
and/or consent election and thereafter certify the sole and exclusive
collective bargaining representative of all rank-and-file employees
and workers of Apex Mining Company, Incorporated."

xxx xxx xxx

On March 11, 1987, APEX filed a Manifestation and Motion manifesting its interest in
the speedy resolution of the case and primary concern for "the restoration of
normalcy and the preservation of industrial peace in the already explosive situation in
the mining area."

xxx xxx xxx

On March 19, 1987, Med-Arbiter Macasa issued an Order, the dispositive portion of
which reads:

"Wherefore, the interest of industrial peace considered, it is hereby

directed that the challenged ballots be opened and inventoried on 26
March 1987 at 3:00 p.m., before the entire records of the case be
indorsed to the BLR for review."

xxx xxx xxx

Petitioner Union appealed Macasa's Order dated March 19, 1987 to the Bureau of
Labor Relations. On April 14, 1987, BLR Director Pura Ferrer-Calleja issued an
Order, the dispositive portion of which reads:

"WHEREFORE, the Appeal of petitioner Southern Philippines

Federation of Labor (SPFL) is hereby dismissed for lack of merit and
the Med- Arbiter's Order dated 19 March 1987 is affirmed with
modification that the 197 ballots should be opened and canvassed by
Labor Regional Office XI, Davao City. Let, therefore, the records of
this case be immediately remanded to the said office, for the
immediate implementation of this Resolution."
 Petitioner Union moved for a reconsideration of the resolution dated April 14, 1987.
Meanwhile, on May 21, 1987, Med-Arbiter Macasa opened and canvassed the 197
challenged ballots with the result as follows:

SPFL 12 votes
SANDIGAN 178 votes
No Union 2 votes
Spoiled 4 votes
Envelop with
no ballots 1 vote

__________
TOTAL 197 votes

As a consequence of the opening and canvass of the challenged ballots, the

outcome of the certification election became:

SPFL 626 votes

SANDIGAN 706 votes
No Union 11 votes

___________
TOTAL 1,343 votes

Based on the aforementioned results, respondent Union filed a Manifestation with the
BLR with prayer for the issuance of Certification Order certifying it as the sole and
exclusive bargaining representative of the rank-and-file employees of APEX. On
June 23, 1987, Director Calleja issued an Order, the dispositive portion of which
reads:

"WHEREFORE, the Motion for reconsideration of Petitioner SPFL is

hereby denied for lack of merit. Meanwhile, intervenor Mindanao
Employees Union-Sandigan Ng Manggagawang Pilipino (MMEU-
SANDIGAN) is hereby certified as the sole and exclusive bargaining
representative of the rank-and-file employees of respondent Apex
Mining Company, Inc. Accordingly, the management of Apex Mining
Company, Inc., is directed to negotiate with (MMEU-SANDIGAN) for
the conclusion of a collective bargaining agreement (CBA)."

Hence, this petition.

The issue raised in this petition is whether or not the public respondent committed grave abuse of
discretion in allowing the 197 employees to vote in the certification election when, as alleged by the
petitioner, they are disqualified by express provision of law or under the existing collective bargaining
agreement.
It is maintained by the petitioner that under the Labor Code, managerial employees are excluded
from forming or joining a collective bargaining unit; and under the collective bargaining agreement
executed between Apex and respondent union, among those who are excluded from the bargaining
unit are: a) managerial employees as defined in paragraph K, Article 212 of the Labor Code; b) those
performing supervisory functions; and c) those holding confidential positions as determined by the
company. Therefore, the employees holding the positions of Supervisors II and III and those in the
confidential payrolls should be excluded from joining the bargaining unit and from voting in the
certification election. Likewise, those employees who are not paying union dues should be excluded
from the same since the existing CBA contains a Union shop provision.

The contentions have no merit.

Although we have upheld the validity of the CBA as the law among the parties, (see Planters
Products, Inc. v. NLRC, et al., G.R. No. 78524, January 20, 1989), its provisions cannot override
what is expressly provided by law that only managerial employees are ineligible to join, assist or
form any labor organization (See Art. 247, Labor Code). Therefore, regardless of the challenged
employees' designations, whether they are employed as Supervisors or in the confidential payrolls, if
the nature of their job does not fall under the definition of "managerial" as defined in the Labor Code,
they are eligible to be members of the bargaining unit and to vote in the certification election. Their
right to self-organization must be upheld in the absence of an express provision of law to the
contrary. It cannot be curtailed by a collective bargaining agreement.

Hence, it is important to determine whether the positions of Supervisors II and III are considered
"managerial" under the law.

As defined in the Labor Code and as we have held in the case of Franklin Baker Company of the
Phils. v. Trajano, (1 57 SCRA 416, 421-423, [1988]):

A managerial employee is defined as one who is vested with powers or prerogatives

to lay down and execute management policies and/or to hire, transfer, suspend, lay-
off, recall, discharge, assign or discipline employees, or to effectively recommend
such managerial actions. (Reynolds Phil. Corp. v. Eslava, 137 SCRA [1985], citing
Section 212 (K), Labor Code.)

xxxxxxxxx

The test of "supervisory" or "managerial status" depends on whether a person

possesses authority to act in the interest of his employer in the matter specified in
Article 212 (k) of the Labor Code and Section 1 (m) of its Implementing Rules and
whether such authority is not merely routinary or clerical in nature, but requires the
use of independent judgment. Thus, where such recommendatory powers as in the
case at bar, are subject to evaluation, review and final action by the department
heads and other higher executives of the company, the same, although present, are
not effective and not an exercise of independent judgment as required by law
(National Warehousing Corp. v. CIR, 7 SCRA 602-603 [1963]).
 Furthermore, in line with the ruling of this Court, subject employees are not
managerial employees because as borne by the records, they do not participate in
policy making but are given ready policies to execute and standard practices to
observe, thus having little freedom of action (National Waterworks and Sewerage
Authority v. NWSA Consolidated, L-18938, 11 SCRA 766 [1964]).

The petitioner's motion for reconsideration before the public respondent outlined the job description
of Supervisors. In the category of Supervisory II, the "General Summary" provides:

GENERAL SUMMARY:

Assists the Foreman in the effective dispatching/distribution of manpower and

equipment to carry out approved work. (p. 30, Rollo)

while the first duty enumerated in the position of Supervisor III states:

1. Executes and coordinates work plans emanating from his supervisors. (p. 32,
Rollo)

Thus, it is clear from the above provisions that the functions of the questioned positions are not
managerial in nature because they only execute approved and established policies leaving little or
no discretion at all whether to implement the said policies or not. The respondent Director, therefore,
did not commit grave abuse of discretion in dismissing the petitioner's appeal from the Med-Arbiter's
Order to open and count the challenged ballots in denying the petitioner's motion for reconsideration
and in certifying the respondent Union as the sole and exclusive bargaining representative of the
rank-and-file employees of respondent Apex .

As regards the employees in the confidential payroll, the petitioner has not shown that the nature of
their jobs is classified as managerial except for its allegation that they are considered by
management as occupying managerial positions and highly confidential. Neither can payment or
non-payment of union dues be the determining factor of whether the challenged employees should
be excluded from the bargaining unit since the union shop provision in the CBA applies only to newly
hired employees but not to members of the bargaining unit who were not members of the union at
the time of the signing of the CBA. It is, therefore, not impossible for employees to be members of
the bargaining unit even though they are non-union members or not paying union dues.

WHEREFORE, the petition is hereby DISMISSED for LACK OF MERIT. Costs against the petitioner.

SO ORDERED.

2. SAN JOSE CITY ELECTRIC SERVICE COOPERATIVE, INC. (SAJELCO), petitioner,

vs.
MINISTRY OF LABOR AND EMPLOYMENT and MAGKAISA-ADLO, respondents.

G.R. No. 77231 May 31, 1989

MEDIALDEA, J.:

This is a petition for certiorari under Rule 65 of the Rules of Court. Petitioner San Jose City Electric
Service Cooperative, Inc. (SAJELCO, for brevity) seeks the reversal of the Order (pp. 38-40, Rollo)
of Pura Ferrer-Calleja, Director of Bureau of Labor Relations in BLR Case No. A-10-259-86 which
affirmed the Order of Med-Arbiter Antonio R. Cortez to conduct a certification election among the
rank-and-file employees of SAJELCO.

The antecedent facts of the instant case are as follows:

On July 29, 1986, private respondent Manggagawang Nagkakaisa ng SAJELCO-Association of

Democratic Labor Organization (MAGKAISA-ADLO) filed a petition (pp. 16-18, Rollo) for direct
certification election with the Regional Office No. 111 of the Department of Labor and Employment in
San Fernando, Pampanga. The petition alleged that MAGKAISA-ADLO is a legitimate labor
organization duly registered with the Ministry of Labor and Employment; that there are more or less
fifty-four (54) rank and file employees in SAJELCO; that almost 62% of the employees sought to be
represented have supported the filing of the petition; that there has been no valid certification
election held in SAJELCO during the twelve (12) month period prior to the filing of the petition and
that there is no other union in the bargaining unit.

In its answer (pp. 19-21, Rollo), SAJELCO opposed the petition for direct certification election
contending, inter alia, that the employees who sought to be represented by private respondent are
members-consumers of the Cooperative itself and at the same time composed the General
Assembly which, pursuant to the By-laws is also the final arbiter of any dispute arising in the
Cooperative. Thus:

xxx

5. That some, if not most, of the employees who sought to be represented by the
petitioner, are member-consumers, and as such are members of the General or
Special Assembly which is the final arbiter on any dispute which a member and/or
the Board, or the Cooperative may have, and that such "some"of said alleged
supporters, in their capacity as member-consumers, enjoy two personalities in that
as employees and/or members of the General Assembly, and therefore cannot fairly
and prudently represent such opposing personalities that merge into one juridical or
natural person, and these special and unique status or personalities of the supposed
supporters cannot qualify to be represented by the petitioner, without doing injustice,
in equity and unfair status or advantage to those member-consumers who have not
that destiny or status of becoming employees;

6 No valid and lawful representation can be obtained by petitioner in behalf of the

supposed supporters, who are also member-consumer, that are bound by the Article
of Incorporation, By-laws of the respondent Cooperative and pertinent Decrees and
laws, to support and defend the basic policies of the Government on Electric
Cooperatives;
 7. There is no possible legal way by which to dismantle the personalities of some of
the supporters of the petitioner, as employees, from their status as consumer-
members, who are, under the By-laws, part and parcels of the General or Special
Assembly that finally decides any dispute, and no reasonable or valid scale of justice
could be invoked to divide a person who, in conscience, is also the other fellow
against whom a remedy is sought for in allowing this to happen is tantamount to
slaughtering a man to his own ends;

xxx

On September 5, 1986, the Med-Arbiter who was assigned to the case issued an Order (pp. 24-
26, Rollo) granting the petition for direct certification election on the basis of the pleadings filed. The
Order said that while some of the members of petitioner union are members of the cooperative, it
cannot be denied that they are also employees within the contemplation of the Labor Code and are
therefore entitled to enjoy all the benefits of employees, including the right to self-organization (pp.
25, Rollo). This Order was appealed by SAJELCO to the Bureau of Labor Relations.

In its appeal, (pp. 27-36, Rollo) SAJELCO reiterated its position that:

. . . upon the principle that in electric cooperative as in the case of respondent,

there is a merger of the consumer-members that composed of the assembly and that
of the rank-and-file members of the petitioners-into one person or juridical status thus
rendering the proposed collective bargaining agent ineffective and/or uncalled for
considering that a grievance machinery for employees and/or member-consumers of
the cooperative-has been provided for by the By-laws as a built-in over-all arbiter
involving disputes affecting said cooperative;

Respondent Director of the Bureau of Labor Relations dismissed the appeal and sustained the ruling
of the Med-Arbiter in an order dated January 5, 1987.

On February 19, 1987, SAJELCO filed the instant petition for certiorari praying that the order of
respondent Director be set aside and another one rendered denying the holding or conduct of a
certification election among the rank and file employees of SAJELCO.

In a letter dated June 20, 1987, Atty. Ricardo Soto, Jr., counsel for private respondent union,
manifested that a direct certification election was conducted in SAJELCO, there being no restraining
order from this Court enjoining the holding thereof Likewise, Atty. Soto was of the opinion that in view
of the direct certification election conducted, the petition brought before this Court by SAJELCO has
become moot and academic (p. 48, Rollo). Attached to his letter is a copy of the minutes of the
certification election held on April 13, 1987 showing that of forty three (43) employees who voted,
thirty (30) voted for respondent union and thirteen (13) voted for "no union."

In the resolution of this court (First Division) dated September 29, 1987, respondents were required
to comment on the petition. The Solicitor General filed its comment dated October 30, 1987 wherein
it took a stand contrary to that of respondent Director. To support its stand, the Solicitor General
argued firstly, that the union members who seek to be represented by the union are the very
members of the cooperative, thereby resulting in a fusion of two personalities. Thus, it will be
inconsistent for the union members to bargain with themselves. Secondly, he said that article 243 of
the Labor Code; requires that before one can form, join or assist a labor union, he must first be
employed and to be an employee one must be under hire and must have no involvement in the
ownership of the firm. A labor union is formed for purposes of collective bargaining. The duty to
bargain exists only between employer and employees and not between an employer and his co-
owners. Thirdly, he also said that under the National Electrification Decree (P.D. No. 269, August 6,
1973) members of an electric cooperative such as petitioner, besides contributing financially to its
establishments and maintenance, participate in its management. In the latter aspect, they possess
the powers and prerogatives of managerial employees who are not eligible to join, assist or form any
labor organization (pp. 4-6 of Comment; pp 43-45, Rollo).

On November 25, 1987, We required Atty. Soto, Jr. to comment on the comment of the Solicitor
General (p. 47, Rollo). However, the notices sent to him were returned and stamped "moved to an
unknown address." But respondent Director of the Bureau of Labor Relations filed a comment on the
aforesaid comment of the Solicitor General reiterating his stand that members of private respondent
union fall under the general provision of Article 244 of the Code on who are qualified to form, join or
assist in the formation of unions as they are neither managerial employees nor persons belonging to
subversive organizations. Thus, on May 25, 1988, we gave due course to the petition (p. 79, Rollo).

The only issue presented for resolution in this petition is whether or not the employees-members of
an electric cooperative can organize themselves for purposes of collective bargaining.

This Court had the occasion to rule on this issue in the consolidated cases of Batangas I-Electric
Cooperative Labor Union vs. Romeo Young, et al., G.R. No. 62386, Bulacan II- Electric Cooperative,
Inc., vs. Hon. Eliseo A. Penaflor, et al., G.R. No. 70880 and Albay Electric Cooperative vs.
Crescencio B. Trajano et. al., G.R. No. 74560 (November 9, 1988), citing the case of Cooperative
Rural Bank of Davao City, Inc. vs. Pura Ferrer-Calleja, G.R. No. 77951, September 26,1988, where it
was held that:

A cooperative, therefore, is by its nature different from an ordinary business concern

being run either, by persons, partnerships or corporations. Its owners and/or
members are the ones who run and operate the business while the others are its
employees. As above stated, irrespective of the name of shares owned by its
members they are entitled to cast one vote each in deciding upon the affair of the
cooperative. Their share capital earn limited interests, They enjoy special privileges
as exemption from income tax and sales taxes, preferential right to supply their
products to State agencies and even exemption from minimum wage laws.

An employee therefore of such a cooperative who is a member and co-owner thereof

cannot invoke the right to collective bargaining for certainly an owner cannot bargain
with himself or his co-owners. In the opinion of August 14, 1981 of the Solicitor
General, he corectly opined that employees of cooperatives who are themselves
members of the cooperative have no right to form or join labor organizations for
purposes of collective bargaining for being themselves co-owners of the cooperative.
 However, in so far as it involves cooperatives with employees who are not members
or co-owners thereof, certainly such employees are entitled to exercise the rights of
all workers to organization, collective bargaining, negotiations and others as are
enshrined in the Constitution and existing laws of the country.

In this petition, San Jose City Electric Service Cooperative, Inc. (SAJELCO) claims that its
employees are also members of the cooperative. It cited Section 17(18) of its By-laws which
declares that:

The Board shall also create positions for subordinate employees and fix their duties
and remunerations. Only member-consumers or members of their immediate family
shall be employed by the cooperative (Emphasis supplied).

The above-cited provision, however, mentions two types of employees, namely: the members-
consumers and the members of their immediate families. As regards employees of SAJELCO who
are members-consumers, the rule is settled that they are not qualified to form, join or assist labor
organizations for purposes of collective bargaining. The reason for withholding from employees of a
cooperative who are members-co-owners the right to collective bargaining is clear: an owner cannot
bargain with himself. However, employees who are not members-consumers may form, join or assist
labor organizations for purposes of collective bargaining notwithstanding the fact that employees of
SAJELCO who are not members-consumers were employed ONLY because they are members of
the immediate family of members-consumers. The fact remains that they are not themselves
members-consumers, and as such, they are entitled to exercise the rights of all workers to
organization, collective bargaining, negotiations and others as are enshrined in Section 8, Article III
and Section 3, Article XIII of the 1987 Constitution, Labor Code of the Philippines and other related
laws (Cooperative Rural Bank of Davao City, Inc., supra, p. 10).

ACCORDINGLY, the petition is GRANTED. The assailed Order of respondent Pura Ferrer-Calleja,
Director of the Bureau of Labor Relations is hereby MODIFIED to the effect that only the rank-and-
file employees of petitioner who are not its members-consumers are entitled to self-organization,
collective bargaining, and negotiations, while other employees who are members-consumers thereof
cannot enjoy such right. The direct certification election conducted on April 13, 1987 is hereby set
aside. The Regional Office III of the Department of Labor and Employment in San Fernando,
Pampanga is hereby directed: (a) to determine the number of rank and file employees of SAJELCO
who are not themselves members-consumers; (b) to resolve whether or not there is compliance with
the requirements set forth in Article 257 of the Labor Code; and (c) in the affirmative, to immediately
conduct a direct certification election among the rank and file employees of SAJELCO who are not
members-consumers.

SO ORDERED.

3. INTERNATIONAL CATHOLIC IMMIGRATION COMMISSION, petitioner

vs
HON. PURA CALLEJA IN HER CAPACITY AS DIRECTOR OF THE BUREAU OF LABOR
RELATIONS AND TRADE UNIONS OF THE PHILIPPINES AND ALLIED SERVICES (TUPAS)
WFTU respondents. G.R. No. 85750 September 28, 1990
KAPISANAN NG MANGGAGAWA AT TAC SA IRRI-ORGANIZED LABOR ASSOCIATION IN LINE
INDUSTRIES AND AGRICULTURE, petitioner,
vs
SECRETARY OF LABOR AND EMPLOYMENT AND INTERNATIONAL RICE RESEARCH
INSTITUTE, INC., respondents.

Araullo, Zambrano, Gruba, Chua Law Firm for petitioner in 85750.

Dominguez, Armamento, Cabana & Associates for petitioner in G.R. No. 89331.

Jimenez & Associates for IRRI.

Alfredo L. Bentulan for private respondent in 85750.

G.R. No. 89331 September 28, 1990

MELENCIO-HERRERA, J.:

Consolidated on 11 December 1989, these two cases involve the validity of the claim of immunity by
the International Catholic Migration Commission (ICMC) and the International Rice Research
Institute, Inc. (IRRI) from the application of Philippine labor laws.

Facts and Issues

A. G.R. No. 85750 the International Catholic Migration Commission (ICMC) Case.

As an aftermath of the Vietnam War, the plight of Vietnamese refugees fleeing from South Vietnam's
communist rule confronted the international community.

In response to this crisis, on 23 February 1981, an Agreement was forged between the Philippine
Government and the United Nations High Commissioner for Refugees whereby an operating center
for processing Indo-Chinese refugees for eventual resettlement to other countries was to be
established in Bataan (Annex "A", Rollo, pp. 22-32).

ICMC was one of those accredited by the Philippine Government to operate the refugee processing
center in Morong, Bataan. It was incorporated in New York, USA, at the request of the Holy See, as
a non-profit agency involved in international humanitarian and voluntary work. It is duly registered
with the United Nations Economic and Social Council (ECOSOC) and enjoys Consultative Status,
Category II. As an international organization rendering voluntary and humanitarian services in the
Philippines, its activities are parallel to those of the International Committee for Migration (ICM) and
the International Committee of the Red Cross (ICRC) [DOLE Records of BLR Case No. A-2-62-
87, ICMC v. Calleja, Vol. 1].

On 14 July 1986, Trade Unions of the Philippines and Allied Services (TUPAS) filed with the then
Ministry of Labor and Employment a Petition for Certification Election among the rank and file
members employed by ICMC The latter opposed the petition on the ground that it is an international
organization registered with the United Nations and, hence, enjoys diplomatic immunity.

On 5 February 1987, Med-Arbiter Anastacio L. Bactin sustained ICMC and dismissed the petition for
lack of jurisdiction.

On appeal by TUPAS, Director Pura Calleja of the Bureau of Labor Relations (BLR), reversed the
Med-Arbiter's Decision and ordered the immediate conduct of a certification election. At that time,
ICMC's request for recognition as a specialized agency was still pending with the Department of
Foreign Affairs (DEFORAF).

Subsequently, however, on 15 July 1988, the Philippine Government, through the DEFORAF,
granted ICMC the status of a specialized agency with corresponding diplomatic privileges and
immunities, as evidenced by a Memorandum of Agreement between the Government and ICMC
(Annex "E", Petition, Rollo, pp. 41-43), infra.

ICMC then sought the immediate dismissal of the TUPAS Petition for Certification Election invoking
the immunity expressly granted but the same was denied by respondent BLR Director who, again,
ordered the immediate conduct of a pre-election conference. ICMC's two Motions for
Reconsideration were denied despite an opinion rendered by DEFORAF on 17 October 1988 that
said BLR Order violated ICMC's diplomatic immunity.

Thus, on 24 November 1988, ICMC filed the present Petition for Certiorari with Preliminary Injunction
assailing the BLR Order.

On 28 November 1988, the Court issued a Temporary Restraining Order enjoining the holding of the
certification election.

On 10 January 1989, the DEFORAF, through its Legal Adviser, retired Justice Jorge C. Coquia of the
Court of Appeals, filed a Motion for Intervention alleging that, as the highest executive department
with the competence and authority to act on matters involving diplomatic immunity and privileges,
and tasked with the conduct of Philippine diplomatic and consular relations with foreign governments
and UN organizations, it has a legal interest in the outcome of this case.

Over the opposition of the Solicitor General, the Court allowed DEFORAF intervention.

On 12 July 1989, the Second Division gave due course to the ICMC Petition and required the
submittal of memoranda by the parties, which has been complied with.

As initially stated, the issue is whether or not the grant of diplomatic privileges and immunites to
ICMC extends to immunity from the application of Philippine labor laws.
ICMC sustains the affirmative of the proposition citing (1) its Memorandum of Agreement with the
Philippine Government giving it the status of a specialized agency, (infra); (2) the Convention on the
Privileges and Immunities of Specialized Agencies, adopted by the UN General Assembly on 21
November 1947 and concurred in by the Philippine Senate through Resolution No. 91 on 17 May
1949 (the Philippine Instrument of Ratification was signed by the President on 30 August 1949 and
deposited with the UN on 20 March 1950) infra; and (3) Article II, Section 2 of the 1987 Constitution,
which declares that the Philippines adopts the generally accepted principles of international law as
part of the law of the land.

Intervenor DEFORAF upholds ICMC'S claim of diplomatic immunity and seeks an affirmance of the
DEFORAF determination that the BLR Order for a certification election among the ICMC employees
is violative of the diplomatic immunity of said organization.

Respondent BLR Director, on the other hand, with whom the Solicitor General agrees, cites State
policy and Philippine labor laws to justify its assailed Order, particularly, Article II, Section 18 and
Article III, Section 8 of the 1987 Constitution, infra; and Articles 243 and 246 of the Labor Code, as
amended, ibid. In addition, she contends that a certification election is not a litigation but a mere
investigation of a non-adversary, fact-finding character. It is not a suit against ICMC its property,
funds or assets, but is the sole concern of the workers themselves.

B. G.R. No. 89331 (The International Rice Research Institute [IRRI] Case).

Before a Decision could be rendered in the ICMC Case, the Third Division, on 11 December 1989,
resolved to consolidate G.R. No. 89331 pending before it with G.R. No. 85750, the lower-numbered
case pending with the Second Division, upon manifestation by the Solicitor General that both cases
involve similar issues.

The facts disclose that on 9 December 1959, the Philippine Government and the Ford and
Rockefeller Foundations signed a Memorandum of Understanding establishing the International Rice
Research Institute (IRRI) at Los Baos, Laguna. It was intended to be an autonomous, philanthropic,
tax-free, non-profit, non-stock organization designed to carry out the principal objective of conducting
"basic research on the rice plant, on all phases of rice production, management, distribution and
utilization with a view to attaining nutritive and economic advantage or benefit for the people of Asia
and other major rice-growing areas through improvement in quality and quantity of rice."

Initially, IRRI was organized and registered with the Securities and Exchange Commission as a
private corporation subject to all laws and regulations. However, by virtue of Pres. Decree No. 1620,
promulgated on 19 April 1979, IRRI was granted the status, prerogatives, privileges and immunities
of an international organization.

The Organized Labor Association in Line Industries and Agriculture (OLALIA), is a legitimate labor
organization with an existing local union, the Kapisanan ng Manggagawa at TAC sa IRRI
(Kapisanan, for short) in respondent IRRI.

On 20 April 1987, the Kapisanan filed a Petition for Direct Certification Election with Region IV,
Regional Office of the Department of Labor and Employment (DOLE).
IRRI opposed the petition invoking Pres. Decree No. 1620 conferring upon it the status of an
international organization and granting it immunity from all civil, criminal and administrative
proceedings under Philippine laws.

On 7 July 1987, Med-Arbiter Leonardo M. Garcia, upheld the opposition on the basis of Pres.
Decree No. 1620 and dismissed the Petition for Direct Certification.

On appeal, the BLR Director, who is the public respondent in the ICMC Case, set aside the Med-
Arbiter's Order and authorized the calling of a certification election among the rank-and-file
employees of IRRI. Said Director relied on Article 243 of the Labor Code, as amended, infra and
Article XIII, Section 3 of the 1987 Constitution, 1and held that "the immunities and privileges granted to
IRRI do not include exemption from coverage of our Labor Laws." Reconsideration sought by IRRI was
denied.

On appeal, the Secretary of Labor, in a Resolution of 5 July 1989, set aside the BLR Director's
Order, dismissed the Petition for Certification Election, and held that the grant of specialized agency
status by the Philippine Government to the IRRI bars DOLE from assuming and exercising
jurisdiction over IRRI Said Resolution reads in part as follows:

Presidential Decree No. 1620 which grants to the IRRI the status, prerogatives,
privileges and immunities of an international organization is clear and explicit. It
provides in categorical terms that:

Art. 3 The Institute shall enjoy immunity from any penal, civil and administrative
proceedings, except insofar as immunity has been expressly waived by the Director-
General of the Institution or his authorized representative.

Verily, unless and until the Institute expressly waives its immunity, no summons,
subpoena, orders, decisions or proceedings ordered by any court or administrative
or quasi-judicial agency are enforceable as against the Institute. In the case at bar
there was no such waiver made by the Director-General of the Institute. Indeed, the
Institute, at the very first opportunity already vehemently questioned the jurisdiction
of this Department by filing an ex-parte motion to dismiss the case.

Hence, the present Petition for Certiorari filed by Kapisanan alleging grave abuse of discretion by
respondent Secretary of Labor in upholding IRRI's diplomatic immunity.

The Third Division, to which the case was originally assigned, required the respondents to comment
on the petition. In a Manifestation filed on 4 August 1990, the Secretary of Labor declared that it
was "not adopting as his own" the decision of the BLR Director in the ICMC Case as well as the
Comment of the Solicitor General sustaining said Director. The last pleading was filed by IRRI on 14
August 1990.

Instead of a Comment, the Solicitor General filed a Manifestation and Motion praying that he be
excused from filing a comment "it appearing that in the earlier case of International Catholic
Migration Commission v. Hon. Pura Calleja, G.R. No. 85750. the Office of the Solicitor General had
sustained the stand of Director Calleja on the very same issue now before it, which position has
been superseded by respondent Secretary of Labor in G.R. No. 89331," the present case. The Court
acceded to the Solicitor General's prayer.

The Court is now asked to rule upon whether or not the Secretary of Labor committed grave abuse
of discretion in dismissing the Petition for Certification Election filed by Kapisanan.

Kapisanan contends that Article 3 of Pres. Decree No. 1620 granting IRRI the status, privileges,
prerogatives and immunities of an international organization, invoked by the Secretary of Labor, is
unconstitutional in so far as it deprives the Filipino workers of their fundamental and constitutional
right to form trade unions for the purpose of collective bargaining as enshrined in the 1987
Constitution.

A procedural issue is also raised. Kapisanan faults respondent Secretary of Labor for entertaining
IRRI'S appeal from the Order of the Director of the Bureau of Labor Relations directing the holding of
a certification election. Kapisanan contends that pursuant to Sections 7, 8, 9 and 10 of Rule V 2 of the
Omnibus Rules Implementing the Labor Code, the Order of the BLR Director had become final and
unappeable and that, therefore, the Secretary of Labor had no more jurisdiction over the said appeal.

On the other hand, in entertaining the appeal, the Secretary of Labor relied on Section 25 of Rep.
Act. No. 6715, which took effect on 21 March 1989, providing for the direct filing of appeal from the
Med-Arbiter to the Office of the Secretary of Labor and Employment instead of to the Director of the
Bureau of Labor Relations in cases involving certification election orders.

III

Findings in Both Cases.

There can be no question that diplomatic immunity has, in fact, been granted ICMC and IRRI.

Article II of the Memorandum of Agreement between the Philippine Government and ICMC provides
that ICMC shall have a status "similar to that of a specialized agency." Article III, Sections 4 and 5 of
the Convention on the Privileges and Immunities of Specialized Agencies, adopted by the UN
General Assembly on 21 November 1947 and concurred in by the Philippine Senate through
Resolution No. 19 on 17 May 1949, explicitly provides:

Art. III, Section 4. The specialized agencies, their property and assets, wherever
located and by whomsoever held, shall enjoy immunity from every form of legal
process except insofar as in any particular case they have expressly waived their
immunity. It is, however, understood that no waiver of immunity shall extend to any
measure of execution.

Sec. 5. The premises of the specialized agencies shall be inviolable. The property
and assets of the specialized agencies, wherever located and by whomsoever held
shall be immune from search, requisition, confiscation, expropriation and any other
 form of interference, whether by executive, administrative, judicial or legislative
action. (Emphasis supplied).

IRRI is similarly situated, Pres. Decree No. 1620, Article 3, is explicit in its grant of immunity, thus:

Art. 3. Immunity from Legal Process. The Institute shall enjoy immunity from any
penal, civil and administrative proceedings, except insofar as that immunity has been
expressly waived by the Director-General of the Institute or his authorized
representatives.

Thus it is that the DEFORAF, through its Legal Adviser, sustained ICMC'S invocation of immunity
when in a Memorandum, dated 17 October 1988, it expressed the view that "the Order of the
Director of the Bureau of Labor Relations dated 21 September 1988 for the conduct of Certification
Election within ICMC violates the diplomatic immunity of the organization." Similarly, in respect of
IRRI, the DEFORAF speaking through The Acting Secretary of Foreign Affairs, Jose D. Ingles, in a
letter, dated 17 June 1987, to the Secretary of Labor, maintained that "IRRI enjoys immunity from the
jurisdiction of DOLE in this particular instance."

The foregoing opinions constitute a categorical recognition by the Executive Branch of the
Government that ICMC and IRRI enjoy immunities accorded to international organizations, which
determination has been held to be a political question conclusive upon the Courts in order not to
embarrass a political department of Government.

It is a recognized principle of international law and under our system of separation of

powers that diplomatic immunity is essentially a political question and courts should
refuse to look beyond a determination by the executive branch of the government,
and where the plea of diplomatic immunity is recognized and affirmed by the
executive branch of the government as in the case at bar, it is then the duty of the
courts to accept the claim of immunity upon appropriate suggestion by the principal
law officer of the government . . . or other officer acting under his direction. Hence, in
adherence to the settled principle that courts may not so exercise their
jurisdiction . . . as to embarrass the executive arm of the government in conducting
foreign relations, it is accepted doctrine that in such cases the judicial department of
(this) government follows the action of the political branch and will not embarrass the
latter by assuming an antagonistic jurisdiction. 3

A brief look into the nature of international organizations and specialized agencies is in order. The
term "international organization" is generally used to describe an organization set up by agreement
between two or more states. 4 Under contemporary international law, such organizations are endowed
with some degree of international legal personality 5 such that they are capable of exercising specific
rights, duties and powers. 6 They are organized mainly as a means for conducting general international
business in which the member states have an interest. 7 The United Nations, for instance, is an
international organization dedicated to the propagation of world peace.

"Specialized agencies" are international organizations having functions in particular fields. The term
appears in Articles 57 8 and 63 9 of the Charter of the United Nations:
 The Charter, while it invests the United Nations with the general task of promoting
progress and international cooperation in economic, social, health, cultural,
educational and related matters, contemplates that these tasks will be mainly fulfilled
not by organs of the United Nations itself but by autonomous international
organizations established by inter-governmental agreements outside the United
Nations. There are now many such international agencies having functions in many
different fields, e.g. in posts, telecommunications, railways, canals, rivers, sea
transport, civil aviation, meteorology, atomic energy, finance, trade, education and
culture, health and refugees. Some are virtually world-wide in their membership,
some are regional or otherwise limited in their membership. The Charter provides
that those agencies which have "wide international responsibilities" are to be brought
into relationship with the United Nations by agreements entered into between them
and the Economic and Social Council, are then to be known as "specialized
agencies." 10

The rapid growth of international organizations under contemporary international law has paved the
way for the development of the concept of international immunities.

It is now usual for the constitutions of international organizations to contain

provisions conferring certain immunities on the organizations themselves,
representatives of their member states and persons acting on behalf of the
organizations. A series of conventions, agreements and protocols defining the
immunities of various international organizations in relation to their members
generally are now widely in force; . . . 11

There are basically three propositions underlying the grant of international immunities to international
organizations. These principles, contained in the ILO Memorandum are stated thus: 1) international
institutions should have a status which protects them against control or interference by any one
government in the performance of functions for the effective discharge of which they are responsible
to democratically constituted international bodies in which all the nations concerned are represented;
2) no country should derive any national financial advantage by levying fiscal charges on common
international funds; and 3) the international organization should, as a collectivity of States members,
be accorded the facilities for the conduct of its official business customarily extended to each other
by its individual member States. 12 The theory behind all three propositions is said to be essentially
institutional in character. "It is not concerned with the status, dignity or privileges of individuals, but with
the elements of functional independence necessary to free international institutions from national control
and to enable them to discharge their responsibilities impartially on behalf of all their
members. 13 The raison d'etre for these immunities is the assurance of unimpeded performance of their
functions by the agencies concerned.

The grant of immunity from local jurisdiction to ICMC and IRRI is clearly necessitated by their
international character and respective purposes. The objective is to avoid the danger of partiality and
interference by the host country in their internal workings. The exercise of jurisdiction by the
Department of Labor in these instances would defeat the very purpose of immunity, which is to
shield the affairs of international organizations, in accordance with international practice, from
political pressure or control by the host country to the prejudice of member States of the
organization, and to ensure the unhampered performance of their functions.

ICMC's and IRRI's immunity from local jurisdiction by no means deprives labor of its basic rights,
which are guaranteed by Article II, Section 18, 14 Article III, Section 8, 15 and Article XIII, Section 3
(supra), of the 1987 Constitution; and implemented by Articles 243 and 246 of the Labor Code, 16 relied on
by the BLR Director and by Kapisanan.

For, ICMC employees are not without recourse whenever there are disputes to be settled. Section
31 of the Convention on the Privileges and Immunities of the Specialized Agencies of the United
Nations 17 provides that "each specialized agency shall make provision for appropriate modes of
settlement of: (a) disputes arising out of contracts or other disputes of private character to which the
specialized agency is a party." Moreover, pursuant to Article IV of the Memorandum of Agreement
between ICMC the the Philippine Government, whenever there is any abuse of privilege by ICMC, the
Government is free to withdraw the privileges and immunities accorded. Thus:

Art. IV. Cooperation with Government Authorities. 1. The Commission shall

cooperate at all times with the appropriate authorities of the Government to ensure
the observance of Philippine laws, rules and regulations, facilitate the proper
administration of justice and prevent the occurrences of any abuse of the privileges
and immunities granted its officials and alien employees in Article III of this
Agreement to the Commission.

2. In the event that the Government determines that there has been an abuse of the
privileges and immunities granted under this Agreement, consultations shall be held
between the Government and the Commission to determine whether any such abuse
has occurred and, if so, the Government shall withdraw the privileges and immunities
granted the Commission and its officials.

Neither are the employees of IRRI without remedy in case of dispute with management as, in fact,
there had been organized a forum for better management-employee relationship as evidenced by
the formation of the Council of IRRI Employees and Management (CIEM) wherein "both
management and employees were and still are represented for purposes of maintaining mutual and
beneficial cooperation between IRRI and its employees." The existence of this Union factually and
tellingly belies the argument that Pres. Decree No. 1620, which grants to IRRI the status, privileges
and immunities of an international organization, deprives its employees of the right to self-
organization.

The immunity granted being "from every form of legal process except in so far as in any particular
case they have expressly waived their immunity," it is inaccurate to state that a certification election
is beyond the scope of that immunity for the reason that it is not a suit against ICMC. A certification
election cannot be viewed as an independent or isolated process. It could tugger off a series of
events in the collective bargaining process together with related incidents and/or concerted activities,
which could inevitably involve ICMC in the "legal process," which includes "any penal, civil and
administrative proceedings." The eventuality of Court litigation is neither remote and from which
international organizations are precisely shielded to safeguard them from the disruption of their
functions. Clauses on jurisdictional immunity are said to be standard provisions in the constitutions
of international Organizations. "The immunity covers the organization concerned, its property and its
assets. It is equally applicable to proceedings in personam and proceedings in rem." 18

We take note of a Manifestation, dated 28 September 1989, in the ICMC Case (p. 161, Rollo),
wherein TUPAS calls attention to the case entitled "International Catholic Migration Commission v.
NLRC, et als., (G.R. No. 72222, 30 January 1989, 169 SCRA 606), and claims that, having taken
cognizance of that dispute (on the issue of payment of salary for the unexpired portion of a six-
month probationary employment), the Court is now estopped from passing upon the question of
DOLE jurisdiction petition over ICMC.

We find no merit to said submission. Not only did the facts of said controversy occur between 1983-
1985, or before the grant to ICMC on 15 July 1988 of the status of a specialized agency with
corresponding immunities, but also because ICMC in that case did not invoke its immunity and,
therefore, may be deemed to have waived it, assuming that during that period (1983-1985) it was
tacitly recognized as enjoying such immunity.

Anent the procedural issue raised in the IRRI Case, suffice it to state that the Decision of the BLR
Director, dated 15 February 1989, had not become final because of a Motion for Reconsideration
filed by IRRI Said Motion was acted upon only on 30 March 1989 when Rep. Act No. 6715, which
provides for direct appeals from the Orders of the Med-Arbiter to the Secretary of Labor in
certification election cases either from the order or the results of the election itself, was already in
effect, specifically since 21 March 1989. Hence, no grave abuse of discretion may be imputed to
respondent Secretary of Labor in his assumption of appellate jurisdiction, contrary to Kapisanan's
allegations. The pertinent portion of that law provides:

Art. 259. Any party to an election may appeal the order or results of the election as
determined by the Med-Arbiter directly to the Secretary of Labor and Employment on
the ground that the rules and regulations or parts thereof established by the
Secretary of Labor and Employment for the conduct of the election have been
violated. Such appeal shall be decided within 15 calendar days (Emphasis supplied).

En passant, the Court is gratified to note that the heretofore antagonistic positions assumed by two
departments of the executive branch of government have been rectified and the resultant
embarrassment to the Philippine Government in the eyes of the international community now,
hopefully, effaced.

WHEREFORE, in G.R. No. 85750 (the ICMC Case), the Petition is GRANTED, the Order of the
Bureau of Labor Relations for certification election is SET ASIDE, and the Temporary Restraining
Order earlier issued is made PERMANENT.

In G.R. No. 89331 (the IRRI Case), the Petition is Dismissed, no grave abuse of discretion having
been committed by the Secretary of Labor and Employment in dismissing the Petition for
Certification Election.

No pronouncement as to costs.
SO ORDERED.

4. BENJAMIN VICTORIANO, plaintiff-appellee,

vs.
ELIZALDE ROPE WORKERS' UNION and ELIZALDE ROPE FACTORY, INC., defendants,
ELIZALDE ROPE WORKERS' UNION, defendant-appellant.

Salonga, Ordonez, Yap, Sicat & Associates for plaintiff-appellee.

Cipriano Cid & Associates for defendant-appellant.

G.R. No. L-25246 September 12, 1974

ZALDIVAR, J.:p

Appeal to this Court on purely questions of law from the decision of the Court of First Instance of
Manila in its Civil Case No. 58894.

The undisputed facts that spawned the instant case follow:

Benjamin Victoriano (hereinafter referred to as Appellee), a member of the religious sect known as
the "Iglesia ni Cristo", had been in the employ of the Elizalde Rope Factory, Inc. (hereinafter referred
to as Company) since 1958. As such employee, he was a member of the Elizalde Rope Workers'
Union (hereinafter referred to as Union) which had with the Company a collective bargaining
agreement containing a closed shop provision which reads as follows:

Membership in the Union shall be required as a condition of employment for all

permanent employees workers covered by this Agreement.

The collective bargaining agreement expired on March 3, 1964 but was renewed the following day,
March 4, 1964.

Under Section 4(a), paragraph 4, of Republic Act No. 875, prior to its amendment by Republic Act
No. 3350, the employer was not precluded "from making an agreement with a labor organization to
require as a condition of employment membership therein, if such labor organization is the
representative of the employees." On June 18, 1961, however, Republic Act No. 3350 was enacted,
introducing an amendment to paragraph (4) subsection (a) of section 4 of Republic Act No. 875,
as follows: ... "but such agreement shall not cover members of any religious sects which prohibit
affiliation of their members in any such labor organization".

Being a member of a religious sect that prohibits the affiliation of its members with any labor
organization, Appellee presented his resignation to appellant Union in 1962, and when no action was
taken thereon, he reiterated his resignation on September 3, 1974. Thereupon, the Union wrote a
formal letter to the Company asking the latter to separate Appellee from the service in view of the
fact that he was resigning from the Union as a member. The management of the Company in turn
notified Appellee and his counsel that unless the Appellee could achieve a satisfactory arrangement
with the Union, the Company would be constrained to dismiss him from the service. This prompted
Appellee to file an action for injunction, docketed as Civil Case No. 58894 in the Court of First
Instance of Manila to enjoin the Company and the Union from dismissing Appellee. 1 In its answer, the
Union invoked the "union security clause" of the collective bargaining agreement; assailed the
constitutionality of Republic Act No. 3350; and contended that the Court had no jurisdiction over the case,
pursuant to Republic Act No. 875, Sections 24 and 9 (d) and (e). 2 Upon the facts agreed upon by the
parties during the pre-trial conference, the Court a quo rendered its decision on August 26, 1965, the
dispositive portion of which reads:

IN VIEW OF THE FOREGOING, judgment is rendered enjoining the defendant

Elizalde Rope Factory, Inc. from dismissing the plaintiff from his present employment
and sentencing the defendant Elizalde Rope Workers' Union to pay the plaintiff P500
for attorney's fees and the costs of this action.3

From this decision, the Union appealed directly to this Court on purely questions of law, assigning
the following errors:

I. That the lower court erred when it did not rule that Republic Act No. 3350 is
unconstitutional.

II. That the lower court erred when it sentenced appellant herein to pay plaintiff the
sum of P500 as attorney's fees and the cost thereof.

In support of the alleged unconstitutionality of Republic Act No. 3350, the Union contented, firstly,
that the Act infringes on the fundamental right to form lawful associations; that "the very phraseology
of said Republic Act 3350, that membership in a labor organization is banned to all those belonging
to such religious sect prohibiting affiliation with any labor organization" 4 , "prohibits all the members of
a given religious sect from joining any labor union if such sect prohibits affiliations of their members
thereto" 5 ; and, consequently, deprives said members of their constitutional right to form or join lawful
associations or organizations guaranteed by the Bill of Rights, and thus becomes obnoxious to Article III,
Section 1 (6) of the 1935 Constitution. 6

Secondly, the Union contended that Republic Act No. 3350 is unconstitutional for impairing the
obligation of contracts in that, while the Union is obliged to comply with its collective bargaining
agreement containing a "closed shop provision," the Act relieves the employer from its reciprocal
obligation of cooperating in the maintenance of union membership as a condition of employment;
and that said Act, furthermore, impairs the Union's rights as it deprives the union of dues from
members who, under the Act, are relieved from the obligation to continue as such members. 7

Thirdly, the Union contended that Republic Act No. 3350 discriminatorily favors those religious sects
which ban their members from joining labor unions, in violation of Article Ill, Section 1 (7) of the 1935
Constitution; and while said Act unduly protects certain religious sects, it leaves no rights or
protection to labor organizations. 8

Fourthly, Republic Act No. 3350, asserted the Union, violates the constitutional provision that "no
religious test shall be required for the exercise of a civil right," in that the laborer's exercise of his civil
right to join associations for purposes not contrary to law has to be determined under the Act by his
affiliation with a religious sect; that conversely, if a worker has to sever his religious connection with
a sect that prohibits membership in a labor organization in order to be able to join a labor
organization, said Act would violate religious freedom. 9

Fifthly, the Union contended that Republic Act No. 3350, violates the "equal protection of laws"
clause of the Constitution, it being a discriminately legislation, inasmuch as by exempting from the
operation of closed shop agreement the members of the "Iglesia ni Cristo", it has granted said
members undue advantages over their fellow workers, for while the Act exempts them from union
obligation and liability, it nevertheless entitles them at the same time to the enjoyment of all
concessions, benefits and other emoluments that the union might secure from the employer. 10

Sixthly, the Union contended that Republic Act No. 3350 violates the constitutional provision
regarding the promotion of social justice. 11

Appellant Union, furthermore, asserted that a "closed shop provision" in a collective bargaining
agreement cannot be considered violative of religious freedom, as to call for the amendment
introduced by Republic Act No. 3350; 12 and that unless Republic Act No. 3350 is declared
unconstitutional, trade unionism in this country would be wiped out as employers would prefer to hire or
employ members of the Iglesia ni Cristo in order to do away with labor organizations. 13

Appellee, assailing appellant's arguments, contended that Republic Act No. 3350 does not violate
the right to form lawful associations, for the right to join associations includes the right not to join or
to resign from a labor organization, if one's conscience does not allow his membership therein, and
the Act has given substance to such right by prohibiting the compulsion of workers to join labor
organizations; 14 that said Act does not impair the obligation of contracts for said law formed part of, and
was incorporated into, the terms of the closed shop agreement; 15that the Act does not violate the
establishment of religion clause or separation of Church and State, for Congress, in enacting said law,
merely accommodated the religious needs of those workers whose religion prohibits its members from
joining labor unions, and balanced the collective rights of organized labor with the constitutional right of an
individual to freely exercise his chosen religion; that the constitutional right to the free exercise of one's
religion has primacy and preference over union security measures which are merely contractual 16 ; that
said Act does not violate the constitutional provision of equal protection, for the classification of workers
under the Act depending on their religious tenets is based on substantial distinction, is germane to the
purpose of the law, and applies to all the members of a given class; 17 that said Act, finally, does not
violate the social justice policy of the Constitution, for said Act was enacted precisely to equalize
employment opportunities for all citizens in the midst of the diversities of their religious beliefs." 18

I. Before We proceed to the discussion of the first assigned error, it is necessary to premise that
there are some thoroughly established principles which must be followed in all cases where
questions of constitutionality as obtains in the instant case are involved. All presumptions are
indulged in favor of constitutionality; one who attacks a statute, alleging unconstitutionality must
prove its invalidity beyond a reasonable doubt, that a law may work hardship does not render it
unconstitutional; that if any reasonable basis may be conceived which supports the statute, it will be
upheld, and the challenger must negate all possible bases; that the courts are not concerned with
the wisdom, justice, policy, or expediency of a statute; and that a liberal interpretation of the
constitution in favor of the constitutionality of legislation should be adopted. 19
1. Appellant Union's contention that Republic Act No. 3350 prohibits and bans the members of such
religious sects that forbid affiliation of their members with labor unions from joining labor unions
appears nowhere in the wording of Republic Act No. 3350; neither can the same be deduced by
necessary implication therefrom. It is not surprising, therefore, that appellant, having thus misread
the Act, committed the error of contending that said Act is obnoxious to the constitutional provision
on freedom of association.

Both the Constitution and Republic Act No. 875 recognize freedom of association. Section 1 (6) of
Article III of the Constitution of 1935, as well as Section 7 of Article IV of the Constitution of 1973,
provide that the right to form associations or societies for purposes not contrary to law shall not be
abridged. Section 3 of Republic Act No. 875 provides that employees shall have the right to self-
organization and to form, join of assist labor organizations of their own choosing for the purpose of
collective bargaining and to engage in concerted activities for the purpose of collective bargaining
and other mutual aid or protection. What the Constitution and the Industrial Peace Act recognize and
guarantee is the "right" to form or join associations. Notwithstanding the different theories
propounded by the different schools of jurisprudence regarding the nature and contents of a "right", it
can be safely said that whatever theory one subscribes to, a right comprehends at least two broad
notions, namely: first, liberty or freedom, i.e., the absence of legal restraint, whereby an employee
may act for himself without being prevented by law; and second, power, whereby an employee may,
as he pleases, join or refrain from Joining an association. It is, therefore, the employee who should
decide for himself whether he should join or not an association; and should he choose to join, he
himself makes up his mind as to which association he would join; and even after he has joined, he
still retains the liberty and the power to leave and cancel his membership with said organization at
any time. 20 It is clear, therefore, that the right to join a union includes the right to abstain from joining any
union. 21 Inasmuch as what both the Constitution and the Industrial Peace Act have recognized, and
guaranteed to the employee, is the "right" to join associations of his choice, it would be absurd to say that
the law also imposes, in the same breath, upon the employee the duty to join associations. The law does
not enjoin an employee to sign up with any association.

The right to refrain from joining labor organizations recognized by Section 3 of the Industrial Peace
Act is, however, limited. The legal protection granted to such right to refrain from joining is withdrawn
by operation of law, where a labor union and an employer have agreed on a closed shop, by virtue of
which the employer may employ only member of the collective bargaining union, and the employees
must continue to be members of the union for the duration of the contract in order to keep their jobs.
Thus Section 4 (a) (4) of the Industrial Peace Act, before its amendment by Republic Act No. 3350,
provides that although it would be an unfair labor practice for an employer "to discriminate in regard
to hire or tenure of employment or any term or condition of employment to encourage or discourage
membership in any labor organization" the employer is, however, not precluded "from making an
agreement with a labor organization to require as a condition of employment membership therein, if
such labor organization is the representative of the employees". By virtue, therefore, of a closed
shop agreement, before the enactment of Republic Act No. 3350, if any person, regardless of his
religious beliefs, wishes to be employed or to keep his employment, he must become a member of
the collective bargaining union. Hence, the right of said employee not to join the labor union is
curtailed and withdrawn.
To that all-embracing coverage of the closed shop arrangement, Republic Act No. 3350 introduced
an exception, when it added to Section 4 (a) (4) of the Industrial Peace Act the following proviso: "but
such agreement shall not cover members of any religious sects which prohibit affiliation of their
members in any such labor organization". Republic Act No. 3350 merely excludes ipso jure from the
application and coverage of the closed shop agreement the employees belonging to any religious
sects which prohibit affiliation of their members with any labor organization. What the exception
provides, therefore, is that members of said religious sects cannot be compelled or coerced to join
labor unions even when said unions have closed shop agreements with the employers; that in spite
of any closed shop agreement, members of said religious sects cannot be refused employment or
dismissed from their jobs on the sole ground that they are not members of the collective bargaining
union. It is clear, therefore, that the assailed Act, far from infringing the constitutional provision on
freedom of association, upholds and reinforces it. It does not prohibit the members of said religious
sects from affiliating with labor unions. It still leaves to said members the liberty and the power to
affiliate, or not to affiliate, with labor unions. If, notwithstanding their religious beliefs, the members of
said religious sects prefer to sign up with the labor union, they can do so. If in deference and fealty
to their religious faith, they refuse to sign up, they can do so; the law does not coerce them to join;
neither does the law prohibit them from joining; and neither may the employer or labor union compel
them to join. Republic Act No. 3350, therefore, does not violate the constitutional provision on
freedom of association.

2. Appellant Union also contends that the Act is unconstitutional for impairing the obligation of its
contract, specifically, the "union security clause" embodied in its Collective Bargaining Agreement
with the Company, by virtue of which "membership in the union was required as a condition for
employment for all permanent employees workers". This agreement was already in existence at the
time Republic Act No. 3350 was enacted on June 18, 1961, and it cannot, therefore, be deemed to
have been incorporated into the agreement. But by reason of this amendment, Appellee, as well as
others similarly situated, could no longer be dismissed from his job even if he should cease to be a
member, or disaffiliate from the Union, and the Company could continue employing him
notwithstanding his disaffiliation from the Union. The Act, therefore, introduced a change into the
express terms of the union security clause; the Company was partly absolved by law from the
contractual obligation it had with the Union of employing only Union members in permanent
positions, It cannot be denied, therefore, that there was indeed an impairment of said union security
clause.

According to Black, any statute which introduces a change into the express terms of the contract, or
its legal construction, or its validity, or its discharge, or the remedy for its enforcement, impairs the
contract. The extent of the change is not material. It is not a question of degree or manner or cause,
but of encroaching in any respect on its obligation or dispensing with any part of its force. There is
an impairment of the contract if either party is absolved by law from its performance. 22 Impairment
has also been predicated on laws which, without destroying contracts, derogate from substantial
contractual rights. 23

It should not be overlooked, however, that the prohibition to impair the obligation of contracts is not
absolute and unqualified. The prohibition is general, affording a broad outline and requiring
construction to fill in the details. The prohibition is not to be read with literal exactness like a
mathematical formula, for it prohibits unreasonable impairment only. 24 In spite of the constitutional
prohibition, the State continues to possess authority to safeguard the vital interests of its people.
Legislation appropriate to safeguarding said interests may modify or abrogate contracts already in
effect. 25 For not only are existing laws read into contracts in order to fix the obligations as between the
parties, but the reservation of essential attributes of sovereign power is also read into contracts as a
postulate of the legal order. All contracts made with reference to any matter that is subject to regulation
under the police power must be understood as made in reference to the possible exercise of that
power. 26 Otherwise, important and valuable reforms may be precluded by the simple device of entering
into contracts for the purpose of doing that which otherwise may be prohibited. The policy of protecting
contracts against impairment presupposes the maintenance of a government by virtue of which
contractual relations are worthwhile a government which retains adequate authority to secure the peace
and good order of society. The contract clause of the Constitution must, therefore, be not only in harmony
with, but also in subordination to, in appropriate instances, the reserved power of the state to safeguard
the vital interests of the people. It follows that not all legislations, which have the effect of impairing a
contract, are obnoxious to the constitutional prohibition as to impairment, and a statute passed in the
legitimate exercise of police power, although it incidentally destroys existing contract rights, must be
upheld by the courts. This has special application to contracts regulating relations between capital and
labor which are not merely contractual, and said labor contracts, for being impressed with public interest,
must yield to the common good. 27

In several occasions this Court declared that the prohibition against impairing the obligations of
contracts has no application to statutes relating to public subjects within the domain of the general
legislative powers of the state involving public welfare. 28 Thus, this Court also held that the Blue
Sunday Law was not an infringement of the obligation of a contract that required the employer to furnish
work on Sundays to his employees, the law having been enacted to secure the well-being and happiness
of the laboring class, and being, furthermore, a legitimate exercise of the police power. 29

In order to determine whether legislation unconstitutionally impairs contract obligations, no

unchanging yardstick, applicable at all times and under all circumstances, by which the validity of
each statute may be measured or determined, has been fashioned, but every case must be
determined upon its own circumstances. Legislation impairing the obligation of contracts can be
sustained when it is enacted for the promotion of the general good of the people, and when the
means adopted to secure that end are reasonable. Both the end sought and the means adopted
must be legitimate, i.e., within the scope of the reserved power of the state construed in harmony
with the constitutional limitation of that power. 30

What then was the purpose sought to be achieved by Republic Act No. 3350? Its purpose was to
insure freedom of belief and religion, and to promote the general welfare by preventing
discrimination against those members of religious sects which prohibit their members from joining
labor unions, confirming thereby their natural, statutory and constitutional right to work, the fruits of
which work are usually the only means whereby they can maintain their own life and the life of their
dependents. It cannot be gainsaid that said purpose is legitimate.

The questioned Act also provides protection to members of said religious sects against two
aggregates of group strength from which the individual needs protection. The individual employee, at
various times in his working life, is confronted by two aggregates of power collective labor,
directed by a union, and collective capital, directed by management. The union, an institution
developed to organize labor into a collective force and thus protect the individual employee from the
power of collective capital, is, paradoxically, both the champion of employee rights, and a new
source of their frustration. Moreover, when the Union interacts with management, it produces yet a
third aggregate of group strength from which the individual also needs protection the collective
bargaining relationship. 31

The aforementioned purpose of the amendatory law is clearly seen in the Explanatory Note to House
Bill No. 5859, which later became Republic Act No. 3350, as follows:

It would be unthinkable indeed to refuse employing a person who, on account of his

religious beliefs and convictions, cannot accept membership in a labor organization
although he possesses all the qualifications for the job. This is tantamount to
punishing such person for believing in a doctrine he has a right under the law to
believe in. The law would not allow discrimination to flourish to the detriment of those
whose religion discards membership in any labor organization. Likewise, the law
would not commend the deprivation of their right to work and pursue a modest
means of livelihood, without in any manner violating their religious faith and/or
belief. 32

It cannot be denied, furthermore, that the means adopted by the Act to achieve that purpose
exempting the members of said religious sects from coverage of union security agreements is
reasonable.

It may not be amiss to point out here that the free exercise of religious profession or belief is superior
to contract rights. In case of conflict, the latter must, therefore, yield to the former. The Supreme
Court of the United States has also declared on several occasions that the rights in the First
Amendment, which include freedom of religion, enjoy a preferred position in the constitutional
system. 33 Religious freedom, although not unlimited, is a fundamental personal right and liberty, 34 and
has a preferred position in the hierarchy of values. Contractual rights, therefore, must yield to freedom of
religion. It is only where unavoidably necessary to prevent an immediate and grave danger to the security
and welfare of the community that infringement of religious freedom may be justified, and only to the
smallest extent necessary to avoid the danger.

3. In further support of its contention that Republic Act No. 3350 is unconstitutional, appellant Union
averred that said Act discriminates in favor of members of said religious sects in violation of Section
1 (7) of Article Ill of the 1935 Constitution, and which is now Section 8 of Article IV of the 1973
Constitution, which provides:

No law shall be made respecting an establishment of religion, or prohibiting the free

exercise thereof, and the free exercise and enjoyment of religious profession and
worship, without discrimination and preference, shall forever be allowed. No religious
test shall be required for the exercise of civil or political rights.

The constitutional provision into only prohibits legislation for the support of any religious tenets or the
modes of worship of any sect, thus forestalling compulsion by law of the acceptance of any creed or
the practice of any form of worship, 35 but also assures the free exercise of one's chosen form of religion
within limits of utmost amplitude. It has been said that the religion clauses of the Constitution are all
designed to protect the broadest possible liberty of conscience, to allow each man to believe as his
conscience directs, to profess his beliefs, and to live as he believes he ought to live, consistent with the
liberty of others and with the common good. 36 Any legislation whose effect or purpose is to impede the
observance of one or all religions, or to discriminate invidiously between the religions, is invalid, even
though the burden may be characterized as being only indirect. 37 But if the stage regulates conduct by
enacting, within its power, a general law which has for its purpose and effect to advance the state's
secular goals, the statute is valid despite its indirect burden on religious observance, unless the state can
accomplish its purpose without imposing such burden. 38

In Aglipay v. Ruiz 39 , this Court had occasion to state that the government should not be precluded from
pursuing valid objectives secular in character even if the incidental result would be favorable to a religion
or sect. It has likewise been held that the statute, in order to withstand the strictures of constitutional
prohibition, must have a secular legislative purpose and a primary effect that neither advances nor inhibits
religion. 40 Assessed by these criteria, Republic Act No. 3350 cannot be said to violate the constitutional
inhibition of the "no-establishment" (of religion) clause of the Constitution.

The purpose of Republic Act No. 3350 is secular, worldly, and temporal, not spiritual or religious or
holy and eternal. It was intended to serve the secular purpose of advancing the constitutional right to
the free exercise of religion, by averting that certain persons be refused work, or be dismissed from
work, or be dispossessed of their right to work and of being impeded to pursue a modest means of
livelihood, by reason of union security agreements. To help its citizens to find gainful employment
whereby they can make a living to support themselves and their families is a valid objective of the
state. In fact, the state is enjoined, in the 1935 Constitution, to afford protection to labor, and regulate
the relations between labor and capital and industry. 41 More so now in the 1973 Constitution where it is
mandated that "the State shall afford protection to labor, promote full employment and equality in
employment, ensure equal work opportunities regardless of sex, race or creed and regulate the relation
between workers and employers. 42

The primary effects of the exemption from closed shop agreements in favor of members of religious
sects that prohibit their members from affiliating with a labor organization, is the protection of said
employees against the aggregate force of the collective bargaining agreement, and relieving certain
citizens of a burden on their religious beliefs; and by eliminating to a certain extent economic
insecurity due to unemployment, which is a serious menace to the health, morals, and welfare of the
people of the State, the Act also promotes the well-being of society. It is our view that the exemption
from the effects of closed shop agreement does not directly advance, or diminish, the interests of
any particular religion. Although the exemption may benefit those who are members of religious
sects that prohibit their members from joining labor unions, the benefit upon the religious sects is
merely incidental and indirect. The "establishment clause" (of religion) does not ban regulation on
conduct whose reason or effect merely happens to coincide or harmonize with the tenets of some or
all religions. 43 The free exercise clause of the Constitution has been interpreted to require that religious
exercise be preferentially aided. 44

We believe that in enacting Republic Act No. 3350, Congress acted consistently with the spirit of the
constitutional provision. It acted merely to relieve the exercise of religion, by certain persons, of a
burden that is imposed by union security agreements. It was Congress itself that imposed that
burden when it enacted the Industrial Peace Act (Republic Act 875), and, certainly, Congress, if it so
deems advisable, could take away the same burden. It is certain that not every conscience can be
accommodated by all the laws of the land; but when general laws conflict with scrupples of
conscience, exemptions ought to be granted unless some "compelling state interest" intervenes. 45
In
the instant case, We see no such compelling state interest to withhold exemption.

Appellant bewails that while Republic Act No. 3350 protects members of certain religious sects, it
leaves no right to, and is silent as to the protection of, labor organizations. The purpose of Republic
Act No. 3350 was not to grant rights to labor unions. The rights of labor unions are amply provided
for in Republic Act No. 875 and the new Labor Code. As to the lamented silence of the Act regarding
the rights and protection of labor unions, suffice it to say, first, that the validity of a statute is
determined by its provisions, not by its silence 46 ; and, second, the fact that the law may work hardship
does not render it unconstitutional. 47

It would not be amiss to state, regarding this matter, that to compel persons to join and remain
members of a union to keep their jobs in violation of their religious scrupples, would hurt, rather than
help, labor unions, Congress has seen it fit to exempt religious objectors lest their resistance spread
to other workers, for religious objections have contagious potentialities more than political and
philosophic objections.

Furthermore, let it be noted that coerced unity and loyalty even to the country, and a fortiori to a
labor union assuming that such unity and loyalty can be attained through coercion is not a goal
that is constitutionally obtainable at the expense of religious liberty. 48 A desirable end cannot be
promoted by prohibited means.

4. Appellants' fourth contention, that Republic Act No. 3350 violates the constitutional prohibition
against requiring a religious test for the exercise of a civil right or a political right, is not well taken.
The Act does not require as a qualification, or condition, for joining any lawful association
membership in any particular religion or in any religious sect; neither does the Act require affiliation
with a religious sect that prohibits its members from joining a labor union as a condition or
qualification for withdrawing from a labor union. Joining or withdrawing from a labor union requires a
positive act. Republic Act No. 3350 only exempts members with such religious affiliation from the
coverage of closed shop agreements. So, under this Act, a religious objector is not required to do a
positive act to exercise the right to join or to resign from the union. He is exempted ipso
jure without need of any positive act on his part. A conscientious religious objector need not perform
a positive act or exercise the right of resigning from the labor union he is exempted from the
coverage of any closed shop agreement that a labor union may have entered into. How then can
there be a religious test required for the exercise of a right when no right need be exercised?

We have said that it was within the police power of the State to enact Republic Act No. 3350, and
that its purpose was legal and in consonance with the Constitution. It is never an illegal evasion of a
constitutional provision or prohibition to accomplish a desired result, which is lawful in itself, by
discovering or following a legal way to do it. 49

5. Appellant avers as its fifth ground that Republic Act No. 3350 is a discriminatory legislation,
inasmuch as it grants to the members of certain religious sects undue advantages over other
workers, thus violating Section 1 of Article III of the 1935 Constitution which forbids the denial to any
person of the equal protection of the laws. 50
The guaranty of equal protection of the laws is not a guaranty of equality in the application of the
laws upon all citizens of the state. It is not, therefore, a requirement, in order to avoid the
constitutional prohibition against inequality, that every man, woman and child should be affected
alike by a statute. Equality of operation of statutes does not mean indiscriminate operation on
persons merely as such, but on persons according to the circumstances surrounding them. It
guarantees equality, not identity of rights. The Constitution does not require that things which are
different in fact be treated in law as though they were the same. The equal protection clause does
not forbid discrimination as to things that are different. 51 It does not prohibit legislation which is limited
either in the object to which it is directed or by the territory within which it is to operate.

The equal protection of the laws clause of the Constitution allows classification. Classification in law,
as in the other departments of knowledge or practice, is the grouping of things in speculation or
practice because they agree with one another in certain particulars. A law is not invalid because of
simple inequality. 52 The very idea of classification is that of inequality, so that it goes without saying that
the mere fact of inequality in no manner determines the matter of constitutionality. 53 All that is required of
a valid classification is that it be reasonable, which means that the classification should be based on
substantial distinctions which make for real differences; that it must be germane to the purpose of the law;
that it must not be limited to existing conditions only; and that it must apply equally to each member of the
class. 54 This Court has held that the standard is satisfied if the classification or distinction is based on a
reasonable foundation or rational basis and is not palpably arbitrary. 55

In the exercise of its power to make classifications for the purpose of enacting laws over matters
within its jurisdiction, the state is recognized as enjoying a wide range of discretion. 56 It is not
necessary that the classification be based on scientific or marked differences of things or in their
relation. 57 Neither is it necessary that the classification be made with mathematical nicety. 58 Hence
legislative classification may in many cases properly rest on narrow distinctions, 59 for the equal protection
guaranty does not preclude the legislature from recognizing degrees of evil or harm, and legislation is
addressed to evils as they may appear.

We believe that Republic Act No. 3350 satisfies the aforementioned requirements. The Act classifies
employees and workers, as to the effect and coverage of union shop security agreements, into those
who by reason of their religious beliefs and convictions cannot sign up with a labor union, and those
whose religion does not prohibit membership in labor unions. Tile classification rests on real or
substantial, not merely imaginary or whimsical, distinctions. There is such real distinction in the
beliefs, feelings and sentiments of employees. Employees do not believe in the same religious faith
and different religions differ in their dogmas and cannons. Religious beliefs, manifestations and
practices, though they are found in all places, and in all times, take so many varied forms as to be
almost beyond imagination. There are many views that comprise the broad spectrum of religious
beliefs among the people. There are diverse manners in which beliefs, equally paramount in the
lives of their possessors, may be articulated. Today the country is far more heterogenous in religion
than before, differences in religion do exist, and these differences are important and should not be
ignored.

Even from the phychological point of view, the classification is based on real and important
differences. Religious beliefs are not mere beliefs, mere ideas existing only in the mind, for they
carry with them practical consequences and are the motives of certain rules. of human conduct and
the justification of certain acts. 60 Religious sentiment makes a man view things and events in their
relation to his God. It gives to human life its distinctive character, its tone, its happiness or unhappiness its
enjoyment or irksomeness. Usually, a strong and passionate desire is involved in a religious belief. To
certain persons, no single factor of their experience is more important to them than their religion, or their
not having any religion. Because of differences in religious belief and sentiments, a very poor person may
consider himself better than the rich, and the man who even lacks the necessities of life may be more
cheerful than the one who has all possible luxuries. Due to their religious beliefs people, like the martyrs,
became resigned to the inevitable and accepted cheerfully even the most painful and excruciating pains.
Because of differences in religious beliefs, the world has witnessed turmoil, civil strife, persecution,
hatred, bloodshed and war, generated to a large extent by members of sects who were intolerant of other
religious beliefs. The classification, introduced by Republic Act No. 3350, therefore, rests on substantial
distinctions.

The classification introduced by said Act is also germane to its purpose. The purpose of the law is
precisely to avoid those who cannot, because of their religious belief, join labor unions, from being
deprived of their right to work and from being dismissed from their work because of union shop
security agreements.

Republic Act No. 3350, furthermore, is not limited in its application to conditions existing at the time
of its enactment. The law does not provide that it is to be effective for a certain period of time only. It
is intended to apply for all times as long as the conditions to which the law is applicable exist. As
long as there are closed shop agreements between an employer and a labor union, and there are
employees who are prohibited by their religion from affiliating with labor unions, their exemption from
the coverage of said agreements continues.

Finally, the Act applies equally to all members of said religious sects; this is evident from its
provision. The fact that the law grants a privilege to members of said religious sects cannot by itself
render the Act unconstitutional, for as We have adverted to, the Act only restores to them their
freedom of association which closed shop agreements have taken away, and puts them in the same
plane as the other workers who are not prohibited by their religion from joining labor unions. The
circumstance, that the other employees, because they are differently situated, are not granted the
same privilege, does not render the law unconstitutional, for every classification allowed by the
Constitution by its nature involves inequality.

The mere fact that the legislative classification may result in actual inequality is not violative of the
right to equal protection, for every classification of persons or things for regulation by law produces
inequality in some degree, but the law is not thereby rendered invalid. A classification otherwise
reasonable does not offend the constitution simply because in practice it results in some
inequality. 61 Anent this matter, it has been said that whenever it is apparent from the scope of the law
that its object is for the benefit of the public and the means by which the benefit is to be obtained are of
public character, the law will be upheld even though incidental advantage may occur to individuals beyond
those enjoyed by the general public. 62

6. Appellant's further contention that Republic Act No. 3350 violates the constitutional provision on
social justice is also baseless. Social justice is intended to promote the welfare of all the
people. 63 Republic Act No. 3350 promotes that welfare insofar as it looks after the welfare of those who,
because of their religious belief, cannot join labor unions; the Act prevents their being deprived of work
and of the means of livelihood. In determining whether any particular measure is for public advantage, it is
not necessary that the entire state be directly benefited it is sufficient that a portion of the state be
benefited thereby.

Social justice also means the adoption by the Government of measures calculated to insure
economic stability of all component elements of society, through the maintenance of a proper
economic and social equilibrium in the inter-relations of the members of the community. 64 Republic
Act No. 3350 insures economic stability to the members of a religious sect, like the Iglesia ni Cristo, who
are also component elements of society, for it insures security in their employment, notwithstanding their
failure to join a labor union having a closed shop agreement with the employer. The Act also advances the
proper economic and social equilibrium between labor unions and employees who cannot join labor
unions, for it exempts the latter from the compelling necessity of joining labor unions that have closed
shop agreements and equalizes, in so far as opportunity to work is concerned, those whose religion
prohibits membership in labor unions with those whose religion does not prohibit said membership. Social
justice does not imply social equality, because social inequality will always exist as long as social relations
depend on personal or subjective proclivities. Social justice does not require legal equality because legal
equality, being a relative term, is necessarily premised on differentiations based on personal or natural
conditions. 65 Social justice guarantees equality of opportunity 66 , and this is precisely what Republic Act
No. 3350 proposes to accomplish it gives laborers, irrespective of their religious scrupples, equal
opportunity for work.

7. As its last ground, appellant contends that the amendment introduced by Republic Act No. 3350 is
not called for in other words, the Act is not proper, necessary or desirable. Anent this matter, it has
been held that a statute which is not necessary is not, for that reason, unconstitutional; that in
determining the constitutional validity of legislation, the courts are unconcerned with issues as to the
necessity for the enactment of the legislation in question. 67 Courts do inquire into the wisdom of
laws. 68 Moreover, legislatures, being chosen by the people, are presumed to understand and correctly
appreciate the needs of the people, and it may change the laws accordingly. 69 The fear is entertained by
appellant that unless the Act is declared unconstitutional, employers will prefer employing members of
religious sects that prohibit their members from joining labor unions, and thus be a fatal blow to unionism.
We do not agree. The threat to unionism will depend on the number of employees who are members of
the religious sects that control the demands of the labor market. But there is really no occasion now to go
further and anticipate problems We cannot judge with the material now before Us. At any rate, the validity
of a statute is to be determined from its general purpose and its efficacy to accomplish the end desired,
not from its effects on a particular case. 70 The essential basis for the exercise of power, and not a mere
incidental result arising from its exertion, is the criterion by which the validity of a statute is to be
measured. 71

II. We now pass on the second assignment of error, in support of which the Union argued that the
decision of the trial court ordering the Union to pay P500 for attorney's fees directly contravenes
Section 24 of Republic Act No. 875, for the instant action involves an industrial dispute wherein the
Union was a party, and said Union merely acted in the exercise of its rights under the union shop
provision of its existing collective bargaining contract with the Company; that said order also
contravenes Article 2208 of the Civil Code; that, furthermore, Appellee was never actually dismissed
by the defendant Company and did not therefore suffer any damage at all . 72

In refuting appellant Union's arguments, Appellee claimed that in the instant case there was really no
industrial dispute involved in the attempt to compel Appellee to maintain its membership in the union
under pain of dismissal, and that the Union, by its act, inflicted intentional harm on Appellee; that
since Appellee was compelled to institute an action to protect his right to work, appellant could
legally be ordered to pay attorney's fees under Articles 1704 and 2208 of the Civil Code. 73

The second paragraph of Section 24 of Republic Act No. 875 which is relied upon by appellant
provides that:

No suit, action or other proceedings shall be maintainable in any court against a

labor organization or any officer or member thereof for any act done by or on behalf
of such organization in furtherance of an industrial dispute to which it is a party, on
the ground only that such act induces some other person to break a contract of
employment or that it is in restraint of trade or interferes with the trade, business or
employment of some other person or with the right of some other person to dispose
of his capital or labor. (Emphasis supplied)

That there was a labor dispute in the instant case cannot be disputed for appellant sought the
discharge of respondent by virtue of the closed shop agreement and under Section 2 (j) of Republic
Act No. 875 a question involving tenure of employment is included in the term "labor dispute". 74 The
discharge or the act of seeking it is the labor dispute itself. It being the labor dispute itself, that very same
act of the Union in asking the employer to dismiss Appellee cannot be "an act done ... in furtherance of an
industrial dispute". The mere fact that appellant is a labor union does not necessarily mean that all its acts
are in furtherance of an industrial dispute. 75 Appellant Union, therefore, cannot invoke in its favor Section
24 of Republic Act No. 875. This case is not intertwined with any unfair labor practice case existing at the
time when Appellee filed his complaint before the lower court.

Neither does Article 2208 of the Civil Code, invoked by the Union, serve as its shield. The article
provides that attorney's fees and expenses of litigation may be awarded "when the defendant's act
or omission has compelled the plaintiff ... to incur expenses to protect his interest"; and "in any other
case where the court deems it just and equitable that attorney's fees and expenses of litigation
should be recovered". In the instant case, it cannot be gainsaid that appellant Union's act in
demanding Appellee's dismissal caused Appellee to incur expenses to prevent his being dismissed
from his job. Costs according to Section 1, Rule 142, of the Rules of Court, shall be allowed as a
matter of course to the prevailing party.

WHEREFORE, the instant appeal is dismissed, and the decision, dated August 26, 1965, of the
Court of First Instance of Manila, in its Civil Case No. 58894, appealed from is affirmed, with costs
against appellant Union. It is so ordered.

Makalintal, C.J, Castro, Teehankee, Barredo, Makasiar, Antonio, Esguerra, Muoz Palma and
Aquino, JJ., concur.
Separate Opinions

FERNANDO, J, concurring:

The decision arrived at unanimously by this Court that Republic Act No. 3350 is free from the
constitutional infirmities imputed to it was demonstrated in a manner wellnigh conclusive in the
learned, scholarly, and comprehensive opinion so typical of the efforts of the ponente, Justice
Zaldivar. Like the rest of my brethren, I concur fully. Considering moreover, the detailed attention
paid to each and every objection raised as to its validity and the clarity and persuasiveness with
which it was shown to be devoid of support in authoritative doctrines, it would appear that the last
word has been written on this particular subject. Nonetheless, I deem it proper to submit this brief
expression of my views on the transcendent character of religious freedom 1 and its primacy even as
against the claims of protection to labor, 2 also one of the fundamental principles of the Constitution.

1. Religious freedom is identified with the liberty every individual possesses to worship or not a
Supreme Being, and if a devotee of any sect, to act in accordance with its creed. Thus is
constitutionally safeguarded, according to Justice Laurel, that "profession of faith to an active power
that binds and elevates man to his Creator ...." 3 The choice of what a man wishes to believe in is his
and his alone. That is a domain left untouched, where intrusion is not allowed, a citadel to which the law is
denied entry, whatever be his thoughts or hopes. In that sphere, what he wills reigns supreme. The
doctrine to which he pays fealty may for some be unsupported by evidence, devoid of rational foundation.
No matter. There is no requirement as to its conformity to what has found acceptance. It suffices that for
him such a concept holds undisputed sway. That is a recognition of man's freedom. That for him is one of
the ways of self- realization. It would be to disregard the dignity that attaches to every human being to
deprive him of such an attribute. The "fixed star on our constitutional constellation," to borrow the
felicitous phrase of Justice Jackson, is that no official, not excluding the highest, has it in his power to
prescribe what shall be orthodox in matters of conscience or to mundane affairs, for that matter.

Gerona v. Secretary of Education 4 speaks similarly. In the language of its ponente, Justice Montemayor: "The realm of belief
and creed is infinite and limitless bounded only by one's imagination and thought. So is the freedom of belief, including religious belief,
limitless and without bounds. One may believe in most anything, however strange, bizarre and unreasonable the same may appear to
There was this qualification though:
others, even heretical when weighed in the scales of orthodoxy or doctrinal standards." 5
"But between the freedom of belief and the exercise of said belief, there is quite a stretch of road to travel.
If the exercise of said religious belief clashes with the established institutions of society and with the law,
then the former must yield and give way to the latter. The Government steps in and either restrains said
exercise or even prosecutes the one exercising it." 6 It was on that basis that the daily compulsory flag
ceremony in accordance with a statute 7 was found free from the constitutional objection on the part of a
religious sect, the Jehovah's Witnesses, whose members alleged that their participation would be
offensive to their religious beliefs. In a case not dissimilar, West Virginia State Board of Education v.
Barnette, 8 the American Supreme Court reached a contrary conclusion. Justice Jackson's eloquent
opinion is, for this writer, highly persuasive. Thus: "The case is made difficult not because the principles of
its decision are obscure but because the flag involved is our own. Nevertheless, we apply the limitations
of the Constitution with no fear that freedom to be intellectually and spiritually diverse or even contrary will
disintegrate the social organization. To believe that patriotism will not flourish if patriotic ceremonies are
voluntary and spontaneous instead of a compulsory routine is to make an unflattering estimate of the
appeal of our institutions to free minds. We can have intellectual individualism and the rich cultural
diversities that we owe to exceptional minds only at the price of occasional eccentricity and abnormal
attitudes. When they are so harmless to others or to the State as those we deal with here, the price is not
too great. But freedom to differ is not limited to things that do not matter much. That would be a mere
shadow of freedom. The test of its substance is the right to differ as to things that touch the heart of the
existing order." 9

There is moreover this ringing affirmation by Chief Justice Hughes of the primacy of religious
freedom in the forum of conscience even as against the command of the State itself: "Much has
been said of the paramount duty to the state, a duty to be recognized, it is urged, even though it
conflicts with convictions of duty to God. Undoubtedly that duty to the state exists within the domain
of power, for government may enforce obedience to laws regardless of scruples. When one's belief
collides with the power of the state, the latter is supreme within its sphere and submission or
punishment follows. But, in the forum of conscience, duty to a moral power higher than the state has
always been maintained. The reservation of that supreme obligation, as a matter of principle, would
unquestionably be made by many of our conscientious and law-abiding citizens. The essence of
religion is belief in a relation to God involving duties superior to those arising from any human
relation." 10 The American Chief Justice spoke in dissent, it is true, but with him in agreement were three
of the foremost jurists who ever sat in that Tribunal, Justices Holmes, Brandeis, and Stone.

2. As I view Justice Zaldivar's opinion in that light, my concurrence, as set forth earlier, is
wholehearted and entire. With such a cardinal postulate as the basis of our polity, it has a message
that cannot be misread. Thus is intoned with a reverberating clang, to paraphrase Cardozo, a
fundamental principle that drowns all weaker sounds. The labored effort to cast doubt on the validity
of the statutory provision in question is far from persuasive. It is attended by futility. It is not for this
Court, as I conceive of the judicial function, to restrict the scope of a preferred freedom.

3. There is, however, the question of whether such an exception possesses an implication that
lessens the effectiveness of state efforts to protect labor, likewise, as noted, constitutionally
ordained. Such a view, on the surface, may not be lacking in plausibility, but upon closer analysis, it
cannot stand scrutiny. Thought must be given to the freedom of association, likewise an aspect of
intellectual liberty. For the late Professor Howe a constitutionalist and in his lifetime the biographer of
the great Holmes, it even partakes of the political theory of pluralistic sovereignty. So great is the
respect for the autonomy accorded voluntary societies. 11 Such a right implies at the very least that one
can determine for himself whether or not he should join or refrain from joining a labor organization, an
institutional device for promoting the welfare of the working man. A closed shop, on the other hand, is
inherently coercive. That is why, as is unmistakably reflected in our decisions, the latest of which
is Guijarno v. Court of Industrial Relations, 12 it is far from being a favorite of the law. For a statutory
provision then to further curtail its operation, is precisely to follow the dictates of sound public policy.

The exhaustive and well-researched opinion of Justice Zaldivar thus is in the mainstream of
constitutional tradition. That, for me, is the channel to follow.

Separate Opinions
FERNANDO, J, concurring:

The decision arrived at unanimously by this Court that Republic Act No. 3350 is free from the
constitutional infirmities imputed to it was demonstrated in a manner wellnigh conclusive in the
learned, scholarly, and comprehensive opinion so typical of the efforts of the ponente, Justice
Zaldivar. Like the rest of my brethren, I concur fully. Considering moreover, the detailed attention
paid to each and every objection raised as to its validity and the clarity and persuasiveness with
which it was shown to be devoid of support in authoritative doctrines, it would appear that the last
word has been written on this particular subject. Nonetheless, I deem it proper to submit this brief
expression of my views on the transcendent character of religious freedom 1 and its primacy even as
against the claims of protection to labor, 2 also one of the fundamental principles of the Constitution.

1. Religious freedom is identified with the liberty every individual possesses to worship or not a
Supreme Being, and if a devotee of any sect, to act in accordance with its creed. Thus is
constitutionally safeguarded, according to Justice Laurel, that "profession of faith to an active power
that binds and elevates man to his Creator ...." 3 The choice of what a man wishes to believe in is his
and his alone. That is a domain left untouched, where intrusion is not allowed, a citadel to which the law is
denied entry, whatever be his thoughts or hopes. In that sphere, what he wills reigns supreme. The
doctrine to which he pays fealty may for some be unsupported by evidence, devoid of rational foundation.
No matter. There is no requirement as to its conformity to what has found acceptance. It suffices that for
him such a concept holds undisputed sway. That is a recognition of man's freedom. That for him is one of
the ways of self- realization. It would be to disregard the dignity that attaches to every human being to
deprive him of such an attribute. The "fixed star on our constitutional constellation," to borrow the
felicitous phrase of Justice Jackson, is that no official, not excluding the highest, has it in his power to
prescribe what shall be orthodox in matters of conscience or to mundane affairs, for that matter.

Gerona v. Secretary of Education 4 speaks similarly. In the language of its ponente, Justice Montemayor: "The realm of belief
and creed is infinite and limitless bounded only by one's imagination and thought. So is the freedom of belief, including religious belief,
limitless and without bounds. One may believe in most anything, however strange, bizarre and unreasonable the same may appear to
There was this qualification though:
others, even heretical when weighed in the scales of orthodoxy or doctrinal standards." 5
"But between the freedom of belief and the exercise of said belief, there is quite a stretch of road to travel.
If the exercise of said religious belief clashes with the established institutions of society and with the law,
then the former must yield and give way to the latter. The Government steps in and either restrains said
exercise or even prosecutes the one exercising it." 6 It was on that basis that the daily compulsory flag
ceremony in accordance with a statute 7 was found free from the constitutional objection on the part of a
religious sect, the Jehovah's Witnesses, whose members alleged that their participation would be
offensive to their religious beliefs. In a case not dissimilar, West Virginia State Board of Education v.
Barnette, 8 the American Supreme Court reached a contrary conclusion. Justice Jackson's eloquent
opinion is, for this writer, highly persuasive. Thus: "The case is made difficult not because the principles of
its decision are obscure but because the flag involved is our own. Nevertheless, we apply the limitations
of the Constitution with no fear that freedom to be intellectually and spiritually diverse or even contrary will
disintegrate the social organization. To believe that patriotism will not flourish if patriotic ceremonies are
voluntary and spontaneous instead of a compulsory routine is to make an unflattering estimate of the
appeal of our institutions to free minds. We can have intellectual individualism and the rich cultural
diversities that we owe to exceptional minds only at the price of occasional eccentricity and abnormal
attitudes. When they are so harmless to others or to the State as those we deal with here, the price is not
too great. But freedom to differ is not limited to things that do not matter much. That would be a mere
shadow of freedom. The test of its substance is the right to differ as to things that touch the heart of the
existing order." 9

There is moreover this ringing affirmation by Chief Justice Hughes of the primacy of religious
freedom in the forum of conscience even as against the command of the State itself: "Much has
been said of the paramount duty to the state, a duty to be recognized, it is urged, even though it
conflicts with convictions of duty to God. Undoubtedly that duty to the state exists within the domain
of power, for government may enforce obedience to laws regardless of scruples. When one's belief
collides with the power of the state, the latter is supreme within its sphere and submission or
punishment follows. But, in the forum of conscience, duty to a moral power higher than the state has
always been maintained. The reservation of that supreme obligation, as a matter of principle, would
unquestionably be made by many of our conscientious and law-abiding citizens. The essence of
religion is belief in a relation to God involving duties superior to those arising from any human
relation." 10 The American Chief Justice spoke in dissent, it is true, but with him in agreement were three
of the foremost jurists who ever sat in that Tribunal, Justices Holmes, Brandeis, and Stone.

2. As I view Justice Zaldivar's opinion in that light, my concurrence, as set forth earlier, is
wholehearted and entire. With such a cardinal postulate as the basis of our polity, it has a message
that cannot be misread. Thus is intoned with a reverberating clang, to paraphrase Cardozo, a
fundamental principle that drowns all weaker sounds. The labored effort to cast doubt on the validity
of the statutory provision in question is far from persuasive. It is attended by futility. It is not for this
Court, as I conceive of the judicial function, to restrict the scope of a preferred freedom.

3. There is, however, the question of whether such an exception possesses an implication that
lessens the effectiveness of state efforts to protect labor, likewise, as noted, constitutionally
ordained. Such a view, on the surface, may not be lacking in plausibility, but upon closer analysis, it
cannot stand scrutiny. Thought must be given to the freedom of association, likewise an aspect of
intellectual liberty. For the late Professor Howe a constitutionalist and in his lifetime the biographer of
the great Holmes, it even partakes of the political theory of pluralistic sovereignty. So great is the
respect for the autonomy accorded voluntary societies. 11 Such a right implies at the very least that one
can determine for himself whether or not he should join or refrain from joining a labor organization, an
institutional device for promoting the welfare of the working man. A closed shop, on the other hand, is
inherently coercive. That is why, as is unmistakably reflected in our decisions, the latest of which
is Guijarno v. Court of Industrial Relations, 12 it is far from being a favorite of the law. For a statutory
provision then to further curtail its operation, is precisely to follow the dictates of sound public policy.

The exhaustive and well-researched opinion of Justice Zaldivar thus is in the mainstream of
constitutional tradition. That, for me, is the channel to follow.

5. G.R. Nos. 43633-34 September 14, 1990

PABLO ARIZALA, SERGIO MARIBAO, LEONARDO JOVEN, and FELINO

BULANDUS, petitioners,
vs.
THE COURT OF APPEALS and THE PEOPLE OF THE PHILIPPINES, respondents.
Januario T. Seno for petitioners.

NARVASA, J.:

Under the Industrial Peace Act, 1 government-owned or controlled corporations had the duty to bargain
collectively and were otherwise subject to the obligations and duties of employers in the private
sector. 2 The Act also prohibited supervisors to become, or continue to be, members of labor organizations
composed of rank-and-file employees, 3 and prescribed criminal sanctions for breach of the prohibition. 4

It was under the regime of said Industrial Peace Act that the Government Service Insurance System
(GSIS, for short) became bound by a collective bargaining agreement executed between it and the
labor organization representing the majority of its employees, the GSIS Employees Association. The
agreement contained a "maintenance-of-membership" clause, 5 i.e., that all employees who, at the
time of the execution of said agreement, were members of the union or became members thereafter,
were obliged to maintain their union membership in good standing for the duration of the agreement as a
condition for their continued employment in the GSIS.

There appears to be no dispute that at that time, the petitioners occupied supervisory positions in the
GSIS. Pablo Arizala and Sergio Maribao were, respectively, the Chief of the Accounting Division, and
the Chief of the Billing Section of said Division, in the Central Visayas Regional Office of the GSIS.
Leonardo Joven and Felino Bulandus were, respectively, the Assistant Chief of the Accounting
Division (sometimes Acting Chief in the absence of the Chief) and the Assistant Chief of the Field
Service and Non-Life Insurance Division (and Acting Division Chief in the absence of the Chief), of
the same Central Visayas Regional Office of the GSIS. Demands were made on all four of them to
resign from the GSIS Employees Association, in view of their supervisory positions. They refused to
do so. Consequently, two (2) criminal cases for violation of the Industrial Peace Act were lodged
against them in the City Court of Cebu: one involving Arizala and Maribao 6 and the other, Joven and
Bulandus. 7

Both criminal actions resulted in the conviction of the accused in separate decisions. 8 They were
each sentenced "to pay a fine of P 500.00 or to suffer subsidiary imprisonment in case of insolvency."
They appealed to the Court of Appeals. 9 Arizala's and Maribao's appeal was docketed as CA-G.R. No.
14724-CR; that of Joven and Bulandus, as CA-G.R. No. 14856-CR.

The appeals were consolidated on motion of the appellants, and eventuated in a judgment
promulgated on January 29, 1976 affirming the convictions of all four appellants. The appellants
moved for reconsideration. They argued that when the so called "1973 Constitution" took effect on
January 17, 1973 pursuant to Proclamation No. 1104, the case of Arizala and Maribao was still
pending in the Court of Appeals and that of Joven and Bulandus, pending decision in the City Court
of Cebu; that since the provisions of that constitution and of the Labor Code subsequently
promulgated (eff., November 1, 1974), repealing the Industrial Peace Act-placed employees of all
categories in government-owned or controlled corporations without distinction within the Civil
Service, and provided that the terms and conditions of their employment were to be "governed by
the Civil Service Law, rules and regulations" and hence, no longer subject of collective bargaining,
the appellants ceased to fall within the coverage of the Industrial Peace Act and should thus no
longer continue to be prosecuted and exposed to punishment for a violation thereof. They pointed
out further that the criminal sanction in the Industrial Peace Act no longer appeared in the Labor
Code. The Appellate Court denied their plea for reconsideration.

Hence, the present petition for review on certiorari.

The crucial issue obviously is whether or not the petitioners' criminal liability for a violation of the
Industrial Peace Act may be deemed to have been obliterated in virtue of subsequent legislation and
the provisions of the 1973 and 1987 Constitutions.

The petitioners' contention that their liability had been erased is made to rest upon the following
premises:

1. Section 1, Article XII-B of the 1973 Constitution does indeed provide that the "Civil Service
embraces every branch, agency, subdivision and instrumentality of the government, including
government-owned or controlled corporations, .. administered by an independent Civil Service
Commission.

2. Article 292 of the Labor Code repealed such parts and provisions of the Industrial Peace Act as
were "not adopted as part" of said Code "either directly or by reference." The Code did not adopt the
provision of the Industrial Peace Act conferring on employees of government-owned or controlled
corporations the right of self-organization and collective bargaining; in fact it made known that the
"terms and conditions of employment of all government employees, including employees of
government-owned and controlled corporations," would thenceforth no longer be fixed by collective
bargaining but "be governed by the Civil Service Law, rules and regulations." 10

3. The specific penalty for violation of the prohibition on supervisors being members in a labor
organization of employees under their supervision has disappeared.

4. The Code also modified the concept of unfair labor practice, decreeing that thenceforth, "it shall
be considered merely as an administrative offense rather than a criminal offense (and that) (u)nfair
labor practice complaints shall x x be processed like any ordinary labor disputes." 11

On the other hand, in justification of the Appellate Tribunal's affirmance of the petitioners' convictions
of violations of the Industrial Peace Act, the People-

1) advert to the fact that said Labor Code also states that "all actions or claims accruing prior to ...
(its) effectivity ... shall be determined in accordance with the laws in force at the time of their
accrual;" and

2) argue that the legislature cannot generally intervene and vacate the judgment of the courts, either
directly or indirectly, by the repeal of the statute under which said judgment has been rendered.

The legal principles governing the rights of self-organization and collective bargaining of rank-and-
file employees in the government- particularly as regards supervisory, and high level or managerial
employees have undergone alterations through the years.
Republic Act No. 875

As already intimated, under RA 875 (the Industry Peace Act), 12 persons "employed in proprietary
functions of the Government, including but not limited to governmental corporations," had the right of self-
organization and collective bargaining, including the right to engage in concerted activities to attain their
objectives, e.g. strikes.

But those "employed in governmental functions" were forbidden to "strike for the purpose of securing
changes or modification in their terms and conditions of employment" or join labor organizations
which imposed on their members the duty to strike. The reason obviously was that the terms and
conditions of their employment were "governed by law" and hence could not be fixed, altered or
otherwise modified by collective bargaining.

Supervisory employees were forbidden to join labor organizations composed of employees under
them, but could form their own unions. Considered "supervisors' were those 'having authority in the
interest of an employer to hire, transfer, suspend, lay-off, recall, discharge, assign, recommend, or
discipline other employees, or responsibly to direct them, and to adjust their grievance or effectively
to recommend such acts if, in connection with the foregoing, the exercise of such authority is not
merely routinary or clerical in nature but requires the use of independent judgment." 13

Republic Act No. 2260

Similar provisions were found in R.A. No. 2260, the Civil Service Act of 1959. This Act declared that
the "Philippine Civil Service ... (embraced) all branches, subdivisions and instrumentalities of the
government including government-owned and controlled corporations." 14

It prohibited such civil service employees who were "employed in governmental functions" to belong
to any labor organization which imposed on their members "the obligation to strike or to join strikes."
And one of the first issuances of the President after the proclamation of martial law in September,
1972, was General Order No. 5 which inter alia banned strikes in vital industries," as well as 'all
rallies, demonstrations and other forms of group actions." 15

Not so prohibited, however, were those "employed in proprietary functions of the Government
including, but not limited to, governmental corporations." 16 The Act also penalized any person who
"violates, refuses or neglects to comply with any ... provisions (of the Act) or rules (thereunder
promulgated) ... by a fine not exceeding one thousand pesos or by imprisonment not exceeding six
months or both such fine and imprisonment in the discretion of the court." 17

The 1973 Constitution

The 1973 Constitution laid down the broad principle that "(t)he State shall assure the rights of
workers to self-organization, collective bargaining, security of tenure, and just and humane
conditions of work," 18 and directed that the "National Assembly shall provide for the standardization of
compensation of government officials and employees, including those in government-owned or controlled
corporations, taking into account the nature of the responsibilities pertaining to, and the qualifications
required for, the positions concerned." 19
PD 442, The Labor Code

The Labor Code of the Philippines, Presidential Decree No. 442, enacted within a year from
effectivity of the 1973 Constitution, 20 incorporated the proposition that the "terms and conditions of
employment of all government employees, including employees of government-owned and controlled
corporations ... (are) governed by the Civil Service Law, rules and regulations." 21 It incorporated, too, the
constitutional mandate that the salaries of said employees "shall be standardized by the National
Assembly."

The Labor Code, 22 however "exempted" government employees from the right to self-organization for
purposes of collective bargaining. While the Code contained provisions acknowledging the right of "all
persons employed in commercial, industrial and agricultural enterprises, including religious, medical or
educational institutions operating for profit" to "self-organization and to form, join or assist labor
organizations for purposes of collective bargaining," they "exempted from the foregoing provisions:

a) security guards;

b) government employees, including employees of government government-owned and/ or

controlled corporations;

c) managerial employees; and

d) employees of religious, charitable, medical and educational institutions not operating for profit,
provided the latter do not have existing collective agreements or recognized unions at the time of the
effectivity of the code or have voluntarily waived their exemption." 23

The reason for denying to government employees the right to "self-organization and to form, join or
assist labor organizations for purposes of collective bargaining" is presumably the same as that
under the Industrial Peace Act, i.e., that the terms and conditions of government employment are
fixed by law and not by collective bargaining.

Some inconsistency appears to have arisen between the Labor Code and the Civil Service Act of
1959. Under the Civil Service Act, persons "employed in proprietary functions of the government
including, but not limited to, governmental corporations'-not being within "the policy of the
Government that the employees therein shall not strike for the purpose of securing changes in their
terms and conditions of employment"-could legitimately bargain with their respective employers
through their labor organizations, and corollarily engage in strikes and other concerted activities in
an attempt to bring about changes in the conditions of their work. They could not however do so
under the Labor Code and its Implementing Rules and Regulations; these provided that "government
employees, including employees of government-owned and/or controlled corporations," without
distinction as to function, were "exempted" (excluded is the better term) from "the right to self-
organization and to form, join or assist labor organizations for purposes of collective bargaining," and
by implication, excluded as well from the right to engage in concerted activities, such as strikes, as
coercive measures against their employers.

Members of supervisory unions who were not managerial employees, were declared by the Labor
Code to be "eligible to join or assist the rank and file labor organization, and if none exists, to form or
assist in the forming of such rank and file organization " 24 Managerial employees, on the other hand,
were pronounced as 'not eligible to join, assist or form any labor organization." 25 A "managerial
employee" was defined as one vested with power or prerogatives to lay down and execute management
policies and/or to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline employees, or to
effectively recommend such managerial actions." 26

Presidential Decree No. 807

Clarification of the matter seems to have been very shortly attempted by the Civil Service Decree of
the Philippines, Presidential Decree No. 807 (eff., Oct. 6,1975) which superseded the Civil Service
Law of 1959 (RA 2260) 27 and repealed or modified "all laws, rules and regulations or parts thereof
inconsistent with the provisions" thereof. The Decree categorically described the scope and coverage of
the "Civil Service" as embracing 44 every branch, agency, subdivision, and instrumentality of the
government, including every government owned or controlled corporation whether performing
governmental or propriety function. 28 The effect was seemingly to prohibit government employees
(including those "employed in proprietary functions of the Government") to "strike for the purpose of
securing changes of their terms and conditions of employment," 29 something which, as aforestated, they
were allowed to do under the Civil Service Act of 1959. 30

Be this as it may it seems clear that PD 807 (the Civil Service Decree) did not modify the declared
ineligibility of "managerial employees" from joining, assisting or forming any labor organization.

Executive Order No. 111

Executive Order No. 111, issued by President Corazon C. Aquino on December 24, 1986 in the
exercise of legislative powers under the Freedom Constitution, modified the general disqualification
above mentioned of 'government employees, including employees of government-owned and/or
controlled corporations" from "the right to self-organization and to form, join or assist labor
organizations for purposes of collective bargaining.' It granted to employees "of government
corporations established under the Corporation Code x x the right to organize and to bargain
collectively with their respective employers." 31 To all 'other employees in the civil service, ... (it granted
merely) the right to form associations for purposes not contrary to law," 32 not for "purposes of collective
bargaining."

The 1987 Constitution

The provisions of the present Constitution on the matter appear to be somewhat more extensive.
They declare that the "right to self organization shall not be denied to government employees;" 33 that
the State "shall guarantee the rights of all workers to self-organization, collective bargaining and
negotiations, and peaceful concerted activities, including the right to strike in accordance with law;" and
that said workers "shall be entitled to security of tenure, humane conditions of work, and a living wage, ...
(and) also participate in policy and decision-making processes affecting their rights and benefits as may
be provided by law. 34

CSC Memorandum Circular No. 6

Memorandum Circular No. 6 of the Civil Service Commission, issued on April 21, 1987 enjoined
strikes by government officials and employees, to wit: 35

... Prior to the enactment by Congress of applicable laws concerning strike by

government employees, and considering that there are existing laws which prohibit
government officials and employees from resorting to strike, the Commission enjoins,
under pain of administrative sanctions, all government officers and employees from
staging strikes, demonstrations, mass leaves, walk-outs and other forms of mass
action which will result in temporary stoppage or disruption of public services. To
allow otherwise is to undermine or prejudice the government system.

Executive Order No. 180

The scope of the constitutional right to self-organization of "government employees" above

mentioned, was defined and delineated in Executive Order No. 180 (eff. June 1, 1987). According to
this Executive Order, the right of self-organization does indeed pertain to all "employees of all
branches, subdivisions, instrumentalities and agencies of the Government, including government-
owned or controlled corporations with original charters;" 36such employees "shall not be discriminated
against in respect of their employment by reason of their membership in employees' organizations or
participation in the normal activities of their organization x x (and their) employment shall not be subject to
the condition that they shall not join or shall relinquish their membership in the employees'
organizations. 37

However, the concept of the government employees' right of self-organization differs significantly
from that of employees in the private sector. The latter's right of self-organization, i.e., "to form, join
or assist labor organizations for purposes of collective bargaining," admittedly includes the right to
deal and negotiate with their respective employers in order to fix the terms and conditions of
employment and also, to engage in concerted activities for the attainment of their objectives, such as
strikes, picketing, boycotts. But the right of government employees to "form, join or assist employees
organizations of their own choosing" under Executive Order No. 180 is not regarded as existing or
available for "purposes of collective bargaining," but simply "for the furtherance and protection of
their interests." 38

In other words, the right of Government employees to deal and negotiate with their respective
employers is not quite as extensive as that of private employees. Excluded from negotiation by
government employees are the "terms and conditions of employment ... that are fixed by law," it
being only those terms and conditions not otherwise fixed by law that "may be subject of negotiation
between the duly recognized employees' organizations and appropriate government
authorities," 39 And while EO No. 180 concedes to government employees, like their counterparts in the
private sector, the right to engage in concerted activities, including the right to strike, the executive order
is quick to add that those activities must be exercised in accordance with law, i.e. are subject both to
"Civil Service Law and rules" and "any legislation that may be enacted by Congress," 40 that "the
resolution of complaints, grievances and cases involving government employees" is not ordinarily left to
collective bargaining or other related concerted activities, but to "Civil Service Law and labor laws and
procedures whenever applicable;" and that in case "any dispute remains unresolved after exhausting all
available remedies under existing laws and procedures, the parties may jointly refer the dispute to the
(Public Sector Labor-Management) Council for appropriate action." 41 What is more, the Rules and
Regulations implementing Executive Order No. 180 explicitly provide that since the "terms and conditions
of employment in the government, including any political subdivision or instrumentality thereof and
government-owned and controlled corporations with original charters are governed by law, the employees
therein shall not strike for the purpose of securing changes thereof. 42

On the matter of limitations on membership in labor unions of government employees, Executive

Order No. 180 declares that "high level employees whose functions are normally considered as
policy making or managerial, or whose duties are of a highly confidential nature shall not be eligible
to join the organization of rank-and-file government employees. 43 A "high level employee" is one
"whose functions are normally considered policy determining, managerial or one whose duties are highly
confidential in nature. A managerial function refers to the exercise of powers such as: 1. To effectively
recommend such managerial actions; 2. To formulate or execute management policies and decisions; or
3. To hire, transfer, suspend, lay off, recall, dismiss, assign or discipline employees. 44

Republic Act No. 6715

The rule regarding membership in labor organizations of managerial and supervisory employees just
adverted to, was clarified and refined by Republic Act No. 6715, effective on March 21, 1989, further
amending the Labor Code.

Under RA 6715 labor unions are regarded as organized either (a) "for purposes of negotiation," or
(b) "for furtherance and protection"of the members' rights. Membership in unions organized "for
purposes of negotiation" is open only to rank-and-file employees. "Supervisory employees" are
ineligible "for membership in a labor organization of the rank-and-file employees but may join, assist
or form separate labor organizations of their own," i.e., one organized "for furtherance and
protection" of their rights and interests. However, according to the Rules implementing RA 6715,
"supervisory employees who are included in an existing rank-and- file bargaining unit, upon the
effectivity of Republic Act No. 6715 shall remain in that unit ..." Supervisory employees are "those
who, in the interest of the employer, effectively recommend such managerial actions 45 if the exercise
of such authority is not merely routinary or clerical in nature but requires the use of independent
judgment. 46

Membership in employees' organizations formed for purposes of negotiation are open to rank-and-
file employees only, as above mentioned, and not to high level employees. 47 Indeed, "managerial
employees" or "high level employees" are, to repeat, "not eligible to join, assist or form any labor
organization" at all. 48 A managerial employee is defined as "one who is vested with powers or
prerogatives to lay down and execute, management policies and/or to hire, transfer, suspend, lay-off,
recall, discharge, assign or discipline employees." 49

This is how the law now stands, particularly with respect to supervisory employees vis a vis labor
organizations of employees under them.

Now, the GSIS performs proprietary functions. It is a non-stock corporation, managed by a Board of
Trustees exercising the "usual corporate powers." 50 In other words, it exercises all the powers of a
corporation under the Corporation Law in so far as they are not otherwise inconsistent with other
applicable law. 51 It is engaged essentially in insurance, a business that "is not inherently or exclusively a
governmental function, ... (but) is on the contrary, in essence and practice, of a private nature and
interest." 52

1. The petitioners contend that the right of self-organization and collectivebargaining had been
withdrawn by the Labor Code from government employees including those in government-owned
and controlled corporations- chiefly for the reason that the terms and conditions of government
employment, all embraced in civil service, may not be modified by collective bargaining because set
by law. It is therefore immaterial, they say, whether supervisors are members of rank-and-file unions
or not; after all, the possibility of the employer's control of the members of the union thru supervisors
thus rendering collective bargaining illusory, which is the main reason for the prohibition, is no longer
of any consequence.

This was true, for a time. As already discussed, both under the Labor Code and PD 807, government
employees, including those in government-owned or controlled corporations, were indeed precluded
from bargaining as regards terms and conditions of employment because these were set by law and
hence could not possibly be altered by negotiation.

But EO 111 restored the right to organize and to negotiate and bargain of employees of "government
corporations established under the Corporation Code." And EO 180, and apparently RA 6715, too,
granted to all government employees the right of collective bargaining or negotiation except as
regards those terms of their employment which were fixed by law; and as to said terms fixed by law,
they were prohibited to strike to obtain changes thereof.

2. The petitioners appear to be correct in their view of the disappearance from the law of the
prohibition on supervisors being members of labor organizations composed of employees under
their supervision. The Labor Code (PD 442) allowed supervisors (if not managerial) to join rank-and-
file unions. And under the Implementing Rules of RA 6715, supervisors who were members of
existing labor organizations on the effectivity of said RA 6715 were explicitly authorized to "remain
therein."

3. The correctness of the petitioners' theory that unfair labor practices ceased to be crimes and were
deemed merely administrative offenses in virtue of the Labor Code, cannot be gainsaid. Article 250
of the Labor Code did provide as follows:

ART. 250. Concept of unfair labor practice.-The concept of unfair labor practice is
hereby modified. Henceforth, it shall be considered merely as an administrative
offense rather than a criminal offense. Unfair labor practice complaints shall,
therefore, be processed like any ordinary labor disputes.

But unfair labor practices were declared to be crimes again by later amendments of the Labor Code
effected by Batas Pambansa Blg. 70, approved on May 1, 1980. As thus amended, the Code now
pertinently reads as follows:

ART. 248. Concept of unfair labor practice and procedure for prosecution thereof.
Unfair labor practices violate the right of workers and employees to self
organization, are inimical to the legitimate interests of both labor and management
 including their right to bargain collectively and otherwise deal with each other in an
atmosphere of freedom and mutual respect, and hinder the promotion of healthy and
stable labor management relations. Consequently, unfair labor practices are not only
violations of the civil rights of both labor and management but are also offenses
against the State which shall be subject to prosecution and punishment as herein
provided.

xxx xxx xxx

Recovery of civil liability in the administrative proceedings shall bar recovery under
the Civil Code.

No criminal prosecution under this title may be instituted without a final judgment,
finding that an unfair labor practice was committed having been first obtained in the
preceding paragraph. ...

The decisive consideration is that at present, supervisors who were already members of a rank-and-
file labor organization at the time of the effectivity of R.A. No. 6715, are authorized to "remain
therein." It seems plain, in other words, that the maintenance by supervisors of membership in a
rank-and-file labor organization even after the enactment of a statute imposing a prohibition on such
membership, is not only not a crime, but is explicitly allowed, under present law.

Now, in a case decided as early as 1935, People v. Tamayo, 53 where the appellants had appealed
from a judgment convicting them of a violation of a municipal -ordinance, and while their appeal was
pending, the ordinance was repealed such that the act complained of ceased to be a criminal act but
became legal, this Court dismissed the criminal proceedings, pronouncing the effects of the repeal to be
as follows:

In the leading case of the United States vs. Cuna (12 Phil. 241), and Wing vs. United
States (218 U.S. 272), the doctrine was clearly established that in the Philippines
repeal of a criminal act by its reenactment, even without a saving clause would not
destroy criminal liability. But not a single sentence in either derision indicates that
there was any desire to hold that a person could be prosecuted convicted, and
punished for acts no longer criminal.

There is no question that at common law and in America a much more favorable
attitude towards the accused exists relative to statutes that have been repealed than
has been adopted here. Our rule is more in conformity with the Spanish doctrine, but
even in Spain, where the offense ceased to be criminal, petition cannot be had (1
Pacheco, Commentaries, 296).

The repeal here was absolute and not a reenactment and repeal by implication. Nor
was there any saving clause. The legislative intent as shown by the action of the
municipal is that such conduct, formerly denounced, is no longer deemed criminal,
and it would be illogical for this court to attempt to sentence appellant for the offense
that no longer exists.
 We are therefore of the opinion that the proceedings against appellant must be
dismissed.

To the same effect and in even more unmistakable language is People v. Almuete 54 where the
defendants-appellees were charged under section 39 of Republic Act No. 1199, as amended (the
Agricultural Land Tenancy Law of 1954) which penalized pre-threshing by either agricultural tenant or his
landlord. They sought and secured a dismissal on the ground, among others, that there was no law
punishing the act charged-a reference to the fact that Republic Act No. 1199 had already been
superseded by the Agricultural Land Reform Code of 1963 which instituted the leasehold system and
abolished share tenancy subject to certain conditions. On appeal by the Government, this Court upheld
the dismissal, saying:

The legislative intent not to punish anymore the tenant's act of pre-reaping and pre-
threshing without notice to the landlord is inferable from the fact that, as already
noted, the Code of Agrarian Reforms did not reenact section 39 of the Agricultural
Tenancy Law and that it abolished share tenancy which is the basis for penalizing
clandestine pre-reaping and pre-threshing.

xxx xxx xxx

As held in the Adillo case, 55 the act of pre-reaping and pre-threshing without notice to
the landlord, which is an offense under the Agricultural Tenancy Law, had ceased to be
an offense under the subsequent law, the Code of Agrarian Reforms. To prosecute it as
an offense when the Code of Agrarian Reforms is already in force would be repugnant or
abhorrent to the policy and spirit of that Code and would subvert the manifest legislative
intent not to punish anymore pre-reaping and pre-threshing without notice to the
landholder.

xxx xxx xxx

The repeal of a penal law deprives the courts of jurisdiction to punish persons
charged with a violation of the old penal law prior to its repeal (People vs. Tamayo,
61 Phil. 225; People vs. Sindiong and Pastor, 77 Phil. 1000; People vs. Binuya, 61
Phil. 208; U.S. vs. Reyes, 10 Phil. 423; U.S. vs. Academia, 10 Phil. 431. See dissent
in Lagrimas vs. Director of Prisons, 57 Phil. 247, 252, 254).

The foregoing precedents dictate absolution of the appellants of the offenses imputed to them.

WHEREFORE, the judgments of conviction in CA-G.R. No. 14724-CR and CA-G.R. No. 14856-CR,
subject of the appeal, as well as those in Crim. Case No. 5275-R and Crim. Case No. 4130-R
rendered by the Trial Court, are REVERSED and the accused-appellants ACQUITTED of the
charges against them, with costs de officio.

SO ORDERED.
6. G.R. No. 122226 March 25, 1998

UNITED PEPSI-COLA SUPERVISORY UNION (UPSU), petitioner,

vs.
HON. BIENVENIDO E. LAGUESMA and PEPSI-COLA PRODUCTS, PHILIPPINES,
INC. respondents.

MENDOZA, J.:

Petitioner is a union of supervisory employees. It appears that on March 20, 1995 the union filed a
petition for certification election on behalf of the route managers at Pepsi-Cola Products Philippines,
Inc. However, its petition was denied by the med-arbiter and, on appeal, by the Secretary of Labor
and Employment, on the ground that the route managers are managerial employees and, therefore,
ineligible for union membership under the first sentence of Art. 245 of the Labor Code, which
provides:

Ineligibility of managerial employees to join any labor organization; right of supervisory

employees. Managerial employees are not eligible to join, assist or form any labor
organization. Supervisory employees shall not be eligible for membership in a labor
organization of the rank-and-file employees but may join, assist or form separate labor
organizations of their own.

Petitioner brought this suit challenging the validity of the order dated August 31, 1995, as reiterated
in the order dated September 22, 1995, of the Secretary of Labor and Employment. Its petition was
dismissed by the Third Division for lack of showing that respondent committed grave abuse of
discretion. But petitioner filed a motion for reconsideration, pressing for resolution its contention that
the first sentence of Art. 245 of the Labor Code, so far as it declares managerial employees to be
ineligible to form, assist or join unions, contravenes Art. III, 8 of the Constitution which provides:

The right of the people, including those employed in the public and private sectors, to form
unions, associations, or societies for purposes not contrary to law shall not be abridged.

For this reason, the petition was referred to the Court en banc.

The Issues in this Case

Two questions are presented by the petition: (1) whether the route managers at Pepsi-Cola Products
Philippines, Inc. are managerial employees and (2) whether Art. 245, insofar as it prohibits
managerial employees from forming, joining or assisting labor unions, violates Art. III, 8 of the
Constitution.

In resolving these issues it would be useful to begin by defining who are "managerial employees"
and considering the types of "managerial employees."

Types of Managerial Employees

The term "manager" generally refers to "anyone who is responsible for subordinates and other
organizational resources." As a class, managers constitute three levels of a pyramid:
1
 Top management

Middle

Management

First-Line

Management

(also called

Supervisor)

====================

Operatives

or

Operating

Employees

FIRST-LINE MANAGERS The lowest level in an organization at which individuals are

responsible for the work of others is called first-line or first-level management. First-line
managers direct operating employees only; they do not supervise other
managers. Examples of first-line managers are the "foreman" or production supervisor in a
manufacturing plant, the technical supervisor in a research department, and the clerical
supervisor in a large office. First-level managers are often called supervisors.

MIDDLE MANAGERS The term middle management can refer to more than one level in
an organization. Middle managers direct the activities of other managers and sometimes
also those of operating employees. Middle managers' principal responsibilities are to direct
the activities that implement their organizations' policies and to balance the demands of their
superiors with the capacities of their subordinates. A plant manager in an electronics firm is
an example of a middle manager.

TOP MANAGERS Composed of a comparatively small group of executives, top

management is responsible for the overall management of the organization. It establishes
operating policies and guides the organization's interactions with its environment. Typical
titles of top managers are "chief executive officer," "president," and "senior vice-president."
Actual titles vary from one organization to another and are not always a reliable guide to
membership in the highest management classification. 2
As can be seen from this description, a distinction exists between those who have the authority to
devise, implement and control strategic and operational policies (top and middle managers) and
those whose task is simply to ensure that such policies are carried out by the rank-and-file
employees of an organization (first-level managers/supervisors). What distinguishes them from the
rank-and-file employees is that they act in the interest of the employer in supervising such rank-and-
file employees.

"Managerial employees" may therefore be said to fall into two distinct categories: the
"managers" per se, who compose the former group described above, and the "supervisors" who
form the latter group. Whether they belong to the first or the second category, managers, vis-a-
vis employers, are, likewise, employees. 3

The first question is whether route managers are managerial employees or supervisors.

Previous Administrative Determinations of

the Question Whether Route Managers
are Managerial Employees

It appears that this question was the subject of two previous determinations by the Secretary of
Labor and Employment, in accordance with which this case was decided by the med-arbiter.

In Case No. OS-MA-10-318-91, entitled Worker's Alliance Trade Union (WATU) v. Pepsi-Cola
Products Philippines, Inc., decided on November 13, 1991, the Secretary of Labor found:

We examined carefully the pertinent job descriptions of the subject employees and other
documentary evidence on record vis-a-vis paragraph (m), Article 212 of the Labor Code, as
amended, and we find that only those employees occupying the position of route manager
and accounting manager are managerial employees. The rest i.e. quality control manager,
yard/transport manager and warehouse operations manager are supervisory employees.

To qualify as managerial employee, there must be a clear showing of the exercise of

managerial attributes under paragraph (m), Article 212 of the Labor Code as amended.
Designations or titles of positions are not controlling. In the instant case, nothing on record
will support the claim that the quality control manager, yard/transport manager and
warehouse operations manager are vested with said attributes. The warehouse operations
manager, for example, merely assists the plant finance manager in planning, organizing,
directing and controlling all activities relative to development and implementation of an
effective management control information system at the sale offices. The exercise of
authority of the quality control manager, on the other hand, needs the concurrence of the
manufacturing manager.

As to the route managers and accounting manager, we are convinced that they are
managerial employees. Their job descriptions clearly reveal so.

On July 6, 1992, this finding was reiterated in Case No. OS-A-3-71-92. entitled In Re: Petition for
Direct Certification and/or Certification Election-Route Managers/Supervisory Employees of Pepsi-
Cola Products Phils. Inc., as follows:

The issue brought before us is not of first impression. At one time, we had the occasion to
rule upon the status of route manager in the same company vis a vis the issue as to whether
or not it is supervisory employee or a managerial employee. In the case of Workers Alliance
 Trade Unions (WATU) vs. Pepsi Cola Products, Phils., Inc. (OS-MA-A-10-318-91 ), 15
November 1991, we ruled that a route manager is a managerial employee within the context
of the definition of the law, and hence, ineligible to join, form or assist a union. We have once
more passed upon the logic of our Decision aforecited in the light of the issues raised in the
instant appeal, as well as the available documentary evidence on hand, and have come to
the view that there is no cogent reason to depart from our earlier holding. Route Managers
are, by the very nature of their functions and the authority they wield over their subordinates,
managerial employees. The prescription found in Art. 245 of the Labor Code, as amended
therefore, clearly applies to them.4

Citing our ruling in Nasipit Lumber Co. v. National Labor Relations Commission, however, petitioner
5

argues that these previous administrative determinations do not have the effect of res judicata in this
case, because "labor relations proceedings" are "non-litigious and summary in nature without regard
to legal technicalities." Nasipit Lumber Co. involved a clearance to dismiss an employee issued by
6

the Department of Labor. The question was whether in a subsequent proceeding for illegal dismissal,
the clearance was res judicata. In holding it was not, this Court made it clear that it was referring to
labor relations proceedings of a non-adversary character, thus:

The requirement of a clearance to terminate employment was a creation of the Department

of labor to carry out the Labor Code provisions on security of tenure and termination of
employment. The proceeding subsequent to the filing of an application for clearance to
terminate employment was outlined in Book V, Rule XIV of the Rules and Regulations
Implementing the Labor Code. The fact that said rule allowed a procedure for the approval of
the clearance with or without the opposition of the employee concerned (Secs. 7 & 8),
demonstrates the non-litigious and summary nature of the proceeding. The clearance
requirement was therefore necessary only as an expeditious shield against arbitrary
dismissal without the knowledge and supervision of the Department of Labor. Hence, a duly
approved clearance implied that the dismissal was legal or for cause (Sec. 2). 7

But the doctrine of res judicata certainly applies to adversary administrative proceedings. As early as
1956, in Brillantes v. Castro, we sustained the dismissal of an action by a trial court on the basis of a
8

prior administrative determination of the same case by the Wage Administration Service, applying
the principle of res judicata. Recently, in Abad v. NLRC we applied the related doctrine of stare
9

decisis in holding that the prior determination that certain jobs at the Atlantic Gulf and Pacific Co.,
were project employments was binding in another case involving another group of employees of the
same company. Indeed, in Nasipit Lumber Co., this Court clarified toward the end of its opinion that
"the doctrine of res judicata applies . . . to judicial or quasi judicial proceedings and not to the
exercise of administrative powers." Now proceedings for certification election, such as those
10

involved in Case No. OS-M-A-10-318-91 and Case No. OS-A-3-71-92, are quasi judicial in nature
and, therefore, decisions rendered in such proceedings can attain finality. 11

Thus, we have in this case an expert's view that the employees concerned are managerial
employees within the purview of Art. 212 which provides:

(m) "managerial employee" is one who is vested with powers or prerogatives to lay down and
execute management policies and/or to hire, transfer, suspend, lay off, recall, discharge,
assign or discipline employees. Supervisory employees are those who, in the interest of the
employer, effectively recommend such managerial actions if the exercise of such authority is
not merely routinary or clerical in nature but requires the use of independent judgment. All
employees not falling within any of the above definitions are considered rank-and-file
employees for purposes of this Book.
At the very least, the principle of finality of administrative determination compels respect for the
finding of the Secretary of Labor that route managers are managerial employees as defined by law
in the absence of anything to show that such determination is without substantial evidence to
support it. Nonetheless, the Court, concerned that employees who are otherwise supervisors may
wittingly or unwittingly be classified as managerial personnel and thus denied the right of self-
organization, has decided to review the record of this case.

DOLE's Finding that Route Managers are

Managerial Employees Supported by
Substantial Evidence in the Record

The Court now finds that the job evaluation made by the Secretary of Labor is indeed supported by
substantial evidence. The nature of the job of route managers is given in a four-page pamphlet,
prepared by the company, called "Route Manager Position Description," the pertinent parts of which
read:

A. BASIC PURPOSE

A Manager achieves objectives through others.

As a Route Manager, your purpose is to meet the sales plan; and you
achieve this objective through the skillful MANAGEMENT OF YOUR JOB
AND THE MANAGEMENT OF YOUR PEOPLE.

These then are your functions as Pepsi-Cola Route Manager. Within these
functions managing your job and managing your people you are
accountable to your District Manager for the execution and completion of
various tasks and activities which will make it possible for you to achieve your
sales objectives.

B. PRINCIPAL ACCOUNTABILITIES

1.0 MANAGING YOUR JOB

The Route Manager is accountable for the following:

1.1 SALES DEVELOPMENT

1.1.1 Achieve the sales plan.

1.1.2 Achieve all distribution and new account

objectives.

1.1.3 Develop new business opportunities thru

personal contacts with dealers.

1.1.4 Inspect and ensure that all

merchandizing [sic] objectives are achieved in
all outlets.
 1.1.5 maintain and improve productivity of all
cooling equipment and kiosks.

1.1.6 Execute and control all authorized

promotions.

1.1.7 Develop and maintain dealer goodwill.

1.1.8 Ensure all accounts comply with

company suggested retail pricing.

1.1.9 Study from time to time individual route

coverage and productivity for possible
adjustments to maximize utilization of
resources.

1.2 Administration

1.2.1 Ensure the proper loading of route

trucks before check-out and the proper sorting
of bottles before check-in.

1.2.2 Ensure the upkeep of all route sales

reports and all other related reports and forms
required on an accurate and timely basis.

1.2.3 Ensure proper implementation of the

various company policies and procedures incl.
but not limited to shakedown; route shortage;
progressive discipline; sorting; spoilages;
credit/collection; accident; attendance.

1.2.4 Ensure collection of receivables and

delinquent accounts.

2.0 MANAGING YOUR PEOPLE

The Route Manager is accountable for the following:

2.1 Route Sales Team Development

2.1.2 Conduct route rides to train, evaluate

and develop all assigned route salesmen and
helpers at least 3 days a week, to be
supported by required route ride
documents/reports & back check/spot check
at least 2 days a week to be supported by
required documents/reports.

2.1.2 Conduct sales meetings and morning

huddles. Training should focus on the
 enhancement of effective sales and
merchandizing [sic] techniques of the
salesmen and helpers. Conduct group training
at least 1 hour each week on a designated
day and of specific topic.

2.2 Code of Conduct

2.2.1 Maintain the company's reputation

through strict adherence to PCPPI's code of
conduct and the universal standards of
unquestioned business
ethics.12

Earlier in this opinion, reference was made to the distinction between managers per se (top
managers and middle managers) and supervisors (first-line managers). That distinction is evident in
the work of the route managers which sets them apart from supervisors in general. Unlike
supervisors who basically merely direct operating employees in line with set tasks assigned to them,
route managers are responsible for the success of the company's main line of business through
management of their respective sales teams. Such management necessarily involves the planning,
direction, operation and evaluation of their individual teams and areas which the work of supervisors
does not entail.

The route managers cannot thus possibly be classified as mere supervisors because their work does
not only involve, but goes far beyond, the simple direction or supervision of operating employees to
accomplish objectives set by those above them. They are not mere functionaries with simple
oversight functions but business administrators in their own right. An idea of the role of route
managers as managers per se can be gotten from a memo sent by the director of metro sales
operations of respondent company to one of the route managers. It reads: 13

03 April 1995

To : CESAR T . REOLADA

From : REGGIE M. SANTOS

Subj : SALARY INCREASE

Effective 01 April 1995, your basic monthly salary of P11,710 will be increased to P12,881 or
an increase of 10%. This represents the added managerial responsibilities you will assume
due to the recent restructuring and streamlining of Metro Sales Operations brought about by
the continuous losses for the last nine (9) months.

Let me remind you that for our operations to be profitable, we have to sustain the intensity
and momentum that your group and yourself have shown last March. You just have to deliver
the desired volume targets, better negotiated concessions, rationalized sustaining deals,
eliminate or reduced overdues, improved collections, more cash accounts, controlled
operating expenses, etc. Also, based on the agreed set targets, your monthly performance
will be closely monitored.
 You have proven in the past that your capable of achieving your targets thru better planning,
managing your group as a fighting team, and thru aggressive selling. I am looking forward to
your success and I expect that you just have to exert your doubly best in turning around our
operations from a losing to a profitable one!

Happy Selling!!

(
S
g
d
.
)

R
.
M
.

S
A
N
T
O
S

The plasticized card given to route managers, quoted in the separate opinion of Justice Vitug,
although entitled "RM's Job Description," is only a summary of performance standards. It does not
show whether route managers are managers per se or supervisors. Obviously, these performance
standards have to be related to the specific tasks given to route managers in the four-page "Route
Manager Position Description," and, when this is done, the managerial nature of their jobs is fully
revealed. Indeed, if any, the card indicates the great latitude and discretion given to route managers
from servicing and enhancing company goodwill to supervising and auditing accounts, from trade
(new business) development to the discipline, training and monitoring of performance of their
respective sales teams, and so forth, if they are to fulfill the company's expectations in the "key
result areas."

Article 212(m) says that "supervisory employees are those who, in the interest of the employer,
effectively recommend such managerial actions if the exercise of such authority is not merely
routinary or clerical in nature but requires the use of independent judgment." Thus, their only power
is to recommend. Certainly, the route managers in this case more than merely recommend effective
management action. They perform operational, human resource, financial and marketing functions
for the company, all of which involve the laying down of operating policies for themselves and their
teams. For example, with respect to marketing, route managers, in accordance with B.1.1.1 to
B.1.1.9 of the Route Managers Job Description, are charged, among other things, with expanding
the dealership base of their respective sales areas, maintaining the goodwill of current dealers, and
distributing the company's various promotional items as they see fit. It is difficult to see how
supervisors can be given such responsibility when this involves not just the routine supervision of
operating employees but the protection and expansion of the company's business vis-a-vis its
competitors.
While route managers do not appear to have the power to hire and fire people (the evidence shows
that they only "recommended" or "endorsed" the taking of disciplinary action against certain
employees), this is because this
is a function of the Human Resources or Personnel Department of the company. And neither
14

should it be presumed that just because they are given set benchmarks to observe, they are ipso
facto supervisors. Adequate control methods (as embodied in such concepts as "Management by
Objectives [MBO]" and "performance appraisals") which require a delineation of the functions and
responsibilities of managers by means of ready reference cards as here, have long been recognized
in management as effective tools for keeping businesses competitive.

This brings us to the second question, whether the first sentence of Art. 245 of the Labor Code,
prohibiting managerial employees from forming, assisting or joining any labor organization, is
constitutional in light of Art. III, 8 of the Constitution which provides:

The right of the people, including those employed in the public and private sectors, to form
unions, associations, or societies for purposes not contrary to law shall not be abridged.

As already stated, whether they belong to the first category (managers per se) or the second
category (supervisors), managers are employees. Nonetheless, in the United States, as Justice
Puno's separate opinion notes, supervisors have no right to form unions. They are excluded from
the definition of the term "employee" in 2(3) of the Labor-Management Relations Act of 1947. In
15

the Philippines, the question whether managerial employees have a right of self-organization has
arisen with respect to first-level managers or supervisors, as shown by a review of the course of
labor legislation in this country.

Right of Self-Organization of Managerial

Employees under Pre-Labor Code Laws

Before the promulgation of the Labor Code in 1974, the field of labor relations was governed by the
Industrial Peace Act (R.A. No. 875).

In accordance with the general definition above, this law defined "supervisor" as follows:

Sec. 2. . . .

(k) "Supervisor" means any person having authority in the interest of an employer, to hire,
transfer, suspend, lay-off, recall, discharge, assign, recommend, or discipline other
employees, or responsibly to direct them, and to adjust their grievances, or effectively to
recommend such acts, if, in connection with the foregoing, the exercise of such authority is
not of a merely routinary or clerical nature but requires the use of independent judgment. 16

The right of supervisors to form their own organizations was affirmed:

Sec. 3. Employees' Right to Self-Organization. Employees shall have the right to self-
organization and to form, join or assist labor organizations of their own choosing for the
purpose of collective bargaining through representatives of their own choosing and to
engage in concerted activities for the purpose of collective bargaining and other mutual aid
and protection. Individuals employed as supervisors shall not be eligible for membership in a
labor organization of employees under their supervision but may form separate
organizations of their own. 17
For its part, the Supreme Court upheld in several of its decisions the right of supervisors to organize
for purposes of labor relations. 18

Although it had a definition of the term "supervisor," the Industrial Peace Act did not define the term
"manager." But, using the commonly-understood concept of "manager," as above stated, it is
apparent that the law used the term "supervisors" to refer to the sub-group of "managerial
employees" known as front-line managers. The other sub-group of "managerial employees," known
as managers per se, was not covered.

However, in Caltex Filipino Managers and Supervisors Association v. Court of Industrial

Relations, the right of all managerial employees to self-organization was upheld as a general
19

proposition, thus:

It would be going too far to dismiss summarily the point raised by respondent Company
that of the alleged identity of interest between the managerial staff and the employing firm.
That should ordinarily be the case, especially so where the dispute is between management
and the rank and file. It does not necessarily follow though that what binds the managerial
staff to the corporation forecloses the possibility of conflict between them. There could be a
real difference between what the welfare of such group requires and the concessions the
firm is willing to grant. Their needs might not be attended to then in the absence of any
organization of their own. Nor is this to indulge in empty theorizing. The record of respondent
Company, even the very case cited by it, is proof enough of their uneasy and troubled
relationship. Certainly the impression is difficult to erase that an alien firm failed to manifest
sympathy for the claims of its Filipino executives. To predicate under such circumstances
that agreement inevitably marks their relationship, ignoring that discord would not be
unusual, is to fly in the face of reality.

. . . The basic question is whether the managerial personnel can organize. What respondent
Company failed to take into account is that the right to self-organization is not merely a
statutory creation. It is fortified by our Constitution. All are free to exercise such right unless
their purpose is contrary to law. Certainly it would be to attach unorthodoxy to, not to say an
emasculation of, the concept of law if managers as such were precluded from organizing.
Having done so and having been duly registered, as did occur in this case, their union is
entitled to all the rights under Republic Act No. 875. Considering what is denominated as
unfair labor practice under Section 4 of such Act and the facts set forth in our decision, there
can be only one answer to the objection raised that no unfair labor practice could be
committed by respondent Company insofar as managerial personnel is concerned. It is, as is
quite obvious, in the negative. 20

Actually, the case involved front-line managers or supervisors only, as the plantilla of employees,
quoted in the main opinion, clearly indicates:
21

CAFIMSA members holding the following Supervisory Payroll Position Title are Recognized
by the Company

Payroll Position Title

Assistant to Mgr. National Acct. Sales

Jr. Sales Engineer

Retail Development Asst.

Staff Asst. 0 Marketing

Sales Supervisor

Supervisory Assistant

Jr. Supervisory Assistant

Credit Assistant

Lab. Supvr. Pandacan

Jr. Sales Engineer B

Operations Assistant B

Field Engineer

Sr. Opers. Supvr. MIA A/S

Purchasing Assistant

Jr. Construction Engineer

Sr. Sales Supervisor

Deport Supervisor A

Terminal Accountant B

Merchandiser

Dist. Sales Prom. Supvr.

Instr. Merchandising

Asst. Dist. Accountant B

Sr. Opers. Supervisor

Jr. Sales Engineer A

Asst. Bulk Ter. Supt.

Sr. Opers. Supvr.

Credit Supervisor A
 Asst. Stores Supvr. A

Ref. Supervisory Draftsman

Refinery Shift Supvr. B

Asst. Supvr. A Operations (Refinery)

Refinery Shift Supvr. B

Asst. Lab. Supvr. A (Refinery)

St. Process Engineer B (Refinery)

Asst. Supvr. A Maintenance (Refinery)

Asst. Supvr. B Maintenance (Refinery)

Supervisory Accountant (Refinery)

Communications Supervisor (Refinery)

Finally, also deemed included are all other employees excluded from the rank and file unions
but not classified as managerial or otherwise excludable by law or applicable judicial
precedents.

Right of Self-Organization of Managerial

Employees under the Labor Code

Thus, the dictum in the Caltex case which allowed at least for the theoretical unionization of top and
middle managers by assimilating them with the supervisory group under the broad phrase
"managerial personnel," provided the lynchpin for later laws denying the right of self-organization not
only to top and middle management employees but to front line managers or supervisors as well.
Following the Caltex case, the Labor Code, promulgated in 1974 under martial law, dropped the
distinction between the first and second sub-groups of managerial employees. Instead of treating
the terms "supervisor" and "manager" separately, the law lumped them together and called them
"managerial employees," as follows:

Art. 212. Definitions . . . .

(k) "Managerial Employee" is one who is vested with powers or prerogatives to lay down and
execute management policies and/or to hire, transfer, suspend, lay off, recall, discharge,
assign or discipline employees, or to effectively recommend such managerial actions. All
employees not falling within this definition are considered rank and file employees for
purposes of this Book. 22

The definition shows that it is actually a combination of the commonly understood definitions of both
groups of managerial employees, grammatically joined by the phrase "and/or."
This general definition was perhaps legally necessary at that time for two reasons. First, the 1974
Code denied supervisors their right to self-organize as theretofore guaranteed to them by the
Industrial Peace Act. Second, it stood the dictum in the Caltex case on its head by prohibiting all
types of managers from forming unions. The explicit general prohibition was contained in the then
Art. 246 of the Labor Code.

The practical effect of this synthesis of legal concepts was made apparent in the Omnibus Rules
Implementing the Labor Code which the Department of Labor promulgated on January 19, 1975.
Book V, Rule II, 11 of the Rules provided:

Supervisory unions and unions of security guards to cease operation. All existing
supervisory unions and unions of security guards shall, upon the effectivity of the Code,
cease to operate as such and their registration certificates shall be deemed automatically
canceled. However, existing collective agreements with such unions, the life of which
extends beyond the date of effectivity of the Code, shall be respected until their expiry date
insofar as the economic benefits granted therein are concerned.

Members of supervisory unions who do not fall within the definition of managerial employees
shall become eligible to join or assist the rank and file labor organization, and if none exists,
to form or assist in the forming of such rank and file organization. The determination of who
are managerial employees and who are not shall be the subject of negotiation between
representatives of the supervisory union and the employer. If no agreement is reached
between the parties, either or both of them may bring the issue to the nearest Regional
Office for determination.

The Department of Labor continued to use the term "supervisory unions" despite the demise of the
legal definition of "supervisor" apparently because these were the unions of front line managers
which were then allowed as a result of the statutory grant of the right of self-organization under the
Industrial Peace Act. Had the Department of Labor seen fit to similarly ban unions of top and middle
managers which may have been formed following the dictum in Caltex, it obviously would have done
so. Yet it did not, apparently because no such unions of top and middle managers really then
existed.

Real Intent of the 1986 Constitutional Commission

This was the law as it stood at the time the Constitutional Commission considered the draft of Art. III,
8. Commissioner Lerum sought to amend the draft of what was later to become Art. III, 8 of the
present Constitution:

MR. LERUM. My amendment is on Section 7, page 2, line 19, which is to insert between the
words "people" and "to" the following: WHETHER EMPLOYED BY THE STATE OR
PRIVATE ESTABLISHMENTS. In other words, the section will now read as follows: "The
right of the people WHETHER EMPLOYED BY THE STATE OR PRIVATE
ESTABLISHMENTS to form associations, unions, or societies for purposes not contrary to
law shall not be abridged."23

Explaining his proposed amendment, he stated:

MR. LERUM. Under the 1935 Bill of Rights, the right to form associations is granted to all
persons whether or not they are employed in the government. Under that provision, we allow
unions in the government, in government-owned and controlled corporations and in other
industries in the private sector, such as the Philippine Government Employees' Association,
 unions in the GSIS, the SSS, the DBP and other government-owned and controlled
corporations. Also, we have unions of supervisory employees and of security guards. But
what is tragic about this is that after the 1973 Constitution was approved and in spite of an
express recognition of the right to organize in P.D. No. 442, known as the Labor Code, the
right of government workers, supervisory employees and security guards to form unions was
abolished.

And we have been fighting against this abolition. In every tripartite conference attended by
the government, management and workers, we have always been insisting on the return of
these rights. However, both the government and employers opposed our proposal, so
nothing came out of this until this week when we approved a provision which states:

Notwithstanding any provision of this article, the right to self-organization

shall not be denied to government employees.

We are afraid that without any corresponding provision covering the private sector, the
security guards, the supervisory employees or majority employees [sic] will still be excluded,
and that is the purpose of this amendment.

I will be very glad to accept any kind of wording as long as it will amount to absolute
recognition of private sector employees, without exception, to organize.

THE PRESIDENT. What does the Committee say?

FR. BERNAS. Certainly, the sense is very acceptable, but the point raised by Commissioner
Rodrigo is well-taken. Perhaps, we can lengthen this a little bit more to read: "The right of
the people WHETHER UNEMPLOYED OR EMPLOYED BY STATE OR PRIVATE
ESTABLISHMENTS.

I want to avoid also the possibility of having this interpreted as applicable only to the
employed.

MR. DE LOS REYES. Will the proponent accept an amendment to the amendment, Madam
President?

MR. LERUM. Yes, as long as it will carry the idea that the right of the employees in the
private sector is recognized.24

Lerum thus anchored his proposal on the fact that (1) government employees, supervisory
employees, and security guards, who had the right to organize under the Industrial Peace Act, had
been denied this right by the Labor Code, and (2) there was a need to reinstate the right of these
employees. In consonance with his objective to reinstate the right of government, security, and
supervisory employees to organize, Lerum then made his proposal:

MR. LERUM. Mr. Presiding Officer, after a consultation with several Members of this
Commission, my amendment will now read as follows: "The right of the people INCLUDING
THOSE EMPLOYED IN THE PUBLIC AND PRIVATE SECTORS to form associations,
unions, or societies for purposes not contrary to law shall not be abridged. In proposing that
amendment I ask to make of record that I want the following provisions of the Labor Code to
be automatically abolished, which read:
 Art. 245. Security guards and other personnel employed for the protection
and security of the person, properties and premises of the employers shall
not be eligible for membership in a labor organization.

Art. 246. Managerial employees are not eligible to join, assist, and form any
labor organization.

THE PRESIDING OFFICER (Mr. Bengzon). What does the Committee say?

FR. BERNAS. The Committee accepts.

THE PRESIDING OFFICER. (Mr. Bengzon) The Committee has accepted the amendment,
as amended.

Is there any objection? (Silence) The Chair hears none; the amendment, as amended, is
approved. 25

The question is what Commissioner Lerum meant in seeking to "automatically abolish" the then Art.
246 of the Labor Code. Did he simply want "any kind of wording as long as it will amount to absolute
recognition of private sector employees, without exception, to organize"? Or, did he instead intend
26

to have his words taken in the context of the cause which moved him to propose the amendment in
the first place, namely, the denial of the right of supervisory employees to organize, because he
said, "We are afraid that without any corresponding provision covering the private sector, security
guards, supervisory employees or majority [of] employees will still be excluded, and that is the
purpose of this amendment"? 27

It would seem that Commissioner Lerum simply meant to restore the right of supervisory employees
to organize. For even though he spoke of the need to "abolish" Art. 246 of the Labor Code which, as
already stated, prohibited "managerial employees" in general from forming unions, the fact was that
in explaining his proposal, he repeatedly referred to "supervisory employees" whose right under the
Industrial Peace Act to organize had been taken away by Art. 246. It is noteworthy that
Commissioner Lerum never referred to the then definition of "managerial employees" in Art. 212(m)
of the Labor Code which put together, under the broad phrase "managerial employees," top and
middle managers and supervisors. Instead, his repeated use of the term "supervisory employees,"
when such term then was no longer in the statute books, suggests a frame of mind that remained
grounded in the language of the Industrial Peace Act.

Nor did Lerum ever refer to the dictum in Caltex recognizing the right of all managerial employees to
organize, despite the fact that the Industrial Peace Act did not expressly provide for the right of top
and middle managers to organize. If Lerum was aware of the Caltex dictum, then his insistence on
the use of the term "supervisory employees" could only mean that he was excluding other
managerial employees from his proposal. If, on the other hand, he was not aware of the Caltex
statement sustaining the right to organize to top and middle managers, then the more should his
repeated use of the term "supervisory employees" be taken at face value, as it had been defined in
the then Industrial Peace Act.

At all events, that the rest of the Commissioners understood his proposal to refer solely to
supervisors and not to other managerial employees is clear from the following account of
Commissioner Joaquin G. Bernas, who writes:
 In presenting the modification on the 1935 and 1973 texts, Commissioner Eulogio R. Lerum
explained that the modification included three categories of workers: (1) government
employees, (2) supervisory employees, and (3) security guards. Lerum made of record the
explicit intent to repeal provisions of P.D. 442, the Labor Code. The provisions referred to
were:

Art. 245. Security guards and other personnel employed for the protection
and security of the person, properties and premises of the employers shall
not be eligible for membership in a labor organization.

Art. 246. Managerial employees are not eligible to join, assist, and form any
labor organization.28

Implications of the Lerum Proposal

In sum, Lerum's proposal to amend Art. III, 8 of the draft Constitution by including labor unions in
the guarantee of organizational right should be taken in the context of statements that his aim was
the removal of the statutory ban against security guards and supervisory employees joining labor
organizations. The approval by the Constitutional Commission of his proposal can only mean,
therefore, that the Commission intended the absolute right to organize of government workers,
supervisory employees, and security guards to be constitutionally guaranteed. By implication, no
similar absolute constitutional right to organize for labor purposes should be deemed to have been
granted to top-level and middle managers. As to them the right of self-organization may be regulated
and even abridged conformably to Art. III, 8.

Constitutionality of Art. 245

Finally, the question is whether the present ban against managerial employees, as embodied in Art.
245 (which superseded Art. 246) of the Labor Code, is valid. This provision reads:

Art. 245. Ineligibility of managerial employees to join any labor organization; right of
supervisory employees. Managerial employees are not eligible to join, assist or form any
labor organization. Supervisory employees shall not be eligible for membership in a labor
organization of the rank-and-file employees but may join, assist or form separate labor
organizations of their own. 29

This provision is the result of the amendment of the Labor Code in 1989 by R.A. No. 6715,
otherwise known as the Herrera-Veloso Law. Unlike the Industrial Peace Act or the provisions of the
Labor Code which it superseded, R.A. No. 6715 provides separate definitions of the terms
"managerial" and "supervisory employees," as follows:

Art. 212. Definitions. . . .

(m) "managerial employee" is one who is vested with powers or prerogatives to lay
down and execute management policies and/or to hire transfer, suspend, lay off, recall,
discharge, assign or discipline employees. Supervisory employees are those who, in the
interest of the employer, effectively recommend such managerial actions if the exercise of
such authority is not merely routinary or clerical in nature but requires the use of
independent judgment. All employees not falling within any of the above definitions are
considered rank-and-file employees for purposes of this Book.
Although the definition of "supervisory employees" seems to have been unduly restricted to the last
phrase of the definition in the Industrial Peace Act, the legal significance given to the phrase
"effectively recommends" remains the same. In fact, the distinction between top and middle
managers, who set management policy, and front-line supervisors, who are merely responsible for
ensuring that such policies are carried out by the rank and file, is articulated in the present
definition. When read in relation to this definition in Art. 212(m), it will be seen that Art. 245 faithfully
30

carries out the intent of the Constitutional Commission in framing Art. III, 8 of the fundamental law.

Nor is the guarantee of organizational right in Art. III, 8 infringed by a ban against managerial
employees forming a union. The right guaranteed in Art. III, 8 is subject to the condition that its
exercise should be for purposes "not contrary to law." In the case of Art. 245, there is a rational basis
for prohibiting managerial employees from forming or joining labor organizations. As Justice Davide,
Jr., himself a constitutional commissioner, said in his ponencia in Philips Industrial Development,
Inc. v. NLRC: 31

In the first place, all these employees, with the exception of the service engineers and the
sales force personnel, are confidential employees. Their classification as such is not
seriously disputed by PEO-FFW; the five (5) previous CBAs between PIDI and PEO-FFW
explicitly considered them as confidential employees. By the very nature of their functions,
they assist and act in a confidential capacity to, or have access to confidential matters of,
persons who exercise managerial functions in the field of labor relations. As such, the
rationale behind the ineligibility of managerial employees to form, assist or joint a labor union
equally applies to them.

In Bulletin Publishing Co., Inc. v. Hon. Augusto Sanchez, this Court elaborated on this
rationale, thus:

. . . The rationale for this inhibition has been stated to be, because if these
managerial employees would belong to or be affiliated with a Union, the latter
might not be assured of their loyalty to the Union in view of evident conflict of
interests. The Union can also become company-dominated with the
presence of managerial employees in Union membership. 32

To be sure, the Court in Philips Industrial was dealing with the right of confidential employees to
organize. But the same reason for denying them the right to organize justifies even more the ban on
managerial employees from forming unions. After all, those who qualify as top or middle managers
are executives who receive from their employers information that not only is confidential but also is
not generally available to the public, or to their competitors, or to other employees. It is hardly
necessary to point out that to say that the first sentence of Art. 245 is unconstitutional would be to
contradict the decision in that case.

WHEREFORE, the petition is DISMISSED.

SO ORDERED.

Narvasa, C.J., Regalado, Romero, Bellosillo, Martinez and Purisima, JJ., concur.

Separate Opinions
DAVIDE, JR., J., concurring and dissenting;

I concur with the majority that the "route managers" of private respondent Pepsi-Cola Products
Philippines, Inc. are managerial employees. However, I respectfully submit that contrary to the
majority's holding, Article 245 of the Labor Code is unconstitutional, as it abridges Section 8, Article
III of the Constitution.

Section 8, Article III of the 1987 Constitution was taken from Section 7, Article IV of the 1973
Constitution which, in turn, was lifted from Section 6, Article III of the 1935 Constitution. Section 7 of
the 1973 Constitution provided as follows:

Sec. 7. The right to form associations or societies for purpose not contrary to law shall not be
abridged.

This Section was adopted in Section 7 of Proposed Resolution No. 486 of the 1986 Constitutional
Commission, entitled Resolution to Incorporate in the New Constitution an Article on the Bill of
Rights, submitted by the Committee on Citizenship, Bill of Rights, Political Rights and Obligations,
1

and Human Rights, with a modification, however, consisting of the insertion of the word union
between the words "associations" and "societies." Thus the proposed Section 7 provided as follows:

Sec. 7. The right of the people to form associations, unions, or societies for purposes not
contrary to law shall not be abridged (emphasis supplied).

Commissioner Joaquin G. Bernas, in his sponsorship speech on the proposed Article on the Bill of
Rights, expounded on the nature of the proposed provision, in this wise:

Section 7 preserves the old provision not because it is strictly needed but because its
removal might be subject to misinterpretation. It reads:

xxx xxx xxx

It strictly does not prepare the old provision because it adds the word UNION, and in the
explanation we received from Commissioner Lerum, the term envisions not just unions in
private corporations but also in the government. This preserves our link with the Malolos
Constitution as far as the right to form associations or societies for purposes not contrary to
law is concerned. 2

During the period of individual amendments, Commissioner Lerum introduced an amendment to the
proposed section consisting of the insertion of the clause "WHETHER EMPLOYED BY THE STATE
OR PRIVATE ESTABLISHMENTS, which, after consulting other Commissioners, he modified his
proposed amendment to read: "INCLUDING THOSE EMPLOYED IN THE PUBLIC AND PRIVATE
SECTORS." At that time, the section read:

Sec. 7. The right of the people including those employed in the public and private sectors to
form associations, unions or societies for purposes not contrary to law shall not be abridged.

Pertinently to this dispute Commissioner Lerum's intention that the amendment "automatically
abolish" Articles 245 and 246 of the Labor Code. The Committee accepted the amendment, and
there having been no objection from the floor, the Lerum amendment was approved, thus:
 MR. LERUM: . . . In proposing that amendment I ask to make of record that I want the
following provisions of the Labor Code to be automatically abolished, which read:

Art. 245. Security guards and other personnel employed for the protection
and security of the person, properties and premises of the employers shall
not be eligible for membership in a labor organization.

Art. 246. Managerial employees are not eligible to join, assist, and form any
labor organization.

THE PRESIDING OFFICER (Mr. Bengzon):

What does the Committee say?

FR. BERNAS: The Committee accepts.

THE PRESIDING OFFICER (Mr. Bengzon):

The Committee has accepted the amendment, as amended.

Is there any objection? (Silence) The Chair hears none; the amendment, as
amended, is approved. 3

The Committee on Style then recommended that commas be placed after the words people and
sectors, while Commissioner Lerum likewise moved to place the word unions before the word
associations. Section 7, which was subsequently renumbered as Section 8 as presently appearing
4

in the text ratified in the plebiscite of 2 February 1987, then read as follows:

The right of the people, including those employed in the public and private sectors, to form
unions, associations, or societies for purposes not contrary to law shall not be abridged.

It is then indubitably clear from the foregoing that the intent of the Constitutional Commission was to
abrogate the law prohibiting managerial employees from joining, assisting, or forming unions or
labor organizations. In this regard, there is absolutely no need to decipher the intent of the framers
of the 1987 Constitution vis-a-vis Article 245 (originally 246) of the Labor Code, there being no
ambiguity or vagueness in the wording of the present Section 8, Article III of the 1987 Constitution.
The provision is clear and written in simple language; neither were there any confusing debates
thereon. More importantly, the purpose of Commissioner Lerum's amendments was unequivocal: he
did not merely intend an implied repeal, but an express repeal of the offending article of the Labor
Code. The approval of the amendments left no doubt whatsoever, as faithfully disclosed in the
Records of the Constitutional Commission, that all employees meaning rank-and-file, supervisory
and managerial whether from the public or the private sectors, have the right to form unions for
purposes not contrary to law.

The Labor Code referred to by Commissioner Lerum was P.D. No. 442, promulgated on 1 May 1974.
With the repeal of Article 239 by Executive Order No. 111 issued on 24 December 1986, Article 246
5

(as mentioned by Commissioner Lerum) became Article 245. Thereafter, R.A. No. 6715 amended6

the new Article 245 (originally Article 246) to read, as follows:

Sec. 245. Ineligibility of managerial employees to join any labor organization; right of
supervisory employees. Managerial employees are not eligible to join, assist or form any
 labor organization. Supervisory employees shall not be eligible for membership in a labor
organization of the rank-and-file employees but may join, assist or form separate labor
organizations of their own. 7

With the abrogation of the former Article 246 of the Labor Code, and the constitutional prohibition
8

against any law prohibiting managerial employees from joining, assisting or forming unions or labor
organizations, the first sentence then of the present Article 245 of the Labor Code must be struck
down as unconstitutional. However, due to an obvious conflict of interest being closely identified
9

with the interests of management in view of the inherent nature of their functions, duties and
responsibilities managerial employees may only be eligible to join, assist or form unions or labor
organizations of their own rank, and not those of the supervisory employees nor the rank-and-file
employees.

In the instant case, the petitioner's name United Pepsi-Cola Supervisory Union (UPSU)
indubitably attests that it is a union of supervisory employees. In light of the earlier discussion,
the route managers who are managerial employees, cannot join or assist UPSU. Accordingly, the
Med-Arbiter and public respondent Laguesma committed no error in denying the petition for direct
certification or for certification election.

I thus vote to GRANT, IN PART, the instant petition. That portion of the challenged resolution of
public respondent holding that since the route managers of private respondent Pepsi-Cola Products
Philippines, Inc., are managerial employees, they are "not eligible to assist, join or form a union or
any other organization" should be SET ASIDE for being violative of Section 8 of Article III of the
Constitution, while that portion thereof denying petitioner's appeal from the Med-Arbiter's decision
dismissing the petition for direct certification or for a certification election should be AFFIRMED.

PUNO, J., separate concurring;

With due respect, it is my submission that Article 245 of the Labor Code was not repealed by section
8, Article III of the 1987 Constitution for reasons discussed below.

A. Types of Employees.

For purposes of applying the law on labor relations, the Labor Code in Article 212 (m) defines three
(3) categories of employees. They are managerial, supervisory and rank-and-file, thus:

Art. 212 (m). "Managerial Employee" is one who is vested with powers or prerogatives to lay
down and execute management policies and/or to hire, transfer, suspend, lay-off, recall,
discharge, assign or discipline employees. "Supervisory employees" are those who, in the
interest of the employer, effectively recommended such managerial actions if the exercise of
such authority is not merely routinary or clerical in nature but requires the use of
independent judgment. All employees not falling within any of the above definitions are
considered rank-and-file employees for purposes of this Book.

The test of "managerial" or "supervisory" status depends on whether a person possesses authority
to act in the interest of his employer and whether such authority is not routinary or clerical in nature
but requires the use of independent judgment. The rank-and-file employee performs work that is
1

routinary and clerical in nature. The distinction between these employees is significant because
supervisory and rank-and-file employees may form, join or assist labor organizations. Managerial
employees cannot.
B. The Exclusion of Managerial Employees: Its Historical Roots in the United States.

The National Labor Relations Act (NLRA), also known as the Wagner Act, enacted by the U.S.
Congress in 1935, was the first law that regulated labor relations in the United States and embodied
its national labor policy. The purpose of the NLRA was to eliminate obstructions to the free flow of
2

commerce through the practice of collective bargaining. The NLRA also sought to protect the
workers' full freedoms of association, self-organization, and designation of representatives of their
own choosing, for the purpose of negotiating the terms and conditions of their employment or other
mutual aid and protection. The NLRA established the right of employees to organize, required
3

employers to bargain with employees collectively through employee-elected representatives, gave

employees the right to engage in concerted activities for collective bargaining purposes or other
mutual aid or protection, and created the National Labor Relations Board (NLRB) as the regulatory
agency in labor-management matters. 4

The NLRA was amended in 1947 by the Labor Management Relations Act (LMRA), also known as
the Taft-Hartley Act. This Act sought to lessen industrial disputes and placed employers in a more
nearly equal position with unions in bargaining and labor relations procedures. 5

The NLRA did not make any special provision for "managerial employees." The privileges and
6

benefits of the Act were conferred on "employees." Labor organizations thus clamored for the
inclusion of supervisory personnel in the coverage of the Act on the ground that supervisors were
also employees. Although traditionally, supervisors were regarded as part of management, the
NLRB was constrained to recognize supervisors as employees under the coverage of the law.
Supervisors were then granted collective bargaining rights. Nonetheless, the NLRB refused to
7

consider managers as covered by the law. 8

The LMRA took away the collective bargaining rights of supervisors. The sponsors of the
amendment feared that their unionization would break down industrial discipline as it would blur the
traditional distinction between management and labor. They felt it necessary to deny supervisory
personnel the right of collective bargaining to preserve their loyalty to the interests of their
employers. 9

Several amendments were later made on the NLRA but the exclusion of managers and supervisors
from its coverage was preserved. Until now managers and supervisors are excluded from the
law. Their exclusion hinges on the theory that the employer is entitled to the full loyalty of those
10

whom it chooses for positions of responsibility, entailing action on the employers' behalf. A
supervisor's and manager's ability to control the work of others would be compromised by his
sharing of employee status with them. 11

C. Historical Development in the Philippines.

Labor-management relations in the Philippines were first regulated under the Industrial Peace
Act which took effect in 1953. Hailed as the Magna Carta of Labor, it was modelled after the NLRA
12

and LMRA of the United States. Most of the basic principles of the NLRA have been carried over to
13

the Industrial Peace Act and the Labor Code. This is significant because we have ruled that where
14

our labor statutes are based on statutes in foreign jurisdiction, the decisions of the high courts in
those jurisdictions construing and interpreting the Act are given persuasive effects in the application
of Philippine law.
15

The Industrial Peace Act did not carry any provision prohibiting managerial employees from joining
labor organizations. Section 3 of said law merely provided:
 Sec. 3. Employees' Right to Self-Organization. Employees shall have the right to self-
organization and to form, join or assist labor organizations of their own choosing for the
purpose of collective bargaining through representatives of their own choosing and to
engage in concerted activities for the purpose of collective bargaining and other mutual aid
and protection. Individuals employed as supervisors shall not be eligible for membership in a
labor organization of employees under their supervision but may form separate
organizations of their own.

Significantly, the Industrial Peace Act did not define a manager or managerial employee. It defined a
"supervisor" but not a "manager." Thus:

Sec. 2. . . .

(k) "Supervisor" means any person having authority in the interest of an employer, to hire,
transfer, suspend, lay-off, recall, discharge, assign, recommend, or discipline other
employees, or responsibly to direct them, and to adjust their grievances, or effectively to
recommend such acts, if, in connection with the foregoing, the exercise of such authority is
not of a merely routinary or clerical nature but requires the use of independent judgment.

In 1972, we interpreted Section 3 of the Industrial Peace Act to give supervisors the right to join and
form labor organizations of their own. Soon we grappled with the right of managers to organize. In a
16

case involving Caltex managers, we recognized their right to organize, viz:

It would be going too far to dismiss summarily the point raised by respondent company, that
of the alleged identity of interest between the managerial staff and the employing firm. That
should ordinarily be the case, especially so where the dispute is between management and
the rank-and-file. It does not necessarily follow though that what binds the managerial staff
to the corporation forecloses the possibility of conflict between them. There could be a real
difference between what the welfare of such group requires and the concessions the firm is
willing to grant. Their needs might not be attended to then in the absence of any organization
of their own. Nor is this to indulge in empty theorizing. The records of respondent company,
even the very case cited by it, is proof enough of their uneasy and troubled relationship.
Certainly the impression is difficult to erase that an alien firm failed to manifest sympathy for
the claims of its Filipino executives.
17

The Industrial Peace Act was repealed in 1975 by P.D. 442, the Labor Code of the Philippines. The
Labor Code changed existing jurisprudence when it prohibited supervisory and managerial
employees from joining labor organizations. Supervisory unions were no longer recognized nor
allowed to exist and operate as such. We affirmed this statutory change in Bulletin Publishing
18

Corp. v. Sanchez. Similarly, Article 246 of the Labor Code expressly prohibited managerial
19

employees from forming, assisting and joining labor organizations, to wit:

Art. 246. Ineligibility of managerial employees to join any labor organization. Managerial
employees are not eligible to join, assist or form any labor organization.

In the same Bulletin case, the Court applied Article 246 and held that managerial employees are the
very type of employees who, by the nature of their positions and functions, have been decreed
disqualified from bargaining with management. This prohibition is based on the rationale that if
managerial employees were to belong or be affiliated with a union, the union might not be assured
of their loyalty in view of evident conflict of interest or that the union can be company-dominated with
the presence of managerial employees in the union membership. In the collective bargaining
20

process, managerial employees are supposed to be on the side of the employer, to act as its
representative, and to see to it that its interests are well protected. The employer is not assured of
such protection if these employees themselves become union members. 21

The prohibition on managerial employees to join, assist or form labor organizations was retained in
the Labor Code despite substantial amendments made in 1989 by R.A. 6715, the Herrera-Veloso
Law. R.A. 6715 was passed after the effectivity of the 1987 Constitution and this law did not
abrogate, much less amend the prohibition on managerial employees to join labor
organizations. The express prohibition in Article 246 remained. However, as an addendum to this
same Article, R.A. 6715 restored to supervisory employees the right to join labor organizations of
their own. Article 246 now reads:
22

Art. 246. Ineligibility of managerial employees to join any labor organization; right of
supervisory employees. Managerial employees are not eligible to join, assist or form any
labor organization. Supervisory employees shall not be eligible for membership in a labor
organization of the rank-and-file employees but may join, assist or form separate labor
organizations of their own.

Article 246 became Article 245 after then Article 244 was repealed by E.O. 111. Article 246 is
presently Article 245 of the Labor Code.

Indeed, Article 245 of the Labor Code prohibiting managerial employees from joining labor
organizations has a social and historical significance in our labor relations law. This significance
should be considered in deciphering the intent of the framers of the 1987 Constitution vis-a-vis the
said Article.

With due respect, I do not subscribe to the view that section 8, Article III of the Constitution
abrogated Article 245 of the Labor Code. A textual analysis of section 8, Article III of the Constitution
will not justify this conclusion. With due respect, the resort by Mr. Justice Davide to the deliberations
of the Constitutional Commission does not suffice. It is generally recognized that debates and other
proceedings in a constitutional convention are of limited value and are an unsafe guide to the intent
of the people. Judge Cooley has stated that:
23

When the inquiry is directed to ascertaining the mischief designed to be remedied, or the
purpose sought to be accomplished by a particular provision, it may be proper to examine
the proceedings of the convention which framed the instrument. Where the proceedings
clearly point out the purpose of the provision, the aid will be valuable and satisfactory; but
where the question is one of abstract meaning, it will be difficult to derive from this source
much reliable assistance in interpretation. Every member of such a convention acts upon
such motives and reasons as influence him personally, and the motions and debates do not
necessarily indicate the purpose of a majority of a convention in adopting a particular clause.
It is quite possible for a particular clause to appear so clear and unambiguous to the
members of the convention as to require neither discussion nor illustration; and the few
remarks made concerning it in the convention might have a plain tendency to lead directly
away from the meaning in the minds of the majority. It is equally possible for a part of the
members to accept a clause in one sense and a part in another. And even if we were certain
we had attained to the meaning of the convention, it is by no means to be allowed a
controlling force, especially if that meaning appears not to be the one which the words would
most naturally and obviously convey. For as the constitution does not derive its force from
the convention which framed, but from the people who ratified it, the intent to be arrived at is
that of the people, and it is not to be supposed that they have looked for any dark and
abstruse meaning in the words employed, but rather that they have accepted them in the
 sense most obvious to the common understanding, and ratified the instrument in the belief
that was the sense designed to be conveyed. 24

It is for this reason that proceedings of constitutional conventions are less conclusive of the proper
construction of the instrument than are legislative proceedings of the proper construction of the
statute. In the statutes, it is the intent of the legislature that is being sought, while in constitutions, it
25

is the intent of the people that is being ascertained through the discussions and deliberations of their
representatives. The proper interpretation of constitutional provisions depends more on how it was
26

understood by the people adopting it than in the framers' understanding thereof. 27

Thus, debates and proceedings of the constitutional convention are never of binding force. They
may be valuable but are not necessarily decisive. They may shed a useful light upon the purpose
28

sought to be accomplished or upon the meaning attached to the words employed. And the courts
are free to avail themselves of any light that may be derived from such sources, but they are not
bound to adopt it as the sole ground of their decision. 29

Clearly then, a statute cannot be declared void on the sole ground that it is repugnant to a supposed
intent or spirit declared in constitutional convention proceedings.

D. Freedom of Association

The right of association flows from freedom of expression. Like the right of expression, the exercise
30

of the right of association is not absolute. It is subject to certain limitations.

Article 243 of the Labor Code reiterates the right of association of people in the labor sector. Article
243 provides:

Art. 243. Coverage of employees' right to self-organization. All persons employed in

commercial, industrial and agricultural enterprises and in religious, charitable, medical, or
educational institutions whether operating for profit or not, shall have the right to self-
organization and to form, join, or assist labor organizations of their own choosing for
purposes of collective bargaining. Ambulant, intermittent and itinerant workers, self-
employed people, rural workers and those without any definite employers may form labor
organizations for their mutual aid and protection.

Article 243 guarantees the right to self-organization and association to "all persons." This seemingly
all-inclusive coverage of "all persons," however, actually admits of exceptions.

Article 244 of the Labor Code mandates that all employees in the civil service, i.e, those not
31

employed in government corporations established under the Corporation Code, may only form
associations but may not collectively bargain on terms and conditions fixed by law. An employee of a
cooperative who is a member and co-owner thereof cannot invoke the right of collective bargaining
and negotiation vis-a-vis the cooperative. An owner cannot bargain with himself or his co-
32

owners. Employees in foreign embassies or consulates or in foreign international organizations

33

granted international immunities are also excluded from the right to form labor
organizations. International organizations are organized mainly as a means for conducting general
34

international business in which the member-states have an interest and the immunities granted them
shield their affairs from political pressure or control by the host country and assure the unimpeded
performance of their functions. 35
Confidential employees have also been denied the right to form labor-organizations. Confidential
employees do not constitute a distinct category for purposes of organizational right. Confidentiality
may attach to a managerial or non-managerial position. We have, however, excluded confidential
employees from joining labor organizations following the rationale behind the disqualification of
managerial employees in Article 245. In the case of National Association of Trade Unions-Republic
Planters' Bank Supervisors Chapter v. Torres, we held:
36

In the collective bargaining process, managerial employees are supposed to be on the side
of the employer, to act as its representatives, and to see to it that its interests are well
protected. The employer is not assured of such protection if these employees themselves
are union members. Collective bargaining in such a situation can become one-sided. It is the
same reason that impelled this Court to consider the position of confidential employees as
included in the disqualification found in Article 245 as if the disqualification of confidential
employees were written in the provision. If confidential employees could unionize in order to
bargain for advantages for themselves, then they could be governed by their own motives
rather than the interest of the employers. Moreover, unionization of confidential employees
for the purpose of collective bargaining would mean the extension of the law to persons or
individuals who are supposed to act "in the interest of" the employers. It is not farfetched that
in the course of collective bargaining, they might jeopardize that interest which they are duty-
bound to protect. 37

E. The disqualification extends only to labor organizations.

It must be noted that Article 245 of the Labor Code deprives managerial employees of their right to
join "labor organizations." A labor organization is defined under the Labor Code as:

Art. 212 (g). "Labor organization" means any union or association of employees which exists
in whole or in part for the purpose of collective bargaining or of dealing with the employer
concerning terms and conditions of employment.

A labor organization has two broad rights: (1) to bargain collectively and (2) to deal with the
employer concerning terms and conditions of employment. To bargain collectively is a right given to
a labor organization once it registers itself with the Department of Labor and Employment (DOLE).
Dealing with the employer, on the other hand, is a generic description of interaction between
employer and employees concerning grievances, wages, work hours and other terms and conditions
of employment, even if the employees' group is not registered with the DOLE. Any labor
38

organization which may or may not be a union may deal with the employer. This explains why a
workers' Organization does not always have to be a labor union and why employer-employee
collective interactions are not always collective bargaining. 39

In the instant case, it may be argued that managerial employees' labor organization will merely "deal
with the employer concerning terms and conditions of employment" especially when top
management is composed of aliens, following the circumstances in the Caltex case.

Although the labor organization may exist wholly for the purpose of dealing with the employer
concerning terms and conditions of employment, there is no prohibition in the Labor Code for it to
become a legitimate labor organization and engage in collective bargaining. Once a labor
organization registers with the DOLE and becomes legitimate, it is entitled to the rights accorded
under Articles 242 and 263 (b) of the Labor Code. And these include the right to strike and picket.

Notably, however, Article 245 does not absolutely disqualify managerial employees from exercising
their right of association. What it prohibits is merely the right to join labor organizations. Managerial
employees may form associations or organizations so long as they are not labor organizations. The
freedom of association guaranteed under the Constitution remains and has not been totally
abrogated by Article 245.

To declare Article 245 of the Labor Code unconstitutional cuts deep into our existing industrial life
and will open the floodgates to unionization at all levels of the industrial hierarchy. Such a ruling will
wreak havoc on the existing set-up between management and labor. If all managerial employees will
be allowed to unionize, then all who are in the payroll of the company, starting from the president,
vice-president, general managers and everyone, with the exception of the directors, may go on
strike or picket the
employer. Company officers will join forces with the supervisors and rank-and-file. Management
40

and labor will become a solid phalanx with bargaining rights that could be enforced against the
owner of the company. The basic opposing forces in the industry will not be management and labor
41

but the operating group on the one hand and the stockholder and bondholder group on the other.
The industrial problem defined in the Labor Code comes down to a contest over a fair division of the
gross receipts of industry between these two groups. And this will certainly bring ill-effects on our
42

economy.

The framers of the Constitution could not have intended a major upheaval of our labor and socio-
economic systems. Their intent cannot be made to override substantial policy considerations and
create absurd or impossible situations. A constitution must be viewed as a continuously operative
43

charter of government. It must not be interpreted as demanding the impossible or the impracticable;
or as effecting the unreasonable or absurd. Courts should always endeavour to give such
44

interpretation that would make the constitutional provision and the statute consistent with reason,
justice and the public interest. 45

I vote to dismiss the petition.

VITUG, J., separate concurring and dissenting;

The pivotal issues raised in the case at bar, aptly stated by the Office of the Solicitor General, are:

(1) Whether or not public respondent, Undersecretary of the Department of Labor and Employment
("DOLE") Bienvenido E. Laguesma, gravely abused his discretion in categorizing the members of
petitioner union to be managerial employees and thus ineligible to form or join labor organizations;
and

(2) Whether or not the provision of Article 245 of the Labor Code, disqualifying managerial
employees from joining, assisting or forming any labor organization, violates Section 8, Article III, of
the 1987 Constitution, which expresses that "(t)he right of the people, including those employed in
public and private sectors to form unions, associations or societies for purposes not contrary to law
shall not be abridged."

The case originated from a petition for direct certification or certification election among route
managers/supervisory employees of Pepsi-Cola Products Phils., Inc. ("Pepsi"), filed by the United
Pepsi-Cola Supervisory Union ("Union"), claiming to be a legitimate labor organization duly
registered with the Department of Labor and Employment under Registration Certificate No. NCR-
UR-3-1421-95. Pepsi opposed the petition on the thesis that the case was no more than a mere
duplication of a previous petition for direct certification filed by the same route managers through the
1

Pepsi-Cola Employees Association (PCEA-Supervisory) which petition had already been denied by
Undersecretary Laguesma. The holding reiterated a prior decision in Workers Alliance Trade Unions
("WATU") vs. Pepsi-Cola Products Phils., Inc., that route managers were managerial employees.
2
In its decision, dated 05 May 1995, Med-Arbiter Brigida C. Fadrigon dismissed for lack of merit the
petition of the Union, stating that the issue on the proper classification and status of route managers
had already been ruled with finality in the previous decisions, aforementioned, rendered by DOLE.

The union appealed the decision. In his resolution of 31 August 1995, Undersecretary Laguesma
dismissed the appeal, saying that there was no compelling reason to abandon the ruling in the two
old cases theretofore decided by DOLE. In his order of 22 September 1995, Undersecretary
Laguesma denied the Union's motion for reconsideration.

The Union went to this Court, via a petition for certiorari, assailing the cancellation of its certificate of
registration. The Court, after considering the petition and the comments thereon filed by both public
and private respondents, as well as the consolidated reply of petitioner, dismissed the case in its
resolution of 08 July 1996 on the premise that no grave abuse of discretion had been committed by
public respondent.

Undaunted, the Union moved, with leave, for the reconsideration of the dismissal of its petition by
the Court En Banc. In its resolution of 16 June 1997, the case was referred to the Court En Banc en
consulta with the movant's invocation of unconstitutionality of Article 245 of the Labor Code vis-a-
vis Section 8, Article III, of the 1987 Constitution.

There is merit, in my view, in petitioner's motion for reconsideration but not on constitutional
grounds.

There are, in the hierarchy of management, those who fall below the level of key officers of an
enterprise whose terms and conditions of employment can well be, indeed are not infrequently,
provided for in collective bargaining agreements. To this group belong the supervisory employees.
The "managerial employees," upon the other hand, and relating the matter particularly to the Labor
Code, are those "vested with powers or prerogatives to lay down and execute management policies
and/or to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline employees" as
distinguished from the supervisory employees whose duties in these areas are so designed as to
verily be implementary to the policies or rules and regulations already outstanding and priorly taken
up and passed upon by management. The managerial level is the source, as well as prescribes the
compliance, of broad mandates which, in the field of labor relations, are to be carried out through the
next rank of employees charged with actually seeing to the specific personnel action required. In
fine, the real authority, such as in hiring or firing of employees, comes from management and
exercised by means of instructions, given in general terms, by the "managerial employees;" the
supervisory employees, although ostensibly holding that power, in truth, however, only act in
obedience to the directives handed down to them. The latter unit, unlike the former, cannot be
considered the alter ego of the owner of enterprise.

The duties and responsibilities of the members of petitioner union, shown by their "job description"
below

PCPPI

RM's JOB DESCRIPTION

A. GENERAL/OVERALL OBJECTIVE OF THIS POSITION

To contribute to the growth and profitability of PCPPI via well-selected,

trained and motivated Route Sales Team who sell, collect and merchandise,
 following the Pepsi Way, and consistent with Company policies and
procedures as well as the corporate vision of Customer Satisfaction.

B. SPECIFIC JOB DESCRIPTION:

KEY RESULT AREAS STANDARD OR PERFORMANCE

SALES VOLUME *100% Vs. NRC Target

_____% NTG

DISTRIBUTION * Product Availability

70% Pepsi

80% Seven-Up

40% Mirinda

65% Mt. Dew

5% Out of Stock

ACCOUNTS RECEIVABLE 65% Current (Incl. Legal & Col.)

MANAGEMENT 80:20 Cash to Credit Ratio

DSO assigned Std. to Division

by the District

ASSET MANAGEMENT 30 cases for ice-coolers

80 cases for electric coolers

BLOWAGA on Division Vehicles

60 cases on Rolling/Permanent

Kiosks

TRADE DEVELOPMENT 100% Buying Customers Based

on master list that bought once

5 months payback on concessions

4 CED's/Rte.
 EXPENSE MANAGEMENT a). 5% Absentism rate Excl. VL

b). 280 cases/route/day

c). 15% cost-to-sales ratio

ROUTE MANAGEMENT 3 Days on RR/Wk

Days on BC-SC- Financial &

Co. Assets

Days on TD

75% Load Factor

18 Productive Calls

CUSTOMER SATISFACTION Customer Complaint attended to within the

next working day

HUMAN RESOURCE 5% Absentism Excl. VL

MANAGEMENT (approved) 3 Documented RR/

Week using SLM's Training Log

ADMINISTRATIVE Complete, timely and accurate

MANAGEMENT reports.

PCPPI

RM's BASIC DAILY ACTIVITIES

A. AT THE SALES OFFICE

1. PRACTICES BLOWAGA ON SERVICE VEHICLE (AT HOME)

2. REPORTS FOR WORK ON OR BEFORE 6:15 A.M.

3. REPORTS IN CLEAN AND NEAT UNIFORM (GOOD GROOMING)

4. DAILY BRIEFING WITH THE DM

5. CONDUCTS SKILLS ENHANCEMENT OR HUDDLES WITH RST's

a). ATTENDANCE/GROOMING
 b). OPERATIONAL DIRECTIONS & PRIORITIES

c). ANNOUNCEMENT

6. RM's PRESENCE DURING CHECK-OUT

a). SLM PRACTICES BLOWAGA ON ROUTE TRUCK

b). PRIVATE COUNSELING WITH RST (AM & PM IF

NECESSARY)

c). PROPER HANDLING OF SELLING/MDSG. MATERIALS

d). YESTERDAY's FINAL SETTLEMENT REVIEW

7. UPDATE REPORTS, MONITORS, DOCUMENTS & TELEPHONE

CONMATION

8. ATTENDS TO PRODUCT COMPLAINTS (GFM)

9. CONDUCTS ADMINISTRATIVE INVESTIGATION OR ATTENDS DM's

MEETING (on Saturdays)

B. FIELD WORK

ROUTE RIDE

1. CHECKS SLMS. TRAINING LOG (PROGRESS & DEV'T.)

2. SALESMAN's CPC

3. ROUTE COVERAGE EVALUATION

4. LOAD FACTOR

5. SALESMAN's ROUTING SYSTEM EVALUATION

BC/SC

1. FINANCIAL & ASSET VERIFICATION, CONFIRMATION & AUDIT

2. BACKCHECKS FIRST 5 CUSTOMERS SERVED FOR THE DAY

a). MERCHANDISING

b). SERVICING

c). RM's TERRITORY FAMILIARITY

 d). KEY ACCOUNTS GOODWILL

TRADE DEVELOPMENT

1. PREPARATION PRIOR TO CALL

2. ACTUAL CALL

3. POST CALL ANALYSIS

(HOW DID I FARE? WHY? WHAT ACTIONS TO TAKE)

4. FOLLOW-UP ACTION

C. AT CLOSE OF DAY

1. MAINTAINS & UPDATES CORRECT & ACCURATE RECORDS &

REPORTS

2. RM-SLM DEBRIEFING

3. SLR DISCUSSION (BASED ON A.M. SLR)

4. COORDINATES WITH DM ON PLANS & PROGRAMS

5. PREPARATIONS FOR NEXT DAY's ACTIVITIES 3

convey no more than those that are aptly consigned to the "supervisory" group by the relatively
small unit of "managerial" employees. Certain portions of a pamphlet, the so-called "Route Manager
Position Description" referred to by Mr. Justice Vicente Mendoza, in his ponencia, hereunder
reproduced for easy reference, thus

A. BASIC PURPOSE

A Manager achieves objectives through others.

As a Route Manager, your purpose is to meet the sales plan; and you
achieve this objective through the skillful management of your job and the
management of your people.

These then are your functions as Pepsi-Cola Route Manager. Within these
functions managing your job and managing your people you are
accountable to your District Manager for the execution and completion of
various tasks and activities which will make it possible for you to achieve
your sales objectives.

B. PRINCIPAL ACCOUNTABILITIES

1.0 MANAGING YOUR JOB

 The Route Manager is accountable for the following:

1.1 SALES DEVELOPMENT

1.1.1 Achieve the sales plan.

1.1.2 Achieve all distribution and new account

objectives.

1.1.3 Develop new business opportunities

thru personal contacts with dealers.

1.1.4 Inspect and ensure that all

merchandising objectives are achieved in all
outlets.

1.1.5 Maintain and improve productivity of all

cooling equipment and kiosks.

1.1.6 Execute and control all authorized

promotions.

1.1.7 Develop and maintain dealer goodwill.

1.1.8 Ensure all accounts comply with

company suggested retail pricing.

1.1.9 Study from time to time individual route

coverage and productivity for possible
adjustments to maximize utilization of
resources.

1.2 Administration

1.2.1 Ensure the proper loading of route

trucks before check-out and the proper sorting
of bottles before check-in.

1.2.2 Ensure the upkeep of all route sales

reports and all other related reports and forms
required on an accurate and timely basis.

1.2.3 Ensure proper implementation of the

various company policies and procedures
include but not limited to shakedown; route
shortage; progressive discipline; sorting;
spoilages; credit/collection; accident;
attendance.

1.2.4 Ensure collection of receivables and

delinquent accounts.
 2.0 MANAGING YOUR PEOPLE

The Route Manager is accountable for the following:

2.1 Route Sales Team Development

2.1.1 Conduct route rides to train, evaluate

and develop all assigned route salesmen and
helpers at least 3 days a week, to be
supported by required route ride
documents/reports & back check/spot check
at least 2 days a week to be supported by
required documents/reports.

2.1.2 Conduct sales meetings and morning

huddles. Training should focus on the
enhancement of effective sales and
merchandising techniques of the salesmen
and helpers. Conduct group training at least 1
hour each week on a designated day and of
specific topic.

2.2 Code of Conduct

2.2.1 Maintain the company's reputation

through strict adherence to PCPPI's code of
conduct and the universal standards of
unquestioned business ethics.

offer nothing at all that can approximate the authority and functions of those who actually and
genuinely hold the reins of management.

I submit, with due respect, that the members of petitioning union, not really being "managerial
employees" in the true sense of the term, are not disqualified from forming or joining labor
organizations under Article 245 of the Labor Code.

I shall now briefly touch base on the constitutional question raised by the parties on Article 245 of
the Labor Code.

The Constitution acknowledges "the right of the people, including those employed in the public and
private sectors, to form unions, associations or societies for purposes not contrary to
law . . . ." Perforce, petitioner claims, that part of Article 245 of the Labor Code which states:
4 5

"Managerial employees are not eligible to join, assist or form any labor organization," being in direct
collision with the Constitutional provision, must now be declared abrogated in the law.

Frankly, I do not see such a "direct collision." The Constitution did not obviously grant a limitless
right "to form unions, associations or societies" for it has clearly seen it fit to subject its exercise to
possible legislative judgment such as may be appropriate or, to put it in the language of the
Constitution itself, to "purposes not contrary to law."
Freedom of association, like freedom of expression, truly occupies a choice position in the hierarchy
of constitutional values. Even while the Constitution itself recognizes the State's prerogative to
qualify this right, heretofore discussed, any limitation, nevertheless, must still be predicated on the
existence of a substantive evil sought to be addressed. Indeed, in the exercise of police power, the
6

State may, by law, prescribe proscriptions, provided reasonable and legitimate of course, against
even the most basic rights of individuals.

The restriction embodied in Article 245 of the Labor Code is not without proper rationale.
Concededly, the prohibition to form labor organizations on the part of managerial employees
narrows down their freedom of association. The very nature of managerial functions, however,
should preclude those who exercise them from taking a position adverse to the interest they are
bound to serve and protect. The mere opportunity to undermine that interest can validly be
restrained. To say that the right of managerial employees to form a "labor organization" within the
context and ambit of the Labor Code should be deemed totally separable from the right to bargain
collectively is not justified by related provisions of the Code. For instance

Art. 212. Definitions. . . .

7

(g) "Labor organization" means any union or association of employees which exists in whole
or in part for the purpose of collective bargaining or of dealing with employers concerning
terms and conditions of employment.

xxx xxx xxx

(m) "Managerial employee" is one who is vested with powers or prerogatives to lay down
and execute management policies and/or to hire, transfer, suspend, lay-off, recall, discharge,
assign or discipline employees. Supervisory employees are those who, in the interest of the
employer, effectively recommend such managerial actions if the exercise of such authority is
not merely routinely or clerical in nature but requires the use of independent judgment. All
employees not falling within any of the above definitions are considered rank-and-file
employees for purposes of this Book.

Art. 263. . . .

(b) Workers shall have the right to engage in concerted activities for purposes of collective
bargaining or for their mutual benefit and protection. The right of legitimate labor
organizations to strike and picket and of employers to lockout, consistent with the national
interest, shall continue to be recognized and respected.

The maxim "ut res magis quam pereat" requires not merely that a statute should be given such a
consequence as to be deemed whole but that each of its express provisions equally should be given
the intended effect.

I find it hard to believe that the fundamental law could have envisioned the use by managerial
employees of coercive means against their own employers over matters entrusted by the latter to
the former. Whenever trust and confidence is a major aspect of any relationship, a conflict of interest
on the part of the person to whom that trust and confidence is reposed must be avoided and when,
unfortunately, it does still arise its containment can rightly be decreed.

Article 245 of the Labor Code indeed aligns itself to the Corporation Code, the basic law on by far
the most commonly used business vehicle the corporation which prescribes the tenure of
office, as well as the duties and functions, including terms of employment (governed in most part by
the Articles of Incorporation, the By-laws of the Corporation, or resolutions of the Board of Directors),
of corporate officers for both the statutory officers, i.e., the president, the treasurer and the corporate
secretary, and the non-statutory officers, i.e., those who occupy positions created by the corporate
by-laws who are deemed essential for effective management of the enterprise. I cannot imagine
these officers as being legally and morally capable of associating themselves into a labor
organization and asserting collective bargaining rights against the very entity in whose behalf they
act and are supposed to act.

I submit, accordingly, that, firstly, the members of petitioner union or the so-called route managers,
being no more than supervisory employees, can lawfully organize themselves into a labor union
within the meaning of the Labor Code, and that, secondly, the questioned provision of Article 245 of
the Labor Code has not been revoked by the 1987 Constitution.

WHEREFORE, I vote, given all the foregoing, for the reversal of the resolution of 31 August 1995,
and the order of 22 September 1995, of public respondent.

Kapunan, Panganiban and Quisumbing, JJ., concur and dissent.

Separate Opinions

DAVIDE, JR., J., concurring and dissenting;

I concur with the majority that the "route managers" of private respondent Pepsi-Cola Products
Philippines, Inc. are managerial employees. However, I respectfully submit that contrary to the
majority's holding, Article 245 of the Labor Code is unconstitutional, as it abridges Section 8, Article
III of the Constitution.

Section 8, Article III of the 1987 Constitution was taken from Section 7, Article IV of the 1973
Constitution which, in turn, was lifted from Section 6, Article III of the 1935 Constitution. Section 7 of
the 1973 Constitution provided as follows:

Sec. 7. The right to form associations or societies for purpose not contrary to law shall not be
abridged.

This Section was adopted in Section 7 of Proposed Resolution No. 486 of the 1986 Constitutional
Commission, entitled Resolution to Incorporate in the New Constitution an Article on the Bill of
Rights, submitted by the Committee on Citizenship, Bill of Rights, Political Rights and Obligations,
1

and Human Rights, with a modification, however, consisting of the insertion of the word union
between the words "associations" and "societies." Thus the proposed Section 7 provided as follows:

Sec. 7. The right of the people to form associations, unions, or societies for purposes not
contrary to law shall not be abridged (emphasis supplied).

Commissioner Joaquin G. Bernas, in his sponsorship speech on the proposed Article on the Bill of
Rights, expounded on the nature of the proposed provision, in this wise:

Section 7 preserves the old provision not because it is strictly needed but because its
removal might be subject to misinterpretation. It reads:
 xxx xxx xxx

It strictly does not prepare the old provision because it adds the word UNION, and in the
explanation we received from Commissioner Lerum, the term envisions not just unions in
private corporations but also in the government. This preserves our link with the Malolos
Constitution as far as the right to form associations or societies for purposes not contrary to
law is concerned. 2

During the period of individual amendments, Commissioner Lerum introduced an amendment to the
proposed section consisting of the insertion of the clause "WHETHER EMPLOYED BY THE STATE
OR PRIVATE ESTABLISHMENTS, which, after consulting other Commissioners, he modified his
proposed amendment to read: "INCLUDING THOSE EMPLOYED IN THE PUBLIC AND PRIVATE
SECTORS." At that time, the section read:

Sec. 7. The right of the people including those employed in the public and private sectors to
form associations, unions or societies for purposes not contrary to law shall not be abridged.

Pertinently to this dispute Commissioner Lerum's intention that the amendment "automatically
abolish" Articles 245 and 246 of the Labor Code. The Committee accepted the amendment, and
there having been no objection from the floor, the Lerum amendment was approved, thus:

MR. LERUM: . . . In proposing that amendment I ask to make of record that I want the
following provisions of the Labor Code to be automatically abolished, which read:

Art. 245. Security guards and other personnel employed for the protection
and security of the person, properties and premises of the employers shall
not be eligible for membership in a labor organization.

Art. 246. Managerial employees are not eligible to join, assist, and form any
labor organization.

THE PRESIDING OFFICER (Mr. Bengzon):

What does the Committee say?

FR. BERNAS: The Committee accepts.

THE PRESIDING OFFICER (Mr. Bengzon):

The Committee has accepted the amendment, as amended.

Is there any objection? (Silence) The Chair hears none; the amendment, as
amended, is approved. 3

The Committee on Style then recommended that commas be placed after the words people and
sectors, while Commissioner Lerum likewise moved to place the word unions before the word
associations. Section 7, which was subsequently renumbered as Section 8 as presently appearing
4

in the text ratified in the plebiscite of 2 February 1987, then read as follows:

The right of the people, including those employed in the public and private sectors, to form
unions, associations, or societies for purposes not contrary to law shall not be abridged.
It is then indubitably clear from the foregoing that the intent of the Constitutional Commission was to
abrogate the law prohibiting managerial employees from joining, assisting, or forming unions or
labor organizations. In this regard, there is absolutely no need to decipher the intent of the framers
of the 1987 Constitution vis-a-vis Article 245 (originally 246) of the Labor Code, there being no
ambiguity or vagueness in the wording of the present Section 8, Article III of the 1987 Constitution.
The provision is clear and written in simple language; neither were there any confusing debates
thereon. More importantly, the purpose of Commissioner Lerum's amendments was unequivocal: he
did not merely intend an implied repeal, but an express repeal of the offending article of the Labor
Code. The approval of the amendments left no doubt whatsoever, as faithfully disclosed in the
Records of the Constitutional Commission, that all employees meaning rank-and-file, supervisory
and managerial whether from the public or the private sectors, have the right to form unions for
purposes not contrary to law.

The Labor Code referred to by Commissioner Lerum was P.D. No. 442, promulgated on 1 May 1974.
With the repeal of Article 239 by Executive Order No. 111 issued on 24 December 1986, Article 246
5

(as mentioned by Commissioner Lerum) became Article 245. Thereafter, R.A. No. 6715 amended6

the new Article 245 (originally Article 246) to read, as follows:

Sec. 245. Ineligibility of managerial employees to join any labor organization; right of
supervisory employees. Managerial employees are not eligible to join, assist or form any
labor organization. Supervisory employees shall not be eligible for membership in a labor
organization of the rank-and-file employees but may join, assist or form separate labor
organizations of their own.7

With the abrogation of the former Article 246 of the Labor Code, and the constitutional prohibition
8

against any law prohibiting managerial employees from joining, assisting or forming unions or labor
organizations, the first sentence then of the present Article 245 of the Labor Code must be struck
down as unconstitutional. However, due to an obvious conflict of interest being closely identified
9

with the interests of management in view of the inherent nature of their functions, duties and
responsibilities managerial employees may only be eligible to join, assist or form unions or labor
organizations of their own rank, and not those of the supervisory employees nor the rank-and-file
employees.

In the instant case, the petitioner's name United Pepsi-Cola Supervisory Union (UPSU)
indubitably attests that it is a union of supervisory employees. In light of the earlier discussion,
the route managers who are managerial employees, cannot join or assist UPSU. Accordingly, the
Med-Arbiter and public respondent Laguesma committed no error in denying the petition for direct
certification or for certification election.

I thus vote to GRANT, IN PART, the instant petition. That portion of the challenged resolution of
public respondent holding that since the route managers of private respondent Pepsi-Cola Products
Philippines, Inc., are managerial employees, they are "not eligible to assist, join or form a union or
any other organization" should be SET ASIDE for being violative of Section 8 of Article III of the
Constitution, while that portion thereof denying petitioner's appeal from the Med-Arbiter's decision
dismissing the petition for direct certification or for a certification election should be AFFIRMED.

PUNO, J., separate concurring;

With due respect, it is my submission that Article 245 of the Labor Code was not repealed by section
8, Article III of the 1987 Constitution for reasons discussed below.

A. Types of Employees.
For purposes of applying the law on labor relations, the Labor Code in Article 212 (m) defines three
(3) categories of employees. They are managerial, supervisory and rank-and-file, thus:

Art. 212 (m). "Managerial Employee" is one who is vested with powers or prerogatives to lay
down and execute management policies and/or to hire, transfer, suspend, lay-off, recall,
discharge, assign or discipline employees. "Supervisory employees" are those who, in the
interest of the employer, effectively recommended such managerial actions if the exercise of
such authority is not merely routinary or clerical in nature but requires the use of
independent judgment. All employees not falling within any of the above definitions are
considered rank-and-file employees for purposes of this Book.

The test of "managerial" or "supervisory" status depends on whether a person possesses authority
to act in the interest of his employer and whether such authority is not routinary or clerical in nature
but requires the use of independent judgment. The rank-and-file employee performs work that is
1

routinary and clerical in nature. The distinction between these employees is significant because
supervisory and rank-and-file employees may form, join or assist labor organizations. Managerial
employees cannot.

B. The Exclusion of Managerial Employees: Its Historical Roots in the United States.

The National Labor Relations Act (NLRA), also known as the Wagner Act, enacted by the U.S.
Congress in 1935, was the first law that regulated labor relations in the United States and embodied
its national labor policy. The purpose of the NLRA was to eliminate obstructions to the free flow of
2

commerce through the practice of collective bargaining. The NLRA also sought to protect the
workers' full freedoms of association, self-organization, and designation of representatives of their
own choosing, for the purpose of negotiating the terms and conditions of their employment or other
mutual aid and protection. The NLRA established the right of employees to organize, required
3

employers to bargain with employees collectively through employee-elected representatives, gave

employees the right to engage in concerted activities for collective bargaining purposes or other
mutual aid or protection, and created the National Labor Relations Board (NLRB) as the regulatory
agency in labor-management matters. 4

The NLRA was amended in 1947 by the Labor Management Relations Act (LMRA), also known as
the Taft-Hartley Act. This Act sought to lessen industrial disputes and placed employers in a more
nearly equal position with unions in bargaining and labor relations procedures. 5

The NLRA did not make any special provision for "managerial employees." The privileges and
6

benefits of the Act were conferred on "employees." Labor organizations thus clamored for the
inclusion of supervisory personnel in the coverage of the Act on the ground that supervisors were
also employees. Although traditionally, supervisors were regarded as part of management, the
NLRB was constrained to recognize supervisors as employees under the coverage of the law.
Supervisors were then granted collective bargaining rights. Nonetheless, the NLRB refused to
7

consider managers as covered by the law. 8

The LMRA took away the collective bargaining rights of supervisors. The sponsors of the
amendment feared that their unionization would break down industrial discipline as it would blur the
traditional distinction between management and labor. They felt it necessary to deny supervisory
personnel the right of collective bargaining to preserve their loyalty to the interests of their
employers. 9

Several amendments were later made on the NLRA but the exclusion of managers and supervisors
from its coverage was preserved. Until now managers and supervisors are excluded from the
law. Their exclusion hinges on the theory that the employer is entitled to the full loyalty of those
10

whom it chooses for positions of responsibility, entailing action on the employers' behalf. A
supervisor's and manager's ability to control the work of others would be compromised by his
sharing of employee status with them. 11

C. Historical Development in the Philippines.

Labor-management relations in the Philippines were first regulated under the Industrial Peace
Act which took effect in 1953. Hailed as the Magna Carta of Labor, it was modelled after the NLRA
12

and LMRA of the United States. Most of the basic principles of the NLRA have been carried over to
13

the Industrial Peace Act and the Labor Code. This is significant because we have ruled that where
14

our labor statutes are based on statutes in foreign jurisdiction, the decisions of the high courts in
those jurisdictions construing and interpreting the Act are given persuasive effects in the application
of Philippine law. 15

The Industrial Peace Act did not carry any provision prohibiting managerial employees from joining
labor organizations. Section 3 of said law merely provided:

Sec. 3. Employees' Right to Self-Organization. Employees shall have the right to self-
organization and to form, join or assist labor organizations of their own choosing for the
purpose of collective bargaining through representatives of their own choosing and to
engage in concerted activities for the purpose of collective bargaining and other mutual aid
and protection. Individuals employed as supervisors shall not be eligible for membership in a
labor organization of employees under their supervision but may form separate
organizations of their own.

Significantly, the Industrial Peace Act did not define a manager or managerial employee. It defined a
"supervisor" but not a "manager." Thus:

Sec. 2. . . .

(k) "Supervisor" means any person having authority in the interest of an employer, to hire,
transfer, suspend, lay-off, recall, discharge, assign, recommend, or discipline other
employees, or responsibly to direct them, and to adjust their grievances, or effectively to
recommend such acts, if, in connection with the foregoing, the exercise of such authority is
not of a merely routinary or clerical nature but requires the use of independent judgment.

In 1972, we interpreted Section 3 of the Industrial Peace Act to give supervisors the right to join and
form labor organizations of their own. Soon we grappled with the right of managers to organize. In a
16

case involving Caltex managers, we recognized their right to organize, viz:

It would be going too far to dismiss summarily the point raised by respondent company, that
of the alleged identity of interest between the managerial staff and the employing firm. That
should ordinarily be the case, especially so where the dispute is between management and
the rank-and-file. It does not necessarily follow though that what binds the managerial staff
to the corporation forecloses the possibility of conflict between them. There could be a real
difference between what the welfare of such group requires and the concessions the firm is
willing to grant. Their needs might not be attended to then in the absence of any organization
of their own. Nor is this to indulge in empty theorizing. The records of respondent company,
even the very case cited by it, is proof enough of their uneasy and troubled relationship.
Certainly the impression is difficult to erase that an alien firm failed to manifest sympathy for
the claims of its Filipino executives.
17
The Industrial Peace Act was repealed in 1975 by P.D. 442, the Labor Code of the Philippines. The
Labor Code changed existing jurisprudence when it prohibited supervisory and managerial
employees from joining labor organizations. Supervisory unions were no longer recognized nor
allowed to exist and operate as such. We affirmed this statutory change in Bulletin Publishing
18

Corp. v. Sanchez. Similarly, Article 246 of the Labor Code expressly prohibited managerial
19

employees from forming, assisting and joining labor organizations, to wit:

Art. 246. Ineligibility of managerial employees to join any labor organization. Managerial
employees are not eligible to join, assist or form any labor organization.

In the same Bulletin case, the Court applied Article 246 and held that managerial employees are the
very type of employees who, by the nature of their positions and functions, have been decreed
disqualified from bargaining with management. This prohibition is based on the rationale that if
managerial employees were to belong or be affiliated with a union, the union might not be assured
of their loyalty in view of evident conflict of interest or that the union can be company-dominated with
the presence of managerial employees in the union membership. In the collective bargaining
20

process, managerial employees are supposed to be on the side of the employer, to act as its
representative, and to see to it that its interests are well protected. The employer is not assured of
such protection if these employees themselves become union members. 21

The prohibition on managerial employees to join, assist or form labor organizations was retained in
the Labor Code despite substantial amendments made in 1989 by R.A. 6715, the Herrera-Veloso
Law. R.A. 6715 was passed after the effectivity of the 1987 Constitution and this law did not
abrogate, much less amend the prohibition on managerial employees to join labor
organizations. The express prohibition in Article 246 remained. However, as an addendum to this
same Article, R.A. 6715 restored to supervisory employees the right to join labor organizations of
their own. Article 246 now reads:
22

Art. 246. Ineligibility of managerial employees to join any labor organization; right of
supervisory employees. Managerial employees are not eligible to join, assist or form any
labor organization. Supervisory employees shall not be eligible for membership in a labor
organization of the rank-and-file employees but may join, assist or form separate labor
organizations of their own.

Article 246 became Article 245 after then Article 244 was repealed by E.O. 111. Article 246 is
presently Article 245 of the Labor Code.

Indeed, Article 245 of the Labor Code prohibiting managerial employees from joining labor
organizations has a social and historical significance in our labor relations law. This significance
should be considered in deciphering the intent of the framers of the 1987 Constitution vis-a-vis the
said Article.

With due respect, I do not subscribe to the view that section 8, Article III of the Constitution
abrogated Article 245 of the Labor Code. A textual analysis of section 8, Article III of the Constitution
will not justify this conclusion. With due respect, the resort by Mr. Justice Davide to the deliberations
of the Constitutional Commission does not suffice. It is generally recognized that debates and other
proceedings in a constitutional convention are of limited value and are an unsafe guide to the intent
of the people. Judge Cooley has stated that:
23

When the inquiry is directed to ascertaining the mischief designed to be remedied, or the
purpose sought to be accomplished by a particular provision, it may be proper to examine
the proceedings of the convention which framed the instrument. Where the proceedings
 clearly point out the purpose of the provision, the aid will be valuable and satisfactory; but
where the question is one of abstract meaning, it will be difficult to derive from this source
much reliable assistance in interpretation. Every member of such a convention acts upon
such motives and reasons as influence him personally, and the motions and debates do not
necessarily indicate the purpose of a majority of a convention in adopting a particular clause.
It is quite possible for a particular clause to appear so clear and unambiguous to the
members of the convention as to require neither discussion nor illustration; and the few
remarks made concerning it in the convention might have a plain tendency to lead directly
away from the meaning in the minds of the majority. It is equally possible for a part of the
members to accept a clause in one sense and a part in another. And even if we were certain
we had attained to the meaning of the convention, it is by no means to be allowed a
controlling force, especially if that meaning appears not to be the one which the words would
most naturally and obviously convey. For as the constitution does not derive its force from
the convention which framed, but from the people who ratified it, the intent to be arrived at is
that of the people, and it is not to be supposed that they have looked for any dark and
abstruse meaning in the words employed, but rather that they have accepted them in the
sense most obvious to the common understanding, and ratified the instrument in the belief
that was the sense designed to be conveyed. 24

It is for this reason that proceedings of constitutional conventions are less conclusive of the proper
construction of the instrument than are legislative proceedings of the proper construction of the
statute. In the statutes, it is the intent of the legislature that is being sought, while in constitutions, it
25

is the intent of the people that is being ascertained through the discussions and deliberations of their
representatives. The proper interpretation of constitutional provisions depends more on how it was
26

understood by the people adopting it than in the framers' understanding thereof. 27

Thus, debates and proceedings of the constitutional convention are never of binding force. They
may be valuable but are not necessarily decisive. They may shed a useful light upon the purpose
28

sought to be accomplished or upon the meaning attached to the words employed. And the courts
are free to avail themselves of any light that may be derived from such sources, but they are not
bound to adopt it as the sole ground of their decision. 29

Clearly then, a statute cannot be declared void on the sole ground that it is repugnant to a supposed
intent or spirit declared in constitutional convention proceedings.

D. Freedom of Association

The right of association flows from freedom of expression. Like the right of expression, the exercise
30

of the right of association is not absolute. It is subject to certain limitations.

Article 243 of the Labor Code reiterates the right of association of people in the labor sector. Article
243 provides:

Art. 243. Coverage of employees' right to self-organization. All persons employed in

commercial, industrial and agricultural enterprises and in religious, charitable, medical, or
educational institutions whether operating for profit or not, shall have the right to self-
organization and to form, join, or assist labor organizations of their own choosing for
purposes of collective bargaining. Ambulant, intermittent and itinerant workers, self-
employed people, rural workers and those without any definite employers may form labor
organizations for their mutual aid and protection.
Article 243 guarantees the right to self-organization and association to "all persons." This seemingly
all-inclusive coverage of "all persons," however, actually admits of exceptions.

Article 244 of the Labor Code mandates that all employees in the civil service, i.e, those not
31

employed in government corporations established under the Corporation Code, may only form
associations but may not collectively bargain on terms and conditions fixed by law. An employee of a
cooperative who is a member and co-owner thereof cannot invoke the right of collective bargaining
and negotiation vis-a-vis the cooperative. An owner cannot bargain with himself or his co-
32

owners. Employees in foreign embassies or consulates or in foreign international organizations

33

granted international immunities are also excluded from the right to form labor
organizations. International organizations are organized mainly as a means for conducting general
34

international business in which the member-states have an interest and the immunities granted them
shield their affairs from political pressure or control by the host country and assure the unimpeded
performance of their functions.35

Confidential employees have also been denied the right to form labor-organizations. Confidential
employees do not constitute a distinct category for purposes of organizational right. Confidentiality
may attach to a managerial or non-managerial position. We have, however, excluded confidential
employees from joining labor organizations following the rationale behind the disqualification of
managerial employees in Article 245. In the case of National Association of Trade Unions-Republic
Planters' Bank Supervisors Chapter v. Torres, we held:
36

In the collective bargaining process, managerial employees are supposed to be on the side
of the employer, to act as its representatives, and to see to it that its interests are well
protected. The employer is not assured of such protection if these employees themselves
are union members. Collective bargaining in such a situation can become one-sided. It is the
same reason that impelled this Court to consider the position of confidential employees as
included in the disqualification found in Article 245 as if the disqualification of confidential
employees were written in the provision. If confidential employees could unionize in order to
bargain for advantages for themselves, then they could be governed by their own motives
rather than the interest of the employers. Moreover, unionization of confidential employees
for the purpose of collective bargaining would mean the extension of the law to persons or
individuals who are supposed to act "in the interest of" the employers. It is not farfetched that
in the course of collective bargaining, they might jeopardize that interest which they are duty-
bound to protect. 37

E. The disqualification extends only to labor organizations.

It must be noted that Article 245 of the Labor Code deprives managerial employees of their right to
join "labor organizations." A labor organization is defined under the Labor Code as:

Art. 212 (g). "Labor organization" means any union or association of employees which exists
in whole or in part for the purpose of collective bargaining or of dealing with the employer
concerning terms and conditions of employment.

A labor organization has two broad rights: (1) to bargain collectively and (2) to deal with the
employer concerning terms and conditions of employment. To bargain collectively is a right given to
a labor organization once it registers itself with the Department of Labor and Employment (DOLE).
Dealing with the employer, on the other hand, is a generic description of interaction between
employer and employees concerning grievances, wages, work hours and other terms and conditions
of employment, even if the employees' group is not registered with the DOLE. Any labor
38

organization which may or may not be a union may deal with the employer. This explains why a
workers' Organization does not always have to be a labor union and why employer-employee
collective interactions are not always collective bargaining.39

In the instant case, it may be argued that managerial employees' labor organization will merely "deal
with the employer concerning terms and conditions of employment" especially when top
management is composed of aliens, following the circumstances in the Caltex case.

Although the labor organization may exist wholly for the purpose of dealing with the employer
concerning terms and conditions of employment, there is no prohibition in the Labor Code for it to
become a legitimate labor organization and engage in collective bargaining. Once a labor
organization registers with the DOLE and becomes legitimate, it is entitled to the rights accorded
under Articles 242 and 263 (b) of the Labor Code. And these include the right to strike and picket.

Notably, however, Article 245 does not absolutely disqualify managerial employees from exercising
their right of association. What it prohibits is merely the right to join labor organizations. Managerial
employees may form associations or organizations so long as they are not labor organizations. The
freedom of association guaranteed under the Constitution remains and has not been totally
abrogated by Article 245.

To declare Article 245 of the Labor Code unconstitutional cuts deep into our existing industrial life
and will open the floodgates to unionization at all levels of the industrial hierarchy. Such a ruling will
wreak havoc on the existing set-up between management and labor. If all managerial employees will
be allowed to unionize, then all who are in the payroll of the company, starting from the president,
vice-president, general managers and everyone, with the exception of the directors, may go on
strike or picket the
employer. Company officers will join forces with the supervisors and rank-and-file. Management
40

and labor will become a solid phalanx with bargaining rights that could be enforced against the
owner of the company. The basic opposing forces in the industry will not be management and labor
41

but the operating group on the one hand and the stockholder and bondholder group on the other.
The industrial problem defined in the Labor Code comes down to a contest over a fair division of the
gross receipts of industry between these two groups. And this will certainly bring ill-effects on our
42

economy.

The framers of the Constitution could not have intended a major upheaval of our labor and socio-
economic systems. Their intent cannot be made to override substantial policy considerations and
create absurd or impossible situations. A constitution must be viewed as a continuously operative
43

charter of government. It must not be interpreted as demanding the impossible or the impracticable;
or as effecting the unreasonable or absurd. Courts should always endeavour to give such
44

interpretation that would make the constitutional provision and the statute consistent with reason,
justice and the public interest. 45

I vote to dismiss the petition.

VITUG, J., separate concurring and dissenting;

The pivotal issues raised in the case at bar, aptly stated by the Office of the Solicitor General, are:

(1) Whether or not public respondent, Undersecretary of the Department of Labor and Employment
("DOLE") Bienvenido E. Laguesma, gravely abused his discretion in categorizing the members of
petitioner union to be managerial employees and thus ineligible to form or join labor organizations;
and
(2) Whether or not the provision of Article 245 of the Labor Code, disqualifying managerial
employees from joining, assisting or forming any labor organization, violates Section 8, Article III, of
the 1987 Constitution, which expresses that "(t)he right of the people, including those employed in
public and private sectors to form unions, associations or societies for purposes not contrary to law
shall not be abridged."

The case originated from a petition for direct certification or certification election among route
managers/supervisory employees of Pepsi-Cola Products Phils., Inc. ("Pepsi"), filed by the United
Pepsi-Cola Supervisory Union ("Union"), claiming to be a legitimate labor organization duly
registered with the Department of Labor and Employment under Registration Certificate No. NCR-
UR-3-1421-95. Pepsi opposed the petition on the thesis that the case was no more than a mere
duplication of a previous petition for direct certification filed by the same route managers through the
1

Pepsi-Cola Employees Association (PCEA-Supervisory) which petition had already been denied by
Undersecretary Laguesma. The holding reiterated a prior decision in Workers Alliance Trade Unions
("WATU") vs. Pepsi-Cola Products Phils., Inc., that route managers were managerial employees.
2

In its decision, dated 05 May 1995, Med-Arbiter Brigida C. Fadrigon dismissed for lack of merit the
petition of the Union, stating that the issue on the proper classification and status of route managers
had already been ruled with finality in the previous decisions, aforementioned, rendered by DOLE.

The union appealed the decision. In his resolution of 31 August 1995, Undersecretary Laguesma
dismissed the appeal, saying that there was no compelling reason to abandon the ruling in the two
old cases theretofore decided by DOLE. In his order of 22 September 1995, Undersecretary
Laguesma denied the Union's motion for reconsideration.

The Union went to this Court, via a petition for certiorari, assailing the cancellation of its certificate of
registration. The Court, after considering the petition and the comments thereon filed by both public
and private respondents, as well as the consolidated reply of petitioner, dismissed the case in its
resolution of 08 July 1996 on the premise that no grave abuse of discretion had been committed by
public respondent.

Undaunted, the Union moved, with leave, for the reconsideration of the dismissal of its petition by
the Court En Banc. In its resolution of 16 June 1997, the case was referred to the Court En Banc en
consulta with the movant's invocation of unconstitutionality of Article 245 of the Labor Code vis-a-
vis Section 8, Article III, of the 1987 Constitution.

There is merit, in my view, in petitioner's motion for reconsideration but not on constitutional
grounds.

There are, in the hierarchy of management, those who fall below the level of key officers of an
enterprise whose terms and conditions of employment can well be, indeed are not infrequently,
provided for in collective bargaining agreements. To this group belong the supervisory employees.
The "managerial employees," upon the other hand, and relating the matter particularly to the Labor
Code, are those "vested with powers or prerogatives to lay down and execute management policies
and/or to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline employees" as
distinguished from the supervisory employees whose duties in these areas are so designed as to
verily be implementary to the policies or rules and regulations already outstanding and priorly taken
up and passed upon by management. The managerial level is the source, as well as prescribes the
compliance, of broad mandates which, in the field of labor relations, are to be carried out through the
next rank of employees charged with actually seeing to the specific personnel action required. In
fine, the real authority, such as in hiring or firing of employees, comes from management and
exercised by means of instructions, given in general terms, by the "managerial employees;" the
supervisory employees, although ostensibly holding that power, in truth, however, only act in
obedience to the directives handed down to them. The latter unit, unlike the former, cannot be
considered the alter ego of the owner of enterprise.

The duties and responsibilities of the members of petitioner union, shown by their "job description"
below

PCPPI

RM's JOB DESCRIPTION

A. GENERAL/OVERALL OBJECTIVE OF THIS POSITION

To contribute to the growth and profitability of PCPPI via well-selected,

trained and motivated Route Sales Team who sell, collect and merchandise,
following the Pepsi Way, and consistent with Company policies and
procedures as well as the corporate vision of Customer Satisfaction.

B. SPECIFIC JOB DESCRIPTION:

KEY RESULT AREAS STANDARD OR PERFORMANCE

SALES VOLUME *100% Vs. NRC Target

_____% NTG

DISTRIBUTION * Product Availability

70% Pepsi

80% Seven-Up

40% Mirinda

65% Mt. Dew

5% Out of Stock

ACCOUNTS RECEIVABLE 65% Current (Incl. Legal & Col.)

MANAGEMENT 80:20 Cash to Credit Ratio

DSO assigned Std. to Division

by the District

ASSET MANAGEMENT 30 cases for ice-coolers

80 cases for electric coolers

BLOWAGA on Division Vehicles

60 cases on Rolling/Permanent

Kiosks

TRADE DEVELOPMENT 100% Buying Customers Based

on master list that bought once

5 months payback on concessions

4 CED's/Rte.

EXPENSE MANAGEMENT a). 5% Absentism rate Excl. VL

b). 280 cases/route/day

c). 15% cost-to-sales ratio

ROUTE MANAGEMENT 3 Days on RR/Wk

Days on BC-SC- Financial &

Co. Assets

Days on TD

75% Load Factor

18 Productive Calls

CUSTOMER SATISFACTION Customer Complaint attended to within the

next working day

HUMAN RESOURCE 5% Absentism Excl. VL

MANAGEMENT (approved) 3 Documented RR/

Week using SLM's Training Log

ADMINISTRATIVE Complete, timely and accurate

MANAGEMENT reports.

PCPPI

RM's BASIC DAILY ACTIVITIES

A. AT THE SALES OFFICE

1. PRACTICES BLOWAGA ON SERVICE VEHICLE (AT HOME)

2. REPORTS FOR WORK ON OR BEFORE 6:15 A.M.

3. REPORTS IN CLEAN AND NEAT UNIFORM (GOOD GROOMING)

4. DAILY BRIEFING WITH THE DM

5. CONDUCTS SKILLS ENHANCEMENT OR HUDDLES WITH RST's

a). ATTENDANCE/GROOMING

b). OPERATIONAL DIRECTIONS & PRIORITIES

c). ANNOUNCEMENT

6. RM's PRESENCE DURING CHECK-OUT

a). SLM PRACTICES BLOWAGA ON ROUTE TRUCK

b). PRIVATE COUNSELING WITH RST (AM & PM IF

NECESSARY)

c). PROPER HANDLING OF SELLING/MDSG. MATERIALS

d). YESTERDAY's FINAL SETTLEMENT REVIEW

7. UPDATE REPORTS, MONITORS, DOCUMENTS & TELEPHONE

CONMATION

8. ATTENDS TO PRODUCT COMPLAINTS (GFM)

9. CONDUCTS ADMINISTRATIVE INVESTIGATION OR ATTENDS DM's

MEETING (on Saturdays)

B. FIELD WORK

ROUTE RIDE

1. CHECKS SLMS. TRAINING LOG (PROGRESS & DEV'T.)

2. SALESMAN's CPC

3. ROUTE COVERAGE EVALUATION

4. LOAD FACTOR
 5. SALESMAN's ROUTING SYSTEM EVALUATION

BC/SC

1. FINANCIAL & ASSET VERIFICATION, CONFIRMATION & AUDIT

2. BACKCHECKS FIRST 5 CUSTOMERS SERVED FOR THE DAY

a). MERCHANDISING

b). SERVICING

c). RM's TERRITORY FAMILIARITY

d). KEY ACCOUNTS GOODWILL

TRADE DEVELOPMENT

1. PREPARATION PRIOR TO CALL

2. ACTUAL CALL

3. POST CALL ANALYSIS

(HOW DID I FARE? WHY? WHAT ACTIONS TO TAKE)

4. FOLLOW-UP ACTION

C. AT CLOSE OF DAY

1. MAINTAINS & UPDATES CORRECT & ACCURATE RECORDS &

REPORTS

2. RM-SLM DEBRIEFING

3. SLR DISCUSSION (BASED ON A.M. SLR)

4. COORDINATES WITH DM ON PLANS & PROGRAMS

5. PREPARATIONS FOR NEXT DAY's ACTIVITIES 3

convey no more than those that are aptly consigned to the "supervisory" group by the relatively
small unit of "managerial" employees. Certain portions of a pamphlet, the so-called "Route Manager
Position Description" referred to by Mr. Justice Vicente Mendoza, in his ponencia, hereunder
reproduced for easy reference, thus

A. BASIC PURPOSE

A Manager achieves objectives through others.

 As a Route Manager, your purpose is to meet the sales plan; and you
achieve this objective through the skillful management of your job and the
management of your people.

These then are your functions as Pepsi-Cola Route Manager. Within these
functions managing your job and managing your people you are
accountable to your District Manager for the execution and completion of
various tasks and activities which will make it possible for you to achieve
your sales objectives.

B. PRINCIPAL ACCOUNTABILITIES

1.0 MANAGING YOUR JOB

The Route Manager is accountable for the following:

1.1 SALES DEVELOPMENT

1.1.1 Achieve the sales plan.

1.1.2 Achieve all distribution and new account

objectives.

1.1.3 Develop new business opportunities

thru personal contacts with dealers.

1.1.4 Inspect and ensure that all

merchandising objectives are achieved in all
outlets.

1.1.5 Maintain and improve productivity of all

cooling equipment and kiosks.

1.1.6 Execute and control all authorized

promotions.

1.1.7 Develop and maintain dealer goodwill.

1.1.8 Ensure all accounts comply with

company suggested retail pricing.

1.1.9 Study from time to time individual route

coverage and productivity for possible
adjustments to maximize utilization of
resources.

1.2 Administration

1.2.1 Ensure the proper loading of route

trucks before check-out and the proper sorting
of bottles before check-in.
 1.2.2 Ensure the upkeep of all route sales
reports and all other related reports and forms
required on an accurate and timely basis.

1.2.3 Ensure proper implementation of the

various company policies and procedures
include but not limited to shakedown; route
shortage; progressive discipline; sorting;
spoilages; credit/collection; accident;
attendance.

1.2.4 Ensure collection of receivables and

delinquent accounts.

2.0 MANAGING YOUR PEOPLE

The Route Manager is accountable for the following:

2.1 Route Sales Team Development

2.1.1 Conduct route rides to train, evaluate

and develop all assigned route salesmen and
helpers at least 3 days a week, to be
supported by required route ride
documents/reports & back check/spot check
at least 2 days a week to be supported by
required documents/reports.

2.1.2 Conduct sales meetings and morning

huddles. Training should focus on the
enhancement of effective sales and
merchandising techniques of the salesmen
and helpers. Conduct group training at least 1
hour each week on a designated day and of
specific topic.

2.2 Code of Conduct

2.2.1 Maintain the company's reputation

through strict adherence to PCPPI's code of
conduct and the universal standards of
unquestioned business ethics.

offer nothing at all that can approximate the authority and functions of those who actually and
genuinely hold the reins of management.

I submit, with due respect, that the members of petitioning union, not really being "managerial
employees" in the true sense of the term, are not disqualified from forming or joining labor
organizations under Article 245 of the Labor Code.
I shall now briefly touch base on the constitutional question raised by the parties on Article 245 of
the Labor Code.

The Constitution acknowledges "the right of the people, including those employed in the public and
private sectors, to form unions, associations or societies for purposes not contrary to
law . . . ." Perforce, petitioner claims, that part of Article 245 of the Labor Code which states:
4 5

"Managerial employees are not eligible to join, assist or form any labor organization," being in direct
collision with the Constitutional provision, must now be declared abrogated in the law.

Frankly, I do not see such a "direct collision." The Constitution did not obviously grant a limitless
right "to form unions, associations or societies" for it has clearly seen it fit to subject its exercise to
possible legislative judgment such as may be appropriate or, to put it in the language of the
Constitution itself, to "purposes not contrary to law."

Freedom of association, like freedom of expression, truly occupies a choice position in the hierarchy
of constitutional values. Even while the Constitution itself recognizes the State's prerogative to
qualify this right, heretofore discussed, any limitation, nevertheless, must still be predicated on the
existence of a substantive evil sought to be addressed. Indeed, in the exercise of police power, the
6

State may, by law, prescribe proscriptions, provided reasonable and legitimate of course, against
even the most basic rights of individuals.

The restriction embodied in Article 245 of the Labor Code is not without proper rationale.
Concededly, the prohibition to form labor organizations on the part of managerial employees
narrows down their freedom of association. The very nature of managerial functions, however,
should preclude those who exercise them from taking a position adverse to the interest they are
bound to serve and protect. The mere opportunity to undermine that interest can validly be
restrained. To say that the right of managerial employees to form a "labor organization" within the
context and ambit of the Labor Code should be deemed totally separable from the right to bargain
collectively is not justified by related provisions of the Code. For instance

Art. 212. Definitions. . . .

7

(g) "Labor organization" means any union or association of employees which exists in whole
or in part for the purpose of collective bargaining or of dealing with employers concerning
terms and conditions of employment.

xxx xxx xxx

(m) "Managerial employee" is one who is vested with powers or prerogatives to lay down
and execute management policies and/or to hire, transfer, suspend, lay-off, recall, discharge,
assign or discipline employees. Supervisory employees are those who, in the interest of the
employer, effectively recommend such managerial actions if the exercise of such authority is
not merely routinely or clerical in nature but requires the use of independent judgment. All
employees not falling within any of the above definitions are considered rank-and-file
employees for purposes of this Book.

Art. 263. . . .

(b) Workers shall have the right to engage in concerted activities for purposes of collective
bargaining or for their mutual benefit and protection. The right of legitimate labor
 organizations to strike and picket and of employers to lockout, consistent with the national
interest, shall continue to be recognized and respected.

The maxim "ut res magis quam pereat" requires not merely that a statute should be given such a
consequence as to be deemed whole but that each of its express provisions equally should be given
the intended effect.

I find it hard to believe that the fundamental law could have envisioned the use by managerial
employees of coercive means against their own employers over matters entrusted by the latter to
the former. Whenever trust and confidence is a major aspect of any relationship, a conflict of interest
on the part of the person to whom that trust and confidence is reposed must be avoided and when,
unfortunately, it does still arise its containment can rightly be decreed.

Article 245 of the Labor Code indeed aligns itself to the Corporation Code, the basic law on by far
the most commonly used business vehicle the corporation which prescribes the tenure of
office, as well as the duties and functions, including terms of employment (governed in most part by
the Articles of Incorporation, the By-laws of the Corporation, or resolutions of the Board of Directors),
of corporate officers for both the statutory officers, i.e., the president, the treasurer and the corporate
secretary, and the non-statutory officers, i.e., those who occupy positions created by the corporate
by-laws who are deemed essential for effective management of the enterprise. I cannot imagine
these officers as being legally and morally capable of associating themselves into a labor
organization and asserting collective bargaining rights against the very entity in whose behalf they
act and are supposed to act.

I submit, accordingly, that, firstly, the members of petitioner union or the so-called route managers,
being no more than supervisory employees, can lawfully organize themselves into a labor union
within the meaning of the Labor Code, and that, secondly, the questioned provision of Article 245 of
the Labor Code has not been revoked by the 1987 Constitution.

WHEREFORE, I vote, given all the foregoing, for the reversal of the resolution of 31 August 1995,
and the order of 22 September 1995, of public respondent.

7. G.R. No. 75039 January 28, 1988

FRANKLIN BAKER COMPANY OF THE PHILIPPINES, petitioner,

vs.
HONORABLE CRESENCIO B. TRAJANO, DIRECTOR OF BUREAU OF LABOR RELATIONS,
FRANKLIN BAKER BROTHERHOOD ASSOCIATION (TECHNICAL AND OFFICE EMPLOYEES)-
ASSOCIATION OF TRADE UNIONS (ATU), respondents.

PARAS, J.:

This is a petition for certiorari seeking the annulment of. (a) the Order of Mediator-Arbiter Conchita J.
Martinez of the Ministry of Labor and Employment, Davao City, dated September 17, 1984 in LRD
Case No. R-22 MED-ROXI-UR-28-84 entitled "In Re: Petition for Certification Election Among the
Office and Technical Employees of Franklin Baker Company of the Philippines, Davao Plant at
Coronan, Sta. Cruz, Davao del Sur, Franklin Baker Company of the Philippines, Davao Plant,
Employer, Franklin Baker Brotherhood Association (Technical and Office Employees)-Association of
Trade Unions (ATU)," insofar as it includes the managerial employees (inspectors, foremen and
supervisors) in the certification election; (b) the Order of April 7, 1986 of Director Cresencio B.
Trajano, also of the MOLE, dismissing the appeal of aforesaid Order of September 17, 1985 for lack
of merit; and (c) the Order of June 6, 1986 of said Director denying reconsideration of his Order of
April 7, 1986 and affirming the same in toto (Rollo, p. 90).

In brief, the undisputed facts of this case are as follows:

On April 23, 1984, private respondent Franklin Baker Brotherhood Association-(ATU) filed a petition
for certification election among the office and technical employees of petitioner company with the
Ministry of Labor and Employment, Regional Office No. XI, Davao City, docketed as LRD No. R-22,
MED-ROXI-UR-2884. Among other things, it alleges that Franklin Baker Company of the Phils.
Davao Plant, had in its employ approximately ninety (90) regular technical and office employees,
which group is separate and distinct from the regular rank and file employees and is excluded from
the coverage of existing Collective Bargaining Agreement.

Petitioner company did not object to the holding of such an election but manifested that out of the
ninety (90) employees sought to be represented by the respondent union, seventy four (74) are
managerial employees while two (2) others are confidential employees, hence, must be excluded
from the certification election and from the bargaining unit that may result from such election (Rollo,
p. 3).

Hearings were held and thereafter, the parties agreed to file their respective memoranda. Likewise,
petitioner filed a reply to private respondent's Memorandum (Rollo, p. 4).

Subsequently, on September 17, 1984, Med-Arbiter Conchita J. Martinez issued an order, the
dispositive part of which reads:

Accordingly, the petition is hereby granted and a certification election among the
office and technical employees of Franklin Baker Company of the Philippines, Davao
Plant is ordered within twenty (20) days from receipt hereof. The choices shall be the
following:

1. Franklin Baker Brotherhood Association-(ATU)

2. No Union

The representation officer assigned shall call the parties for a pre-election
conference at least five (5) days before the date of the election to thresh out the
mechanics of the election, the finalization of the list of voters, the posting of notices
and other relevant matters.

The company's latest payroll shall be the basis for determining the office and
technical workers qualified to vote.
 SO ORDERED. (Rollo, pp. 47-48).

From the aforequoted order petitioner Company appealed to the Bureau of Labor Relations,
docketed as BLR Case No. A-22884, praying that the appealed order be set aside and another be
issued declaring the seventy four (74) inspectors, foremen and supervisors as managerial
employees.

During the pendency of the appeal, sixty one (61) of the employees involved, filed a Motion to
Withdraw the petition for certification election praying therein for their exclusion from the Bargaining
Unit and for a categorical declaration that they are managerial employees, as they are performing
managerial functions (Rollo, p. 4).

On April 7, 1986, public respondent Bureau of Labor Relations Cresencio B. Trajano issued a
Resolution affirming the order dated September 17, 1984, the dispositive part of which reads:

WHEREFORE, the appealed Order dated September 17, 1985 is hereby affirmed
and the appeal dismissed for lack of merit. Let the certification election among the
office and technical employees of Franklin Baker Company of the Philippines
proceed without delay.

The latest payrolls of the company shall be used as basis of determining the list of
eligible voters. (Rollo, p. 77),

Petitioner company sought the reconsideration of the aforequoted resolution but its motion was
denied by Director Cresencio B. Trajano in his order dated June 6, 1986, the dispositive part of
which reads:

WHEREFORE, the appeal of respondent company is, dismissed for lack of merit and
the Bureau's Resolution dated April 1986 affirmed in toto.

Let, therefore, the pertinent papers of this case be immediately forwarded to the
Office of origin for the conduct of the certification election. (Rollo, p. 90).

Hence, this petition.

In the resolution of July 30, 1986, the Second Division of this Court without giving due course to the
petition required the respondents to file their comment (Rollo, p. 91). On August 28, 1986, public
respondent filed its comment (Rollo, pp. 99 to 102). Likewise private respondent filed its comment on
September 5, 1986 (Rollo, pp. 104 to 107).

In the resolution of September 8, 1986, petitioner was required to file its reply to public respondent's
comment (Rollo, p. 119) which reply was filed on September 18, 1986 (Rollo, pp. 122-127).

On October 20, 1986, this Court resolved to give due course to the petition and required the parties
to file their respective Memoranda (Rollo, p. 133). In compliance with said resolution, petitioner and
private respondent filed their Memoranda on December 8, 1986 and December 29, 1986,
respectively (Rollo, pp. 183-187). On the other hand, public respondent filed with this Court a
manifestation (Rollo, p. 153) to the effect that it is adopting as its memorandum its comment dated
August 18, 1986 (Rollo, p. 99) which manifestation was noted by this Court in its resolution dated
November 26, 1986
(Rollo, p. 155).

The lone assignment of error raised by petitioner states:

Public respondent acted with grave abuse of discretion amounting to lack of

jurisdiction when he ruled that the 76 employees subject of this petition are not
managerial employees (inspectors, foremen, supervisors and the like) and therefore,
may participate in the certification election among the office and technical
employees. Such ruling is contrary to jurisprudence and to the factual evidence
presented by petitioner which was not rebutted by private respondent union and is
therefore patently baseless.

From this assigned error two questions are raised by petitioner, namely: (1) whether or not subject
employees are managerial employees under the purview of the Labor Code and its Implementing
Rules; and (2) whether the Director of the Bureau of Labor Relations acted with abuse of discretion
in affirming the order of Mediator-Arbiter Conchita J. Martinez.

There is no question that there are in the DAVAO Plant of petitioner company approximately 90
regular technical and office employees which form a unit, separate and distinct from the regular rank
and file employees and are excluded from the coverage of existing Collective Bargaining Agreement;
that said group of employees organized themselves as Franklin Baker Brotherhood Association
(technical and office employees) and affiliated with the local chapter of the Association of trade
Unions (ATU), a legitimate labor organization with Registration Permit No. 8745 (Fed) LC and with
office located at the 3rd Floor of Antwell Bldg., Sta. Ana, Davao City; that petitioner company did not
object to the holding of such certification, but only sought the exclusion of inspectors, foremen and
supervisors, members of Franklin Baker Brotherhood Association (technical and office employees)
numbering 76 from the certification election on the ground that they are managerial employees.

A managerial employee is defined as one "who is vested with powers or prerogatives to lay down
and execute management policies and/or to hire, transfer, suspend, lay-off, recall, discharge, assign
or discipline employees, or to effectively recommend such managerial actions." (Reynolds Phil.
Corp. v. Eslava, 137 SCRA [1985], citing Section 212 (K), Labor Code.

Also pertinent thereto is Section 1 (M) of the Implementing Rules and Regulations, which is
practically a restatement of the above provision of law.

To sustain its posture, that the inspectors, foreman and supervisors numbering 76 are managerial
employees, petitioner painstakingly demonstrates that subject employees indeed participate in the
formulation and execution of company policies and regulations as to the conduct of work in the plant,
exercised the power to hire, suspend or dismiss subordinate employees and effectively recommend
such action, by citing concrete cases, among which are: (1) Mr. Ponciano Viola, a wet process
inspector, who while in the performance of his duty, found Mr. Enrique Asuncion, a trimmer "forging",
falsifying and simulating a company time card (timesheet) resulting in payroll padding, immediately
recommended the dismissal of said erring employee, resulting in the latter's discharge. (Employer's
Memo, Rollo, p.18); (2) Mr. Manuel Alipio, an opening inspector, recommended for suspension Nut
Operator Ephraim Dumayos who was caught in the act of surreptitiously transferring to a co-worker's
bin some whole nuts which act constitutes a violation of company policy; (3) Mr. Sofronio Abangan, a
line inspector, censured and thereafter recommended the suspension of Mr. Romeo Fullante, for
being remiss in the proper and accurate counting of nuts; (4) Binleader Dionisio Agtang was required
to explain his inefficiency of Mr. Saturnino Bangkas, Bin Loading Inspector; (5) for disobeying the
orders of Bin Loading Inspector Mauricio Lumanog's order, Macario Mante, Eduardo Adaptor,
Rodolfo Irene and George Rellanos were all recommended for suspension which culminated in an
investigation conducted by Lumanog's higher bosses (Ibid., p. 20).

It has also been shown that subject employees have the power to hire, as evidenced by the hiring of
Rolando Asis, Roy Layson, Arcadio Gaudicos and Felix Arciaga, upon the recommendation of
Opening Inspector Serafin Suelo, Processing Inspector Leonardo Velez and Laureano C. Lim,
Opening Inspector (Ibid., p. 21).

It will be noted, however, that in the performance of their duties and functions and in the exercise of
their recommendatory powers, subject employees may only recommend, as the ultimate power to
hire, fire or suspend as the case may be, rests upon the plant personnel manager.

The test of "supervisory" or "managerial status" depends on whether a person possesses authority
to act in the interest of his employer in the matter specified in Article 212 (k) of the Labor Code and
Section 1 (m) of its Implementing Rules and whether such authority is not merely routinary or clerical
in nature, but requires the use of independent judgment. Thus, where such recommendatory powers
as in the case at bar, are subject to evaluation, review and final action by the department heads and
other higher executives of the company, the same, although present, are not effective and not an
exercise of independent judgment as required by law (National Warehousing Corp. v. CIR, 7 SCRA
602-603 [1963]).

Furthermore, in line with the ruling of this Court, subject employees are not managerial employees
because as borne by the records, they do not participate in policy making but are given ready
policies to execute and standard practices to observe, thus having little freedom of action (National
Waterworks and Sewerage Authority v. NWSA Consolidated, L-18938, 11 SCRA 766 [1964]).

Petitioner's contention that the Director of the Bureau of Labor Relations acted with abuse of
discretion amounting to lack of jurisdiction in holding that the 76 employees are not managerial
employees and must be included in the certification election has no basis in fact and in law. Neither
is its contention that the use of the word's "and/or" categorically shows that performance of the
functions enumerated in the law qualifies an employee as a managerial employee.

It is well settled that the findings of fact of the Ministry of Labor and National Labor Relations
Commission are entitled to great respect, unless the findings of fact and the conclusions made
therefrom, are not supported by substantial evidence, or when there is grave abuse of discretion
committed by said public official (Kapisanan ng Manggagawa sa Camara Shoes, 2nd Heirs of
Santos Camara, et al., 111 SCRA 477 [1982]; International hardwood and Veneer Co. of the
Philippines v. Leonardo, 117 SCRA 967 [1982]; Pan-Phil-Life, Inc. v. NLRC, 114 SCRA 866 [1982];
Pepsi-Cola Labor Union-BF LUTUPAS Local Chapter N-896 v. NLRC, 114 SCRA 930 [1982];
Egyptair v. NLRC, 148 SCRA 125 [1987]; RJL Martinez Fishing Corp. v. NLRC, G.R. Nos. 63550-51,
127 SCRA 455 [1984]; and Reyes v. Phil. Duplicators, G.R. No. 54996, 109 SCRA 489 [1981]).

By "grave abuse of discretion" is meant, such capricious and whimsical exercise of judgment as is
equivalent to lack of jurisdiction. The abuse of discretion must be grave as where the power is
exercised in an arbitrary or despotic manner by reason of passion or personal hostility and must be
so patent and gross as to amount to an evasion of positive duty or to a virtual refusal to perform the
duty enjoined by or to act at all in contemplation of law (G.R. No. 59880, George Arguelles [Hda.
Emma Arguelles v. Romeo Yang, etc.], September 11, 1987).

Moreover, this Court has ruled that findings of administrative agencies which have acquired
expertise, like the Labor Ministry, are accorded respect and finality (Special Events and Central
Shipping Office Workers Union v. San Miguel Corp., 122 SCRA 557 [1983] and that the remedy of
certiorari does not lie in the absence of any showing of abuse or misuse of power properly vested in
the Ministry of Labor and Employment (Buiser v. Leogardo, Jr., 131 SCRA 151 [1984]).

After a careful review of the records, no plausible reason could be found to disturb the findings of
fact and the conclusions of law of the Ministry of Labor.

Even if We regard the employees concerned as "managerial employees," they can still join the union
of the rank and file employees. They cannot however form their own exclusive union as "managerial
employees" (Bulletin Publishing Corporation v. Sanchez, 144 SCRA 628).

PREMISES CONSIDERED, the petition is DISMISSED, and the assailed resolution and orders are
AFFIRMED.

SO ORDERED.

8. G.R. No. 110399 August 15, 1997

SAN MIGUEL CORPORATION SUPERVISORS AND EXEMPT UNION AND ERNESTO L. PONCE,
President, petitioners,
vs.
HONORABLE BIENVENIDO E. LAGUESMA IN HIS CAPACITY AS UNDERSECRETARY OF
LABOR AND EMPLOYMENT, HONORABLE DANILO L. REYNANTE IN HIS CAPACITY AS MED-
ARBITER AND SAN MIGUEL CORPORATION, respondents.

ROMERO, J.:

This is a Petition for Certiorari with Prayer for the Issuance of Preliminary Injunction seeking to
reverse and set aside the Order of public respondent, Undersecretary of the Department of Labor
and Employment, Bienvenido E. Laguesma, dated March 11, 1993, in Case No. OS MA A-2-70-
91 1 entitled "In Re: Petition for Certification Election Among the Supervisory and Exempt Employees of
the San Miguel Corporation Magnolia Poultry Plants of Cabuyao, San Fernando and Otis, San Miguel
Corporation Supervisors and Exempt Union, Petitioner." The Order excluded the employees under
supervisory levels 3 and 4 and the so-called exempt employees from the proposed bargaining unit and
ruled out their participation in the certification election.

The antecedent facts are undisputed:

On October 5, 1990, petitioner union filed before the Department of Labor and Employment (DOLE)
a Petition for Direct Certification or Certification Election among the supervisors and exempt
employees of the SMC Magnolia Poultry Products Plants of Cabuyao, San Fernando and Otis.

On December 19, 1990, Med-Arbiter Danilo L. Reynante issued an Order ordering the conduct of
certification election among the supervisors and exempt employees of the SMC Magnolia Poultry
Products Plants of Cabuyao, San Fernando and Otis as one bargaining unit.

On January 18, 1991, respondent San Miguel Corporation filed a Notice of Appeal with
Memorandum on Appeal, pointing out, among others, the Med-Arbiter's error in grouping together all
three (3) separate plants, Otis, Cabuyao and San Fernando, into one bargaining unit, and in
including supervisory levels 3 and above whose positions are confidential in nature.

On July 23, 1991, the public respondent, Undersecretary Laguesma, granted respondent company's
Appeal and ordered the remand of the case to the Med-Arbiter of origin for determination of the true
classification of each of the employees sought to be included in the appropriate bargaining unit.

Upon petitioner-union's motion dated August 7, 1991, Undersecretary Laguesma granted the
reconsideration prayed for on September 3, 1991 and directed the conduct of separate certification
elections among the supervisors ranked as supervisory levels 1 to 4 (S1 to S4) and the exempt
employees in each of the three plants at Cabuyao, San Fernando and Otis.

On September 21, 1991, respondent company, San Miguel Corporation filed a Motion for
Reconsideration with Motion to suspend proceedings.

On March 11, 1993, an Order was issued by the public respondent granting the Motion, citing the
doctrine enunciated in Philips Industrial Development, Inc. v. NLRC 2 case. Said Order reads in part:

. . . Confidential employees, like managerial employees, are not allowed to form, join
or assist a labor union for purposes of collective bargaining.

In this case, S3 and S4 Supervisors and the so-called exempt employees are
admittedly confidential employees and therefore, they are not allowed to form, join or
assist a labor union for purposes of collective bargaining following the above court's
ruling. Consequently, they are not allowed to participate in the certification election.

WHEREFORE, the Motion is hereby granted and the Decision of this Office dated 03
September 1991 is hereby modified to the extent that employees under supervisory
 levels 3 and 4 (S3 and S4) and the so-called exempt employees are not allowed to
join the proposed bargaining unit and are therefore excluded from those who could
participate in the certification election. 3

Hence this petition.

For resolution in this case are the following issues:

1. Whether Supervisory employees 3 and 4 and the exempt

employees of the company are considered confidential employees,
hence ineligible from joining a union.

2. If they are not confidential employees, do the employees of the

three plants constitute an appropriate single bargaining unit.

On the first issue, this Court rules that said employees do not fall within the term "confidential
employees" who may be prohibited from joining a union.

There is no question that the said employees, supervisors and the exempt employees, are not
vested with the powers and prerogatives to lay down and execute management policies and/or to
hire, transfer, suspend, layoff, recall, discharge or dismiss employees. They are, therefore, not
qualified to be classified as managerial employees who, under Article 245 4 of the Labor Code, are not
eligible to join, assist or form any labor organization. In the very same provision, they are not allowed
membership in a labor organization of the rank-and-file employees but may join, assist or form separate
labor organizations of their own. The only question that need be addressed is whether these employees
are properly classified as confidential employees or not.

Confidential employees are those who (1) assist or act in a confidential capacity, (2) to persons who
formulate, determine, and effectuate management policies in the field of labor relations. 5 The two
criteria are cumulative, and both must be met if an employee is to be considered a confidential employee
that is, the confidential relationship must exist between the employee and his supervisor, and the
supervisor must handle the prescribed responsibilities relating to labor relations. 6

The exclusion from bargaining units of employees who, in the normal course of their duties, become
aware of management policies relating to labor relations is a principal objective sought to be
accomplished by the ''confidential employee rule." The broad rationale behind this rule is that
employees should not be placed in a position involving a potential conflict of
interests. 7 "Management should not be required to handle labor relations matters through employees
who are represented by the union with which the company is required to deal and who in the normal
performance of their duties may obtain advance information of the company's position with regard to
contract negotiations, the disposition of grievances, or other labor relations matters." 8

There have been precedents in this regards, thus in Bulletin Publishing Company v. Hon. Augusto
Sanchez, 9 the Court held that "if these managerial employees would belong to or be affiliated with a
Union, the latter might not be assured of their loyalty to the Union in view of evident conflict of interest.
The Union can also become company-dominated with the presence of managerial employees in Union
membership." The same rationale was applied to confidential employees in "Golden Farms, Inc. v. Ferrer-
Calleja" 10 and in the more recent case of "Philips Industrial Development, Inc. v. NLRC" 11which held that
confidential employees, by the very nature of their functions, assist and act in a confidential capacity to, or
have access to confidential matters of, persons who exercise managerial functions in the field of labor
relations. Therefore, the rationale behind the ineligibility of managerial employees to form, assist or join a
labor union was held equally applicable to them. 12

An important element of the "confidential employee rule" is the employee's need to use labor
relations information. Thus, in determining the confidentiality of certain employees, a key question
frequently considered is the employee's necessary access to confidential labor relations
information. 13

It is the contention of respondent corporation that Supervisor employees 3 and 4 and the exempt
employees come within the meaning of the term "confidential employees" primarily because they
answered in the affirmative when asked "Do you handle confidential data or documents?" in the
Position Questionnaires submitted by the Union. 14 In the same questionnaire, however, it was also
stated that the confidential information handled by questioned employees relate to product formulation,
product standards and product specification which by no means relate to "labor relations." 15

Granting arguendo that an employee has access to confidential labor relations information but such
is merely incidental to his duties and knowledge thereof is not necessary in the performance of such
duties, said access does not render the employee a confidential employee. 16 "If access to confidential
labor relations information is to be a factor in the determination of an employee's confidential status, such
information must relate to the employer's labor relations policies. Thus, an employee of a labor union, or
of a management association, must have access to confidential labor relations information with respect to
his employer, the union, or the association, to be regarded a confidential employee, and knowledge of
labor relations information pertaining to the companies with which the union deals, or which the
association represents, will not cause an employee to be excluded from the bargaining unit representing
employees of the union or association." 17 "Access to information which is regarded by the employer to be
confidential from the business standpoint, such as financial information 18 or technical trade secrets, will
not render an employee a confidential employee." 19

Herein listed are the functions of supervisors 3 and higher:

1. To undertake decisions to discontinue/temporarily stop shift

operations when situations require.

2. To effectively oversee the quality control function at the processing

lines in the storage of chicken and other products.

3. To administer efficient system of evaluation of products in the

outlets.

4. To be directly responsible for the recall, holding and rejection of

direct manufacturing materials.

5. To recommend and initiate actions in the maintenance of sanitation

and hygiene throughout the plant. 20
It is evident that whatever confidential data the questioned employees may handle will have to relate
to their functions. From the foregoing functions, it can be gleaned that the confidential information
said employees have access to concern the employer's internal business operations. As held
in Westinghouse Electric Corporation v. National Labor Relations Board, 21 "an employee may not be
excluded from appropriate bargaining unit merely because he has access to confidential information
concerning employer's internal business operations and which is not related to the field of labor relations."

It must be borne in mind that Section 3 of Article XIII of the 1987 Constitution mandates the State to
guarantee to "all" workers the right to self-organization. Hence, confidential employees who may be
excluded from bargaining unit must be strictly defined so as not to needlessly deprive many
employees of their right to bargain collectively through representatives of their choosing. 22

In the case at bar, supervisors 3 and above may not be considered confidential employees merely
because they handle "confidential data" as such must first be strictly classified as pertaining to labor
relations for them to fall under said restrictions. The information they handle are properly classifiable
as technical and internal business operations data which, to our mind, has no relevance to
negotiations and settlement of grievances wherein the interests of a union and the management are
invariably adversarial. Since the employees are not classifiable under the confidential type, this
Court rules that they may appropriately form a bargaining unit for purposes of collective bargaining.
Furthermore, even assuming that they are confidential employees, jurisprudence has established
that there is no legal prohibition against confidential employees who are not performing managerial
functions to form and join a union. 23

In this connection, the issue of whether the employees of San Miguel Corporation Magnolia Poultry
Products Plants of Cabuyao, San Fernando, and Otis constitute a single bargaining unit needs to be
threshed out.

It is the contention of the petitioner union that the creation of three (3) separate bargaining units, one
each for Cabuyao, Otis and San Fernando as ruled by the respondent Undersecretary, is contrary to
the one-company, one-union policy. It adds that Supervisors level 1 to 4 and exempt employees of
the three plants have a similarity or a community of interests.

This Court finds the contention of the petitioner meritorious.

An appropriate bargaining unit may be defined as "a group of employees of a given employer,
comprised of all or less than all of the entire body of employees, which the collective interest of all
the employees, consistent with equity to the employer, indicate to be best suited to serve the
reciprocal rights and duties of the parties under the collective bargaining provisions of the
law." 24

A unit to be appropriate must effect a grouping of employees who have substantial, mutual interests
in wages, hours, working conditions and other subjects of collective bargaining. 25

It is readily seen that the employees in the instant case have "community or mutuality of interests,"
which is the standard in determining the proper constituency of a collective bargaining unit. 26 It is
undisputed that they all belong to the Magnolia Poultry Division of San Miguel Corporation. This means
that, although they belong to three different plants, they perform work of the same nature, receive the
same wages and compensation, and most importantly, share a common stake in concerted activities.

In light of these considerations, the Solicitor General has opined that separate bargaining units in the
three different plants of the division will fragmentize the employees of the said division, thus greatly
diminishing their bargaining leverage. Any concerted activity held against the private respondent for
a labor grievance in one bargaining unit will, in all probability, not create much impact on the
operations of the private respondent. The two other plants still in operation can well step up their
production and make up for the slack caused by the bargaining unit engaged in the concerted
activity. This situation will clearly frustrate the provisions of the Labor Code and the mandate of the
Constitution. 27

The fact that the three plants are located in three different places, namely, in Cabuyao, Laguna, in
Otis, Pandacan, Metro Manila, and in San Fernando, Pampanga is immaterial. Geographical
location can be completely disregarded if the communal or mutual interests of the employees are not
sacrificed as demonstrated in UP v. Calleja-Ferrer where all non-academic rank and file employee of
the University of the Philippines in Diliman, Quezon City, Padre Faura, Manila, Los Baos, Laguna
and the Visayas were allowed to participate in a certification election. We rule that the distance
among the three plants is not productive of insurmountable difficulties in the administration of union
affairs. Neither are there regional differences that are likely to impede the operations of a single
bargaining representative.

WHEREFORE, the assailed Order of March 11, 1993 is hereby SET ASIDE and the Order of the
Med-Arbiter on December 19, 1990 is REINSTATED under which a certification election among the
supervisors (level 1 to 4) and exempt employees of the San Miguel Corporation Magnolia Poultry
Products Plants of Cabuyao, San Fernando, and Otis as one bargaining unit is ordered conducted.

SO ORDERED.

9. G.R. No. 88957 June 25, 1992

PHILIPS INDUSTRIAL DEVELOPMENT, INC., petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and PHILIPS EMPLOYEES ORGANIZATION
(FFW), respondents.

DAVIDE, JR., J.:

In this petition for certiorari and prohibition under Rule 65 of the Rules of Court with a prayer for a
temporary restraining order and/or a writ of preliminary injunction, petitioner Philips Industrial
Development, Inc. (PIDI) seeks to set aside the Decision and Resolution, dated 16 January 1989
and 17 March 1989, respectively, of the National Labor Relations Commission (NLRC) in Case No.
NLRC-NCR-00-11-03936-87 on the ground that it committed grave abuse of discretion amounting to
lack of jurisdiction in holding that service engineers, sales representatives and confidential
employees of PIDI are qualified to be included in the existing bargaining unit.

PIDI is a domestic corporation engaged in the manufacturing and marketing of electronic products
Since 1971, it had a total of six (6) collective bargaining agreements (CBAs) with private respondent
Philips Employees Organization-FFW (PEO-FFW), a registered labor union and the certified
bargaining agent of all the rank and file employees of PIDI. In the first CBA (1971-1974), the
supervisors referred to in R.A. No. 875, confidential employees, security guards, temporary
employees and sales representatives were excluded from the bargaining unit. In the second to the
fifth CBAs (1975-1977; 1978-1980; 1981-1983; and 1984-1986), the sales force, confidential
employees and heads of small units, together with the managerial employees, temporary employees
and security personnel, were specifically excluded from the bargaining unit. 1 The confidential
employees are the division secretaries of light/telecom/data and consumer electronics, marketing
managers, secretaries of the corporate planning and business manager, fiscal and financial system
manager and audit and EDP manager, and the staff of both the General Management and the Personnel
Department. 2

In the sixth CBA covering the years 1987 to 1989, it was agreed upon, among others, that the
subject of inclusion or exclusion of service engineers, sales personnel and confidential employees in
the coverage of the bargaining unit would be submitted for arbitration. Pursuant thereto, on June
1987, PEO-FFW filed a petition before the Bureau of Labor Relations (BLR) praying for an order
"directing the parties to select a voluntary arbitrator in accordance with its rules and regulations."

As the parties failed to agree on a voluntary arbitrator, the BLR endorsed the petition to the
Executive Labor Arbiter of the National Capital Region for compulsory arbitration pursuant to Article
228 of the Labor Code. Docketed as Case No. NLRC-NCR-00-11-03936-87, the case was assigned
to Executive Labor Arbiter Arthur Amansec.

On 17 March 1988, Labor Arbiter Amansec rendered a decision, the dispositive portion of which
states:

In view of the foregoing, a decision is hereby rendered, ordering the respondent to

conduct a referendum to determine the will of the service engineers, sales
representatives as to their inclusion or exclusion in the bargaining unit.

It is hereby declared that the Division Secretaries and all Staff of general
management, personnel and industrial relations department, secretaries of audit,
EDP, financial system are confidential employees and as such are hereby deemed
excluded in the bargaining unit.

SO ORDERED.

PEO-FFW appealed from the decision to the NLRC.

On 16 January 1989, the NLRC rendered the questioned decision, the dispositive portion of which
reads:
 WHEREFORE, the foregoing premises considered, the appealed decision of the
Executive Labor Arbiter is hereby SET ASIDE and a new one entered declaring
respondent company's Service Engineers, Sales Force, division secretaries, all Staff
of General Management, Personnel and Industrial Relations Department, Secretaries
of Audit, EDP and Financial Systems are included within the rank and file bargaining
unit.

SO ORDERED.

The reversal is anchored on the respondent NLRC's conclusion that based on Section 1, 3 Rule II,
Book V of the Omnibus Rules Implementing the Labor Code, as amended by Section 3, Implementing
Rules of E.O. No. 111; paragraph (c) Section 2, Rule V of the same Code, as amended by Section 6 4 of
the Implementing Rules of E.O. No. 111; and Article 245 5 of the Labor Code, as amended:

. . . all workers, except managerial employees and security personnel, are qualified
to join or be a part of the bargaining unit. . . .

It further ruled that:

The Executive Labor Arbiters directive that the service engineers and sales
representatives to (sic) conduct a referendum among themselves is erroneous
inasmuch as it arrogates unto said employees the right to define what the law
means. It would not be amiss to state at this point that there would be no one more
interested in excluding the subject employees from the bargaining unit than
management and that it would not be improbable for the latter to lobby and/or exert
pressure on the employees concerned, thus agitating unrest among the rank-and-file.
Likewise, the Executive Labor Arbiter's declaration that the Division Secretaries and
all Staff of general management, personnel and industrial relations department,
secretaries of audit, EDP and financial system "are confidential employees and as
such are hereby deemed excluded in (sic) the bargaining unit" is contrary to law for
the simple reason that the law, as earlier quoted, does not mention them as among
those to be excluded from the bargaining unit only (sic) managerial
employees and security guards. As a matter of fact, supervisory unions have already
been dissolved and their members who do not fall within the definition of managerial
employees have become eligible to join or assist the rank-and-file organization. 6

Its motion for the reconsideration of this decision having been denied by the NLRC in its Resolution
of 16 March 1989, a copy of which it received on 8 June 1989, petitioner PIDI filed the instant
petition on 20 July 1989, alleging that:

THE NLRC COMMITTED ABUSE OF DISCRETION AMOUNTING TO LACK OF

JURISDICTION IN HOLDING THAT SERVICE ENGINEERS, SALES
REPRESENTATIVES AND CONFIDENTIAL EMPLOYEES OF PETITIONER ARE
QUALIFIED TO BE PART OF THE EXISTING BARGAINING UNIT.
 II

THE NLRC COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK

OF JURISDICTION IN NOT APPLYING THE TIME HONORED "GLOBE
DOCTRINE." 7

On 31 July 1989, this Court; required the respondents to comment on the petition, which PEO-FFW
complied with on 28 August 1989. Public respondent NLRC, thru its counsel, the Solicitor General,
moved for, and was granted a 30-day extension to file its Comment.

On 18 September 1989, this Court required the parties to show cause why the petition should not be
dismissed in view of the finality of the NLRC decision as provided for by the penultimate sentence of
Article 223 of the Labor Code, as amended by R.A. No. 6715 R..A. No. 6715, which amended Article
223 of the Labor Code, was enacted on 2 March 1989 and took effect on 21 March 1989. The
parties subsequently complied with the Resolution.

On 16 May 1990, this Court required the parties to submit Memoranda explaining the effect in this
case of Article 223 of the Labor Code, as amended by Section 12 of R.A. No-6715 with respect to
the finality of decisions of the NLRC. The parties complied separately with the same.

On 10 September 1990, this Court gave due course to the petition and required the parties to submit
their respective Memoranda. The petitioner and the Office of the Solicitor General filed their separate
Memoranda. On the other hand, PEO-FFW moved that its Motion and manifestation dated 23
August 1989 be considered as its Memorandum; this Court granted the same.

As stated earlier, the principal issue in this case is whether the NLRC committed grave abuse of
discretion in holding that service engineers, sales representatives and confidential employees
(division secretaries, staff of general management, personnel and industrial relations department,
secretaries of audit, EDP and financial system) are qualified to be included in the existing bargaining
unit. Petitioner maintains that it did, and in support of its stand that said employees should not be
absorbed by the existing bargaining unit, it urges this Court to consider these points:

1) The inclusion of the group in the existing bargaining unit would run counter to the history of this
parties CBA. The parties' five (5) previous CBAs consistently excluded this group of employees from
the scope of the bargaining unit. The rationale for such exclusion is that these employees hold
positions which are highly sensitive, confidential and of a highly fiduciary nature; to include them in
the bargaining unit may subject the company to breaches in security and the possible revelation of
highly sensitive and confidential matters. It would cripple the company's bargaining position and
would give undue advantage to the union.

2) The absence of mutuality of interests between this group of employees and the regular rank and
file militates against such inclusion. A table prepared by the petitioner shows the disparity of interests
between the said groups:

SERVICE ENGINEERS SERVICE

SALES REPRESENTATIVES TECHNICIANS
 (Non-Bargaining (Bargaining
AREAS OF INTEREST Unit Employees) Unit Employees)

Qualifications Professional Employees High School/

Vocational
Grads.
Work Schedule With Night Shift None
Schedule
Night Shift 10% of Basic Rate None
Differential Pay
Stand-By Call & On Stand-By Call with: None
Allowance First Line:15% of
basic rate
Second Line: 10% of
basic rate
Uniforms None 2 sets of polo
& pants every
6 months
Retirement Benefits 15 yrs. ser.70% 15 yrs. serv. 50%
16 75% 16 85%
17 80% 17 90%
18 85% 18 100%
19 90% 19 115%
20 100% 20 135%
Year End Performance Merit Increase system None
Evaluation
Sales Commission Yes None
Car Loan Yes None
Precalculated Yes None
Kilometer allowance

The Office of the Solicitor General supports the decision of the Executive Labor Arbiter and refuses
to uphold the position of the NLRC. It holds the view that the division Secretaries; the staff members
of General Management, Personnel and the Industrial Relations Department; and the secretaries of
Audit, EDP and Financial Systems, are disqualified from joining the PEO-FFW as they are
confidential employees. They cannot even form a union of their own for, as held in Golden Farms,
Inc. vs. Ferrer-Calleja, 8 the rationale for the disqualification of managerial employees from joining unions holds true also for
confidential employees. As regards the sales representatives and service engineers, however, there is no doubt that they are entitled to join
or form a union, as they are not disqualified by law from doing so. Considering that they have interests dissimilar to those of the rank and file
employees comprising the existing bargaining unit, and following the Globe Doctrine enunciated in In Re: Globe Machine and Stamping
Company 9 to the effect that in determining the proper bargaining unit the express will or desire of the
employees shall be considered, they should be allowed to determine for themselves what union to join or
form. The best way to determine their preference is through a referendum. As shown by the records, such
a. referendum was decreed by the Executive Labor Arbiter.
The petition is impressed with merit.

At the outset, We express Our agreement with the petitioner's view that respondent NLRC did not
quite accurately comprehend the issue raised before it. Indeed, the issue is not whether the subject
employees may join or form a union, but rather, whether or not they may be part of the existing
bargaining unit for the rank and file employees of PIDI.

Even if the issue was, indeed, as perceived by the NLRC, still, a palpable error was committed by it
in ruling that under the law, all workers, except managerial employees and security personnel, are
qualified to join a union, or form part of a bargaining unit. At the time Case No. NLRC-NCR-00-11-
03936-87 was filed in 1987, security personnel were no longer disqualified from joining or forming a
union.

Section 6 of E.O. No. 111, enacted on 24 December 1986, repealed the original provisions of Article
245 of the Labor Code, reading as follows:

Art. 245. Ineligibility of security personnel to join any labor organization. Security
guards and other personnel employed for the protection and security of the person,
properties and premises of the employer shall not be eligible for membership, in any
labor organization.

and substituted it with the following provision:

Art. 245. Right of employees in the public service. 10

xxx xxx xxx

By virtue of such repeal and substitution, security guards became eligible for membership in
any labor organization. 11

On the main issue raised before Us, it is quite obvious that respondent NLRC committed grave
abuse of discretion in reversing the decision of the Executive Labor Arbiter and in decreeing that
PIDI's "Service Engineers, Sales Force, division secretaries, all Staff of General Management,
Personnel and Industrial Relations Department, Secretaries of Audit, EDP and Financial Systems
are included within the rank and file bargaining unit."

In the first place, all these employees, with the exception of the service engineers and the sales
force personnel, are confidential employees. Their classification as such is not seriously disputed by
PEO-FFW; the five (5) previous CBAs between PIDI and PEO-FFW explicitly considered them as
confidential employees. By the very nature of their functions, they assist and act in a confidential
capacity to, or have access to confidential matters of, persons who exercise managerial functions in
the field of labor relations. 12 As such, the rationale behind the ineligibility of managerial employees to
form, assist or join a labor union equally applies to them.

In Bulletin Publishing Co., Inc. vs. Hon Augusto Sanchez, 13

this Court elaborated on this rationale,
thus:
 . . . The rationale for this inhibition has been stated to be, because if these
managerial employees would belong to or be affiliated with a Union, the latter might
not be assured of their loyalty, to the Union in view of evident conflict of interests. The
Union can also become company-dominated with the presence of managerial
employees in Union membership.

In Golden Farms, Inc. vs. Ferrer-Calleja, 14 this Court explicitly made this rationale applicable to
confidential employees:

This rationale holds true also for confidential employees such as accounting
personnel, radio and telegraph operators, who having access to confidential
information, may become the source of undue advantage. Said employee(s) may act
as a spy or, spies of either party to a collective bargaining agreement. This is
specially true in the present case where the petitioning Union is already the
bargaining agent of the rank-and-file employees in the establishment. To allow the
confidential employees to join the existing Union of the rank-and-file would be in
violation of the terms of the Collective Bargaining Agreement wherein this kind of
employees by the nature of their functions/ positions are expressly excluded.

As regards the service engineers and the sales representatives, two (2) points which respondent
NLRC likewise arbitrarily and erroneously ruled upon agreed to be discussed. Firstly, in holding that
they are included in the bargaining unit for the rank and file employees of PIDI, the NLRC practically
forced them to become members of PEO-FFW or to be subject to its sphere of influence, it being the
certified bargaining agent for the subject bargaining unit. This violates, obstructs, impairs and
impedes the service engineers' and the sales representatives' constitutional right to form unions or
associations 15 and to self-organization. 16 In Victoriano vs. Elizalde Rope Workers Union, 17 this Court
already ruled:

. . . Notwithstanding the different theories propounded by the different schools of

jurisprudence regarding the nature and contents of a "right", it can be safely said that
whatever theory one subscribes to, a right comprehends at least two broad notions,
namely: first, liberty or freedom, i.e., the absence of legal restraint, whereby an
employee may act for himself without being prevented by law; and second, power,
whereby an employee may, as he pleases, join or refrain from joining an association.
It is, therefore, the employee who should decide for himself whether he should join or
not an association; and should he choose to join, he himself makes up his mind as to
which association he would join; and even after he has joined, he still retains the
liberty and the power to leave and cancel his membership with said organization at
any time. 18 It is clear, therefore, that the right to join a union includes the right to abstain
from joining any
union. 19 Inasmuch as what both the Constitution and the Industrial Peace Act have
recognized, and guaranteed to the employee, is the "right" to join associations of his
choice, it would be absurd to say that the law also imposes, in the same breath, upon the
employee the duty to join associations. The law does not enjoin an employee to sign up
with any association.
The decision then of the Executive Labor Arbiter in merely directing the holding of a referendum "to
determine the will of the service engineers, sales representatives as to their inclusion or exclusion in
(sic) the bargaining unit" is the most appropriate procedure that conforms with their right to form,
assist or join in labor union or organization. However, since this decision was rendered before the
effectivity of R.A. No. 6715, it must now be stressed that its future application to the private parties in
this case should, insofar as service engineers and sales representatives holding supervisory
positions or functions are concerned, take into account the present Article 245 20 of the Labor Code
which, as amended by R.A. No. 6715, now reads:

ARTICLE 245. Ineligibility of managerial employees to join any labor organization;

right of supervisory employees. Managerial employees are not eligible to join,
assist or form any labor organization. Supervisory employees shall not be eligible for
membership in a labor organization of the rank-and-file employees but may join,
assist or form separate labor organizations of their own. (emphasis supplied)

The foregoing disquisitions render unnecessary a discussion on the second ground on the alleged
grave abuse of discretion on the part of the NLRC in not applying the "Globe Doctrine". Suffice it to
state here that since the only issue is the subject employees' inclusion in or exclusion from the
bargaining unit in question, and PIDI never questioned the decision of the Executive Labor Arbiter,
the Globe Doctrine finds no application. Besides, this doctrine applies only in instances of evenly
balanced claims by competitive groups for the right to be established as the bargaining unit, 21 which
do not obtain in this case.

WHEREFORE, the petition is hereby GRANTED. The Decision of public respondent National Labor
Relations Commission in Case No. NLRC-NCR-00-11-03936-87, promulgated on 16 January 1989,
is hereby SET ASIDE while the Decision of the Executive Labor Arbiter in said case dated 17 March
1988 is hereby REINSTATED, subject to the modifications above indicated. Costs against private
respondent.

SO ORDERED.

10. G.R. No. 162025 August 3, 2010

TUNAY NA PAGKAKAISA NG MANGGAGAWA SA ASIA BREWERY, Petitioner,

vs.
ASIA BREWERY, INC., Respondent.

DECISION

VILLARAMA, JR., J.:

For resolution is an appeal by certiorari filed by petitioner under Rule 45 of the 1997 Rules of Civil
Procedure, as amended, assailing the Decision1 dated November 22, 2002 and Resolution2 dated
January 28, 2004 rendered by the Court of Appeals (CA) in CA-G.R. SP No. 55578, granting the
petition of respondent company and reversing the Voluntary Arbitrators Decision 3 dated October 14,
1999.
The facts are:

Respondent Asia Brewery, Inc. (ABI) is engaged in the manufacture, sale and distribution of beer,
shandy, bottled water and glass products. ABI entered into a Collective Bargaining Agreement
(CBA),4 effective for five (5) years from August 1, 1997 to July 31, 2002, with Bisig at Lakas ng mga
Manggagawa sa Asia-Independent (BLMA-INDEPENDENT), the exclusive bargaining representative
of ABIs rank-and-file employees. On October 3, 2000, ABI and BLMA-INDEPENDENT signed a
renegotiated CBA effective from August 1, 2000 to 31 July 2003. 5

Article I of the CBA defined the scope of the bargaining unit, as follows:

Section 1. Recognition. The COMPANY recognizes the UNION as the sole and exclusive bargaining
representative of all the regular rank-and-file daily paid employees within the scope of the
appropriate bargaining unit with respect to rates of pay, hours of work and other terms and
conditions of employment. The UNION shall not represent or accept for membership employees
outside the scope of the bargaining unit herein defined.

Section 2. Bargaining Unit. The bargaining unit shall be comprised of all regular rank-and-file daily-
paid employees of the COMPANY. However, the following jobs/positions as herein defined shall be
excluded from the bargaining unit, to wit:

1. Managers

2. Assistant Managers

3. Section Heads

4. Supervisors

5. Superintendents

6. Confidential and Executive Secretaries

7. Personnel, Accounting and Marketing Staff

8. Communications Personnel

9. Probationary Employees

10. Security and Fire Brigade Personnel

11. Monthly Employees

12. Purchasing and Quality Control Staff6 [emphasis supplied.]

Subsequently, a dispute arose when ABIs management stopped deducting union dues from eighty-
one (81) employees, believing that their membership in BLMA-INDEPENDENT violated the CBA.
Eighteen (18) of these affected employees are QA Sampling Inspectors/Inspectresses and Machine
Gauge Technician who formed part of the Quality Control Staff. Twenty (20) checkers are assigned
at the Materials Department of the Administration Division, Full Goods Department of the Brewery
Division and Packaging Division. The rest are secretaries/clerks directly under their respective
division managers.7

BLMA-INDEPENDENT claimed that ABIs actions restrained the employees right to self-organization
and brought the matter to the grievance machinery. As the parties failed to amicably settle the
controversy, BLMA-INDEPENDENT lodged a complaint before the National Conciliation and
Mediation Board (NCMB). The parties eventually agreed to submit the case for arbitration to resolve
the issue of "[w]hether or not there is restraint to employees in the exercise of their right to self-
organization."8

In his Decision, Voluntary Arbitrator Bienvenido Devera sustained the BLMA-INDEPENDENT after
finding that the records submitted by ABI showed that the positions of the subject employees qualify
under the rank-and-file category because their functions are merely routinary and clerical. He noted
that the positions occupied by the checkers and secretaries/clerks in the different divisions are not
managerial or supervisory, as evident from the duties and responsibilities assigned to them. With
respect to QA Sampling Inspectors/Inspectresses and Machine Gauge Technician, he ruled that ABI
failed to establish with sufficient clarity their basic functions as to consider them Quality Control Staff
who were excluded from the coverage of the CBA. Accordingly, the subject employees were
declared eligible for inclusion within the bargaining unit represented by BLMA-INDEPENDENT.9

On appeal, the CA reversed the Voluntary Arbitrator, ruling that:

WHEREFORE, foregoing premises considered, the questioned decision of the Honorable Voluntary
Arbitrator Bienvenido De Vera is hereby REVERSED and SET ASIDE, and A NEW ONE ENTERED
DECLARING THAT:

a) the 81 employees are excluded from and are not eligible for inclusion in the bargaining
unit as defined in Section 2, Article I of the CBA;

b) the 81 employees cannot validly become members of respondent and/or if already

members, that their membership is violative of the CBA and that they should disaffiliate from
respondent; and

c) petitioner has not committed any act that restrained or tended to restrain its employees in
the exercise of their right to self-organization.

NO COSTS.

SO ORDERED.10

BLMA-INDEPENDENT filed a motion for reconsideration. In the meantime, a certification election

was held on August 10, 2002 wherein petitioner Tunay na Pagkakaisa ng Manggagawa sa Asia
(TPMA) won. As the incumbent bargaining representative of ABIs rank-and-file employees claiming
interest in the outcome of the case, petitioner filed with the CA an omnibus motion for
reconsideration of the decision and intervention, with attached petition signed by the union
officers.11 Both motions were denied by the CA.12

The petition is anchored on the following grounds:

(1)
THE COURT OF APPEALS ERRED IN RULING THAT THE 81 EMPLOYEES ARE EXCLUDED
FROM AND ARE NOT ELIGIBLE FOR INCLUSION IN THE BARGAINING UNIT AS DEFINED IN
SECTION 2, ARTICLE 1 OF THE CBA[;]

(2)

THE COURT OF APPEALS ERRED IN HOLDING THAT THE 81 EMPLOYEES CANNOT VALIDLY
BECOME UNION MEMBERS, THAT THEIR MEMBERSHIP IS VIOLATIVE OF THE CBA AND THAT
THEY SHOULD DISAFFILIATE FROM RESPONDENT;

(3)

THE COURT OF APPEALS SERIOUSLY ERRED IN HOLDING THAT PETITIONER (NOW PRIVATE
RESPONDENT) HAS NOT COMMITTED ANY ACT THAT RESTRAINED OR TENDED TO
RESTRAIN ITS EMPLOYEES IN THE EXERCISE OF THEIR RIGHT TO SELF-ORGANIZATION. 13

Although Article 245 of the Labor Code limits the ineligibility to join, form and assist any labor
organization to managerial employees, jurisprudence has extended this prohibition to confidential
employees or those who by reason of their positions or nature of work are required to assist or act in
a fiduciary manner to managerial employees and hence, are likewise privy to sensitive and highly
confidential records.14 Confidential employees are thus excluded from the rank-and-file bargaining
unit. The rationale for their separate category and disqualification to join any labor organization is
similar to the inhibition for managerial employees because if allowed to be affiliated with a Union, the
latter might not be assured of their loyalty in view of evident conflict of interests and the Union can
also become company-denominated with the presence of managerial employees in the Union
membership.15 Having access to confidential information, confidential employees may also become
the source of undue advantage. Said employees may act as a spy or spies of either party to a
collective bargaining agreement.16

In Philips Industrial Development, Inc. v. NLRC,17 this Court held that petitioners "division
secretaries, all Staff of General Management, Personnel and Industrial Relations Department,
Secretaries of Audit, EDP and Financial Systems" are confidential employees not included within the
rank-and-file bargaining unit.18 Earlier, in Pier 8 Arrastre & Stevedoring Services, Inc. v. Roldan-
Confesor,19 we declared that legal secretaries who are tasked with, among others, the typing of legal
documents, memoranda and correspondence, the keeping of records and files, the giving of and
receiving notices, and such other duties as required by the legal personnel of the corporation, fall
under the category of confidential employees and hence excluded from the bargaining unit
composed of rank-and-file employees.20

Also considered having access to "vital labor information" are the executive secretaries of the
General Manager and the executive secretaries of the Quality Assurance Manager, Product
Development Manager, Finance Director, Management System Manager, Human Resources
Manager, Marketing Director, Engineering Manager, Materials Manager and Production Manager.21

In the present case, the CBA expressly excluded "Confidential and Executive Secretaries" from the
rank-and-file bargaining unit, for which reason ABI seeks their disaffiliation from petitioner. Petitioner,
however, maintains that except for Daisy Laloon, Evelyn Mabilangan and Lennie Saguan who had
been promoted to monthly paid positions, the following secretaries/clerks are deemed included
among the rank-and-file employees of ABI:22

NAME DEPARTMENT IMMEDIATE SUPERIOR

C1 ADMIN DIVISION
1. Angeles, Cristina C.
2. Barraquio, Carina P.
3. Cabalo, Marivic B.
4. Fameronag, Leodigario C.
1. Abalos, Andrea A.
2. Algire, Juvy L.
3. Anouevo, Shirley P.
4. Aviso, Rosita S.
5. Barachina, Pauline C.
6. Briones, Catalina P.
7. Caralipio, Juanita P.
8. Elmido, Ma. Rebecca S.
9. Giron, Laura P.
10. Mane, Edna A.
xxxx
C2 BREWERY DIVISION
1. Laloon, Daisy S.
1. Arabit, Myrna F.
2. Burgos, Adelaida D.
3. Menil, Emmanuel S.
4. Nevalga, Marcelo G.
1. Mapola, Ma. Esraliza T.
2. Velez, Carmelito A.
1. Bordamonte, Rhumela D.
2. Deauna, Edna R.
3. Punongbayan, Marylou F.
4. Saguan, Lennie Y.
1. Alcoran, Simeon A.
2. Cervantes, Ma. Sherley Y.
3. Diongco, Ma. Teresa M.
4. Mabilangan, Evelyn M.
5. Rivera, Aurora M.
6. Salandanan, Nancy G.
1. Magbag, Ma. Corazon C.
Transportation Mr. Melito K. Tan
Transportation Mr. Melito K. Tan
Transportation Mr. Melito K. Tan
Transportation Mr. Melito K. Tan
Materials Mr. Andres G. Co
Materials Mr. Andres G. Co
Materials Mr. Andres G. Co
Materials Mr. Andres G. Co
Materials Mr. Andres G. Co
Materials Mr. Andres G. Co
Materials Mr. Andres G. Co
Materials Mr. Andres G. Co
Materials Mr. Andres G. Co
Materials Mr. Andres G. Co
Brewhouse Mr. William Tan
Bottling Production Mr. Julius Palmares
Bottling Production Mr. Julius Palmares
Bottling Production Mr. Julius Palmares
Bottling Production Mr. Julius Palmares
Bottling Maintenance Mr. Ernesto Ang
Bottling Maintenance Mr. Ernesto Ang
Bottled Water Mr. Faustino Tetonche
Bottled Water Mr. Faustino Tetonche
Bottled Water Mr. Faustino Tetonche
Bottled Water Mr. Faustino Tetonche
Full Goods Mr. Tsoi Wah Tung
Full Goods Mr. Tsoi Wah Tung
Full Goods Mr. Tsoi Wah Tung
Full Goods Mr. Tsoi Wah Tung
Full Goods Mr. Tsoi Wah Tung
Full Goods Mr. Tsoi Wah Tung
Tank Farm/ Mr. Manuel Yu Liat
Cella Services
 1. Capiroso, Francisca A. Quality Assurance Ms. Regina Mirasol

1. Alconaba, Elvira C. Engineering Mr. Clemente Wong

2. Bustillo, Bernardita E. Electrical Mr. Jorge Villarosa
3. Catindig, Ruel A. Civil Works Mr. Roger Giron
4. Sison, Claudia B. Utilities Mr. Venancio Alconaba

xxxx

C3 PACKAGING DIVISION

1. Alvarez, Ma. Luningning L. GP Administration Ms. Susan Bella

2. Caiza, Alma A. GP Technical Mr. Chen Tsai Tyan
3. Cantalejo, Aida S. GP Engineering Mr. Noel Fernandez
4. Castillo, Ma. Riza R. GP Production Mr. Tsai Chen Chih
5. Lamadrid, Susana C. GP Production Mr. Robert Bautista
6. Mendoza, Jennifer L. GP Technical Mr. Mel Oa

As can be gleaned from the above listing, it is rather curious that there would be several
secretaries/clerks for just one (1) department/division performing tasks which are mostly routine and
clerical. Respondent insisted they fall under the "Confidential and Executive Secretaries" expressly
excluded by the CBA from the rank-and-file bargaining unit. However, perusal of the job descriptions
of these secretaries/clerks reveals that their assigned duties and responsibilities involve routine
activities of recording and monitoring, and other paper works for their respective departments while
secretarial tasks such as receiving telephone calls and filing of office correspondence appear to
have been commonly imposed as additional duties.23 Respondent failed to indicate who among
these numerous secretaries/clerks have access to confidential data relating to management policies
that could give rise to potential conflict of interest with their Union membership. Clearly, the rationale
under our previous rulings for the exclusion of executive secretaries or division secretaries would
have little or no significance considering the lack of or very limited access to confidential information
of these secretaries/clerks. It is not even farfetched that the job category may exist only on paper
since they are all daily-paid workers. Quite understandably, petitioner had earlier expressed the view
that the positions were just being "reclassified" as these employees actually discharged routine
functions.

We thus hold that the secretaries/clerks, numbering about forty (40), are rank-and-file employees
and not confidential employees.

With respect to the Sampling Inspectors/Inspectresses and the Gauge Machine Technician, there
seems no dispute that they form part of the Quality Control Staff who, under the express terms of the
CBA, fall under a distinct category. But we disagree with respondents contention that the twenty (20)
checkers are similarly confidential employees being "quality control staff" entrusted with the handling
and custody of company properties and sensitive information.

Again, the job descriptions of these checkers assigned in the storeroom section of the Materials
Department, finishing section of the Packaging Department, and the decorating and glass sections
of the Production Department plainly showed that they perform routine and mechanical tasks
preparatory to the delivery of the finished products.24 While it may be argued that quality control
extends to post-production phase -- proper packaging of the finished products -- no evidence was
presented by the respondent to prove that these daily-paid checkers actually form part of the
companys Quality Control Staff who as such "were exposed to sensitive, vital and confidential
information about [companys] products" or "have knowledge of mixtures of the products, their
defects, and even their formulas" which are considered trade secrets. Such allegations of
respondent must be supported by evidence.25

Consequently, we hold that the twenty (20) checkers may not be considered confidential employees
under the category of Quality Control Staff who were expressly excluded from the CBA of the rank-
and-file bargaining unit.

Confidential employees are defined as those who (1) assist or act in a confidential capacity, (2) to
persons who formulate, determine, and effectuate management policies in the field of labor relations.
The two (2) criteria are cumulative, and both must be met if an employee is to be considered a
confidential employee that is, the confidential relationship must exist between the employee and
his supervisor, and the supervisor must handle the prescribed responsibilities relating to labor
relations. The exclusion from bargaining units of employees who, in the normal course of their
duties, become aware of management policies relating to labor relations is a principal objective
sought to be accomplished by the "confidential employee rule."26 There is no showing in this case
that the secretaries/clerks and checkers assisted or acted in a confidential capacity to managerial
employees and obtained confidential information relating to labor relations policies. And even
assuming that they had exposure to internal business operations of the company, respondent
claimed, this is not per se ground for their exclusion in the bargaining unit of the daily-paid rank-and-
file employees.27

Not being confidential employees, the secretaries/clerks and checkers are not disqualified from
membership in the Union of respondents rank-and-file employees. Petitioner argues that
respondents act of unilaterally stopping the deduction of union dues from these employees
constitutes unfair labor practice as it "restrained" the workers exercise of their right to self-
organization, as provided in Article 248 (a) of the Labor Code.

Unfair labor practice refers to "acts that violate the workers right to organize." The prohibited acts
are related to the workers right to self organization and to the observance of a CBA. For a charge of
unfair labor practice to prosper, it must be shown that ABI was motivated by ill will, "bad faith, or
fraud, or was oppressive to labor, or done in a manner contrary to morals, good customs, or public
policy, and, of course, that social humiliation, wounded feelings or grave anxiety resulted x x
x"28 from ABIs act in discontinuing the union dues deduction from those employees it believed were
excluded by the CBA. Considering that the herein dispute arose from a simple disagreement in the
interpretation of the CBA provision on excluded employees from the bargaining unit, respondent
cannot be said to have committed unfair labor practice that restrained its employees in the exercise
of their right to self-organization, nor have thereby demonstrated an anti-union stance.

WHEREFORE, the petition is GRANTED. The Decision dated November 22, 2002 and Resolution
dated January 28, 2004 of the Court of Appeals in CA-G.R. SP No. 55578 are hereby REVERSED
and SET ASIDE. The checkers and secretaries/clerks of respondent company are hereby declared
rank-and-file employees who are eligible to join the Union of the rank-and-file employees.

No costs.

SO ORDERED.

11. G.R. No. 146206 August 1, 2011

SAN MIGUEL FOODS, INCORPORATED, Petitioner,
vs.
SAN MIGUEL CORPORATION SUPERVISORS and EXEMPT UNION, Respondent.

DECISION

PERALTA, J.:

The issues in the present case, relating to the inclusion of employees in supervisor levels 3 and 4
and the exempt employees in the proposed bargaining unit, thereby allowing their participation in the
certification election; the application of the "community or mutuality of interests" test; and the
determination of the employees who belong to the category of confidential employees, are not novel.

In G.R. No. 110399, entitled San Miguel Corporation Supervisors and Exempt Union v.
Laguesma,1 the Court held that even if they handle confidential data regarding technical and internal
business operations, supervisory employees 3 and 4 and the exempt employees of petitioner San
Miguel Foods, Inc. (SMFI) are not to be considered confidential employees, because the same do
not pertain to labor relations, particularly, negotiation and settlement of grievances. Consequently,
they were allowed to form an appropriate bargaining unit for the purpose of collective bargaining.
The Court also declared that the employees belonging to the three different plants of San Miguel
Corporation Magnolia Poultry Products Plants in Cabuyao, San Fernando, and Otis, having
"community or mutuality of interests," constitute a single bargaining unit. They perform work of the
same nature, receive the same wages and compensation, and most importantly, share a common
stake in concerted activities. It was immaterial that the three plants have different locations as they
did not impede the operations of a single bargaining representative. 2

Pursuant to the Court's decision in G.R. No. 110399, the Department of Labor and Employment
National Capital Region (DOLE-NCR) conducted pre-election conferences. 3 However, there was a
discrepancy in the list of eligible voters, i.e., petitioner submitted a list of 23 employees for the San
Fernando plant and 33 for the Cabuyao plant, while respondent listed 60 and 82, respectively.4

On August 31, 1998, Med-Arbiter Agatha Ann L. Daquigan issued an Order 5 directing Election Officer
Cynthia Tolentino to proceed with the conduct of certification election in accordance with Section 2,
Rule XII of Department Order No. 9.

On September 30, 1998, a certification election was conducted and it yielded the following
results,6 thus:

Cabuyao San Fernando Total

Plant Plant
Yes 23 23 46
No 0 0 0
Spoiled 2 0 2
Segregated 41 35 76
Total Votes Cast 66 58 124

On the date of the election, September 30, 1998, petitioner filed the Omnibus Objections and
Challenge to Voters,7 questioning the eligibility to vote by some of its employees on the grounds that
some employees do not belong to the bargaining unit which respondent seeks to represent or that
there is no existence of employer-employee relationship with petitioner. Specifically, it argued that
certain employees should not be allowed to vote as they are: (1) confidential employees; (2)
employees assigned to the live chicken operations, which are not covered by the bargaining unit; (3)
employees whose job grade is level 4, but are performing managerial work and scheduled to be
promoted; (4) employees who belong to the Barrio Ugong plant; (5) non-SMFI employees; and (6)
employees who are members of other unions.

On October 21, 1998, the Med-Arbiter issued an Order directing respondent to submit proof showing
that the employees in the submitted list are covered by the original petition for certification election
and belong to the bargaining unit it seeks to represent and, likewise, directing petitioner to
substantiate the allegations contained in its Omnibus Objections and Challenge to Voters. 8

In compliance thereto, respondent averred that (1) the bargaining unit contemplated in the original
petition is the Poultry Division of San Miguel Corporation, now known as San Miguel Foods, Inc.; (2)
it covered the operations in Calamba, Laguna, Cavite, and Batangas and its home base is either in
Cabuyao, Laguna or San Fernando, Pampanga; and (3) it submitted individual and separate
declarations of the employees whose votes were challenged in the election. 9

Adding the results to the number of votes canvassed during the September 30, 1998 certification
election, the final tally showed that: number of eligible voters 149; number of valid votes cast
121; number of spoiled ballots - 3; total number of votes cast 124, with 118 (i.e., 46 + 72 = 118 )
"Yes" votes and 3 "No" votes.10

The Med-Arbiter issued the Resolution11 dated February 17, 1999 directing the parties to appear
before the Election Officer of the Labor Relations Division on March 9, 1999, 10:00 a.m., for the
opening of the segregated ballots. Thereafter, on April 12, 1999, the segregated ballots were
opened, showing that out of the 76 segregated

votes, 72 were cast for "Yes" and 3 for "No," with one "spoiled" ballot. 12

Based on the results, the Med-Arbiter issued the Order13 dated April 13, 1999, stating that since the
"Yes" vote received 97% of the valid votes cast, respondent is certified to be the exclusive
bargaining agent of the supervisors and exempt employees of petitioner's Magnolia Poultry Products
Plants in Cabuyao, San Fernando, and Otis.

On appeal, the then Acting DOLE Undersecretary, in the Resolution14 dated July 30, 1999, in OS-A-
2-70-91 (NCR-OD-M-9010-017), affirmed the Order dated April 13, 1999, with modification that
George C. Matias, Alma Maria M. Lozano, Joannabel T. Delos Reyes, and Marilyn G. Pajaron be
excluded from the bargaining unit which respondent seeks to represent. She opined that the
challenged voters should be excluded from the bargaining unit, because Matias and Lozano are
members of Magnolia Poultry Processing Plants Monthly Employees Union, while Delos Reyes and
Pajaron are employees of San Miguel Corporation, which is a separate and distinct entity from
petitioner.

Petitioners Partial Motion for Reconsideration15 dated August 14, 1999 was denied by the then
Acting DOLE Undersecretary in the Order16 dated August 27, 1999.

In the Decision17 dated April 28, 2000, in CA-G.R. SP No. 55510, entitled San Miguel Foods, Inc. v.
The Honorable Office of the Secretary of Labor, Bureau of Labor Relations, and San Miguel
Corporation Supervisors and Exempt Union, the Court of Appeals (CA) affirmed with modification the
Resolution dated July 30, 1999 of the DOLE Undersecretary, stating that those holding the positions
of Human Resource Assistant and Personnel Assistant are excluded from the bargaining unit.

Petitioners Motion for Partial Reconsideration18 dated May 23, 2000 was denied by the CA in the
Resolution19dated November 28, 2000.

Hence, petitioner filed this present petition raising the following issues:

I.

WHETHER THE COURT OF APPEALS DEPARTED FROM JURISPRUDENCE WHEN IT

EXPANDED THE SCOPE OF THE BARGAINING UNIT DEFINED BY THIS COURT'S
RULING IN G.R. NO. 110399.

II.

WHETHER THE COURT OF APPEALS DEPARTED FROM JURISPRUDENCE -

SPECIFICALLY, THIS COURT'S DEFINITION OF A "CONFIDENTIAL EMPLOYEE" - WHEN
IT RULED FOR THE INCLUSION OF THE "PAYROLL MASTER" POSITION IN THE
BARGAINING UNIT.

III.

WHETHER THIS PETITION IS A "REHASH" OR A "RESURRECTION" OF THE ISSUES

RAISED IN G.R. NO. 110399, AS ARGUED BY PRIVATE RESPONDENT.

Petitioner contends that with the Court's ruling in G.R. No. 110399 20 identifying the specific
employees who can participate in the certification election, i.e., the supervisors (levels 1 to 4) and
exempt employees of San Miguel Poultry Products Plants in Cabuyao, San Fernando, and Otis, the
CA erred in expanding the scope of the bargaining unit so as to include employees who do not
belong to or who are not based in its Cabuyao or San Fernando plants. It also alleges that the
employees of the Cabuyao, San Fernando, and Otis plants of petitioners predecessor, San Miguel
Corporation, as stated in G.R. No. 110399, were engaged in "dressed" chicken processing, i.e.,
handling and packaging of chicken meat, while the new bargaining unit, as defined by the CA in the
present case, includes employees engaged in "live" chicken operations, i.e., those who breed chicks
and grow chickens.

Respondent counters that petitioners proposed exclusion of certain employees from the bargaining
unit was a rehashed issue which was already settled in G.R. No. 110399. It maintains that the issue
of union membership coverage should no longer be raised as a certification election already took
place on September 30, 1998, wherein respondent won with 97% votes.

Petitioners contentions are erroneous. In G.R. No. 110399, the Court explained that the employees
of San Miguel Corporation Magnolia Poultry Products Plants of Cabuyao, San Fernando, and Otis
constitute a single bargaining unit, which is not contrary to the one-company, one-union policy. An
appropriate bargaining unit is defined as a group of employees of a given employer, comprised of all
or less than all of the entire body of employees, which the collective interest of all the employees,
consistent with equity to the employer, indicate to be best suited to serve the reciprocal rights and
duties of the parties under the collective bargaining provisions of the law.21
In National Association of Free Trade Unions v. Mainit Lumber Development Company Workers
Union United Lumber and General Workers of the Phils, 22 the Court, taking into account the
"community or mutuality of interests" test, ordered the formation of a single bargaining unit
consisting of the Sawmill Division in Butuan City and the Logging Division in Zapanta Valley,
Kitcharao, Agusan [Del] Norte of the Mainit Lumber Development Company. It held that while the
existence of a bargaining history is a factor that may be reckoned with in determining the appropriate
bargaining unit, the same is not decisive or conclusive. Other factors must be considered. The test of
grouping is community or mutuality of interest. This is so because the basic test of an asserted
bargaining units acceptability is whether or not it is fundamentally the combination which will best
assure to all employees the exercise of their collective bargaining rights. 23 Certainly, there is a
mutuality of interest among the employees of the Sawmill Division and the Logging Division. Their
functions mesh with one another. One group needs the other in the same way that the company
needs them both. There may be differences as to the nature of their individual assignments, but the
distinctions are not enough to warrant the formation of a separate bargaining unit. 24

Thus, applying the ruling to the present case, the Court affirms the finding of the CA that there
should be only one bargaining unit for

the employees in Cabuyao, San Fernando, and Otis25 of Magnolia Poultry Products Plant involved in
"dressed" chicken processing and Magnolia Poultry Farms engaged in "live" chicken operations.
Certain factors, such as specific line of work, working conditions, location of work, mode of
compensation, and other relevant conditions do not affect or impede their commonality of interest.
Although they seem separate and distinct from each other, the specific tasks of each division are
actually interrelated and there exists mutuality of interests which warrants the formation of a single
bargaining unit.

Petitioner asserts that the CA erred in not excluding the position of Payroll Master in the definition of
a confidential employee and, thus, prays that the said position and all other positions with access to
salary and compensation data be excluded from the bargaining unit.

This argument must fail. Confidential employees are defined as those who (1) assist or act in a
confidential capacity, in regard (2) to persons who formulate, determine, and effectuate management
policies in the field of labor relations.26 The two criteria are cumulative, and both must be met if an
employee is to be considered a confidential employee - that is, the confidential relationship must
exist between the employee and his supervisor, and the supervisor must handle the prescribed
responsibilities relating to labor relations. The exclusion from bargaining units of employees who, in
the normal course of their duties, become aware of management policies relating to labor relations is
a principal objective sought to be accomplished by the "confidential employee rule." 27

A confidential employee is one entrusted with confidence on delicate, or with the custody, handling
or care and protection of the employers property.28 Confidential employees, such as accounting
personnel, should be excluded from the bargaining unit, as their access to confidential information
may become the source of undue advantage.29 However, such fact does not apply to the position of
Payroll Master and the whole gamut of employees who, as perceived by petitioner, has access to
salary and compensation data. The CA correctly held that the position of Payroll Master does not
involve dealing with confidential labor relations information in the course of the performance of his
functions. Since the nature of his work does not pertain to company rules and regulations and
confidential labor relations, it follows that he cannot be excluded from the subject bargaining unit.

Corollarily, although Article 24530 of the Labor Code limits the ineligibility to join, form and assist any
labor organization to managerial employees, jurisprudence has extended this prohibition to
confidential employees or those who by reason of their positions or nature of work are required to
assist or act in a fiduciary manner to managerial employees and, hence, are likewise privy to
sensitive and highly confidential records.31 Confidential employees are thus excluded from the rank-
and-file bargaining unit. The rationale for their separate category and disqualification to join any
labor organization is similar to the inhibition for managerial employees, because if allowed to be
affiliated with a union, the latter might not be assured of their loyalty in view of evident conflict of
interests and the union can also become company-denominated with the presence of managerial
employees in the union membership.32 Having access to confidential information, confidential
employees may also become the source of undue advantage. Said employees may act as a spy or
spies of either party to a collective bargaining agreement. 331avvphi1

In this regard, the CA correctly ruled that the positions of Human Resource Assistant and Personnel
Assistant belong to the category of confidential employees and, hence, are excluded from the
bargaining unit, considering their respective positions and job descriptions. As Human Resource
Assistant,34 the scope of ones work necessarily involves labor relations, recruitment and selection of
employees, access to employees' personal files and compensation package, and human resource
management. As regards a Personnel Assistant,35 one's work includes the recording of minutes for
management during collective bargaining negotiations, assistance to management during grievance
meetings and administrative investigations, and securing legal advice for labor issues from the
petitioners team of lawyers, and implementation of company programs. Therefore, in the discharge
of their functions, both gain access to vital labor relations information which outrightly disqualifies
them from union membership.

The proceedings for certification election are quasi-judicial in nature and, therefore, decisions
rendered in such proceedings can attain finality.36 Applying the doctrine of res judicata, the issue in
the

present case pertaining to the coverage of the employees who would constitute the bargaining unit is
now a foregone conclusion.

It bears stressing that a certification election is the sole concern of the workers; hence, an employer
lacks the personality to dispute the same. The general rule is that an employer has no standing to
question the process of certification election, since this is the sole concern of the workers. 37 Law and
policy demand that employers take a strict, hands-off stance in certification elections. The bargaining
representative of employees should be chosen free from any extraneous influence of management.
A labor bargaining representative, to be effective, must owe its loyalty to the employees alone and to
no other.38 The only exception is where the employer itself has to file the petition pursuant to Article
25839 of the Labor Code because of a request to bargain collectively.40

With the foregoing disquisition, the Court writes finis to the issues raised so as to forestall future
suits of similar nature.

WHEREFORE, the petition is DENIED. The Decision dated April 28, 2000 and Resolution dated
November 28, 2000 of the Court of Appeals, in CA-G.R. SP No. 55510, which affirmed with
modification the Resolutions dated July 30, 1999 and August 27, 1999 of the Secretary of Labor,
are AFFIRMED.

SO ORDERED.

12. G.R. No. 109002 April 12, 2000

DELA SALLE UNIVERSITY, petitioner,
vs.
DELA SALLE UNIVERSITY EMPLOYEES ASSOCIATION (DLSUEA) and BUENAVENTURA
MAGSALIN, respondents.

x-----------------------x

G.R. No. 110072 April 12, 2000

DELA SALLE UNIVERSITY EMPLOYEES ASSOCIATION-NATIONAL FEDERATION OF

TEACHERS AND EMPLOYEES UNION (DLSUEA-NAFTEU), petitioner,
vs.
DELA SALLE UNIVERSITY and BUENAVENTURA MAGSALIN, respondents.

BUENA, J.:

Filed with this Court are two petitions for certiorari,1 the first petition with preliminary injunction and/or
temporary restraining order,2 assailing the decision of voluntary arbitrator Buenaventura Magsalin,
dated January 19, 1993, as having been rendered with grave abuse of discretion amounting to lack
or excess of jurisdiction. These two petitions have been consolidated inasmuch as the factual
antecedents, parties involved and issues raised therein are interrelated. 3

The facts are not disputed and, as summarized by the voluntary arbitrator, are as follows. On
December 1986, Dela Salle University (hereinafter referred to as UNIVERSITY) and Dela Salle
University Employees Association National Federation of Teachers and Employees Union
(DLSUEA-NAFTEU), which is composed of regular non-academic rank and file
employees,4 (hereinafter referred to as UNION) entered into a collective bargaining agreement with a
life span of three (3) years, that is, from December 23, 1986 to December 22, 1989. 5 During the
freedom period, or 60 days before the expiration of the said collective bargaining agreement, the
Union initiated negotiations with the University for a new collective bargaining agreement 6 which,
however, turned out to be unsuccessful, hence, the Union filed a Notice of Strike with the National
Conciliation and Mediation Board, National Capital Region.7 After several conciliation-mediation
meetings, five (5) out of the eleven (11) issues raised in the Notice of Strike were resolved by the
parties. A partial collective bargaining agreement was thereafter executed by the parties. 8 On March
18, 1991, the parties entered into a Submission Agreement, identifying the remaining six (6)
unresolved issues for arbitration, namely: "(1) scope of the bargaining unit, (2) union security clause,
(3) security of tenure, (4) salary increases for the third and fourth years [this should properly read
second and third years]9 of the collective bargaining agreement, (5) indefinite union leave, reduction
of the union president's workload, special leave, and finally, (6) duration of the agreement." 10 The
parties appointed Buenaventura Magsalin as voluntary arbitrator. 11 On January 19, 1993, the
voluntary arbitrator rendered the assailed decision. 12

In the said decision, the voluntary arbitrator, on the first issue involving the scope of the bargaining
unit, ruled that ". . . the Computer Operators assigned at the CSC [Computer Services Center], just
like any other Computer Operators in other units, [should be] included as members of the bargaining
unit," 13 after finding that "[e]vidently, the Computer Operators are presently doing clerical and
routinary work and had nothing to do with [the] setting of management policies for the University, as
[may be] gleaned from the duties and responsibilities attached to the position and embodied in the
CSC [Computer Services Center] brochure. They may have, as argued by the University, access to
vital information regarding the University's operations but they are not necessarily
confidential." 14 Regarding the discipline officers, the voluntary arbitrator ". . . believes that this type of
employees belong (sic) to the rank-and-file on the basis of the nature of their job." 15 With respect to
the employees of the College of St. Benilde, the voluntary arbitrator found that the College of St.
Benilde has a personality separate and distinct from the University and thus, held ". . . that the
employees therein are outside the bargaining unit of the University's rank-and-file employees." 16

On the second issue regarding the propriety of the inclusion of a union shop clause in the collective
bargaining agreement, in addition to the existing maintenance of membership clause, the voluntary
arbitrator opined that a union shop clause ". . . is not a restriction on the employee's right of (sic)
freedom of association but rather a valid form of union security while the CBA is in force and in
accordance with the Constitutional policy to promote unionism and collective bargaining and
negotiations. The parties therefore should incorporate such union shop clause in their CBA." 17

On the third issue with respect to the use of the "last-in-first-out" method in case of retrenchment and
transfer to other schools or units, the voluntary arbitrator upheld the ". . . elementary right and
prerogative of the management of the University to select and/or choose its employees, a right
equally recognized by the Constitution and the law. The employer, in the exercise of this right, can
adopt valid and equitable grounds as basis for lay-off or separation, like performance, qualifications,
competence, etc. Similarly, the right to transfer or reassign an employee is an employer's exclusive
right and prerogative." 18

Regarding the fourth issue concerning salary increases for the second and third years of the
collective bargaining agreement, the voluntary arbitrator opined that the ". . .proposed budget of the
University for SY 1992-93 could not sufficiently cope up with the demand for increases by the
Union. . . . . . . . With the present financial condition of the University, it cannot now be required to
grant another round of increases through collective bargaining without exhausting its coffers for
other legitimate needs of the University as an institution," 19 thus, he ruled that ". . . the University can
no longer be required to grant a second round of increase for the school years under consideration
and charge the same to the incremental proceeds." 20

On the fifth issue as to the Union's demand for a reduction of the workload of the union president,
special leave benefits and indefinite union leave with pay, the voluntary arbitrator rejected the same,
ruling that unionism ". . . is no valid reason for the reduction of the workload of its President," 21 and
that there is ". . . no sufficient justification to grant an indefinite leave." 22 Finding that the Union and
the Faculty Association are not similarly situated, technically and professionally, 23 and that "[w]hile
professional growth is highly encouraged on the part of the rank-and-file employees, this educational
advancement would not serve in the same degree as demanded of the faculty members," 24 the
voluntary arbitrator denied the Union's demand for special leave benefits.

On the last issue regarding the duration of the collective bargaining agreement, the voluntary
arbitrator ruled that ". . . when the parties forged their CBA and signed it on 19 November 1990,
where a provision on duration was explicitly included, the same became a binding agreement
between them. Notwithstanding the Submission Agreement, thereby reopening this issue for
resolution, this Voluntary Arbitrator is constrained to respect the original intention of the parties, the
same being not contrary to law, morals or public policy." 25 As to the economic aspect of the
collective bargaining agreement, the voluntary arbitrator opined that the ". . . economic provisions of
the CBA shall be re-opened after the third year in compliance with the mandate of the Labor Code,
as amended." 26
Subsequently, both parties filed their respective motions for reconsideration which, however, were
not entertained by the voluntary arbitrator "pursuant to existing rules and jurisprudence governing
voluntary arbitration cases." 27

On March 5, 1993, the University filed with the Second Division of this Court, a petition
for certiorari with temporary restraining order and/or preliminary injunction assailing the decision of
the voluntary arbitrator, as having been rendered "in excess of jurisdiction and/or with grave abuse of
discretion." 28 Subsequently, on May 24, 1993, the Union also filed a petition for certiorari with the
First Division. 29 Without giving due course to the petition pending before each division, the First and
Second Divisions separately resolved to require the respondents in each petition, including the
Solicitor General on behalf of the voluntary arbitrator, to file their respective Comments. 30 Upon
motion by the Solicitor General dated July 29, 1993, both petitions were consolidated and
transferred to the Second Division. 31

In his consolidated Comment 32 filed on September 9, 1993 on behalf of voluntary arbitrator

Buenaventura C. Magsalin, the Solicitor General agreed with the voluntary arbitrator's assailed
decision on all points except that involving the employees of the College of St. Benilde. According to
the Solicitor General, the employees of the College of St. Benilde should have been included in the
bargaining unit of the rank-and-file employees of the University. 33 The Solicitor General came to this
conclusion after finding ". . . sufficient evidence to justify the Union's proposal to consider the
University and the CSB [College of St. Benilde] as only one entity because the latter is but a mere
integral part of the University," to wit: 34

1. One of the duties and responsibilities of the CSB's Director of Academic Services is to
coordinate with the University's Director of Admissions regarding the admission of freshmen,
shiftees and transferees (Annex "3" of the University's Reply);

2. Some of the duties and responsibilities of the CSB's Administrative Officer are as follows:

A. xxx xxx xxx

4. Recommends and implements personnel policies and guidelines (in accordance with the
Staff Manual) as well as pertinent existing general policies of the university as a whole. . . . .

12. Conducts and establishes liaison with all the offices concerned at the Main Campus as
well (sic) with other government agencies on all administrative-related matters. . . .

B. xxx xxx xxx

7. Handles processing, canvassing and direct purchasing of all requisitions worth more than
P10,000 or less. Coordinates and canvasses with the Main Campus all requisitions worth
more than P10,000. . . .

C. xxx xxx xxx

7. Plans and coordinates with the Security and Safety Committee at the Main Campus the
development of a security and safety program during times of emergency or occurrence of
fire or other natural calamities. . . . (Annex "4" of the University's Reply).
 3. The significant role which the University assumes in the admission of students at the CSB
is revealed in the following provisions of the CSB's Bulletin for Arts and Business Studies
Department for the schoolyear 1992-1993, thus:

Considered in the process of admission for a (sic) high school graduate applicants are the
following criteria: results of DLSU College Entrance Examination . . . .

Admission requirements for transferees are: . . . and an acceptable score in the DLSU
admission test. . . .

Shiftees from DLSU who are still eligible to enroll may be admitted in accordance with the
DLSU policy on shifting. Considering that there sometimes exist exceptional cases where a
very difficult but temporary situation renders a DLSU student falling under this category a last
chance to be re-admitted provided he meets the cut-off scores required in the qualifying
examination administered by the university. . . .

He may not be remiss in his study obligations nor incur any violation whatsoever, as such will
be taken by the University to be an indication of his loss of initiative to pursue further studies
at DLSU. In sch (sic) a case, he renders himself ineligible to continue studying at DLSU.
DLSU thus reserves the right to the discontinuance of the studies of any enrolee whose
presence is inimical to the objectives of the CSB/DLSU. . . .

As a college within the university, the College of St. Benilde subscribes to the De La Salle
Mission." (Annexes "C-1," "C-2," and "C-3" of the Union's Consolidated Reply and Rejoinder)

4. The academic programs offered at the CSB are likewise presented in the University's
Undergraduate Prospectus for schoolyear 1992-1993 (Annex "D" of the Union's
Consolidated Reply and Rejoinder).

5. The Leave Form Request (Annex "F" of the Union's Position Paper) at the CSB requires
prior permission from the University anent leaves of CSB employees, to wit:

AN EMPLOYEE WHO GOES ON LEAVE WITHOUT PRIOR PERMISSION FROM THE

UNIVERSITY OR WHO OVEREXTENDS THE PERIOD OF HIS APPROVED LEAVE
WITHOUT SECURING AUTHORITY FROM THE UNIVERSITY, OR WHO REFUSE TO BE
RECALLED FROM AN APPROVED LEAVE SHALL BE CONSIDERED ABSENT WITHOUT
LEAVE AND SHALL BE SUBJECT TO DISCIPLINARY ACTION.

6. The University officials themselves claimed during the 1990 University Athletic Association
of the Philippines (UAAP) meet that the CSB athletes represented the University since the
latter and the CSB comprise only one entity.

On February 9, 1994, this Court resolved to give due course to these consolidated petitions and to
require the parties to submit their respective memoranda. 35

In its memorandum filed on April 28, 1994, 36 pursuant to the above-stated Resolution, 37
the
University raised the following issues for the consideration of the Court: 38

I.
 WHETHER OR NOT GRAVE ABUSE OF DISCRETION WAS COMMITTED BY THE
VOLUNTARY ARBITRATOR WHEN HE INCLUDED, WITHIN THE BARGAINING UNIT
COMPRISING THE UNIVERSITY'S RANK-AND-FILE EMPLOYEES, THE COMPUTER
OPERATORS ASSIGNED AT THE UNIVERSITY'S COMPUTER SERVICES CENTER AND
THE UNIVERSITY'S DISCIPLINE OFFICERS, AND WHEN HE EXCLUDED THE COLLEGE
OF SAINT BENILDE EMPLOYEES FROM THE SAID BARGAINING UNIT.

II.

WHETHER OR NOT GRAVE ABUSE OF DISCRETION WAS COMMITTED BY THE

VOLUNTARY ARBITRATOR WHEN HE UPHELD THE UNION'S DEMAND FOR THE
INCLUSION OF A UNION SHOP CLAUSE IN THE PARTIES' COLLECTIVE BARGAINING
AGREEMENT.

III.

WHETHER OR NOT GRAVE ABUSE OF DISCRETION WAS COMMITTED BY THE

VOLUNTARY ARBITRATOR WHEN HE DENIED THE UNION'S PROPOSAL FOR THE
"LAST-IN-FIRST-OUT" METHOD OF LAY-OFF IN CASES OF RETRENCHMENT.

IV.

WHETHER OR NOT GRAVE ABUSE OF DISCRETION WAS COMMITTED BY THE

VOLUNTARY ARBITRATOR WHEN HE RULED THAT THE UNIVERSITY CAN NO
LONGER BE REQUIRED TO GRANT A SECOND ROUND OF WAGE INCREASES FOR
THE SCHOOL YEARS 1991-92 AND 1992-93 AND CHARGE THE SAME TO THE
INCREMENTAL PROCEEDS.

V.

WHETHER OR NOT GRAVE ABUSE OF DISCRETION WAS COMMITTED BY THE

VOLUNTARY ARBITRATOR WHEN HE DENIED THE UNION'S PROPOSALS ON THE
DELOADING OF THE UNION PRESIDENT, IMPROVED LEAVE BENEFITS AND
INDEFINITE UNION LEAVE WITH PAY.

The Union, on the other hand, raised the following issues, in its memorandum, 39 filed pursuant to
Supreme Court Resolution dated February 9, 1994, 40 to wit; that the voluntary arbitrator committed
grave abuse of discretion in:

(1) FAILING AND/OR REFUSING TO PIERCE THE VEIL OF CORPORATE FICTION OF

THE COLLEGE OF ST. BENILDE-DLSU DESPITE THE PRESENCE OF SUFFICIENT
BASIS TO DO SO AND IN FINDING THAT THE EMPLOYEES THEREAT ARE OUTSIDE OF
THE BARGAINING UNIT OF THE DLSU'S RANK-AND-FILE EMPLOYEES. HE ALSO
ERRED IN HIS INTERPRETATION OF THE APPLICATION OF THE DOCTRINE;

(2) DENYING THE PETITIONER'S PROPOSAL FOR THE "LAST-IN FIRST-OUT" METHOD
OF LAY-OFF IN CASE OF RETRENCHMENT AND IN UPHOLDING THE ALLEGED
MANAGEMENT PREROGATIVE TO SELECT AND CHOOSE ITS EMPLOYEES
DISREGARDING THE BASIC TENETS OF SOCIAL JUSTICE AND EQUITY UPON WHICH
THIS PROPOSAL WAS FOUNDED;
 (3) FINDING THAT THE MULTISECTORAL COMMITTEE IN THE RESPONDENT
UNIVERSITY IS THE LEGITIMATE GROUP WHICH DETERMINES AND SCRUTINIZES
ANNUAL SALARY INCREASES AND FRINGE BENEFITS OF THE EMPLOYEES;

(4) HOLDING THAT THE 70% SHARE IN THE INCREMENTAL TUITION PROCEEDS IS
THE ONLY SOURCE OF SALARY INCREASES AND FRINGE BENEFITS OF THE
EMPLOYEES;

(5) FAILING/REFUSING/DISREGARDING TO CONSIDER THE RESPONDENT

UNIVERSITY'S FINANCIAL STATEMENTS FACTUALLY TO DETERMINE THE FORMER'S
CAPABILITY TO GRANT THE PROPOSED SALARY INCREASES OVER AND ABOVE THE
70% SHARE IN THE INCREMENTAL TUITION PROCEEDS AND IN GIVING WEIGHT AND
CONSIDERATION TO THE RESPONDENT UNIVERSITY'S PROPOSED BUDGET WHICH
IS MERELY AN ESTIMATE.

(6) FAILING TO EQUATE THE POSITION AND RESPONSIBILITIES OF THE UNION

PRESIDENT WITH THOSE OF THE PRESIDENT OF THE FACULTY ASSOCIATION
WHICH IS NOT EVEN A LEGITIMATE LABOR ORGANIZATION AND IN SPECULATING
THAT THE PRESIDENT OF THE FACULTY ASSOCIATION SUFFERS A
CORRESPONDING REDUCTION IN SALARY ON THE ACCOUNT OF THE REDUCTION
OF HIS WORKLOAD; IN FAILING TO APPRECIATE THE EQUAL RIGHTS OF THE
MEMBERS OF THE UNION AND OF THE FACULTY FOR PROFESSIONAL
ADVANCEMENT AS WELL AS THE DESIRABLE EFFECTS OF THE
INSTITUTIONALIZATION OF THE SPECIAL LEAVE AND WORKLOAD REDUCTION
BENEFITS. 41

The question which now confronts us is whether or not the voluntary arbitrator committed grave
abuse of discretion in rendering the assailed decision, particularly, in resolving the following issues:
(1) whether the computer operators assigned at the University's Computer Services Center and the
University's discipline officers may be considered as confidential employees and should therefore be
excluded from the bargaining unit which is composed of rank and file employees of the University,
and whether the employees of the College of St. Benilde should also be included in the same
bargaining unit; (2) whether a union shop clause should be included in the parties' collective
bargaining agreement, in addition to the existing maintenance of membership clause; (3) whether
the denial of the Union's proposed "last-in-first-out" method of laying-off employees, is proper; (4)
whether the ruling that on the basis of the University's proposed budget, the University can no longer
be required to grant a second round of wage increases for the school years 1991-92 and 1992-93
and charge the same to the incremental proceeds, is correct; (5) whether the denial of the Union's
proposals on the deloading of the union president, improved leave benefits and indefinite union
leave with pay, is proper; (6) whether the finding that the multi-sectoral committee in the University is
the legitimate group which determines and scrutinizes the annual salary increases and fringe
benefits of the employees of the University, is correct; and (7) whether the ruling that the 70% share
in the incremental tuition proceeds is the only source of salary increases and fringe benefits of the
employees, is proper.

Now, before proceeding to the discussion and resolution of the issues raised in the pending
petitions, certain preliminary matters call for disposition. As we reiterated in the case of Caltex
Refinery Employees Association (CREA) vs. Jose S. Brillantes, 42 the following are the well-settled
rules in a petition for certiorari involving labor cases. "First, the factual findings of quasi-judicial
agencies (such as the Department of Labor and Employment), when supported by substantial
evidence, are binding on this Court and entitled to great respect, considering the expertise of these
agencies in their respective fields. It is well-established that findings of these administrative agencies
are generally accorded not only respect but even finality. 43

Second, substantial evidence in labor cases is such amount of relevant evidence which a
reasonable mind will accept as adequate to justify a conclusion. 44

Third, in Flores vs. National Labor Relations Commission, 45 we explained the role and function of
Rule 65 as an extraordinary remedy:

It should be noted, in the first place, that the instant petition is a special civil action
for certiorari under Rule 65 of the Revised Rules of Court. An extraordinary remedy, its use is
available only and restrictively in truly exceptional cases those wherein the action of an
inferior court, board or officer performing judicial or quasi-judicial acts is challenged for being
wholly void on grounds of jurisdiction. The sole office of the writ of certiorari is the correction
of errors of jurisdiction including the commission of grave abuse of discretion amounting to
lack or excess of jurisdiction. It does not include correction of public respondent NLRC's
evaluation of the evidence and factual findings based thereon, which are generally accorded
not only great respect but even finality.

No question of jurisdiction whatsoever is being raised and/or pleaded in the case at bench.
Instead, what is being sought is a judicial re-evaluation of the adequacy or inadequacy of the
evidence on record, which is certainly beyond the province of the extraordinary writ
of certiorari. Such demand is impermissible for it would involve this Court in determining what
evidence is entitled to belief and the weight to be assigned it. As we have reiterated
countless times, judicial review by this Court in labor cases does not go so far as to evaluate
the sufficiency of the evidence upon which the proper labor officer or office based his or its
determination but is limited only to issues of jurisdiction or grave abuse of discretion
amounting to lack of jurisdiction. (emphasis supplied).

With the foregoing rules in mind, we shall now proceed to discuss the merit of these consolidated
petitions.

We affirm in part and modify in part.

On the first issue involving the classification of the computer operators assigned at the University's
Computer Services Center and discipline officers, the University argues that they are confidential
employees and that the Union has already recognized the confidential nature of their functions when
the latter agreed in the parties' 1986 collective bargaining agreement to exclude the said employees
from the bargaining unit of rank-and-file employees. As far as the said computer operators are
concerned, the University contends that ". . . the parties have already previously agreed to exclude
all positions in the University's Computer Services Center (CSC), which include the positions of
computer operators, from the collective bargaining unit. . . . . . . . " 46 The University further contends
that ". . . the nature of the work done by these Computer Operators is enough justification for their
exclusion from the coverage of the bargaining unit of the University's rank-and-file
employees. . . . . . . ." 47According to the University, the Computer Services Center, where these
computer operators work, ". . . processes data that are needed by management for strategic
planning and evaluation of systems. It also houses the University's confidential records and
information [e.g. student records, faculty records, faculty and staff payroll data, and budget allocation
and expenditure related data] which are contained in computer files and computer-generated
reports. . . . . . . . Moreover, the Computer Operators are in fact the repository of the University's
confidential information and data, including those involving and/or pertinent to labor relations. . . . . . .
." 48
As to the discipline officers, the University maintains that " . . . they are likewise excluded from the
bargaining unit of the rank-and-file employees under the parties' 1986 CBA. The Discipline Officers
are clearly alter egos of management as they perform tasks which are inherent in management [e.g.
enforce discipline, act as peace officers, secure peace and safety of the students inside the campus,
conduct investigations on violations of University regulations, or of existing criminal laws, committed
within the University or by University employees] . . . . . . . " 49 The University also alleges that "the
Discipline Officers are privy to highly confidential information ordinarily accessible only to
management." 50

With regard to the employees of the College of St. Benilde, the Union, supported by the Solicitor
General at this point, asserts that the veil of corporate fiction should be pierced, thus, according to
the Union, the University and the College of St. Benilde should be considered as only one entity
because the latter is but a mere integral part of the University. 51

The University's arguments on the first issue fail to impress us. The Court agrees with the Solicitor
General that the express exclusion of the computer operators and discipline officers from the
bargaining unit of rank-and-file employees in the 1986 collective bargaining agreement does not bar
any re-negotiation for the future inclusion of the said employees in the bargaining unit. During the
freedom period, the parties may not only renew the existing collective bargaining agreement but may
also propose and discuss modifications or amendments thereto. With regard to the alleged
confidential nature of the said employees' functions, after a careful consideration of the pleadings
filed before this Court, we rule that the said computer operators and discipline officers are not
confidential employees. As carefully examined by the Solicitor General, the service record of a
computer operator reveals that his duties are basically clerical and non-confidential in nature. 52 As to
the discipline officers, we agree with the voluntary arbitrator that based on the nature of their duties,
they are not confidential employees and should therefore be included in the bargaining unit of rank-
and-file employees.

The Court also affirms the findings of the voluntary arbitrator that the employees of the College of St.
Benilde should be excluded from the bargaining unit of the rank-and-file employees of Dela Salle
University, because the two educational institutions have their own separate juridical personality and
no sufficient evidence was shown to justify the piercing of the veil of corporate fiction. 53

On the second issue involving the inclusion of a union shop clause in addition to the existing
maintenance of membership clause in the collective bargaining agreement, the University avers that
". . . it is in the spirit of the exercise of the constitutional right to self-organization that every individual
should be able to freely choose whether to become a member of the Union or not. The right to join a
labor organization should carry with it the corollary right not to join the same. This position of the
University is but in due recognition of the individual's free will and capability for judgment." 54 The
University assails the Union's demand for a union shop clause as ". . . definitely unjust and amounts
to oppression. Moreover, such a demand is repugnant to democratic principles and the
constitutionally guaranteed freedom of individuals to join or not to join an association as well as their
right to security of tenure, particularly, on the part of present employees." 55

The Union, on the other hand, counters that the Labor Code, as amended, recognizes the validity of
a union shop agreement in Article 248 thereof which reads:

Art. 248. Unfair labor practices of employers.

xxx xxx xxx

 (e) To discriminate in regard to hire or tenure of employment or any term or condition
of employment in order to encourage or discourage membership in any labor
organization. Nothing in this Code or in any other law shall prevent the parties from
requiring membership in a recognized collective bargaining agent as a condition for
employment, except of those employees who are already members of another union
at the time of the signing of the collective bargaining agreement. . . . . . . ." (emphasis
supplied)

We affirm the ruling of the voluntary arbitrator for the inclusion of a union shop provision in
addition to the existing maintenance of membership clause in the collective bargaining
agreement. As the Solicitor General asserted in his consolidated Comment, the University's
reliance on the case of Victoriano vs. Elizalde Rope Workers' Union 56 is clearly misplaced. In
that case, we ruled that ". . . the right to join a union includes the right to abstain from joining
any union. . . . . . . . The right to refrain from joining labor organizations recognized by
Section 3 of the Industrial Peace Act is, however, limited. The legal protection granted to
such right to refrain from joining is withdrawn by operation of law, where a labor union and an
employer have agreed on a closed shop, by virtue of which the employer may employ only
members of the collective bargaining union, and the employees must continue to be
members of the union for the duration of the contract in order to keep their jobs. . . . . . . ." 57

On the third issue regarding the Union's proposal for the use of the "last-in-first-out" method
in case of lay-off, termination due to retrenchment and transfer of employees, the Union
relies on social justice and equity to support its proposition, and submits that the University's
prerogative to select and/or choose the employees it will hire is limited, either by law or
agreement, especially where the exercise of this prerogative might result in the loss of
employment. 58 The Union further insists that its proposal is ". . . in keeping with the avowed
State policy '(q) To ensure the participation of workers in decision and policy-making
processes affecting their rights, duties and welfare' (Art. 211, Labor Code, as amended)." 59

On the other hand, the University asserts its management prerogative and counters that
"[w]hile it is recognized that this right of employees and workers to 'participate in policy and
decision-making processes affecting their rights and benefits as may be provided by law' has
been enshrined in the Constitution (Article III, [should be Article XIII], Section 3, par. 2), said
participation, however, does not automatically entitle the Union to dictate as to how an
employer should choose the employees to be affected by a retrenchment program. The
employer still retains the prerogative to determine the reasonable basis for selecting such
employees." 60

We agree with the voluntary arbitrator that as an exercise of management prerogative, the
University has the right to adopt valid and equitable grounds as basis for terminating or
transferring employees. As we ruled in the case of Autobus Workers' Union (AWU) and
Ricardo Escanlar vs. National Labor Relations Commission, 61 "[a] valid exercise of
management prerogative is one which, among others, covers: work assignment, working
methods, time, supervision of workers, transfer of employees, work supervision, and the
discipline, dismissal and recall of workers. Except as provided for, or limited by special laws,
an employer is free to regulate, according to his own discretion and judgment, all aspects of
employment." (emphasis supplied)

On the fourth issue involving the voluntary arbitrator's ruling that on the basis of the
University's proposed budget, the University can no longer be required to grant a second
round of wage increases for the school years 1991-92 and 1992-93 and charge the same to
the incremental proceeds, we find that the voluntary arbitrator committed grave abuse of
discretion amounting to lack or excess of jurisdiction. As we ruled in the case of Caltex
Refinery Employees Association (CREA) vs. Jose S. Brillantes, 62 ". . . . . . . [w]e believe that
the standard proof of a company's financial standing is its financial statements duly audited
by independent and credible external auditors." 63 Financial statements audited by
independent external auditors constitute the normal method of proof of profit and loss
performance of a company. 64 The financial capability of a company cannot be based on its
proposed budget because a proposed budget does not reflect the true financial condition of
a company, unlike audited financial statements, and more importantly, the use of a proposed
budget as proof of a company's financial condition would be susceptible to abuse by
scheming employers who might be merely feigning dire financial condition in their business
ventures in order to avoid granting salary increases and fringe benefits to their employees.

On the fifth issue involving the Union's proposals on the deloading of the union president,
improved leave benefits and indefinite union leave with pay, we agree with the voluntary
arbitrator's rejection of the said demands, there being no justifiable reason for the granting of
the same.

On the sixth issue regarding the finding that the multi-sectoral committee in the University is
the legitimate group which determines and scrutinizes the annual salary increases and fringe
benefits of the employees of the University, the Court finds that the voluntary arbitrator did
not gravely abuse his discretion on this matter. From our reading of the assailed decision, it
appears that during the parties' negotiations for a new collective bargaining agreement, the
Union demanded for a 25% and 40% salary increase for the second and third years,
respectively, of the collective bargaining agreement. 65 The University's counter-proposal was
for a 10% increase for the third year. 66 After the meeting of the multi-sectoral committee on
budget, which is composed of students, parents, faculty, administration and union, the
University granted across-the-board salary increases of 11.3% and 19% for the second and
third years, respectively. 67 While the voluntary arbitrator found that the said committee ". . .
decided to grant the said increases based on the University's viability which were exclusively
sourced from the tuition fees. . . . . . . .," no finding was made as to the basis of the
committee's decision. Be that as it may, assuming for the sake of argument that the said
committee is the group responsible for determining wage increases and fringe benefits, as
ruled by the voluntary arbitrator, the committee's determination must still be based on duly
audited financial statements following our ruling on the fourth issue.1wphi1

On the seventh and last issue involving the ruling that the 70% share in the incremental
tuition proceeds is the only source of salary increases and fringe benefits of the employees,
the Court deems that any determination of this alleged error is unnecessary and irrelevant, in
view of our rulings on the fourth and preceding issues and there being no evidence
presented before the voluntary arbitrator that the University held incremental tuition fee
proceeds from which any wage increase or fringe benefit may be satisfied.

WHEREFORE, premises considered, the petitions in these consolidated cases, G.R. No.
109002 and G.R. No. 110072 are partially GRANTED. The assailed decision dated January
19, 1993 of voluntary arbitrator Buenaventura Magsalin is hereby AFFIRMED with the
modification that the issue on salary increases for the second and third years of the
collective bargaining agreement be REMANDED to the voluntary arbitrator for definite
resolution within one month from the finality of this Decision, on the basis of the externally
audited financial statements of the University already submitted by the Union before the
voluntary arbitrator and forming part of the records.1wphi1.nt

SO ORDERED.
13. G.R. No. 183317 December 21, 2009

MARIWASA SIAM CERAMICS, INC., Petitioner,

vs.
THE SECRETARY OF THE DEPARTMENT OF LABOR AND EMPLOYMENT, CHIEF OF THE
BUREAU OF LABOR RELATIONS, DEPARTMENT OF LABOR AND EMPLOYMENT, REGIONAL
DIRECTOR OF DOLE REGIONAL OFFICE NUMBER IV-A & SAMAHAN NG MGA
MANGGAGAWA SA MARIWASA SIAM CERAMICS, INC. (SMMSC-
INDEPENDENT), Respondents.

DECISION

NACHURA, J.:

This is a petition for review on certiorari1 under Rule 45 of the Rules of Court, seeking to annul the
Decision2dated December 20, 2007 and the Resolution3 dated June 6, 2008 of the Court of Appeals
in CA-G.R. SP No. 98332.

The antecedent facts are as follows

On May 4, 2005, respondent Samahan Ng Mga Manggagawa Sa Mariwasa Siam Ceramics, Inc.
(SMMSC-Independent) was issued a Certificate of Registration 4 as a legitimate labor organization by
the Department of Labor and Employment (DOLE), Region IV-A.

On June 14, 2005, petitioner Mariwasa Siam Ceramics, Inc. filed a Petition for Cancellation of Union
Registration against respondent, claiming that the latter violated Article 234 5 of the Labor Code for
not complying with the 20% requirement, and that it committed massive fraud and misrepresentation
in violation of Article 2396 of the same code. The case was docketed as Case No. RO400-0506-AU-
004.

On August 26, 2005, the Regional Director of DOLE IV-A issued an Order granting the petition,
revoking the registration of respondent, and delisting it from the roster of active labor unions.

Aggrieved, respondent appealed to the Bureau of Labor Relations (BLR).

In a Decision7 dated June 14, 2006, the BLR granted respondents appeal and disposed as follows

WHEREFORE, premises considered, the appeal by Samahan ng Manggagawa sa Mariwasa Siam

Ceramics, Inc. (SMMSC-Independent) is hereby GRANTED, and the Decision dated 26 August 2005
by DOLE-Region-IV-A Director Maximo B. Lim is hereby REVERSED and SET ASIDE. Samahan ng
Manggagawa sa Mariwasa Siam Ceramics, Inc. (SMMSC-Independent), under Registration
Certificate No. RO400-200505-UR-002, remains in the roster of legitimate labor organizations.

SO DECIDED.8
Petitioner filed a Motion for Reconsideration but the BLR denied it in a Resolution 9 dated February 2,
2007.

Petitioner sought recourse with the Court of Appeals (CA) through a Petition for Certiorari; but the
CA denied the petition for lack of merit.

Petitioners motion for reconsideration of the CA Decision was likewise denied, hence, this petition
based on the following grounds

Review of the Factual Findings of the Bureau of Labor Relations, adopted and confirmed by the
Honorable Court of Appeals is warranted[;]

The Honorable Court of Appeals seriously erred in ruling that the affidavits of recantation cannot be
given credence[;]

The Honorable Court of Appeals seriously erred in ruling that private respondent union complied with
the 20% membership requirement[; and]

The Honorable Court of Appeals seriously erred when it ruled that private respondent union did not
commit misrepresentation, fraud or false statement.10

The petition should be denied.

The petitioner insists that respondent failed to comply with the 20% union membership requirement
for its registration as a legitimate labor organization because of the disaffiliation from the total
number of union members of 102 employees who executed affidavits recanting their union
membership.

It is, thus, imperative that we peruse the affidavits appearing to have been executed by these
affiants.

The affidavits uniformly state

Ako, _____________, Pilipino, may sapat na gulang, regular na empleyado bilang Rank & File sa
Mariwasa Siam Ceramics, Inc., Bo. San Antonio, Sto. Tomas, Batangas, matapos na makapanumpa
ng naaayon sa batas ay malaya at kusang loob na nagsasaad ng mga sumusunod:

1. Ako ay napilitan at nilinlang sa pagsapi sa Samahan ng mga Manggagawa sa Mariwasa

Siam Ceramics, Inc. o SMMSC-Independent sa kabila ng aking pag-aalinlangan[;]

2. Aking lubos na pinagsisihan ang aking pagpirma sa sipi ng samahan, at handa ako[ng]
tumalikod sa anumang kasulatan na aking nalagdaan sa kadahilanan na hindi angkop sa
aking pananaw ang mga mungkahi o adhikain ng samahan.

SA KATUNAYAN NANG LAHAT, ako ay lumagda ng aking pangalan ngayong ika-____ ng ______,
2005 dito sa Lalawigan ng Batangas, Bayan ng Sto. Tomas.
____________________
Nagsasalaysay

Evidently, these affidavits were written and prepared in advance, and the pro forma affidavits were
ready to be filled out with the employees names and signatures.

The first common allegation in the affidavits is a declaration that, in spite of his hesitation, the affiant
was forced and deceived into joining the respondent union. It is worthy to note, however, that the
affidavit does not mention the identity of the people who allegedly forced and deceived the affiant
into joining the union, much less the circumstances that constituted such force and deceit. Indeed,
not only was this allegation couched in very general terms and sweeping in nature, but more
importantly, it was not supported by any evidence whatsoever.

The second allegation ostensibly bares the affiants regret for joining respondent union and
expresses the desire to abandon or renege from whatever agreement he may have signed regarding
his membership with respondent.

Simply put, through these affidavits, it is made to appear that the affiants recanted their support of
respondents application for registration.

In appreciating affidavits of recantation such as these, our ruling in La Suerte Cigar and Cigarette
Factory v. Director of the Bureau of Labor Relations11 is enlightening, viz.

On the second issuewhether or not the withdrawal of 31 union members from NATU affected the
petition for certification election insofar as the 30% requirement is concerned, We reserve the Order
of the respondent Director of the Bureau of Labor Relations, it appearing undisputably that the 31
union members had withdrawn their support to the petition before the filing of said petition. It would
be otherwise if the withdrawal was made after the filing of the petition for it would then be presumed
that the withdrawal was not free and voluntary. The presumption would arise that the withdrawal was
procured through duress, coercion or for valuable consideration. In other words, the distinction must
be that withdrawals made before the filing of the petition are presumed voluntary unless there is
convincing proof to the contrary, whereas withdrawals made after the filing of the petition are
deemed involuntary.

The reason for such distinction is that if the withdrawal or retraction is made before the filing of the
petition, the names of employees supporting the petition are supposed to be held secret to the
opposite party. Logically, any such withdrawal or retraction shows voluntariness in the absence of
proof to the contrary. Moreover, it becomes apparent that such employees had not given consent to
the filing of the petition, hence the subscription requirement has not been met.

When the withdrawal or retraction is made after the petition is filed, the employees who are
supporting the petition become known to the opposite party since their names are attached to the
petition at the time of filing. Therefore, it would not be unexpected that the opposite party would use
foul means for the subject employees to withdraw their support. 12
In the instant case, the affidavits of recantation were executed after the identities of the union
members became public, i.e., after the union filed a petition for certification election on May 23,
2005, since the names of the members were attached to the petition. The purported withdrawal of
support for the registration of the union was made after the documents were submitted to the DOLE,
Region IV-A. The logical conclusion, therefore, following jurisprudence, is that the employees were
not totally free from the employers pressure, and so the voluntariness of the employees execution
of the affidavits becomes suspect.

It is likewise notable that the first batch of 25 pro forma affidavits shows that the affidavits were
executed by the individual affiants on different dates from May 26, 2005 until June 3, 2005, but they
were all sworn before a notary public on June 8, 2005.

There was also a second set of standardized affidavits executed on different dates from May 26,
2005 until July 6, 2005. While these 77 affidavits were notarized on different dates, 56 of these were
notarized on June 8, 2005, the very same date when the first set of 25 was notarized.

Considering that the first set of 25 affidavits was submitted to the DOLE on June 14, 2005, it is
surprising why petitioner was able to submit the second set of affidavits only on July 12, 2005.

Accordingly, we cannot give full credence to these affidavits, which were executed under suspicious
circumstances, and which contain allegations unsupported by evidence. At best, these affidavits are
self-serving. They possess no probative value.

A retraction does not necessarily negate an earlier declaration. For this reason, retractions are
looked upon with disfavor and do not automatically exclude the original statement or declaration
based solely on the recantation. It is imperative that a determination be first made as to which
between the original and the new statements should be given weight or accorded belief, applying the
general rules on evidence. In this case, inasmuch as they remain bare allegations, the purported
recantations should not be upheld.13

Nevertheless, even assuming the veracity of the affidavits of recantation, the legitimacy of
respondent as a labor organization must be affirmed. While it is true that the withdrawal of support
may be considered as a resignation from the union, the fact remains that at the time of the unions
application for registration, the affiants were members of respondent and they comprised more than
the required 20% membership for purposes of registration as a labor union. Article 234 of the Labor
Code merely requires a 20% minimum membership during the application for union registration. It
does not mandate that a union must maintain the 20% minimum membership requirement all
throughout its existence.14
1avvphi1

Respondent asserts that it had a total of 173 union members at the time it applied for registration.
Two names were repeated in respondents list and had to be deducted, but the total would still be
171 union members. Further, out of the four names alleged to be no longer connected with
petitioner, only two names should be deleted from the list since Diana Motilla and T.W. Amutan
resigned from petitioner only on May 10, 2005 and May 17, 2005, respectively, or after respondents
registration had already been granted. Thus, the total union membership at the time of registration
was 169. Since the total number of rank-and-file employees at that time was 528, 169 employees
would be equivalent to 32% of the total rank-and-file workers complement, still very much above the
minimum required by law.

For the purpose of de-certifying a union such as respondent, it must be shown that there was
misrepresentation, false statement or fraud in connection with the adoption or ratification of the
constitution and by-laws or amendments thereto; the minutes of ratification; or, in connection with the
election of officers, the minutes of the election of officers, the list of voters, or failure to submit these
documents together with the list of the newly elected-appointed officers and their postal addresses to
the BLR.15

The bare fact that two signatures appeared twice on the list of those who participated in the
organizational meeting would not, to our mind, provide a valid reason to cancel respondents
certificate of registration. The cancellation of a unions registration doubtless has an impairing
dimension on the right of labor to self-organization. For fraud and misrepresentation to be grounds
for cancellation of union registration under the Labor Code, the nature of the fraud and
misrepresentation must be grave and compelling enough to vitiate the consent of a majority of union
members.

In this case, we agree with the BLR and the CA that respondent could not have possibly committed
misrepresentation, fraud, or false statements. The alleged failure of respondent to indicate with
mathematical precision the total number of employees in the bargaining unit is of no moment,
especially as it was able to comply with the 20% minimum membership requirement. Even if the total
number of rank-and-file employees of petitioner is 528, while respondent declared that it should only
be 455, it still cannot be denied that the latter would have more than complied with the registration
requirement.

WHEREFORE, the petition is DENIED. The assailed December 20, 2007 Decision and the June 6,
2008 Resolution of the Court of Appeals are AFFIRMED. Costs against petitioner.

SO ORDERED.

14. G.R. No. 131235 November 16, 1999

UST FACULTY UNION (USTFU), GIL Y. GAMILLA, CORAZON QUI, NORMA CALAGUAS, IRMA
POTENCIANO, LUZ DE GUZMAN, REMEDIOS GARCIA, RENE ARNEJO, EDITHA OCAMPO,
CESAR REYES, CELSO NIERRA, GLICERIA BALDRES, MA. LOURDES MEDINA, HIDELITA
GABO, MAFEL YSRAEL, LAURA ABARA, NATIVIDAD SANTOS, FERDINAND LIMOS,
CARMELITA ESPINA, ZENAIDA FAMORCA, PHILIP AGUINALDO, BENEDICTA ALAVA and
LEONCIO CASAL, petitioners,
vs.
Dir. BENEDICTO ERNESTO R. BITONIO JR. of the Bureau of Labor Relations, Med-Arbiter
TOMAS F. FALCONITIN of The National Capital Region, Department of Labor and Employment
(DOLE), EDUARDO J. MARIO JR., MA. MELVYN ALAMIS, NORMA COLLANTES, URBANO
ALABAGIA, RONALDO ASUNCION, ZENAIDA BURGOS, ANTHONY CURA, FULVIO M.
GUERRERO, MYRNA HILARIO, TERESITA MEER, FERNANDO PEDROSA, NILDA
REDOBLADO, RENE SISON, EVELYN TIROL and ROSIE ALCANTARA, respondents.

PANGANIBAN, J.:

There is a right way to do the right thing at the right time for the right reasons, 1 and in the present
case, in the right forum by the right parties. While grievances against union leaders constitute legitimate
complaints deserving appropriate redress, action thereon should be made in the proper forum at the
proper time and after observance of proper procedures. Similarly, the election of union officers should be
conducted in accordance with the provisions of the union's constitution and bylaws, as well as the
Philippine Constitution and the Labor Code. Specifically, while all legitimate faculty members of the
University of Santo Tomas (UST) belonging to a collective bargaining unit may take part in a duly
convened certification election, only bona fide members of the UST Faculty Union (USTFU) may
participate and vote in a legally called election for union officers. Mob hysteria, however well-intentioned,
is not a substitute for the rule of law.

The Case

The Petition for Certiorari before us assails the August 15, 1997 Resolution 2 of Director Benedicto
Ernesto R. Bitonio Jr. of the Bureau of Labor Relations (BLR) in BLR Case No. A-8-49-97, which affirmed
the February 11, 1997 Decision of Med-Arbiter Tomas F. Falconitin. The med-arbiters Decision disposed
as follows:

WHEREFORE, premises considered, judgment is hereby rendered declaring the

election of USTFU officers conducted on October 4, 1996 and its election results as
null and void ab initio.

Accordingly, respondents Gil Gamilla, et al are hereby ordered to cease and desist
from acting and performing the duties and functions of the legitimate officers of [the]
University of Santo Tomas Faculty Union (USTFU) pursuant to [the] union's
constitution and by-laws (CBL).

The Temporary Restraining Order (TRO) issued by this Office on December 11, 1996
in connection with the instant petition, is hereby made and declared permanent. 3

Likewise challenged is the October 30, 1997 Resolution 4 of Director Bitonio, which denied petitioners'
Motion for Reconsideration.

The Facts

The factual antecedents of the case are summarized in the assailed Resolution as follows:

Petitioners-appellees [herein Private Respondents] Marino, et. al. (appellees) are

duly elected officers of the UST Faculty Union (USTFU). The union has a subsisting
five-year Collective Bargaining Agreement with its employer, the University of Santo
Tomas (UST). The CBA was registered with the Industrial Relations Division, DOLE-
NCR, on 20 February 1995. It is set to expire on 31 May 1998.

On 21 September 1996, appellee Collantes, in her capacity as Secretary General of

USTFU, posted a notice addressed to all USTFU members announcing a general
assembly to be held on 05 October 1996. Among others, the general assembly was
called to elect USTFU's next set of officers. Through the notice, the members were
also informed of the constitution of a Committee on Elections (COMELEC) to
oversee the elections. (Annex "B", petition)

On 01 October 1996, some of herein appellants filed a separate petition with the
Med-Arbiter, DOLE-NCR, directed against herein appellees and the members of the
COMELEC. Docketed as Case No. NCR-OD-M-9610-001, the petition alleged that
the COMELEC was not constituted in accordance with USTFU's constitution and by-
laws (CBL) and that no rules had been issued to govern the conduct of the 05
October 1996 election.

On 02 October 1996, the secretary general of UST, upon the request of the various
UST faculty club presidents (See paragraph VI, Respondents' Comment and Motion
to Dismiss), issued notices allowing all faculty members to hold a convocation on 04
October 1996 (See Annex "C" Petition; Annexes "4" to "10", Appeal). Denominated
as [a] general faculty assembly, the convocation was supposed to discuss the "state
of the unratified UST-USTFU CBA" and "status and election of USTFU officers"
(Annex "11", Appeal)

On 04 October 1996, the med-arbiter in Case No. NCR-OD-M-9610-001 issued a

temporary restraining order against herein appellees enjoining them from conducting
the election scheduled on 05 October 1996.

Also on 04 October 1996, and as earlier announced by the UST secretary general,
the general faculty assembly was held as scheduled. The general assembly was
attended by members of the USTFU and, as admitted by the appellants, also by
"non-USTFU members [who] are members in good standing of the UST Academic
Community Collective Bargaining Unit" (See paragraph XI, Respondents' Comment
and Motion to Dismiss). On this occasion, appellants were elected as USTFU's new
set of officers by acclamation and clapping of hands (See paragraphs 40 to 50,
Annex "12", Appeal).

The election of the appellants came about upon a motion of one Atty. Lopez,
admittedly not a member of USTFU, that the USTFU CBL and "the rules of the
election be suspended and that the election be held [on] that day" (See paragraph
39, Idem.)

On 11 October 1996, appellees filed the instant petition seeking injunctive reliefs and
the nullification of the results of the 04 October 1996 election. Appellees alleged that
the holding of the same violated the temporary restraining order issued in Case No.
NCR-OD-M-9610-001. Accusing appellants of usurpation, appellees characterized
the election as spurious for being violative of USTFU's CBL, specifically because the
general assembly resulting in the election of appellants was not called by the Board
of Officers of the USTFU; there was no compliance with the ten-day notice rule
required by Section 1, Article VIII of the CBL; the supposed elections were conducted
without a COMELEC being constituted by the Board of Officers in accordance with
Section 1, Article IX of the CBL; the elections were not by secret balloting as required
by Section 1, Article V and Section 6, Article IX of the CBL, and, the general
assembly was convened by faculty members some of whom were not members of
USTFU, so much so that non-USTFU members were allowed to vote in violation of
Section 1, Article V of the CBL.

On 24 October 1996, appellees filed another urgent ex-parte motion for a temporary
restraining order, this time alleging that appellants had served the former a notice to
vacate the union office. For their part, appellants moved to dismiss the original
petition and the subsequent motion on jurisdictional grounds. Both the petition and
the motion were captioned to be for "Prohibition, Injunction with Prayer for
Preliminary Injunction and Temporary Restraining Order." According to the
appellants, the med-arbiter has no jurisdiction over petitions for prohibition, "including
the ancillary remedies of restraining order and/or preliminary injunction, which are
merely incidental to the main petition for PROHIBITION" (Paragraph XVIII3,
Respondents' Comment and Motion to Dismiss). Appellants also averred that they
now constituted the new set of union officers having been elected in accordance with
law after the term of office of appellees had expired. They further maintained that
appellees' scheduling of the 5 October 1996 elections was illegal because no rules
and regulations governing the elections were promulgated as required by USTFU's
CBL and that one of the members of the COMELEC was not a registered member of
USTFU. Appellants likewise noted that the elections called by the appellees should
have been postponed to allow the promulgation of rules and regulations and to
"insure a free, clean, honest and orderly elections and to afford at the same time the
greater majority of the general membership to participate" (See paragraph V, Idem).
Finally, appellants contended that the holding of the general faculty assembly on 04
October 1996 was under the control of the Council of College/Faculty Club
Presidents in cooperation with the USTFU Reformist Alliance and that they received
the Temporary Restraining Order issued in Case No. NCR-OD-M-9610-001 only on
07 October 1996 and were not aware of the same on 04 October 1996.

On 03 December 1996, appellants and UST allegedly entered into another CBA
covering the period from 01 June 1996 to 31 May 2001 (Annex 11, appellants'
Rejoinder to the Reply and Opposition).

Consequently, appellees again moved for the issuance of a temporary restraining

order to prevent appellants from making further representations that [they] had
entered into a new agreement with UST. Appellees also reiterated their earlier stand
that appellants were usurping the former's duties and functions and should be
stopped from continuing such acts.
 On 11 December 1996, over appellants' insistence that the issue of jurisdiction
should first be resolved, the med-arbiter issued a temporary restraining order
directing the respondents to cease and desist from performing any and all acts
pertaining to the duties and functions of the officers and directors of USTFU.

In the meantime, appellants claimed that the new CBA was purportedly ratified by an
overwhelming majority of UST's academic community on 12 December 1996
(Annexes 1 to 10, Idem). For this reason, appellants moved for the dismissal of what
it denominated as appellees' petition for prohibition on the ground that this had
become moot and academic. 5

Petitioners appealed the med-arbiter's Decision to the labor secretary, 6 who transmitted the records of
the case to the Bureau of Labor Relations which, under Department Order No. 9, was authorized to
resolve appeals of intra-union cases, consistent with the last paragraph of Article 241 of the Labor Code. 7

The Assailed Ruling

Agreeing with the med-arbiter that the USTFU officers' purported election held on October 4, 1994
was void for having been conducted in violation of the union's Constitution and Bylaws (CBL), Public
Respondent Bitonio rejected petitioners' contention that it was a legitimate exercise of their right to
self-organization. He ruled that the CBL, which constituted the covenant between the union and its
members, could not be suspended during the October 4, 1996 general assembly of all faculty
members, since that assembly had not been convened or authorized by the USTFU.

Director Bitonio likewise held that the October 4, 1996 election could not be legitimized by the
recognition of the newly "elected" set of officers by UST or by the alleged ratification of the new CBA
by the general membership of the USTFU. Ruled Respondent Bitonio:

This submission is flawed. The issue at hand is not collective bargaining

representation but union leadership, a matter that should concern only the members
of USTFU. As pointed out by the appellees, the privilege of determining who the
union officers will be belongs exclusively to the members of the union. Said privilege
is exercised in an election proceeding in accordance with the union's CBL and
applicable law.

To accept appellants' claim to legitimacy on the foregoing grounds is to invest in

appellants the position, duties, responsibilities, rights and privileges of USTFU
officers without the benefit of a lawful electoral exercise as defined in USTFU's CBL
and Article 241(c) of the Labor Code. Not to mention the fact that labor laws prohibit
the employer from interfering with the employees in the latter' exercise of their right
to self-organization. To allow appellants to become USTFU officers on the strength of
management's recognition of them is to concede to the employer the power of
determining who should be USTFU's leaders. This is a clear case of interference in
the exercise by USTFU members of their right to self-organization. 8

Hence, this Petition. 9

 The Issues

The main issue in this case is whether the public respondent committed grave abuse of discretion in
refusing to recognize the officers "elected" during the October 4, 1996 general assembly.
Specifically, petitioners in their Memorandum urge the Court to resolve the following questions: 10

(1) Whether the Collective Bargaining Unit of all the faculty members in that General
Faculty Assembly had the right in that General Faculty Assembly to suspend the
provisions of the Constitution and By-Laws of the USTFU regarding the elections of
officers of the union[.]

(2) Whether the suspension of the provisions of the Constitution and By-Laws of the
USTFU in that General Faculty Assembly is valid pursuant to the constitutional right
of the Collective Bargaining Unit to engage in "peaceful concerted activities" for the
purpose of ousting the corrupt regime of the private respondents[.]

(3) Whether the overwhelming ratification of the Collective Bargaining Agreement

executed by the petitioners in behalf of the USTFU with the University of Santo
Tomas has rendered moot and academic the issue as to the validity of the
suspension of the Constitution and By-Laws and the elections of October 4, 1996 in
the General Faculty Assembly[.]

The Courts Ruling

The petition is not meritorious. Petitioners fail to convince this Court that Director Bitonio gravely
abused his discretion in affirming the med-arbiter and in refusing to recognize the binding effect of
the October 4, 1996 general assembly called by the UST administration.

First Issue:

Right to Self-Organization

and Union Membership

At the outset, the Court stresses that National Federation of Labor (NFL) v. Laguesma 11 has held that
challenges against rulings of the labor secretary and those acting on his behalf, like the director of labor
relations, shall be acted upon by the Court of Appeals, which has concurrent jurisdiction with this Court
over petitions for certiorari. However, inasmuch as the memoranda in the instant case have been filed
prior to the promulgation and finality of our Decision in NFL, we deem it proper to resolve the present
controversy directly, instead of remanding it to the Court of Appeals. Having disposed of the foregoing
procedural matter, we now tackle the issues in the present case seriatim.

Self-organization is a fundamental right guaranteed by the Philippine Constitution and the Labor
Code. Employees have the right to form, join or assist labor organizations for the purpose of
collective bargaining or for their mutual aid and protection. 12 Whether employed for a definite period or
not, any employee shall be considered as such, beginning on his first day of service, for purposes of
membership in a labor union. 13
Corollary to this right is the prerogative not to join, affiliate with or assist a labor union. 14 Therefore, to
become a union member, an employee must, as a rule, not only signify the intent to become one, but also
take some positive steps to realize that intent. The procedure for union membership is usually embodied
in the union's constitution and bylaws. 15 An employee who becomes a union member acquires the rights
and the concomitant obligations that go with this new status and becomes bound by the union's rules and
regulations.

When a man joins a labor union (or almost any other democratically controlled
group), necessarily a portion of his individual freedom is surrendered for the benefit
of all members. He accepts the will of the majority of the members in order that he
may derive the advantages to be gained from the concerted action of all. Just as the
enactments of the legislature bind all of us, to the constitution and by-laws of the
union (unless contrary to good morals or public policy, or otherwise illegal), which are
duly enacted through democratic processes, bind all of the members. If a member of
a union dislikes the provisions of the by-laws, he may seek to have them amended or
may withdraw from the union; otherwise, he must abide by them. It is not the function
of courts to decide the wisdom or propriety of legitimate by-laws of a trade union.

On joining a labor union, the constitution and by-laws become a part of the member's
contract of membership under which he agrees to become bound by the constitution
and governing rules of the union so far as it is not inconsistent with controlling
principles of law. The constitution and by-laws of an unincorporated trade union
express the terms of a contract, which define the privileges and rights secured to,
and duties assumed by, those who have become members. The agreement of a
member on joining a union to abide by its laws and comply with the will of the lawfully
constituted majority does not require a member to submit to the determination of the
union any question involving his personal rights. 16

Petitioners claim that the numerous anomalies allegedly committed by the private respondents
during the latter's incumbency impelled the October 4, 1996 election of the new set of USTFU
officers. They assert that such exercise was pursuant to their right to self-organization.

Petitioners' frustration over the performance of private respondents, as well as their fears of a
"fraudulent" election to be held under the latter's supervision, could not justify the method they chose
to impose their will on the union. Director Bitonio aptly elucidated: 17

The constitutional right to self-organization is better understood in the context of ILO

Convention No. 87 (Freedom of Association and Protection of Right to Organize), to
which the Philippines is signatory. Article 3 of the Convention provides that workers'
organizations shall have the right to draw up their constitution and rules and to elect
their representatives in full freedom, free from any interference from public
authorities. The freedom conferred by the provision is expansive; the responsibility
imposed on union members to respect the constitution and rules they themselves
draw up equally so. The point to be stressed is that the union's CBL is the
fundamental law that governs the relationship between and among the members of
the union. It is where the rights, duties and obligations, powers, functions and
 authority of the officers as well as the members are defined. It is the organic law that
determines the validity of acts done by any officer or member of the union. Without
respect for the CBL, a union as a democratic institution degenerates into nothing
more than a group of individuals governed by mob rule.

Union Election vs.

Certification Election

A union election is held pursuant to the union's constitution and bylaws, and the right to vote in it is
enjoyed only by union members. A union election should be distinguished from a certification
election, which is the process of determining, through secret ballot, the sole and exclusive
bargaining agent of the employees in the appropriate bargaining unit, for purposes of collective
bargaining. 18 Specifically, the purpose of a certification election is to ascertain whether or not a majority
of the employees wish to be represented by a labor organization and, in the affirmative case,
by which particular labor organization. 19

In a certification election, all employees belonging to the appropriate bargaining unit can
vote. 20 Therefore, a union member who likewise belongs to the appropriate bargaining unit is entitled to
vote in said election. However, the reverse is not always true; an employee belonging to the appropriate
bargaining unit but who is not a member of the union cannot vote in the union election, unless otherwise
authorized by the constitution and bylaws of the union. Verily, union affairs and elections cannot be
decided in a non-union activity.

In both elections, there are procedures to be followed. Thus, the October 4, 1996 election cannot
properly be called a union election, because the procedure laid down in the USTFU's CBL for the
election of officers was not followed. It could not have been a certification election either, because
representation was not the issue, and the proper procedure for such election was not followed. The
participation of non-union members in the election aggravated its irregularity.

Second Issue:

USTFU's Constitution and

By Laws Violated

The importance of a union's constitution and bylaws cannot be overemphasized. They embody a
covenant between a union and its members and constitute the fundamental law governing the
members' rights and obligations. 21 As such, the union's constitution and bylaws should be upheld, as
long as they are not contrary to law, good morals or public policy.

We agree with the finding of Director Bitonio and Med-Arbiter Falconitin that the October 4, 1996
election was tainted with irregularities because of the following reasons.

First, the October 4, 1996 assembly was not called by the USTFU. It was merely a convocation of
faculty clubs, as indicated in the memorandum sent to all faculty members by Fr. Rodel Aligan, OP,
the secretary general of the University of Santo Tomas. 22 It was not convened in accordance with the
provision on general membership meetings as found in the USTFU's CBL, which reads:

ARTICLE VIII-MEETINGS OF THE UNION

Sec. 1. The Union shall hold regular general membership meetings at least once
every three (3) months. Notices of the meeting shall be sent out by the Secretary-
General at least ten (10) days prior to such meetings by posting in conspicuous
places, preferably inside Company premises, said notices. The date, time and place
for the meetings shall be determined by the Board of Officers. 23

Unquestionably, the assembly was not a union meeting. It was in fact a gathering that was called
and participated in by management and non-union members. By no legal fiat was such assembly
transformed into a union activity by the participation of some union members.

Second, there was no commission on elections to oversee the election, as mandated by Sections 1
and 2 of Article IX of the USTFU's CBL, which provide:

ARTICLE IX - UNION ELECTION

Sec. 1. There shall be a Committee on Election (COMELEC) to be

created by the Board of Officers at least thirty (30) days before any
regular or special election. The functions of the COMELEC include
the following:

a) Adopt and promulgate rules and regulations that will ensure a free,
clean, honest and orderly election, whether regular or special;

b) Pass upon qualifications of candidates;

c) Rule on any question or protest regarding the conduct of the

election subject to the procedure that may be promulgated by the
Board of Officers; and

d) Proclaim duly elected officers.

Sec. 2. The COMELEC shall be composed of a chairman and two

members all of whom shall be appointed by the Board of Officers.

xxx xxx xxx 24

Third, the purported election was not done by secret balloting, in violation of Section 6, Article IX of
the USTFU's CBL, as well as Article 241 (c) of the Labor Code.

The foregoing infirmities considered, we cannot attribute grave abuse of discretion to Director
Bitonio's finding and conclusion. In Rodriguez v. Director, Bureau of Labor Relations, 25 we invalidated
the local union elections held at the wrong date without prior notice to members and conducted without
regard for duly prescribed ground rules. We held that the proceedings were rendered void by the lack of
due process undue haste, lack of adequate safeguards to ensure integrity of the voting, and the
absence of the notice of the dates of balloting.

Third Issue:

Suspension of USTFU's CBL

Petitioners contend that the October 4, 1996 assembly "suspended" the union's CBL. They aver that
the suspension and the election that followed were in accordance with their "constituent and residual
powers as members of the collective bargaining unit to choose their representatives for purposes of
collective bargaining." Again they cite the numerous anomalies allegedly committed by the private
respondents as USTFU officers. This argument does not persuade.

First, as has been discussed, the general faculty assembly was not the proper forum to conduct the
election of USTFU officers. Not all who attended the assembly were members of the union; some,
apparently, were even disqualified from becoming union members, since they represented
management. Thus, Director Bitonio correctly observed:

Further, appellants cannot be heard to say that the CBL was effectively suspended
during the 04 October 1996 general assembly. A union CBL is a covenant between
the union and its members and among members (Johnson and Johnson Labor
Union-FFW, et al. v. Director of Labor Relations, 170 SCRA 469). Where ILO
Convention No. 87 speaks of a union's full freedom to draw up its constitution and
rules, it includes freedom from interference by persons who are not members of the
union. The democratic principle that governance is a matter for the governed to
decide upon applies to the labor movement which, by law and constitutional
mandate, must be assiduously insulated against intrusions coming from both the
employer and complete strangers if the "protection to labor clause" of the constitution
is to be guaranteed. By appellant's own evidence, the general faculty assembly of 04
October 1996 was not a meeting of USTFU. It was attended by members and non-
members alike, and therefore was not a forum appropriate for transacting union
matters. The person who moved for the suspension of USTFU's CBL was not a
member of USTFU. Allowing a non-union member to initiate the suspension of a
union's CBL, and non-union members to participate in a union election on the
premise that the union's CBL had been suspended in the meantime, is incompatible
with the freedom of association and protection of the right to organize.

If there are members of the so-called "academic community collective bargaining

unit" who are not USTFU members but who would nevertheless want to have a hand
in USTFU's affairs, the appropriate procedure would have been for them to become
members of USTFU first. The procedure for membership is very clearly spelled out in
Article IV of USTFU's CBL. Having become members, they could then draw
guidance from Ang Malayang Manggagawa Ng Ang Tibay v. Ang Tibay, 103 Phil.
669. Therein the Supreme Court held that "if a member of the union dislikes the
 provisions of the by-laws he may seek to have them amended or may withdraw from
the union; otherwise he must abide by them." Under Article XVII of USTFU's CBL,
there is also a specific provision for constitutional amendments. What is clear
therefore is that USTFU's CBL provides for orderly procedures and remedies which
appellants could have easily availed [themselves] of instead of resorting to an
exercise of their so-called "residual power". 26

Second, the grievances of the petitioners could have been brought up and resolved in accordance
with the procedure laid down by the union's CBL 27 and by the Labor Code. 28 They contend that their
sense of desperation and helplessness led to the October 4, 1996 election. However, we cannot agree
with the method they used to rectify years of inaction on their part and thereby ease bottled-up
frustrations, as such method was in total disregard of the USTFU's CBL and of due process. The end
never justifies the means.

We agree with the solicitor general's observation that "the act of suspending the constitution when
the questioned election was held is an implied admission that the election held on that date [October
4, 1996] could not be considered valid under the existing USTFU constitution . . .." 29

The ratification of the new CBA executed between the petitioners and the University of Santo Tomas
management did not validate the void October 4, 1996 election. Ratified were the terms of the new
CBA, not the issue of union leadership a matter that should be decided only by union members in
the proper forum at the proper time and after observance of proper procedures.

Epilogue

In dismissing this Petition, we are not passing upon the merits of the mismanagement allegations
imputed by the petitioners to the private respondents; these are not at issue in the present case.
Petitioners can bring their grievances and resolve their differences with private respondents in timely
and appropriate proceedings. Courts will not tolerate the unfair treatment of union members by their
own leaders. When the latter abuse and violate the rights of the former, they shall be dealt with
accordingly in the proper forum after the observance of due process.

WHEREFORE, the Petition is hereby DISMISSED and the assailed Resolutions AFFIRMED. Costs
against petitioners.

SO ORDERED.

15. G.R. No. 190515 November 15, 2010

CIRTEK EMPLOYEES LABOR UNION-FEDERATION OF FREE WORKERS, Petitioner,

vs.
CIRTEK ELECTRONICS, INC., Respondent.

DECISION
CARPIO MORALES, J.:

Cirtek Electronics, Inc. (respondent), an electronics and semi-conductor firm situated inside the
Laguna Technopark, had an existing Collective Bargaining Agreement (CBA) with Cirtek Employees
Labor Union-Federation of Free Workers (petitioner) for the period January 1, 2001 up to December
31, 2005. Prior to the 3rd year of the CBA, the parties renegotiated its economic provisions but failed
to reach a settlement, particularly on the issue of wage increases. Petitioner thereupon declared a
bargaining deadlock and filed a Notice of Strike with the National Conciliation and Mediation Board-
Regional Office No. IV (NCMB-RO IV) on April 26, 2004. Respondent, upon the other hand, filed a
Notice of Lockout on June 16, 2004.

While the conciliation proceedings were ongoing, respondent placed seven union officers including
the President, a Vice President, the Secretary and the Chairman of the Board of Directors under
preventive suspension for allegedly spearheading a boycott of overtime work. The officers were
eventually dismissed from employment, prompting petitioner to file another Notice of Strike which
was, after conciliation meetings, converted to a voluntary arbitration case. The dismissal of the
officers was later found to be legal, hence, petitioner appealed.

In the meantime, as amicable settlement of the CBA was deadlocked, petitioner went on strike on
June 20, 2005. By Order1 dated June 23, 2005, the Secretary of Labor assumed jurisdiction over the
controversy and issued a Return to Work Order which was complied with.

Before the Secretary of Labor could rule on the controversy, respondent created a Labor
Management Council (LMC) through which it concluded with the remaining officers of petitioner a
Memorandum of Agreement (MOA)2providing for daily wage increases of P6.00 per day effective
January 1, 2004 and P9.00 per day effective January 1, 2005. Petitioner submitted the MOA via
Motion and Manifestation3 to the Secretary of Labor, alleging that the remaining officers signed the
MOA under respondents assurance that should the Secretary order a higher award of wage
increase, respondent would comply.

By Order4 dated March 16, 2006, the Secretary of Labor resolved the CBA deadlock by awarding a
wage increase of from P6.00 to P10.00 per day effective January 1, 2004 and from P9.00 to P15.00
per day effective January 1, 2005, and adopting all other benefits as embodied in the MOA.

Respondent moved for a reconsideration of the Decision as petitioners vice-president submitted a

"Muling Pagpapatibay ng Pagsang-ayon sa Kasunduan na may Petsang ika-4 ng Agosto
2005,"5 stating that the union members were waiving their rights and benefits under the Secretarys
Decision. Reconsideration of the Decision was denied by Resolution6 of August 12, 2008, hence,
respondent filed a petition for certiorari before the Court of Appeals.

By Decision7 of September 24, 2009, the appellate court ruled in favor of respondent and accordingly
set aside the Decision of the Secretary of Labor. It held that the Secretary of Labor gravely abused
his discretion in not respecting the MOA. It did not give credence to the minutes of the meeting 8 that
attended the forging of the MOA as it was not verified, nor to the "Paliwanag" 9 submitted by
respondent union members explaining why they signed the MOA as it was not notarized.
Petitioners motion for reconsideration having been denied by Resolution10 of December 2, 2009, the
present petition was filed, maintaining that the Secretary of Labors award is in order, being in accord
with the parties CBA history respondent having already granted P15.00 per day for 2001, P10.00
per day for 2002, and P10.00 per day for 2003, and that the Secretary has the power to grant
awards higher than what are stated in the CBA.

Respecting the MOA, petitioner posits that it was "surreptitiously entered into [in] bad faith," it having
been forged without the assistance of the Federation of Free Workers or counsel, adding that
respondent could have waited for the Secretarys resolution of the pending CBA deadlock or that the
MOA could have been concluded before representatives of the Secretary of Labor.

The relevant issues for resolution are 1) whether the Secretary of Labor is authorized to give an
award higher than that agreed upon in the MOA, and 2) whether the MOA was entered into and
ratified by the remaining officers of petitioner under the condition, which was not incorporated in the
MOA, that respondent would honor the Secretary of Labors award in the event that it is higher.

The Court resolves both issues in the affirmative.

It is well-settled that the Secretary of Labor, in the exercise of his power to assume jurisdiction under
Art. 263 (g)11 of the Labor Code, may resolve all issues involved in the controversy including the
award of wage increases and benefits.12 While an arbitral award cannot per se be categorized as an
agreement voluntarily entered into by the parties because it requires the intervention and imposing
power of the State thru the Secretary of Labor when he assumes jurisdiction, the arbitral award can
be considered an approximation of a collective bargaining agreement which would otherwise have
been entered into by the parties, hence, it has the force and effect of a valid contract obligation. 13

That the arbitral award was higher than that which was purportedly agreed upon in the MOA is of no
moment. For the Secretary, in resolving the CBA deadlock, is not limited to considering the MOA as
basis in computing the wage increases. He could, as he did, consider the financial
documents14 submitted by respondent as well as the parties bargaining history and respondents
financial outlook and improvements as stated in its website. 15

It bears noting that since the filing and submission of the MOA did not have the effect of divesting the
Secretary of his jurisdiction, or of automatically disposing the controversy, then neither should the
provisions of the MOA restrict the Secretarys leeway in deciding the matters before him. 1avvphi1

The appellate courts brushing aside of the "Paliwanag" and the minutes of the meeting that resulted
in the conclusion of the MOA because they were not verified and notarized, thus violating, so the
appellate court reasoned, the rules on parol evidence, does not lie. Like any other rule on evidence,
parol evidence should not be strictly applied in labor cases.

The reliance on the parol evidence rule is misplaced. In labor cases pending before the Commission
or the Labor Arbiter, the rules of evidence prevailing in courts of law or equity are not controlling.
Rules of procedure and evidence are not applied in a very rigid and technical sense in labor cases.
Hence, the Labor Arbiter is not precluded from accepting and evaluating evidence other than, and
even contrary to, what is stated in the CBA.16(emphasis supplied)
While a contract constitutes the law between the parties, this is so in the present case with respect
to the CBA, not to the MOA in which even the unions signatories had expressed reservations
thereto. But even assuming arguendo that the MOA is treated as a new CBA, since it is imbued with
public interest, it must be construed liberally and yield to the common good.

While the terms and conditions of a CBA constitute the law between the parties, it is not, however,
an ordinary contract to which is applied the principles of law governing ordinary contracts. A CBA, as
a labor contract within the contemplation of Article 1700 of the Civil Code of the Philippines which
governs the relations between labor and capital, is not merely contractual in nature but impressed
with public interest, thus, it must yield to the common good. As such, it must be construed
liberally rather than narrowly and technically, and the courts must place a practical and realistic
construction upon it, giving due consideration to the context in which it is negotiated and purpose
which it is intended to serve.17 (emphasis and underscoring supplied)

WHEREFORE, the petition is GRANTED. The Decision dated September 24, 2009 and the
Resolution dated December 2, 2009 of the Court of Appeals are REVERSED and SET ASIDE and
the Order dated March 16, 2006 and Resolution dated August 12, 2008 of the Secretary of Labor are
REINSTATED.

SO ORDERED.

16. G.R. No. 113907 February 28, 2000

MALAYANG SAMAHAN NG MGA MANGGAGAWA SA M. GREENFIELD (MSMG-UWP), ITS

PRESIDENT BEDA MAGDALENA VILLANUEVA, MARIO DAGANIO, DONATO GUERRERO,
BELLA P. SANCHEZ, ELENA TOBIS, RHODA TAMAYO, LIWAYWAY MALLILIN, ELOISA
SANTOS, DOMINADOR REBULLO, JOSE IRLAND, TEOFILA QUEJADA, VICENTE
SAMONTINA, FELICITAS DURIAN, ANTONIO POLDO, ANGELINA TUGNA, SALVADOR
PENALOSA, LUZVIMINDA TUBIG, ILUMINADA RIVERA, ROMULO SUMILANG, NENITA
BARBELONIA, LEVI BASILIA, RICARDO PALAGA, MERCY ROBLES, LEODEGARIO GARIN,
DOMINGO ECLARINAL, MELCHOR GALLARDO, MARCELO GARIN, ROSALINA BAUTISTA,
MARY ANN TALIGATOS, ALEJANDRO SANTOS, ANTONIO FRAGA, LUZ GAPULTOS,
MAGDALENA URSUA, EUGENIO ORDAN, LIGAYA MANALO, PEPITO DELA PAZ, PERLITA
DIMAQUIAT, MYRNA VASQUEZ, FLORENTINA SAMPAGA, ARACELI FRAGA, MAXIMINA
FAUSTINO, MARINA TAN, OLIGARIO LOMO, PRECILA EUSEBIO, SUSAN ABOGANO,
CAROLINA MANINANG, GINA GLIFONIA, OSCAR SOTTO, CELEDONA MALIGAYA, EFREN
VELASQUEZ, DELIA ANOVER, JOSEPHINE TALIMORO, MAGDALENA TABOR, NARCISA
SARMIENTO, SUSAN MACASIEB, FELICIDAD SISON, PRICELA CARTA, MILA MACAHILIG,
CORAZON NUNALA, VISITACION ELAMBRE, ELIZABETH INOFRE, VIOLETA BARTE,
LUZVIMINDA VILLOSA, NORMA SALVADOR, ELIZABETH BOGATE, MERLYN BALBOA,
EUFRECINA SARMIENTO, SIMPLICIA SIMPLICIA BORLEO, MATERNIDAD DAVID, LAILA JOP,
POTENCIANA CULALA, LUCIVITA NAVARRO, ROLANDO BOTIN, AMELITA MAGALONA,
AGNES CENA, NOLI BARTOLAY, DANTE AQUINO, HERMINIA RILLON, CANDIDA APARIJADO,
LYDIA JIMENEZ, ELIZABETH ANOCHE, ALDA MURO, TERESA VILLANUEVA, TERESITA
RECUENCO, ELIZA SERRANO, ESTELLA POLINAR, GERTRUDES NUNEZ, FELIPE BADIOLA,
ROSLYN FERNANDEZ, OSCAR PAGUTA, NATIVIDAD BALIWAS, ELIZABETH BARCIBAL,
CYNTHIA ESTELLER, TEODORA SANTOS, ALICIA PILAR, MILA PATENO, GLORIA CATRIZ,
MILA MACAHILIG, ADELAIDA DE LEON, ROSENDO EDILO, ARSENIA ESPIRITU, NUMERIANO
CABRERA, CONCEPSION ARRIOLA, PAULINA DIMAPASOK, ANGELA SANGCO, PRESILA
ARIAS, ZENAIDA NUNES, EDITHA IGNACIO, ROSA GUIRON, TERESITA CANETA, ALICIA
ARRO, TEOFILO RUWETAS, CARLING AGCAOILI, ROSA NOLASCO, GERLIE PALALON,
CLAUDIO DIRAS, LETICIA ALBOS, AURORA ALUBOG, LOLITA ACALEN, GREGORIO ALIVIO,
GUILLERMO ANICETA, ANGELIE ANDRADA, SUSAN ANGELES, ISABELITA AURIN,
MANUELA AVELINA, CARLING AGCAOILI, TERESITA ALANO, LOLITA AURIN, EMMABETH
ARCIAGA, CRESENCIA ACUNA, LUZVIMINDA ABINES, FLORENCIA ADALID, OLIVIA
AGUSTIN, EVANGELINE ALCORAN, ROSALINA ALFERES, LORNA AMANTE, FLORENTINA
AMBITO, JULIETA AMANONCO, CARMEN AMARILLO, JOSEFINA AMBAGAN, ZENAIDA
ANAYA, MARIA ANGLO, EDITHA ANTA ZO, MARY JANE ANTE, ANDREA AQUINO, ROWENA
ARABIT, MARIETA ARAGON, REBECCA ARCENA, LYDIA ARCIDO, FERNANDO ARENAS,
GREGORIO ARGUELLES, EDITHA ARRIOLA, EMMA ATIENZA, EMMA ATIENZA, TEODY
ATIENZA, ELIZABETH AUSTRIA, DIOSA AZARES, SOLIDA AZAINA, MILAGROS BUAG, MARIA
BANADERA, EDNALYN BRAGA, OFELIA BITANGA, FREDISMINDA BUGUIS, VIOLETA
BALLESTEROS, ROSARIO BALLADJAY, BETTY BORIO, ROMANA BAUTISTA, SUSARA
BRAVO, LILIA BAHINGTING, ENIETA BALDOZA, DAMIANA BANGCORE, HERMINIA BARIL,
PETRONA BARRIOS, MILAGROS BARRAMEDA, PERLA BAUTISTA, CLARITA BAUTISTA,
ROSALINA BAUTISTA, ADELINA BELGA, CONSOLACION BENAS, MARIA BEREZO,
MERCEDES BEREBER, VIOLETA BISCOCHO, ERNESTO BRIONES, ALVINA BROSOTO,
AGUSTINA BUNYI, CARMEN BUGNOT, ERLINDA BUENAFLOR, LITA BAQUIN, CONSEJO
BABOL, CRISANTA BACOLOD, CELIA DE BACTAT, MAZIMA BAGA, ELENA BALADAD,
ROSARIO BALADJAY, AMALIA BALAGTAS, ANITA BALAGTAS, MARIA BALAKIT, RUFINA
BALATAN, REBECCA BALDERAMA, AMELIA BALLESTER, BELEN BARQUIO, BERNANDITA
BASILIDES, HELEN BATO, HELEN BAUTISTA, ROMANA BAUTISTA, ALMEDA BAYTA,
AVELINA BELAYON, NORMA DE BELEN, THELMA DE BELEN, JOCELYN BELTRAN, ELENA
BENITEZ, VIRGINIA BERNARDINO, MERLINA BINUYAG, LINA BINUYA, BLESILDA BISNAR,
SHIRLEY BOLIVAR, CRESENTACION MEDLO, JOCELYN BONIFACIO, AMELIA BORBE,
AMALIA BOROMEO, ZENAIDA BRAVO, RODRIGO BEULDA, TERESITA MENDEZ, ELENA
CAMAN, LALIANE CANDELARIA, MARRY CARUJANO, REVELINA CORANES, MARITESS
CABRERA, JUSTINA CLAZADA, APOLONIA DELA CRUZ, VICTORIA CRUZ, JOSEFINA DELA
CRUZ, MARITESS CATANGHAL, EDNA CRUZ, LUCIA DE CASTRO, JOSIE CARIASO, OFELIA
CERVANTES, MEDITA CORTADO, AMALIA CASAJEROS, LUCINA CASTILIO, EMMA CARPIO,
ANACORITA CABALES, YOLANDA CAMO, MILA CAMAZUELA, ANITA CANTO, ESTELA
CANCERAN, FEMENCIA CANCIO, CYNTHIA CAPALAD, MERLE CASTILLO, JESUSA CASTRO,
CECILIA CASTILLO, SILVERITA CASTRODES, VIVIAN CELLANO, NORMA CELINO, TERESITA
CELSO, GLORIA COLINA, EFIPANIA CONSTANTINO, SALVACION CONSULTA, MEDITA
CORTADO, AIDA CRUZ, MARISSA DELA CRUZ, EDITO CORCILLES, JELYNE CRUZ, ROSA
CORPOS, ROSITA CUGONA, ELSIE CABELLES, EMMA CADUT, VICTORIA CALANZA,
BARBARA CALATA, IMELDA CALDERON, CRISTINA CALIDGUID, EMMALINDA CAMALON,
MARIA CAMERINO, CARMENCITA CAMPO, CONNIE CANEZO, LOURDES CAPANANG, MA.
MILAGROS CAPILI, MYRNA T. CAPIRAL, FLOR SAMPAGA, SUSAN B. CARINO, ROSARIO
CARIZON, VIRGINIA DEL CARMEN, EMMA CARPIO, PRESCILA CARTA, FE CASERO, LUZ DE
CASTRO, ANNA CATARONGAN, JOSEFINA CASTISIMO, JOY MANALO, EMMIE CAWALING,
JOVITA CARA, MARINA CERBITO, MARY CAREJANO, ESTELA R. CHAVEZ, CONCEPCION
PARAJA, GINA CLAUDIO, FLORDELIZA CORALES, EDITO CORCIELER, ROSA C. CORROS,
AMELIA CRUZ, JELYNE CRUZ, WILFREDO DELA CRUZ, REINA CUEVAS, MARILOU
DEJECES, JOSEPHINE DESACULA, EDITHA DEE, EDITHA DIAZ, VIRGIE DOMONDON, CELSA
DOROPAW, VIOLETA DUMELINA, MARIBEL DIMATATAC, ELBERTO DAGANIO, LETECIA
DAGOHOY, DINDO DALUZ, ANGELITA DANTES, GLORIA DAYO, LUCIA DE CASTRO, CARLITA
DE GUZMAN, CARMEN DELA CRUZ, MERCY DE LEON, MARY DELOS REYES, MARIETA
DEPILO, MATILDE DIBLAS, JULIETA DIMAYUGA, TEODORA DIMAYUGA, YOLANDA
DOMDOM, LUCITA DONATO, NELMA DORADO, RITA DORADO, SUSAN DUNTON, HERMINIA
SAN ESTEBAN, AMALI EUGENIO, OLIVIA EUSOYA, ERNESTO ESCOBIN, EVELYN ESCUREL,
LYDIA ESCOBIN, VICENTE E. ELOIDA. ELENA EGAR, GLORIA ERENO, NORMA ESPIRIDION,
ARSENIA ESPIRITU, AURORA ESTACIO, DEMETRIA ESTONELO, MILAGROS FONSEGA,
LYDIA FLORENTINO, JULIA FARABIER, TRINIDAD FATALLA, IMELDA FLORES, JESSINA
FRANCO, MA. CRISTINA FRIJAS, ESPECTACION FERRER, BERDENA FLORES, LEONILA
FRANCISCO, BERNARDA FAUSTINO, DOLORES FACUNDO, CRETITA FAMILARAN, EMELITA
FIGUERAS, MA. VIRGINIA FLORENDO, AURORA FRANCISCO, MA. JESUSA FRANCISCO,
NENITA FUENTES, MARILOU GOLINGAN, JUANITA GUERRERO, LYDIA GUEVARRA,
SOCORRO GONZAGA, PATRICIA GOMEO, ROSALINDA GALAPIN, CARMELITA GALVEZ,
TERESA GLE, SONIA GONZALES, PRIMITA GOMEZ, THERESA GALUA, JOSEFINA GELUA,
BRENDA GONZAGA, FLORA GALLARDO, LUCINDA GRACILLA, VICTORIA GOZUM, NENITA
GAMAO, EDNA GARCIA, DANILO GARCIA, ROSARIO GIRAY, ARACELI GOMEZ, JOEMARIE
GONZAGA, NELIA GONZAGA, MARY GRANCE GOZON, CARMEN GONZALES, MERLITA
GREGORIO, HERMINIA GONZALES, CARLITA DE GUZMAN, MODESTA GABRENTINA,
EDITHA GADDI, SALVACIO GALIAS, MERLINDA GALIDO, MELINDA GAMIT, JULIETA GARCIA,
EMELITA GAVINO, CHARITO GILLIA, GENERA GONEDA, CRESTITA GONZALES, FRANCISCA
GUILING, JULIAN HERNANDEZ, HERRADURA, SUSANA HIPOLITO, NERISSA HAZ, SUSAN
HERNAEZ, APOLONIA ISON, SUSAN IBARRA, LUDIVINA IGNACIO, CHOLITA INFANTE,
JULIETA ITURRIOS, ANITA IBO, MIRASOL INGALLA, JULIO JARDINIANO, MERLITA JULAO,
JULIETA JULIAN, MARIBETH DE JOSE, JOSEPHINE JENER, IMELDA JATAP, JULIETA
JAVIER, SALOME JAVIER, VICTORIA JAVIER, SALVACION JOMOLO, EDNA JARNE, LYDIA
JIMENEZ, TERESITA DE JUAN, MARILYN LUARCA, ROSITA LOSITO, ROSALINA LUMAYAG,
LORNA LARGA, CRESTETA DE LEON, ZENAIDA LEGASPI, ADELAIDA LEON, IMELDA DE
LEON, MELITINA LUMABI, LYDIA LUMABI, ASUNCION LUMACANG, REGINA LAPIADRIO,
MELANIA LUBUGUAN, EVANGELINE LACAP, PELAGIA LACSI, LORNA LAGUI, VIRGIE
LAITAN, VIRGINIA LEE, CRESTELITA DE LEON, FELICISIMA LEONERO, DIOSA LOPE,
ANGELITA LOPEZ, TERESITA LORICA, JUANITA MENDIETA, JUANITA MARANQUEZ, JANET
MALIFERO, INAS MORADOS, MELANIE MANING, LUCENA MABANGLO, CLARITA MEJIA,
IRENE MENDOZA, LILIA MORTA, VIGINIA MARAY, CHARITO MASINAHON, FILMA MALAYA,
LILIA MORTA, VIRGINIA MARAY, CHARITO MASINAHON, FILMA MALAYA, LILIA MORTA,
ROSITA MATIBAG, LORENZA MLINA, SABINA DEL MUNDO, EDITHA MUYCO, NARCISA
MABEZA, MA. FE MACATANGAY, CONCEPCION MAGDARAOG, IMELDA MAHIYA, ELSA
MALLARI, LIGAYA MANAHAN, SOLEDA MANLAPAS, VIRGINIA MAPA, JOSEI MARCOS,
LIBRADA MARQUEZ, VIRGINIA MAZA, JULIANITA MENDIETA, EDILBERTA MENDOZA, IRENE
MERCADO, HELEN MEROY, CRISTINA MEJARES, CECILIA MILLET, EMELITA MINON,
JOSEPHINE MIRANA, PERLITA MIRANO, EVANGELINE MISBAL, ELEANOR MORALES,
TERESITA MORILLA, LYDIA NUDO, MYRIAM NAVAL, CAROLINA NOLIA, ALICIA NUNEZ,
MAGDALENA NAGUIDA, ELSA NICOL, LILIA NACIONALES, MA. LIZA MABO, REMEDIOS
NIEVES, MARGARITA NUYLAN, TERESITA NIEVES, PORFERIA NARAG, RHODORA NUCASA,
CORAZON OCRAY, LILIA OLIMPO, VERONA OVERENCIA, FERMIN OSENA, FLORENCIA
OLIVAROS, SOLEDAD OBEAS, NARISSA OLIVEROS, PELAGIA ORTEGA, SUSAN ORTEGA,
CRISTINA PRENCIPE, PURITA PENGSON, REBECCA PACERAN, EDNA PARINA, MARIETA
PINAT, EPIFANIA PAJERLAN, ROSALINA PASIBE, CECILIA DELA PAZ, LORETA PENA,
APOLONIA PALCONIT, FRANCISCO PAGUIO, LYDIA PAMINTAHON, ELSIE PACALDO,
TERESITA PADILLA, MYRNA PINEDA, MERCEIDTA PEREZ, NOVENA PORLUCAS, TERESITA
PODPOD, ADORACION PORNOBI, ALICIA PERILLO, HELEN JOY PENDAL, LOURDES
PACHECO, LUZVIMINDA PAGALA, LORETA PAGAPULAN, FRANCISCO PAGUIO, PRISCO
PALACA, FLORA PAMINTUAN, NOEMI PARISALES, JOSEPHINE PATRICIO, CRISTINA PE
BENITO, ANGELA PECO, ANGELITA PENA, ESTER PENONES, NORMA PEREZ, MAURA
PERSEVERANCIA, MARINA PETILLA, JOSIE PIA, ZULVILITA PIODO, REBECCA PACERAN,
CLARITA POLICARPIO, MAXIMO POTENTO, PORFIRIO POTENTO, FLORDELIZA PUMARAS,
FERNANDO QUEVEDO, JULIANA QUINDOZA, CHARITO QUIROZ, CARMELITA ROSINO,
RODELIA RAYONDOYON, FLORENCIA RAGOS, REBECCA ROSALES, ROSALYN RIVERO,
FRANCISCO RUIZ, FRANCIA ROSERO, EMELY RUBIO, EDILBERTO RUIO, JUANA RUBY,
RAQUEL REYES, MERCY ROBLES, ESTELA RELANO, ROSITA REYES NIMFA RENDON,
EPIFANIO RAMIRO, MURIEL REALCO, BERNARDITA RED, LEONITA RODIL, BENITA REBOLA,
DELMA REGALARIO, LENY REDILLAS, JULIETA DELA ROSA, FELICITAS DELA ROSA,
SUSAN RAFALLO, ELENA RONDINA, NORMA RACELIS, JOSEPHINE RAGEL, ESPERANZA
RAMIREZ, LUZVIMINDA RANADA, CRISTINA RAPINSAN, JOCELYN RED, ORLANDO REYES,
TERESITA REYES, ANGELITA ROBERTO, DELIA ROCHA, EDLTRUDES ROMERO, MELECIA
ROSALES, ZENAIDA ROTAO, BELEN RUBIS, FE RUEDA, SYLVIA SONGCAYAWON, CRISTINA
SANANO, NERCISA SARMIENTO, HELEN SIBAL, ESTELITA SANTOS, NORMA SILVESTRE,
DARLITA SINGSON, EUFROCINA SARMIENTO, MYRNA SAMSON, EMERLINA SADIA, LORNA
SALAZAR, AVELINA SALVADOR, NACIFORA SALAZAR, TITA SEUS, MARIFE SANTOS,
GRACIA SARMIENTO, ANGELITA SUMANGIL, ELIZABETH SICAT, MA. VICTORIA SIDELA,
ANALITA SALVADOR, MARITES SANTOS, VIRGINIA SANTOS, THELMA SARONG, NILDA
SAYAT, FANCITA SEGUNDO, FYNAIDA SAGUI, EDITHA SALAZAR, EDNA SALZAR, EMMA
SALENDARIO, SOLEDAD SAMSON, EDNA SAN DIEGO, TERESITA SAN GABRIEL,
GERTRUDES SAN JOSE, EGLECERIA OSANCHEZ, ESTRELLA SANCHEZ, CECILIA DELOS
SANTOS, LUISA SEGOVIA, JOCELYN SENDING, ELENA SONGALIA, FELICITAS SORIANO,
OFELIA TIBAYAN, AIDA TIRNIDA, MONICA TIBAYAN, CRISTETA TAMBARAN, GLORIA TACDA,
NENVINA, FELINA TEVES, ANTONINA DELA TORRE, MAXIMA TANILON, NENA TABAT,
ZOSIMA TOLOSA, MARITA TENOSO, IMELDA TANIO, LUZ TANIO, EVANGELINE TAYO,
JOSEFINA TINGTING, ARSENIA TISOY, MAGDALENA TRAJANO, JOSEFINA UBALDE, GINA
UMALI, IRMA VALENZUELA, FELY VALDEZ, PAULINA VALEZ, ROSELITA VALLENTE,
LOURDES VELASCO, AIDA VILLA, FRANCISCA VILLARITO, ZENAIDA VISMONTE, DELIA
VILLAMIEL, NENITA VASQUEZ, JOCELYN VILLASIS, FERMARGARITA VARGAS, CELIA
VALLE, MILA CONCEPCION VIRAY, DOMINGA VALDEZ, LUZVIMINDA VOCINA, MADELINE
VIVERO, RUFINA VELASCO, AUREA VIDALEON, GLORIA DEL VALLE, THELMA VALLOYAS,
CYNTHIA DELA VEGA, ADELA VILLAGOMEZ, TERESITA VINLUAN, EUFEMIA VITAN, GLORIA
VILLAFLORES, EDORACION VALDEZ, ANGELITA VALDEZ, ILUMINADA VALENCI, MYRNA
VASQUEZ, EVELNYN VEJERAMO, TEODORA VELASQUEZ, EDAN VILLANUEVA, PURITA
VILLASENOR, SALVADOR WILSON, EMELINA YU, ADELFA YU, ANA ABRIGUE, VIRGINIA
ADOBAS, VICTORIA ANTIPUESTO, MERCEDITA CASTILLO, JOCELYN CASTRO, CREMENIA
DELA CRUZ, JOSEPHINE IGNACIO, MELITA ILILANGOS, LIGAYA LUMAYAT, DELIA LUMBES,
ROSITA LIBRADO, DELIA LAGRAMADA, GEMMA MAGPANTAY, EMILY MENDOZA, FIDELA
PANGANIBAN, LEONOR RIZALDO, ILUMINDA RIVERA, DIVINA SAMBAYAN, ELMERITA
SOLAYAO, NANCY SAMALA, JOSIE SUMARAN, LUZVIMINDA ABINES, ALMA ACOL,
ROBERTO ADRIATICO, GLORIA AGUINALDO, ROSARIO ALEYO, CRISTETA ALEJANDRO,
LILIA ALMOGUERA, CARMEN AMARILLO, TRINIDAD ARDANIEL, CERINA AVENTAJADO,
ZENAIDA AVAYA, LOLITA ARABIS, MARIA ARSENIA, SOFIA AGUINALDO, SALVE ABAD,
JOSEFINA AMBANGAN EMILIA AQUINO, JOSEFINA AQUINO, JULIANA AUSAN, AMERCIANA
ACOSTA, CONCEPCION ALEROZA, DIANA ADOVOS, FELY ADVINCULA, SEOMINTA ARIAS,
JOSEPHINE ARCEDE, NORMA AMISTOSO, PRESENTACION ALONOS, EMMA ATIENZA,
LEONIDA AQUINO, ANITA ARILLON, ADELAIDA ARELLANO, NORMA AMISTOSO, JOSEPHINE
ARCEDE, SEMIONITA ARIAS, JOSEFINA BANTUG, LOLITA BARTE, HERMINIA BASCO,
MARGARITA BOTARDO, RUFINO BUGNOT, LOLITA BUSTILLO, ISABEL BALAKIT, ROSARIO
BARRERO, TESSIE BALBOS, NORMA BENISANO, GUILLERMA BRUGES, BERNADETTE
BARTOLOME, SHIRLEY BELMONTE, MERONA BELZA, AZUCENA BERNALES, JOSE BASCO,
NIMPHA BANTOG, BENILDA BUBAN, REGINA BUBAN, SALOME BARRAMEDA, IRENE
BISCO, FELICITAS BAUTISTA, VIOLETA BURA, LINA BINUYA, BIBIANA BAARDE, ELSA
BAES, ANASTACIA BELONZO, SONIA BENOYO, ELIZABETH BACUNGAN, PATRICIA
BARRAMEDA, ERLINDA BARCELONA, EMMA BANICO, APOLONIA BUNAO, LUCITA BOLEA,
PACIFICA BARCELONA, EDITHA BASIJAN, RENITA BADAMA, ELENA BALADAD,
CRESENCIA BAJO, BERNADITA BASILID, MELINDA BEATO, YOLANDA BATANES, EDITHA
BORILLA, ANITA BAS, ELSA CALIPUNDAN, MARIA CAMERINO,VIRGINIA CAMPOSANO,
MILAGROS CAPILI, CARINA CARINO, EUFEMIA CASIHAN, NENITA CASTRO, FLORENCIA
CASUBUAN, GIRLIE CENTENO, MARIANITA CHIQUITO, IMELDA DELA CRUZ, TEODOSIA
GONG, TEOFILA CARACOL, TERESITA CANTA, IRENEA CUNANAN, JULITA CANDILOSAS,
VIOLETA CIERES, MILAGROS DELA CRUZ, FLOREPES CAPULONG, CARMENCITA CAMPO,
MARILYN CARILLO, RUTH DELA CRUZ, RITA CIJAS, LYDIA CASTOR, VIRGIE CALUBAD,
EMELITA CABERA, CRISTETA CRUZ, ERLINDA COGADAS, IMELDA CALDERON, SUSIE LUZ
CEZAR, ESTELA CHAVEZ, NORMA CABRERA, ELDA DAGATAN, LEONISA DIMACUNA, ERNA
DUGTONG, FLORDELISA DIGMA, VIRGILIO DADIOS, LOLITA DAGTA, ADELAIDA DORADO,
CELSA DATUMANONG, VIRGINIA DOCTOLERO, EDNA SAN DIEGO, JULIETA DANG, JULIETA
DORANTINAO, LOLITA DAGANO, JUDITH DIAZ, MARIA ENICANE, MARITA ESCARDE,
ENRIMITA ESMAYOR, ROSARIO EPIRITU, REMEDIOS EMBOLTORIO, IRENE ESTUITA,
TERESITA ERESE, ERMELINDA ELEZO, MARIA ESTAREJA, MERLITA ESQUERRA, YOLANDA
FELICITAS, FRUTO FRANCIA, MARTHA FRUTO, LILIA FLORES, SALVACION FORTALESA,
JUDITH FAJARDO, SUSANA FERNANDO, EDWIN FRANCISCO, NENITA GREGORY, ROSA
CAMILO, MARIVIC GERRARDO, CHARITA GOREMBALEM, NORMA GRANDE, DOLORES
GUTIERREZ, CHARLIE GARCIA, LUZ GALVEZ, ADELAIDA GAMILLA, LUZ GAPULTOS,
ERLINDA GARCIA, HELEN GARCIA, ERLINDA GAUDIA, FRANCISCA GUILING, MINTA
HERRERA, ASUNCION HONOA, JUAN HERNANDEZ, LUCERIA ANNA MAE HERNANDEZ,
JULIANA HERNANDEZ, EDITHA IGNACIO, ANITA INOCENCIO, EULALIA INSORIO, ESTELITA
IRLANDA, MILAGROS IGNACIO, LINDA JABONILLO, ADELIMA JAEL, ROWENA JARABJO,
ROBERT JAVILINAR, CLARITA JOSE, CARMENCITA JUNDEZ, SOFIA LALUCIS, GLORIA
LABITORIA, ANGELITA LODES, ERLINDA LATOGA, EVELYN LEGASPI, ROMEO LIMCHOCO,
JESUS LARA, ESTRELLA DE LUNA, LORETA LAREZA, JOSEPHINE ALSCO, MERCY DE
LEON, CONSOLACION LIBAO, MARILYN LIWAG, TERESITA LIZAZO, LILIA MACAPAGAL,
SALVACION MACAREZA, AMALIA MADO, TERESITA MADRIAGA, JOVITA MAGNAYE, JEAN
MALABAD, FRANCISCA MENDOZA, NELCITA MANGANTANG, TERESITA NELLA, GENEROZA
MERCADO, CRISTETA MOJANA, BERNARDA MONGADO, LYDIA MIRANDA, ELISA
MADRILEJOS, LOIDA MAGSINO, AMELIA MALTO, JULITA MAHIBA, MYRNA MAYORES, LUISA
MARAIG, FLORENCIA MARAIG, EMMA MONZON, IMELDA MAGDANGAN, VICTORIA MARTIN,
NOEMI MANGUILLO, BASILIZA MEDINA, VICTORIO MERCADO, ESTELA MAYPA, EMILIA
MENDOZA, LINA MAGPANTAY, FELICIANA MANLOLO, ELENA MANACOP, WILMA MORENO,
JUANA MENDOZA, EVELYN DEL MUNDO, ROSIE MATUTINA, MATILDE MANALO, TERESITA
MENDEZ, FELIPINA MAGONCIA, MARIA MANZANO, LIGAYA MANALO, LETICIA MARCHA,
MARINA MANDIGMA, LETICIA MANDASOC, PRESCILLA MARTINEZ, JULIA MENDOZA,
PACITA MAGALLANES, ANGELINA MARJES, SHIRLEY MELIGRITO, IRENE MERCADO, ELISA
MAATUBANG, MARCELINA NICOLAS, AGUSTINA NICOLAS, ROSA NOLASCO, WILMA
NILAYE, VIOLETA ORACION, ANGELA OSTAYA, JUANITA OSAYOS, MAGDALENA OCAMPO,
MARDIANA OCTA, ROSELA OPAO, LIBRADA OCAMPO, YOLANDA OLIVER, MARCIA
ORLANDA, PAGDUNAN, RITA PABILONA, MYRA PALACA, BETHLEHEM PALINES, GINA
PALIGAR, NORMA PALIGAR, DELMA PEREZ, CLAUDIA PRADO, JULIE PUTONG, LUDIVINA
PAGSALINGAN, MERLYN PANALIGAN, VIOLETA PANAMBITAN, NOREN PAR, ERLINDA
PARAGAS, MILA PARINO, REBECCA PENAFLOR, IMELDA PENAMORA, JERMICILLIN
PERALTA, REBECCA PIAPES, EDITHA PILAR, MAROBETH PILLADO, DIOSCORO PIMENTEL,
AURORA LAS PINAS, EVANGELINA PINON, MA. NITA PONDOC, MA. MERCEDES PODPOD,
ANGELITO PANDEZ, LIGAYA PIGTAIN, LEONILA QUIAMBAO, ELENA QUINO, MARITESS
QUIJANO, CHOLITA REBUENO, LOLITA REYES, JOCELYN RAMOS, ROSITA RAMIREZ,
ELINORA RAMOS, ISABEL RAMOS, ANNABELLE RESURRECCION, EMMA REYES, ALILY
ROXAS, MARY GRACE DELOS REYES, JOCELYN DEL ROSARIO, JOSEFINA RABUSA,
ANGELITA ROTAIRO, SAMCETA ROSETA, EDERLINA RUIZ, ZENAIDA ROSARIO, BENITA
REBOLA, ROSITA REVILLA, ROSITA SANTOS, ROWENA SALAZAR, EMILYN SARMIENTO,
ANA SENIS, ELOISA SANTOS, NARCISA SONGLIAD, ELMA SONGALIA, AMPARA SABIO,
JESSIE SANCHEZ, VIVIAN SAMILO, GLORIA SUMALINOG, ROSALINA DELOS SANTOS,
MARIETA SOMBRERO, HELEN SERRETARIO, TEODORO SULIT, BELLA SONGUINES, LINDA
SARANTAN, ESTELLA SALABAR, MILAGROS SISON, GLORIA TALIDAGA, CECILIA
TEODORO, ROMILLA TUAZON, AMELITA TABULAO, MACARIA TORRES, LUTGARDA TUSI,
ESTELLA TORREJOS, VICTORIA TAN, MERLITA DELA VEGA, WEVINA ORENCIA, REMEDIOS
BALECHA, TERESITA TIBAR, LACHICA LEONORA, JULITA YBUT, JOSEFINA ZABALA,
WINNIE ZALDARIAGA, BENHUR ANTENERO, MARCELINA ANTENERO, ANTONINA ALAPAN,
EDITHA ANTOZO, ROWENA ARABIT, ANDRA AQUINO, TERESITA ANGULO, MARIA ANGLO,
MYRNA ALBOS, ELENITA AUSTRIA, ANNA ABRIGUE, VIRGINIA ADOBAS, VICTORIA
ANTIPUESTO, REMEDIOS BOLECHE, MACARIA BARRIOS, THELMA BELEN, ESTELLA
BARRETTO, JOCELYN CHAVEZ, VIRGINIA CAPISTRANO, BENEDICTA CINCO, YOLLY
CATPANG, REINA CUEVAS, VICTORIA CALANZA, FE CASERO, ROBERTA CATALBAS,
LOURDES CAPANANG, CLEMENCIA CRUZ, JOCELYN COSTO, MERCEDITA CASTILLO,
EDITHA DEE, LUCITA DONATO NORMA ESPIRIDION, LORETA FERNANDEZ, AURORA
FRANCISCO, VILMA FAJARDO, MODESTA GABRENTINA, TERESITA GABRIEL, SALVACION
GAMBOA, JOSEPHINE IGNACIO, SUSAN IBARRA, ESPERANZA JABSON, OSCAR JAMBARO,
ROSANNA JARDIN, CORAZON JALOCON, ZENAIDA LEGASPI, DELLA LAGRAMADA, ROSITA
LIBRANDO, LIGAYA LUMAYOT, DELIA LUMBIS, LEONORA LANCHICA, RELAGIA LACSI,
JOSEFINA LUMBO, VIOLETA DE LUNA, EVELYN MADRID, TERESITA MORILLA, GEMMA
MAGPANTAY, EMILY MENDOZA, IRENEA MEDINA, NARCISA MABEZA, ROSANNA MEDINA,
DELIA MARTINEZ, ROSARIO MAG-ISA, EDITHA MENDOZA, EDILBERTA MENDOZA, FIDELA
PANGANIBAN, OFELIA PANGANIBAN, AZUCENA POSTGO, LOURDES PACHECO, LILIA
PADILLA, MARISSA PEREZ, FLORDELIZA PUMARES, LUZ REYES, NORMA RACELIS,
LEONOR RIZALDO, JOSIE SUMASAR, NANCY SAMALA, EMERLITA SOLAYAO, MERCEDITA
SAMANIEGO, BLANDINA SIMBULAN, JOCELYN SENDING, LUISITA TABERRERO, TERESITA
TIBAR, ESTERLINA VALDEZ, GLORIA VEJERANO, ILUMINADA VALENCIA, MERLITA DELA
VEGA, VIRGIE LAITAN, JULIET VILLARAMA, LUISISTA OCAMPO, NARIO ANDRES, ANSELMA
TULFO, GLORIA MATEO, FLANIA MENDOZA, CONNIE CANGO, EDITHA SALAZAR, MYRNA
DELOS SANTOS, TERESITA SERGIO, CHARITO GILLA, FLORENTINA HERNAEZ,
BERNARDINO VIRGINIA, AMPO ANACORITA, SYLVIA POASADAS, ESTRELLA ESPIRITU,
CONCORDIA LUZURIAGA, MARINA CERBITO, EMMA REYES, NOEMI PENISALES, CLARITA
POLICARPIO, BELEN BANGUIO, HERMINIA ADVINCULA, LILIA MORTA, REGINA LAPIDARIO,
LORNA LARGA, TERESITA VINLUAN, MARITA TENOSO, NILDS SAYAT, THELMA SARONG,
DELMA REGALIS, SUSAN RAFAULO, ELENA RONDINA, MYRNA PIENDA, VIOLETA
DUMELINA, FLORENCIA ADALID, FILMA MELAYA, ERLINDA DE BAUTISTA, MATILDE DE
BLAS, DOLORES FACUNDO, REBECCA LEDAMA, MA. FE MACATANGAY, EMELITA MINON,
NORMA PAGUIO, ELIZA VASQUEZ, GLORIA VILLARINO, MA. JESUS FRANCISCO, TERESITA
GURPIDO, LIGAYA MANALO, FE PINEDA, MIRIAM OCMAR, LUISA SEGOVIA, TEODY
ATIENZA, SOLEDA AZCURE, CARMEN DELA CRUZ, DMETRIA ESTONELO, MA. FLORIDA
LOAZNO, IMELDA MAHIYA, EDILBERTA MENDOZA, SYLVIA POSADAS, SUSANA ORTEGA,
JOSEPHINE D. TALIMORO, TERESITA LORECA, ARSENIA TISOY, LIGAYA MANALO,
TERESITA GURPIO, FE PINEDA, and MARIA JESUS FRANCISCO, petitioners,
vs.
HON. CRESENCIO J. RAMOS, NATIONAL LABOR RELATIONS COMMISSION, M. GREENFIELD
(B), INC., SAUL TAWIL, CARLOS T. JAVELOSA, RENATO C. PUANGCO, WINCEL LIGOT,
MARCIANO HALOG, GODOFREDO PACENO, SR., GERVACIO CASILLANO, LORENZO ITAOC,
ATTY. GODOFREDO PACENO, JR., MARGARITO CABRERA, GAUDENCIO RACHO, SANTIAGO
IBANEZ, AND RODRIGO AGUILING, respondents.

PURISIMA, J.:

At bar is a Petition for Certiorari under Rule 65 of the Revised Rules of Court to annul the decision of
the National Labor Relations Commission in an unfair labor practice case instituted by a local union
against its employer company and the officers of its national federation.

The petitioner, Malayang Samahan ng mga Manggagawa sa M. Greenfield, Inc., (B) (MSMG),
hereinafter referred to as the "local union", is an affiliate of the private respondent, United Lumber
and General Workers of the Philippines (ULGWP), referred to as the "federation". The collective
bargaining agreement between MSMG and M. Greenfield, Inc., names the parties as follows:

This agreement made and entered into by and between:

 M. GREENFIELD, INC. (B) a corporation duly organized in accordance with the laws of the
Republic of the Philippines with office address at Km. 14, Merville Road, Paraaque, Metro
Manila, represented in this act by its General manager, Mr. Carlos T. Javelosa, hereinafter
referred to as the Company;

-and-

MALAYANG SAMAHAN NG MGA MANGGAGAWA SA M. GREENFIELD (B)

(MSMG)/UNITED LUMBER AND GENERAL WORKERS OF THE PHILIPPINES (ULGWP), a
legitimate labor organization with address at Suite 404, Trinity Building, T. M. Kalaw Street,
Manila, represented in this act by a Negotiating Committee headed by its National President,
Mr. Godofredo Paceno, Sr., referred to in this Agreement as the UNION.1

The CBA includes, among others, the following pertinent provisions:

Art. II-Union Security

Sec. 1. Coverage and Scope. All employees who are covered by this Agreement and
presently members of the UNION shall remain members of the UNION for the duration of this
Agreement as a condition precedent to continued employment with the COMPANY.

xxx xxx xxx

Sec. 4. Dismissal. Any such employee mentioned in Section 2 hereof, who fails to maintain
his membership in the UNION for non-payment of UNION dues, for resignation and for
violation of UNION's Constitution and By-Laws and any new employee as defined in Section
2 of this Article shall upon written notice of such failure to join or to maintain membership in
the UNION and upon written recommendation to the COMPANY by the UNION, be
dismissed from the employment by the COMPANY; provided, however, that the UNION shall
hold the COMPANY free and blameless from any and all liabilities that may arise should the
dismissed employee question, in any manner, his dismissal; provided, further that the matter
of the employee's dismissal under this Article may be submitted as a grievance under Article
XIII and, provided, finally, that no such written recommendation shall be made upon the
COMPANY nor shall COMPANY be compelled to act upon any such recommendation within
the period of sixty (60) days prior to the expiry date of this Agreement conformably to law.

Art. IX

Sec. 4. Program Fund The Company shall provide the amount of P10,000.00 a month for
a continuing labor education program which shall be remitted to the Federation . . . 2

On September 12, 1986, a local union election was held under the auspices of the ULGWP wherein
the herein petitioner, Beda Magdalena Villanueva, and the other union officers were proclaimed as
winners. Minutes of the said election were duly filed with the Bureau of Labor Relations on
September 29, 1986.
On March 21, 1987, a Petition for Impeachment was filed with the national federation ULGWP by the
defeated candidates in the aforementioned election.

On June 16, 1987, the federation conducted an audit of the local union funds. The investigation did
not yield any unfavorable result and the local union officers were cleared of the charges of anomaly
in the custody, handling and disposition of the union funds.
1wphi1.nt

The 14 defeated candidates filed a Petition for Impeachment/Expulsion of the local union officers
with the DOLE NCR on November 5, 1987, docketed as NCR-OD-M-11-780-87. However, the same
was dismissed on March 2, 1988, by Med-Arbiter Renato Parungo for failure to substantiate the
charges and to present evidence in support of the allegations.

On April 17, 1988, the local union held a general membership meeting at the Caruncho Complex in
Pasig. Several union members failed to attend the meeting, prompting the Executive Board to create
a committee tasked to investigate the non-attendance of several union members in the said
assembly, pursuant to Sections 4 and 5, Article V of the Constitution and By-Laws of the union,
which read:

Seksyon 4. Ang mga kinukusang hindi pagdalo o hindi paglahok sa lahat ng hakbangin ng
unyon ng sinumang kasapi o pinuno ay maaaring maging sanhi ng pagtitiwalag o
pagpapataw ng multa ng hindi hihigit sa P50.00 sa bawat araw na nagkulang.

Seksyon 5. Ang sinumang dadalo na aalis ng hindi pa natatapos ang pulong ay ituturing na
pagliban at maparusahan itong alinsunod sa Article V, Seksyong 4 ng Saligang Batas na ito.
Sino mang kasapi o pisyales na mahuli and dating sa takdang oras ng di lalampas sa isang
oras ay magmumulta ng P25.00 at babawasin sa sahod sa pamamagitan ng salary
deduction at higit sa isang oras ng pagdating ng huli ay ituturing na pagliban. 3

On June 27, 1988, the local union wrote respondent company a letter requesting it to deduct the
union fines from the wages/salaries of those union members who failed to attend the general
membership meeting. A portion of the said letter stated:

xxx xxx xxx

In connection with Section 4 Article II of our existing Collective Bargaining Agreement, please
deduct the amount of P50.00 from each of the union members named in said annexes on
the payroll of July 2-8, 1988 as fine for their failure to attend said general membership
meeting.4

In a Memorandum dated July 3, 1988, the Secretary General of the national federation, Godofredo
Paceo, Jr. disapproved the resolution of the local union imposing the P50.00 fine. The union
officers protested such action by the Federation in a Reply dated July 4, 1988.

On July 11, 1988, the Federation wrote respondent company a letter advising the latter not to deduct
the fifty-peso fine from the salaries of the union members requesting that:
 . . . any and all future representations by MSMG affecting a number of members be first
cleared from the federation before corresponding action by the Company.5

The following day, respondent company sent a reply to petitioner union's request in a letter, stating
that it cannot deduct fines from the employees' salary without going against certain laws. The
company suggested that the union refer the matter to the proper government office for resolution in
order to avoid placing the company in the middle of the issue.

The imposition of P50.00 fine became the subject of bitter disagreement between the Federation
and the local union culminating in the latter's declaration of general autonomy from the former
through Resolution No. 10 passed by the local executive board and ratified by the general
membership on July 16, 1988.

In retaliation, the national federation asked respondent company to stop the remittance of the local
union's share in the education funds effective August 1988. This was objected to by the local union
which demanded that the education fund be remitted to it in full.

The company was thus constrained to file a Complaint for Interpleader with a Petition for Declaratory
Relief with the Med-Arbitration Branch of the Department of Labor and Employment, docketed as
Case No. OD-M-8-435-88. This was resolved on October 28, 1988, by Med-Arbiter Anastacio Bactin
in an Order, disposing thus:

WHEREFORE, premises considered, it is hereby ordered:

1. That the United Lumber and General Workers of the Philippines (ULGWP) through its
local union officers shall administer the collective bargaining agreement (CBA).

2. That petitioner company shall remit the P10,000.00 monthly labor education program fund
to the ULGWP subject to the condition that it shall use the said amount for its intended
purpose.

3. That the Treasurer of the MSMG shall be authorized to collect from the 356 union
members the amount of P50.00 as penalty for their failure to attend the general membership
assembly on April 17, 1988.

However, if the MSMG Officers could present the individual written authorizations of the 356
union members, then the company is obliged to deduct from the salaries of the 356 union
members the P50.00 fine.6

On appeal, Director Pura-Ferrer Calleja issued a Resolution dated February 7, 1989, which modified
in part the earlier disposition, to wit:

WHEREFORE, premises considered, the appealed portion is hereby modified to the extent
that the company should remit the amount of five thousand pesos (P5,000.00) of the
P10,000.00 monthly labor education program fund to ULGWP and the other P5,000.00 to
MSMG, both unions to use the same for its intended purpose. 7
Meanwhile, on September 2, 1988, several local unions (Top Form, M. Greenfield, Grosby, Triumph
International, General Milling, and Vander Hons chapters) filed a Petition for Audit and Examination
of the federation and education funds of ULGWP which was granted by Med-Arbiter Rasidali
Abdullah on December 25, 1988 in an Order which directed the audit and examination of the books
of account of ULGWP.

On September 30, 1988, the officials of ULGWP called a Special National Executive Board Meeting
at Nasipit, Agusan del Norte where a Resolution was passed placing the MSMG under trusteeship
and appointing respondent Cesar Clarete as administrator.

On October 27, 1988, the said administrator wrote the respondent company informing the latter of its
designation of a certain Alfredo Kalingking as local union president and "disauthorizing" the
incumbent union officers from representing the employees. This action by the national federation
was protested by the petitioners in a letter to respondent company dated November 11, 1988.

On November 13, 1988, the petitioner union officers received identical letters from the administrator
requiring them to explain within 72 hours why they should not be removed from their office and
expelled from union membership.

On November 26, 1988, petitioners replied:

(a) Questioning the validity of the alleged National Executive Board Resolution placing their
union under trusteeship;

(b) Justifying the action of their union in declaring a general autonomy from ULGWP due to
the latter's inability to give proper educational, organizational and legal services to its
affiliates and the pendency of the audit of the federation funds;

(c) Advising that their union did not commit any act of disloyalty as it has remained an affiliate
of ULGWP;

(d) Giving ULGWP a period of five (5) days to cease and desist from further committing acts
of coercion, intimidation and harassment.8

However, as early as November 21, 1988, the officers were expelled from the ULGWP. The
termination letter read:

Effective today, November 21, 1988, you are hereby expelled from UNITED LUMBER AND
GENERAL WORKERS OF THE PHILIPPINES (ULGWP) for committing acts of disloyalty
and/or acts inimical to the interest and violative to the Constitution and by-laws of your
federation.

You failed and/or refused to offer an explanation inspite of the time granted to you.
 Since you are no longer a member of good standing, ULGWP is constrained to recommend
for your termination from your employment, and provided in Article II Section 4, known as
UNION SECURITY, in the Collective Bargaining agreement. 9

On the same day, the federation advised respondent company of the expulsion of the 30 union
officers and demanded their separation from employment pursuant to the Union Security Clause in
their collective bargaining agreement. This demand was reiterated twice, through letters dated
February 21 and March 4, 1989, respectively, to respondent company.

Thereafter, the Federation filed a Notice of Strike with the National Conciliation and Mediation Board
to compel the company to effect the immediate termination of the expelled union officers.

On March 7, 1989, under the pressure of a threatened strike, respondent company terminated the
30 union officers from employment, serving them identical copies of the termination letter
reproduced below:

We received a demand letter dated 21 November 1988 from the United Lumber and General
Workers of the Philippines (ULGWP) demanding for your dismissal from employment
pursuant to the provisions of Article II, Section 4 of the existing Collective Bargaining
Agreement (CBA). In the said demand letter, ULGWP informed us that as of November 21,
1988, you were expelled from the said federation "for committing acts of disloyalty and/or
acts inimical to the interest of ULGWP and violative to its Constitution and By-laws
particularly Article V, Section 6, 9, and 12, Article XIII, Section 8.

In subsequent letters dated 21 February and 4 March 1989, the ULGWP reiterated its
demand for your dismissal, pointing out that notwithstanding your expulsion from the
federation, you have continued in your employment with the company in violation of Sec. 1
and 4 of Article II of our CBA, and of existing provisions of law.

In view thereof, we are left with no alternative but to comply with the provisions of the Union
Security Clause of our CBA. Accordingly, we hereby serve notice upon you that we are
dismissing you from your employment with M. Greenfield, Inc., pursuant to Sections 1 and 4,
Article II of the CBA effective immediately.10

On that same day, the expelled union officers assigned in the first shift were physically or bodily
brought out of the company premises by the company's security guards. Likewise, those assigned to
the second shift were not allowed to report for work. This provoked some of the members of the local
union to demonstrate their protest for the dismissal of the said union officers. Some union members
left their work posts and walked out of the company premises.

On the other hand, the Federation, having achieved its objective, withdrew the Notice of Strike filed
with the NCMB.

On March 8, 1989, the petitioners filed a Notice of Strike with the NCMB, DOLE, Manila, docketed as
Case No. NCMB-NCR-NS-03-216-89, alleging the following grounds for the strike:
 (a) Discrimination

(b) Interference in union activities

(c) Mass dismissal of union officers and shop stewards

(d) Threats, coercion and intimidation

(e) Union busting

The following day, March 9, 1989, a strike vote referendum was conducted and out of 2, 103 union
members who cast their votes, 2,086 members voted to declare a strike.

On March 10, 1989, the thirty (30) dismissed union officers filed an urgent petition, docketed as
Case No. NCMB-NCR-NS-03-216-89, with the Office of the Secretary of the Department of Labor
and Employment praying for the suspension of the effects of their termination from employment.
However, the petition was dismissed by then Secretary Franklin Drilon on April 11, 1989, the
pertinent portion of which stated as follows:

At this point in time, it is clear that the dispute at M. Greenfield is purely an intra-union
matter. No mass lay-off is evident as the terminations have been limited to those allegedly
leading the secessionist group leaving MSMG-ULGWP to form a union under the KMU. . . .

xxx xxx xxx

WHEREFORE, finding no sufficient jurisdiction to warrant the exercise of our extraordinary

authority under Article 277 (b) of the Labor Code, as amended, the instant Petition is hereby
DISMISSED for lack of merit.

SO ORDERED.11

On March 13 and 14, 1989, a total of 78 union shop stewards were placed under preventive
suspension by respondent company. This prompted the union members to again stage a walk-out
and resulted in the official declaration of strike at around 3:30 in the afternoon of March 14, 1989.
The strike was attended with violence, force and intimidation on both sides resulting to physical
injuries to several employees, both striking and non-striking, and damage to company properties.

The employees who participated in the strike and allegedly figured in the violent incident were
placed under preventive suspension by respondent company. The company also sent return-to-work
notices to the home addresses of the striking employees thrice successively, on March 27, April 8
and April 31, 1989, respectively. However, respondent company admitted that only 261 employees
were eventually accepted back to work. Those who did not respond to the return-to-work notice were
sent termination letters dated May 17, 1989, reproduced below:

M. Greenfield Inc., (B)

 Km. 14, Merville Rd., Paraaque, M.M.

May 17, 1989

xxx xxx xxx

On March 14, 1989, without justifiable cause and without due notice, you left your work
assignment at the prejudice of the Company's operations. On March 27, April 11, and April
21, 1989, we sent you notices to report to the Company. Inspite of your receipt of said
notices, we have not heard from you up to this date.

Accordingly, for your failure to report, it is construed that you have effectively abandoned
your employment and the Company is, therefore, constrained to dismiss you for said cause.

Very truly yours,

M. GREENFIELD, INC., (B)

By:

WENZEL STEPHEN LIGOT

Asst. HRD Manager12

On August 7, 1989, the petitioners filed a verified complaint with the Arbitration Branch, National
Capital Region, DOLE, Manila, docketed as Case No. NCR-00-09-04199-89, charging private
respondents of unfair labor practice which consists of union busting, illegal dismissal, illegal
suspension, interference in union activities, discrimination, threats, intimidation, coercion, violence,
and oppression.

After the filing of the complaint, the lease contracts on the respondent company's office and factory
at Merville Subdivision, Paraaque expired and were not renewed. Upon demand of the owners of
the premises, the company was compelled to vacate its office and factory.

Thereafter, the company transferred its administration and account/client servicing department at
AFP-RSBS Industrial Park in Taguig, Metro Manila. For failure to find a suitable place in Metro
Manila for relocation of its factory and manufacturing operations, the company was constrained to
move the said departments to Tacloban, Leyte. Hence, on April 16, 1990, respondent company
accordingly notified its employees of a temporary shutdown in operations. Employees who were
interested in relocating to Tacloban were advised to enlist on or before April 23, 1990.

The complaint for unfair labor practice was assigned to Labor Arbiter Manuel Asuncion but was
thereafter reassigned to Labor Arbiter Cresencio Ramos when respondents moved to inhibit him
from acting on the case.
On December 15, 1992, finding the termination to be valid in compliance with the union security
clause of the collective bargaining agreement, Labor Arbiter Cresencio Ramos dismissed the
complaint.

Petitioners then appealed to the NLRC. During its pendency, Commissioner Romeo Putong retired
from the service, leaving only two commissioners, Commissioner Vicente Veloso III and Hon.
Chairman Bartolome Carale in the First Division. When Commissioner Veloso inhibited himself from
the case, Commissioner Joaquin Tanodra of the Third Division was temporarily designated to sit in
the First Division for the proper disposition of the case.

The First Division affirmed the Labor Arbiter's disposition. With the denial of their motion for
reconsideration on January 28, 1994, petitioners elevated the case to this Court, attributing grave
abuse of discretion to public respondent NLRC in:

I. UPHOLDING THE DISMISSAL OF THE UNION OFFICERS BY RESPONDENT

COMPANY AS VALID;

II. HOLDING THAT THE STRIKE STAGED BY THE PETITIONERS AS ILLEGAL;

III. HOLDING THAT THE PETITIONER EMPLOYEES WERE DEEMED TO HAVE

ABANDONED THEIR WORK AND HENCE, VALIDLY DISMISSED BY RESPONDENT
COMPANY; AND

IV. NOT FINDING RESPONDENT COMPANY AND RESPONDENT FEDERATION

OFFICERS GUILTY OF ACTS OF UNFAIR LABOR PRACTICE.

Notwithstanding the several issues raised by the petitioners and respondents in the voluminous
pleadings presented before the NLRC and this Court, they revolve around and proceed from the
issue of whether or not respondent company was justified in dismissing petitioner employees merely
upon the labor federation's demand for the enforcement of the union security clause embodied in
their collective bargaining agreement.

Before delving into the main issue, the procedural flaw pointed out by the petitioners should first be
resolved.

Petitioners contend that the decision rendered by the First Division of the NLRC is not valid because
Commissioner Tanodra, who is from the Third Division, did not have any lawful authority to sit, much
less write the ponencia, on a case pending before the First Division. It is claimed that a
commissioner from one division of the NLRC cannot be assigned or temporarily designated to
another division because each division is assigned a particular territorial jurisdiction. Thus, the
decision rendered did not have any legal effect at all for being irregularly issued.

Petitioners' argument is misplaced. Article 213 of the Labor Code in enumerating the powers of the
Chairman of the National Labor Relations Commission provides that:
 The concurrence of two (2) Commissioners of a division shall be necessary for the
pronouncement of a judgment or resolution. Whenever the required membership in a division
is not complete and the concurrence of two (2) commissioners to arrive at a judgment or
resolution cannot be obtained, the Chairman shall designate such number of additional
Commissioners from the other divisions as may be necessary.

It must be remembered that during the pendency of the case in the First Division of the NLRC, one
of the three commissioners, Commissioner Romeo Putong, retired, leaving Chairman Bartolome
Carale and Commissioner Vicente Veloso III. Subsequently, Commissioner Veloso inhibited himself
from the case because the counsel for the petitioners was his former classmate in law school. The
First Division was thus left with only one commissioner. Since the law requires the concurrence of
two commissioners to arrive at a judgment or resolution, the Commission was constrained to
temporarily designate a commissioner from another division to complete the First Division. There is
nothing irregular at all in such a temporary designation for the law empowers the Chairman to make
temporary assignments whenever the required concurrence is not met. The law does not say that a
commissioner from the first division cannot be temporarily assigned to the second or third division to
fill the gap or vice versa. The territorial divisions do not confer exclusive jurisdiction to each division
and are merely designed for administrative efficiency.

Going into the merits of the case, the court finds that the Complaint for unfair labor practice filed by
the petitioners against respondent company which charges union busting, illegal dismissal, illegal
suspension, interference in union activities, discrimination, threats, intimidation, coercion, violence,
and oppression actually proceeds from one main issue which is the termination of several
employees by respondent company upon the demand of the labor federation pursuant to the union
security clause embodied in their collective bargaining agreement.

Petitioners contend that their dismissal from work was effected in an arbitrary, hasty, capricious and
illegal manner because it was undertaken by the respondent company without any prior
administrative investigation; that, had respondent company conducted prior independent
investigation it would have found that their expulsion from the union was unlawful similarly for lack of
prior administrative investigation; that the federation cannot recommend the dismissal of the union
officers because it was not a principal party to the collective bargaining agreement between the
company and the union; that public respondents acted with grave abuse of discretion when they
declared petitioners' dismissals as valid and the union strike as illegal and in not declaring that
respondents were guilty of unfair labor practice.

Private respondents, on the other hand, maintain that the thirty dismissed employees who were
former officers of the federation have no cause of action against the company, the termination of
their employment having been made upon the demand of the federation pursuant to the union
security clause of the CBA; the expelled officers of the local union were accorded due process of law
prior to their expulsion from their federation; that the strike conducted by the petitioners was illegal
for noncompliance with the requirements; that the employees who participated in the illegal strike
and in the commission of violence thereof were validly terminated from work; that petitioners were
deemed to have abandoned their employment when they did not respond to the three return to work
notices sent to them; that petitioner labor union has no legal personality to file and prosecute the
case for and on behalf of the individual employees as the right to do so is personal to the latter; and
that, the officers of respondent company cannot be liable because as mere corporate officers, they
acted within the scope of their authority.

Public respondent, through the Labor Arbiter, ruled that the dismissed union officers were validly and
legally terminated because the dismissal was effected in compliance with the union security clause
of the CBA which is the law between the parties. And this was affirmed by the Commission on
appeal. Moreover, the Labor Arbiter declared that notwithstanding the lack of a prior administrative
investigation by respondent company, under the union security clause provision in the CBA, the
company cannot look into the legality or illegality of the recommendation to dismiss by the union nd
the obligation to dismiss is ministerial on the part of the company.13

This ruling of the NLRC is erroneous. Although this Court has ruled that union security clauses
embodied in the collective bargaining agreement may be validly enforced and that dismissals
pursuant thereto may likewise be valid, this does not erode the fundamental requirement of due
process. The reason behind the enforcement of union security clauses which is the sanctity and
inviolability of contracts14 cannot override one's right to due process.

In the case of Cario vs. National Labor Relations Commission,15 this Court pronounced that while
the company, under a maintenance of membership provision of the collective bargaining agreement,
is bound to dismiss any employee expelled by the union for disloyalty upon its written request, this
undertaking should not be done hastily and summarily. The company acts in bad faith in dismissing a
worker without giving him the benefit of a hearing.

The power to dismiss is a normal prerogative of the employer. However, this is not without
limitation. The employer is bound to exercise caution in terminating the services of his
employees especially so when it is made upon the request of a labor union pursuant to the
Collective Bargaining Agreement, . . . Dismissals must not be arbitrary and capricious. Due
process must be observed in dismissing an employee because it affects not only his position
but also his means of livelihood. Employers should respect and protect the rights of their
employees, which include the right to labor.

In the case under scrutiny, petitioner union officers were expelled by the federation for allegedly
committing acts of disloyalty and/or inimical to the interest of ULGWP and in violation of its
Constitution and By-laws. Upon demand of the federation, the company terminated the petitioners
without conducting a separate and independent investigation. Respondent company did not inquire
into the cause of the expulsion and whether or not the federation had sufficient grounds to effect the
same. Relying merely upon the federation's allegations, respondent company terminated petitioners
from employment when a separate inquiry could have revealed if the federation had acted arbitrarily
and capriciously in expelling the union officers. Respondent company's allegation that petitioners
were accorded due process is belied by the termination letters received by the petitioners which
state that the dismissal shall be immediately effective.

As held in the aforecited case of Cario, "the right of an employee to be informed of the charges
against him and to reasonable opportunity to present his side in a controversy with either the
company or his own union is not wiped away by a union security clause or a union shop clause in a
collective bargaining agreement. An employee is entitled to be protected not only from a company
which disregards his rights but also from his own union the leadership of which could yield to the
temptation of swift and arbitrary expulsion from membership and mere dismissal from his job.

While respondent company may validly dismiss the employees expelled by the union for disloyalty
under the union security clause of the collective bargaining agreement upon the recommendation by
the union, this dismissal should not be done hastily and summarily thereby eroding the employees'
right to due process, self-organization and security of tenure. The enforcement of union security
clauses is authorized by law provided such enforcement is not characterized by arbitrariness, and
always with due process.16 Even on the assumption that the federation had valid grounds to expel
the union officers, due process requires that these union officers be accorded a separate hearing by
respondent company.

In its decision, public respondent also declared that if complainants (herein petitioners) have any
recourse in law, their right of action is against the federation and not against the company or its
officers, relying on the findings of the Labor Secretary that the issue of expulsion of petitioner union
officers by the federation is a purely intra-union matter.

Again, such a contention is untenable. While it is true that the issue of expulsion of the local union
officers is originally between the local union and the federation, hence, intra-union in character, the
issue was later on converted into a termination dispute when the company dismissed the petitioners
from work without the benefit of a separate notice and hearing. As a matter of fact, the records
reveal that the termination was effective on the same day that the termination notice was served on
the petitioners.

In the case of Liberty Cotton Mills Workers Union vs. Liberty Cotton Mills, Inc.17, the Court held the
company liable for the payment of backwages for having acted in bad faith in effecting the dismissal
of the employees.

. . . Bad faith on the part of the respondent company may be gleaned from the fact that the
petitioner workers were dismissed hastily and summarily. At best, it was guilty of a tortious
act, for which it must assume solidary liability, since it apparently chose to summarily dismiss
the workers at the union's instance secure in the union's contractual undertaking that the
union would hold it "free from any liability" arising from such dismissal.

Thus, notwithstanding the fact that the dismissal was at the instance of the federation and that it
undertook to hold the company free from any liability resulting from such a dismissal, the company
may still be held liable if it was remiss in its duty to accord the would-be dismissed employees their
right to be heard on the matter.

Anent petitioners contention that the federation was not a principal party to the collective bargaining
agreement between the company and the union, suffice it to say that the matter was already ruled
upon in the Interpleader case filed by respondent company. Med-Arbiter Anastacio Bactin thus ruled:

After a careful examination of the facts and evidences presented by the parties, this Officer
hereby renders its decision as follows:
 1.) It appears on record that in Collective Bargaining Agreement (CBA) which took effect on
July 1, 1986, the contracting parties are M. Greenfield, Inc. (B) and Malayang Samahan ng
Mga Manggagawa sa M. Greenfield, Inc. (B) (MSMG)/United Lumber and General Workers
of the Philippines (ULGWP). However, MSMG was not yet registered labor organization at
the time of the signing of the CBA. Hence, the union referred to in the CBA is the ULGWP.18

Likewise on appeal, Director Pura Ferrer-Calleja put the issue to rest as follows:

It is undisputed that ULGWP is the certified sole and exclusive collective bargaining agent of
all the regular rank-and-file workers of the company, M. Greenfield, Inc. (pages 31-32 of the
records).

It has been established also that the company and ULGWP signed a 3-year collective
bargaining agreement effective July 1, 1986 up to June 30, 1989.19

Although the issue of whether or not the federation had reasonable grounds to expel the petitioner
union officers is properly within the original and exclusive jurisdiction of the Bureau of Labor
Relations, being an intra-union conflict, this Court deems it justifiable that such issue be nonetheless
ruled upon, as the Labor Arbiter did, for to remand the same to the Bureau of Labor Relations would
be to intolerably delay the case.

The Labor Arbiter found that petitioner union officers were justifiably expelled from the federation for
committing acts of disloyalty when it "undertook to disaffiliate from the federation by charging
ULGWP with failure to provide any legal, educational or organizational support to the local. . . . and
declared autonomy, wherein they prohibit the federation from interfering in any internal and external
affairs of the local union."20

It is well-settled that findings of facts of the NLRC are entitled to great respect and are generally
binding on this Court, but it is equally well-settled that the Court will not uphold erroneous
conclusions of the NLRC as when the Court finds insufficient or insubstantial evidence on record to
support those factual findings. The same holds true when it is perceived that far too much is
concluded, inferred or deduced from the bare or incomplete facts appearing of record. 21

In its decision, the Labor Arbiter declared that the act of disaffiliation and declaration of autonomy by
the local union was part of its "plan to take over the respondent federation." This is purely conjecture
and speculation on the part of public respondent, totally unsupported by the evidence.

A local union has the right to disaffiliate from its mother union or declare its autonomy. A local union,
being a separate and voluntary association, is free to serve the interests of all its members including
the freedom to disaffiliate or declare its autonomy from the federation to which it belongs when
circumstances warrant, in accordance with the constitutional guarantee of freedom of association. 22

The purpose of affiliation by a local union with a mother union or a federation.

. . . is to increase by collective action the bargaining power in respect of the terms and
conditions of labor. Yet the locals remained the basic units of association, free to serve their
 own and the common interest of all, subject to the restraints imposed by the Constitution and
By-Laws of the Association, and free also to renounce the affiliation for mutual welfare upon
the terms laid down in the agreement which brought it into existence. 23

Thus, a local union which has affiliated itself with a federation is free to sever such affiliation anytime
and such disaffiliation cannot be considered disloyalty. In the absence of specific provisions in the
federation's constitution prohibiting disaffiliation or the declaration of autonomy of a local union, a
local may dissociate with its parent union.24

The evidence on hand does not show that there is such a provision in ULGWP's constitution.
Respondents' reliance upon Article V, Section 6, of the federation's constitution is not right because
said section, in fact, bolsters the petitioner union's claim of its right to declare autonomy:

Sec. 6. The autonomy of a local union affiliated with ULGWP shall be respected insofar as it
pertains to its internal affairs, except as provided elsewhere in this Constitution.

There is no disloyalty to speak of, neither is there any violation of the federation's constitution
because there is nothing in the said constitution which specifically prohibits disaffiliation or
declaration of autonomy. Hence, there cannot be any valid dismissal because Article II, Section 4 of
the union security clause in the CBA limits the dismissal to only three (3) grounds, to wit: failure to
maintain membership in the union (1) for non-payment of union dues, (2) for resignation; and (3) for
violation of the union's Constitution and By-Laws.

To support the finding of disloyalty, the Labor Arbiter gave weight to the fact that on February 26,
1989, the petitioners declared as vacant all the responsible positions of ULGWP, filled these
vacancies through an election and filed a petition for the registration of UWP as a national
federation. It should be pointed out, however, that these occurred after the federation had already
expelled the union officers. The expulsion was effective November 21, 1988. Therefore, the act of
establishing a different federation, entirely separate from the federation which expelled them, is but a
normal retaliatory reaction to their expulsion.

With regard to the issue of the legality or illegality of the strike, the Labor Arbiter held that the strike
was illegal for the following reasons: (1) it was based on an intra-union dispute which cannot
properly be the subject of a strike, the right to strike being limited to cases of bargaining deadlocks
and unfair labor practice (2) it was made in violation of the "no strike, no lock-out" clause in the CBA,
and (3) it was attended with violence, force and intimidation upon the persons of the company
officials, other employees reporting for work and third persons having legitimate business with the
company, resulting to serious physical injuries to several employees and damage to company
property.

On the submission that the strike was illegal for being grounded on a non-strikeable issue, that is,
the intra-union conflict between the federation and the local union, it bears reiterating that when
respondent company dismissed the union officers, the issue was transformed into a termination
dispute and brought respondent company into the picture. Petitioners believed in good faith that in
dismissing them upon request by the federation, respondent company was guilty of unfair labor
practice in that it violated the petitioner's right to self-organization. The strike was staged to protest
respondent company's act of dismissing the union officers. Even if the allegations of unfair labor
practice are subsequently found out to be untrue, the presumption of legality of the strike prevails. 25

Another reason why the Labor Arbiter declared the strike illegal is due to the existence of a no strike
no lockout provision in the CBA. Again, such a ruling is erroneous. A no strike, no lock out provision
can only be invoked when the strike is economic in nature, i.e. to force wage or other concessions
from the employer which he is not required by law to grant. 26 Such a provision cannot be used to
assail the legality of a strike which is grounded on unfair labor practice, as was the honest belief of
herein petitioners. Again, whether or not there was indeed unfair labor practice does not affect the
strike.

On the allegation of violence committed in the course of the strike, it must be remembered that the
Labor Arbiter and the Commission found that "the parties are agreed that there were violent
incidents . . . resulting to injuries to both sides, the union and management." 27 The evidence on
record show that the violence cannot be attributed to the striking employees alone for the company
itself employed hired men to pacify the strikers. With violence committed on both sides, the
management and the employees, such violence cannot be a ground for declaring the strike as
illegal.

With respect to the dismissal of individual petitioners, the Labor Arbiter declared that their refusal to
heed respondent's recall to work notice is a clear indication that they were no longer interested in
continuing their employment and is deemed abandonment. It is admitted that three return to work
notices were sent by respondent company to the striking employees on March 27, April 11, and April
21, 1989 and that 261 employees who responded to the notice were admitted back to work.

However, jurisprudence holds that for abandonment of work to exist, it is essential (1) that the
employee must have failed to report for work or must have been absent without valid or justifiable
reason; and (2) that there must have been a clear intention to sever the employer-employee
relationship manifested by some overt acts.28Deliberate and unjustified refusal on the part of the
employee to go back to his work post amd resume his employment must be established. Absence
must be accompanied by overt acts unerringly pointing to the fact that the employee simply does not
want to work anymore.29 And the burden of proof to show that there was unjustified refusal to go
back to work rests on the employer.

In the present case, respondents failed to prove that there was a clear intention on the part of the
striking employees to sever their employer-employee relationship. Although admittedly the company
sent three return to work notices to them, it has not been substantially proven that these notices
were actually sent and received by the employees. As a matter of fact, some employees deny that
they ever received such notices. Others alleged that they were refused entry to the company
premises by the security guards and were advised to secure a clearance from ULGWP and to sign a
waiver. Some employees who responded to the notice were allegedly told to wait for further notice
from respondent company as there was lack of work.

Furthermore, this Court has ruled that an employee who took steps to protest his lay-off cannot be
said to have abandoned his work.30 The filing of a complaint for illegal dismissal is inconsistent with
the allegation of abandonment. In the case under consideration, the petitioners did, in fact, file a
complaint when they were refused reinstatement by respondent company.

Anent public respondent's finding that there was no unfair labor practice on the part of respondent
company and federation officers, the Court sustains the same. As earlier discussed, union security
clauses in collective bargaining agreements, if freely and voluntarily entered into, are valid and
binding. Corollary, dismissals pursuant to union security clauses are valid and legal subject only to
the requirement of due process, that is, notice and hearing prior to dismissal. Thus, the dismissal of
an employee by the company pursuant to a labor union's demand in accordance with a union
security agreement does not constitute unfair labor practice.31

However, the dismissal was invalidated in this case because of respondent company's failure to
accord petitioners with due process, that is, notice and hearing prior to their termination. Also, said
dismissal was invalidated because the reason relied upon by respondent Federation was not valid.
Nonetheless, the dismissal still does not constitute unfair labor practice.

Lastly, the Court is of the opinion, and so holds, that respondent company officials cannot be held
personally liable for damages on account of the employees' dismissal because the employer
corporation has a personality separate and distinct from its officers who merely acted as its agents.

It has come to the attention of this Court that the 30-day prior notice requirement for the dismissal of
employees has been repeatedly violated and the sanction imposed for such violation enunciated
in Wenphil Corporation vs. NLRC32 has become an ineffective deterrent. Thus, the Court recently
promulgated a decision to reinforce and make more effective the requirement of notice and hearing,
a procedure that must be observed before termination of employment can be legally effected.

In Ruben Serrano vs. NLRC and Isetann Department Store (G.R. No. 117040, January 27, 2000),
the Court ruled that an employee who is dismissed, whether or not for just or authorized cause but
without prior notice of his termination, is entitled to full backwages from the time he was terminated
until the decision in his case becomes final, when the dismissal was for cause; and in case the
dismissal was without just or valid cause, the backwages shall be computed from the time of his
dismissal until his actual reinstatement. In the case at bar, where the requirement of notice and
hearing was not complied with, the aforecited doctrine laid down in the Serrano case applies.

WHEREFORE, the Petition is GRANTED; the decision of the National Labor Relations Commission
in Case No. NCR-00-09-04199-89 is REVERSED and SET ASIDE; and the respondent company is
hereby ordered to immediately reinstate the petitioners to their respective positions. Should
reinstatement be not feasible, respondent company shall pay separation pay of one month salary for
every year of service. Since petitioners were terminated without the requisite written notice at least
30 days prior to their termination, following the recent ruling in the case of Ruben Serrano vs.
National Labor Relations Commission and Isetann Department Store, the respondent company is
hereby ordered to pay full backwages to petitioner-employees while the Federation is also ordered to
pay full backwages to petitioner-union officers who were dismissed upon its instigation. Since the
dismissal of petitioners was without cause, backwages shall be computed from the time the herein
petitioner employees and union officers were dismissed until their actual reinstatement. Should
reinstatement be not feasible, their backwages shall be computed from the time petitioners were
terminated until the finality of this decision. Costs against the respondent company.
1wphi1.nt

SO ORDERED.

17. G.R. No. 75037 April 30, 1987

TANDUAY DISTILLERY LABOR UNION, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, LAMBERTO SANTOS, PEDRO ESTERAL,
ROMAN CHICO, JOSELITO ESTANISLAO, JOSE DELGADO, JUANITO ARGUELLES, RICARDO
CAJOLES, and JOSEFINO PAGUYO, respondents.

No. 75055 April 30, 1987

TANDUAY DISTILLERY, INC., petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION (NLRC), LAMBERTO SANTOS, PEDRO
ESTERAL, ROMAN CHICO, JOSELITO ESTANISLAO, JOSE DELGADO, JUANITO
ARGUELLES, RICARDO CAJOLES, and JOSEFINO PAGUYO, respondents.

Jaime G. de Leon for petitioner in G.R. No. 75037.

Pacifico de Ocampo and Benjamin C. Gascon for petitioner in G.R. No. 75055.

GUTIERREZ, JR.:

These consolidated petitions for certiorari seek the review and setting aside of respondent National
Labor Relations Commission's decision in NLRC Case No. AB-6-11685-81 dated May 26, 1986,
affirming the October 12, 1984 decision of the Labor Arbiter, and of the NLRC resolution dated June
28, 1986, which denied the motion for reconsideration of the petitioners.

The facts of the case are as follows:

Private respondents were all employees of Tanduay Distillery, Inc., (TDI) and members of the
Tanduay Distillery Labor Union (TDLU), a duly organized and registered labor organization and the
exclusive bargaining agent of the rank and file employees of the petitioner company.

On March 11, 1980, a Collective Bargaining Agreement (CBA), was executed between TDI and
TDLU. The CBA was duly ratified by a majority of the workers in TDI including herein private
respondents, and a copy was filed with the Ministry of Labor and Employment (MOLE) on October
29, 1980 for certification. The CBA had a term of three (3) years from July 1, 1979 to June 30, 1982.
It also contained a union security clause. which provides:
 All workers who are or may during the effectivity of this Contract, become members
of the Union in accordance with its Constitution and By-Laws shall, as a condition of
their continued employment, maintain membership in good standing in the Union for
the duration of the agreement.

On or about the early part of October 1980, while the CBA was in effect and within the contract bar
period the private respondents joined another union, the Kaisahan Ng Manggagawang
Pilipino KAMPIL) and organized its local chapter in TDI, with private respondents Pedro Esteral and
Lamberts Santos being elected President and Vice-President, respectively.

On November 7, 1980, KAMPIL filed a petition for certification election to determine union
representation in TDI, which development compelled TDI to file a grievance with TDLU on November
7, 1980 pursuant to Article XV of the CBA.

Acting on the grievance of TDI, TDLU wrote the private respondents on December 23, 1980
requiring them to explain why TDLU should not take disciplinary action against them for, among
other things

Disloyalty to the Tanduay Distillery Labor Union (T.D.L.U.) by forming and joining
another union with a complete takeover intent as the sole and exclusive bargaining
representative of all rank and file employees at TDI. (p. 16, Rollo)

TDLU created a committee to investigate its erring members in accordance with its by-laws which
are not disputed by the private respondents. Except for Josefino Paguyo who, despite due notice,
was absent during the investigation conducted on January 2, 1981, all the private respondents were
present and given a chance to explain their side. Thereafter, in a resolution dated January 9, 1981,
TDLU, through the Investigating Committee and approved by TDLU's Board of Directors, expelled
the private respondents from TDLU for disloyalty to the Union effective January 16, 1981. By letter
dated January 10, 1981, TDLU notified TDI that private respondents had been expelled from TDLU
and demanded that TDI terminate the employment of private, respondents because they had lost
their membership with TDLU.

Acting on the demand of TDLU, TDI, in a Memorandum dated January 13, 1981, notified "that
effective January 16, 1981, we shall file the usual application for clearance (with preventive
suspension to take effect on the same day) to terminate your services on the basis of the union
security clause of our CBA.

Accordingly, TDI filed with the MOLE on January 14, 1981 its application for clearance to terminate
the employment of private respondents. This application docketed as Case No. NCR-AC-1-435-81
specifically stated that the action applied for was preventive suspension which will result in
termination of employment, ... due to (T)hreat to (P)roduction traceable to rival (U)nion activity. The
private respondents then filed with the MOLE a complaint for illegal dismissal against TDI and
Benjamin Agaloos, in his capacity as President of TDLU, which complaint was docketed as Case No.
STF-1-333-91. The cases were jointly heard and tried by Labor Arbiter Teodorico Dogelio.
However, on January 26, 1981, the Med-Arbiter granted the private respondents' petition calling for a
certification election among the rank and file employees of TDI. The Med-Arbiter's Order
stated, inter-alia that the existence of an uncertified CBA cannot be availed of as a bar to the holding
of a certification election (Emphasis supplied). On appeal of TDI and TDLU to the Bureau of Labor
Relations (BLR), the order for the holding of a certification election was reversed and set aside by
the BLR on July 8,1982, thus:

A careful perusal of the records of the case will reveal that the uncertified CBA was
duly filed and submitted on 29 October 1980, to last until June 30, 1982. Indeed, said
CBA is certifiable for having complied with all the necessary requirements for
certification. Consistent with the intent and spirit of P.D. 1391 and its implementing
rules, the contract bar rule should have been applied in this case. The representation
issue cannot be entertained except within the last sixty (60) days of the collective
agreement. (Emphasis supplied) (p. 243, Rollo)

The last 60 days in a collective bargaining agreement is referred to as the "freedom period" when
rival union representation can be entertained during the existence of a valid CBA. In this case, the
"freedom period" was May 1 to June 30, 1982. After the term of the CBA lapsed, KAMPIL moved for
a reconsideration of the July 8, 1982 decision of the BLR on July 23, 1982 on the same ground that
since the CBA then in question was uncertified, the contract bar rule could not be made to apply. On
December 3, 1982, the BLR reversed itself, but for a different reason and held that:

Movant union (Kampil) now seeks for the reconsideration of that Order on the
ground, among others, that the CBA in question is not certifiable and, hence, the
contract bar rule cannot properly apply in this case.

After a more careful examination of the records, this Bureau is of the view that
the instant motion should be given due course, not necessarily for the arguments
raised by herein movant.

It should be noted that the alleged CBA has now expired. Its expiry date being 30
June 1982. Consequently; there appears to be no more obstacle in allowing a
certification election to be conducted among the rank and file of respondent. The
contract bar rule will no longer apply in view of the supervening event, that is, the
expiration of the contract. (Emphasis supplied) (pp. 244-245, Rollo)

TDLU filed a petition for review of the BLR decision with the Supreme Court, docketed as Case No.
G.R. No. 63995 TDI argued that KAMPIL did not have a cause of action when the petition for
certification was filed on November 7, 1980 because the freedom period was not yet in effect. The
fact that the BLR issued its order when the 60-day freedom period had supervened, did not cure this
defect. Moreover, the BLR decision completely overlooked or ignored the fact that on September 21,
1982, a new CBA had been executed between the TDLU and TDI so that when the BLR allowed a
certification election in its order dated December 3, 1982, the contract bar rule was applicable again.
This Court denied TDLU's petition in a minute resolution on November 14,1983.
Using the foregoing as relevant and applicable to the consolidated cases for the clearance
application for termination filed by TDI and the illegal dismissal case filed by the private respondents
on October 12, 1984, Labor Arbiter Teodorico Dogelio rendered a decision denying TDI's application
to terminate the private respondents and ordering TDI to reinstate the complainants with backwages.
It should be noted that the Labor Arbiter rendered the decision even before the petitioner company
could file its memorandum, formal offer of exhibits and its manifestation and motion to correct
tentative markings of exhibits. This decision of the arbiter was upheld by the respondent NLRC in
NLRC Case No. AB-6-11685-81 in its decision dated May 20,1986.

TDI and TDLU moved for reconsideration of the questioned decision, In its motion, TDI alleged, inter
alia, that respondent NLRC did not rule on the validity of the CBA as a contract, neither did it resolve
squarely the validity of the enforcement of the union security clause of the CBA. TDI stated further
that respondent NLRC failed to consider the fact that at the time the private respondents were
expelled by TDLU and consequently terminated by TDI, the union security clause of the CBA was in
full force and effect, binding TDI and TDLU.

For its part, TDLU said that the decision of the Supreme Court in the certification case could not be
used by respondent NLRC to justify its decision in the dismissal case because the issues on the
cases are entirely different and miles apart. It is for this reason that there are two (2) cases that are
involved. TDLU explained that the Supreme Court decided to dismiss the petition for certiorari of TDI
and TDLU in the certification case because the original CBA existing at the time the private
respondents formed and joined KAMPIL had already expired. However, TDLU made it clear that
when the private respondents organized KAMPIL in TDI, the same CBA was still in force and the
disaffiliation did not take place within the freedom period. Hence, at that point in time, the private
respondents committed disloyalty against the union.

On June 26, 1986, respondent NLRC denied the motion for reconsideration filed by TDI and TDLU
for lack of merit. In its petition, TDI alleged that:

RESPONDENT COMMISSION ACTED IN EXCESS AND WITH GRAVE ABUSE OF

ITS DISCRETION AND IN A MANNER CONTRARY TO LAW IN RENDERING ITS
DECISION EN BANC OF MAY 20, 1986 AND IN DENYING PETITIONER'S MOTION
FOR RECONSIDERATION THEREOF IN ITS RESOLUTION SOLUTION DATED
JUNE 26, 1986 BECAUSE

1. THE RESPONDENT COMMISSION HAS IGNORED THE FACT

THAT THE PRIVATE RESPONDENTS WERE EXPELLED BY TDLU
FROM ITS MEMBERSHIP ON JANUARY 16, 1981 AND,
CONSEQUENTLY, TDLU HAD DEMANDED OF THE PETITIONER
OF THE ENFORCEMENT OF THE UNION SECURITY CLAUSE OF
THE CBA, THE SAID CBA WAS AN EXISTING AND A VALID
CONTRACT BETWEEN THE PETITIONER AND TDLU, AND
EFFECTIVE BETWEEN THE PARTIES;
 2. IT IS FUNDAMENTAL THAT A UNION SECURITY CLAUSE
PROVISION IN COLLECTIVE BARGAINING AGREEMENT IS
BINDING BETWEEN THE PARTIES TO THE CBA UNDER THE
LAWS;

3. THE EXPULSION OF THE PRIVATE RESPONDENTS FROM

TDLU WAS THE UNION'S OWN DECISION. HENCE, WHEN TDLU
DEMANDED OF THE PETITIONER THE ENFORCEMENT OF THE
SECURITY CLAUSE PROVISION OF THE CBA BY SEPARATING
PRIVATE RESPONDENTS FROM THEIR EMPLOYMENT, FOR
HAVING LOST THEIR MEMBERSHIP IN THE UNION, THE
PETITIONER WAS DUTY BOUND TO DO SO;

4. THE ALLUSION THAT THE CBA WAS NOT CERTIFIED BY THE

BUREAU OF LABOR RELATIONS (BLR) HAS NOTHING TO DO
WITH ITS EFFECTIVENESS AS A VALID CONTRACT BETWEEN
ALL PARTIES THERETO.

II

RESPONDENT COMMISSION ACTED WITH GRAVE ABUSE OF DISCRETION

AND IN EXCESS OF ITS JURISDICTION IN HOLDING THAT PRIVATE
RESPONDENTS DID NOT COMMIT ACTS PREJUDICIAL TO THE PETITIONER'S
PRODUCTION EFFORTS TO BE SUFFICIENT BASIS FOR THEIR PREVENTIVE
SUSPENSION AND EVENTUAL REMOVAL.

On the other hand, petitioner TDLU in essence contends that:

THE CBA IS VALID AND BINDING NOT ONLY ON TDI AND TDLU BUT LIKEWISE ON PRIVATE
RESPONDENTS WHO HAVE RATIFIED THE SAME IN THEIR INDIVIDUAL CAPACITIES AS
MEMBERS OF TDLU; HENCE, THE UNION SECURITY CLAUSE IS VALID AND BINDING ON
THEM;

THE ACTION OF TDLU IN REQUESTING FOR THE ENFORCEMENT OF THE UNION SECURITY
CLAUSE OF THE CBA BETWEEN TDI AND TDLU IS PART OF THE INHERENT RIGHT TO SELF-
ORGANIZATION;

TDLU CANNOT BE MADE LIABLE FOR THE PAYMENT OF BACKWAGES BECAUSE ALL THAT IT
DID WAS ASK FOR THE ENFORCEMENT OF A CBA, WHICH CBA HAS NEVER BEEN
DECLARED NULL AND VOID AND THE UNION SECURITY CLAUSE SOUGHT TO BE
ENFORCED WAS NOT ALSO DECLARED NULL AND VOID;

PRIVATE RESPONDENTS DISAFFILIATED THEMSELVES FROM TDLU BY ORGANIZING THE

LOCAL CHAPTER OF KAMPIL IN TDI IN OCTOBER 1980, BUT THE ACT OF DISAFFILIATION
WAS COMMITTED OUTSIDE THE FREEDOM PERIOD PROVIDED UNDER PRESIDENTIAL
DECREE 1391 WHICH LIMIT ALL PETITIONS FOR CERTIFICATION ELECTION, DISAFFILIATION
AND INTERVENTION TO THE 60 DAY FREEDOM PERIOD PRECEDING THE EXPIRATION OF
THE CBA. HENCE, PRIVATE RESPONDENTS COULD BE EXPELLED FROM MEMBERSHIP FOR
DISLOYALTY AND OTHER INIMICAL ACTS AGAINST THE INTEREST OF TDLU.

The private respondents admit that the root of the whole controversy in the instant case is the
organization of a Local Union Chapter of KAMPIL at TDI and the subsequent filing of a petition for
certification election with the MOLE by said local chapter. This local chapter of KAMPIL was
organized with the help of, among others, the private respondents some of whom were elected union
officers of said chapter. They contend that their act of organizing a local chapter of KAMPIL and
eventual filing of a petition for certification election was pursuant to their constitutional right to self-
organization.

The issues to be resolved are the following: (a) whether or not TDI was justified in terminating private
respondents' employment in the company on the basis of TDLU's demand for the enforcement of the
Union Security Clause of the CBA between TDI and TDLU; and (b) whether or not TDI is guilty of
unfair labor practice in complying with TDLU's demand for the dismissal of private respondents.

We enforce basic principles essential to a strong and dynamic labor movement. An established
postulate in labor relations firmly rooted in this jurisdiction is that the dismissal of an employee
pursuant to a demand of the majority union in accordance with a union security agreement following
the loss of seniority rights is valid and privileged and does not constitute an unfair labor practice.

Article 249 (e) of the Labor Code as amended specifically recognizes the closed shop arrangement
as a form of union security. The closed shop, the union shop, the maintenance of membership shop,
the preferential shop, the maintenance of treasury shop, and check-off provisions are valid forms of
union security and strength. They do not constitute unfair labor practice nor are they violations of the
freedom of association clause of the Constitution. (See Pascual, Labor Relations Law, 1986 Edition,
pp. 221-225 and cases cited therein.) There is no showing in these petitions of any arbitrariness or a
violation of the safeguards enunciated in the decisions of this Court interpreting union security
arrangements brought to us for review.

In this light, the petitioner points out that embedded at the very core and as raison d'etre for the
doctrine which enforces the closed-shop, the union shop, and other forms of union security clauses
in the collective bargaining agreement is the principle of sanctity and inviolability of contracts
guaranteed by the Constitution.

This Court speaking thru Mr. Justice Labrador, in Victorias Milling Co., Inc., v. Victorias-Manapia
Workers Organization (9 SCRA 154), ruled:

Another reason for enforcing the closed-shop agreement is the principle of sanctity or
inviolability of contracts guaranteed by the Constitution. As a matter of principle the
provision of the Industrial Peace Act relating freedom to employees to organize
themselves and set their representative for entering into bargaining agreements,
should be subordinate to the constitutional provision protecting the sanctity of
contracts. We can not conceive how freedom to contract, which should be allowed to
be exercised without limitation may be subordinated to the freedom of laborers to
 choose the organization they desire to represent them. And even if the legislature
had intended to do so and made such freedom of the laborer paramount to the
sanctity of obligation of contracts, such attempt to override the constitutional
provision would necessarily and ipso facto be null and void.

xxx xxx xxx

[T]he action of the respondent company in enforcing the terms of the closed-shop
agreement is a valid exercise of its rights and obligations under the contract. The
dismissal by virtue thereof cannot constitute an unfair labor practice, as it was in
pursuance of an agreement that has been found to be regular and of a closed-shop
agreement which under our laws is valid and binding.

In the instant case, the CBA in question provides for a Union Security Clause requiring:

(c) All workers who are or may during the effectivity of this contract become
members of the union in accordance with its constitution and by-laws shall as a
condition of their continued employment, maintain membership in good standing in
the union for the duration of the agreement. (Emphasis supplied)

Having ratified that CBA and being then members of the TDLU, the private respondents owe fealty
and are required under the Union Security Clause to maintain their membership in good standing
with it during the term thereof, a requirement which ceases to be binding only during the 60-day
freedom period immediately preceding the expiration of the CBA. When the private respondents
organized and joined the KAMPIL Chapter in TDI and filed the corresponding petition for certification
election in November 1980, there was no freedom period to speak of yet. For under Presidential
Decree No. 1391, promulgated May 29, 1978, the law applicable in this instance provides:

No petition for certification election for intervention disaffiliation shall be entertained

or given due course except within the 60 day freedom period immediately preceding
the execution of the Collective Bargaining Agreement.

and under Section 21, Rule 3 of the Rules Implementing PD 1391 "... pending certification of a duly
filed collective bargaining agreement no petition for certification election in the same bargaining unit
shall be entertained or processed." (promulgated September 19, 1978). The Labor Code further
mandates that "no certification election shall be entertained if a Collective Bargaining Agreement
which has been submitted in accordance with Article 231 of the Code exists between the employer
and a legitimate labor organization except within sixty (60) days prior to the expiration of the life of
such collective agreement (Art. 257).

The fact, therefore, that the Bureau of Labor Relations (BLR) failed to certify or act on TDLU's
request for certification of the CBA in question is of no moment to the resolution of the issues
presented in this case. The BLR itself found in its order of July 8, 1982 that "the certified CBA was
duly filed and submitted on October 29, 1980, to last until June 30, 1982 is certifiable for having
complied with all the requirements for certification.
The validity of the CBA is not here assailed by private respondents. They admitted having organized
the local chapter of KAMPIL at TDI, although it is claimed that this was done when there was no
certified CBA between TDI and TDLU that would constitute a bar to the certification election. Of
significance is the ruling in Manalang v. Artex Development Co., Inc., (21 SCRA 561, 569) decided
on a factual setting where the petitioners had affiliated themselves with another labor union, Artex
Free Workers, without first terminating their membership with Bagong Buhay Labor Union (BBLU)
and without the knowledge of the officers of the latter union, for which reason the petitioners were
expelled from the BBLU for acts of disloyalty; and the company, upon the behest of BBLU dismissed
them from employment pursuant to the closed-shop stipulation in a Collective Bargaining
Agreement. This Court ruled:

The validity of the Collective Bargaining Agreement of March 4, 1960 is not assailed
by the petitioners. Nor do they deny that they were members of the BBLU prior to
March 4, 1960 and until they were expelled from the union. ...

The petitioners further contention that the closed-shop provision in the collective
Bargaining Agreement is illegal because it is unreasonable,restrictive of right of
freedom of association guaranteed by the Constitution is a futile exercise in
argumentation of this Court has in a number of cases sustained closed-shop as valid
union security.

Finally, even if we assume, in gratia argumenti,that the petition were unaware of the
stipulation set forth in the collective bargaining agreement since their membership in
the BBLU prior to t the expulsion thereform is undenied there can be no question that
as long as the agreement with closed-shop provision was in force they were bound
by it. Neither their ignorance of,nor their dissatisfaction with, its terms and condition
would justify breach thereof or the formation by them of a union of their own.As has
been aptly said the collective bargaining agreement entered into by officers of a
union as agent of the member,and an employer,gives rise to valid inforcible
contractual relation against the individual union members in matters that affect the
entire membership or large classes of its member who employed under an
agreement between the union and his employer is bound by the provision
thereof,since it is a joint and several contract of the members of the union and
entered into by the union as their agent.

In an earlier case, this Court held:

Nor can it be said that the stipulation providing that the employer may dismiss an
employee whenever the union recommends his expulsion either for disloyalty or for
any violation of its by-laws and constitution is illegal or constitute of unfair labor
practice, for such is one of the matters on which management and labor can agree in
order to bring about harmonious relations between them and the union, and cohesion
and integrity of their organization And as an act of loyalty a union may certainly
require its members not to affiliate with any other labor union and to consider its
infringement as a reasonable cause for separation. This is what was done by
respondent union. And the respondent employer did nothing but to put in force their
 agreement when it separated the herein complainants upon the recommendation of
said union. Such a stipulation is not only necessary to maintain loyalty and preserve
the integrity of the union but is allowed by the Magna Charta of Labor when it
provided that while it is recognized that an employee shall have the right to self-
organization, it is at the same time postulated that such right shall not injure the right
of the labor organization to prescribe its own rules with respect to the acquisition or
retention of membership therein (Section 41(b) par. 1, Republic Act 875). This
provision is significant. It is an indirect restriction on the right of an employee to self-
organization. It is a solemn pronouncement of a policy that while an employee is
given the right to join a labor organization, such right should only be asserted in a
manner that will not spell the destruction of the same organization The law requires
loyalty to the union on the part of its members in order to obtain to the full extent its
cohesion and integrity. We therefore, see nothing improper in the disputed provisions
of the collective bargaining agreement entered into between the parties. (Ang
Malayang Manggagawa ng Ang Tibay Enterprises, et al. v. Ang Tibay, et al. 102 Phil.
669) (Emphasis supplied)

We agree with petitioner TDLU that the dismissal of the petition for certiorari in G.R. No. 63995
entitled TDLU v. Kaisahan ng Manggagawang Pilipina could not be construed as to extinguish the
right of TDLU to expel private respondents for acts of disloyalty when they organized a local chapter
of KAMPIL in October 1980 in TDI. The subject matter brought to this Court in G.R. No. 63995 was
the decision of the Bureau of Labor Relations dated December 3, 1982 requiring the holding of
certification election in TDI within twenty (20) days from receipt of said BLR's decision which reads:

Movant union (KAMPIL) now seeks for the reconsideration of that order on the
ground, among others, that the CBA in question is not certifiable and, hence, the
contract bar rule cannot properly apply to this case.

After a careful examination of the records, this Bureau is of the view that the instant
motion should be given due course, not necessarily for the arguments raised by
herein movant.

It should be noted that alleged CBA has now expired, its expiry date being 30 June
1982. Consequently, there appears to be no more obstacle in allowing a certification
election to be conducted among the rank and file of respondent. The contract bar
rule will no longer apply in view of the supervening even that is, the expiration of the
contract. (ANNEX C, TDI's Memorandum dated November 28,1986; Emphasis
supplied).

It is clearly apparent that the BLR aforesaid Order which this Court upheld in G.R. No. 63995 when it
dismissed TDLU's petition in a minute resolution, did not pass upon the question of legality or
illegality of the dismissal of private respondents from TDI by reason of their expulsion from TDLU for
disloyalty. That question was neither raised nor passed upon in the certification case, and was not a
proper issue therein because a petition for certification election is not a litigation but a mere
investigation of a non-adversary character to determine the bargaining unit to represent the
employees (George Peter Lines, Inc. v. Associated Labor Union, 134 SCRA 82). Hence, no inference
could be derived from the dismissal of said petition that either the BLR or this Court has decided in
favor of private respondents insofar as the question of union disloyalty and their suspension and
termination from employment of TDI is concerned.

Simply put, the BLR ordered the holding of a certification election because the CBA in question had
already expired, its expiry date being June 30, 1982. Consequently, there appears to be no more
obstacle in allowing a certification election. "... [T]he contract bar rule will not apply in view of the
supervening event, that is, the expiration of the CBA."

But the fact that the CBA had expired on June 30, 1982 and the BLR, because of such supervening
event, ordered the holding of a certification election could not and did not wipe out or cleanse private
respondents from the acts of disloyalty committed in October 1980 when they organized KAMPIL's
local chapter in TDI while still members of TDLU. The ineluctable fact is that private respondents
committed acts of disloyalty against TDLU while the CBA was in force and existing for which they
have to face the necessary sanctions lawfully imposed by TDLU.

In Villar v. Inciong (121 SCRA 444), we held that "petitioners, although entitled to disaffiliation from
their union and to form a new organization of their own must however, suffer the consequences of
their separation from the union under the security clause of the CBA: "

Inherent in every labor union, or any organization for that matter, is the right of self-
preservation. When members of a labor union, therefore, sow the seeds of
dissension and strife within the union; when they seek the disintegration and
destruction of the very union to which they belong; they thereby forfeit their rights to
remain as members of the union which they seek to destroy. Prudence and equity, as
well as the dictates of law and justice, therefore, compelling mandate the adoption by
the labor union of such corrective and remedial measures, in keeping with its laws
and regulations, for its preservation and continued existence; lest by its folly and
inaction, the labor union crumble and fall. (Idem., p. 458)

The private respondents cannot, therefore, escape the effects of the security clause of their own
applicable collective bargaining agreement.

WHEREFORE, the decision dated May 26, 1986 and the resolution dated June 26, 1986 of
respondent National Labor Relations Commission in NLRC Case No. AB-11685-81 are hereby SET
ASIDE. The expulsion of private respondents from TANDUAY DISTILLERY LABOR UNION and their
consequent suspension and termination from employment with TANDUAY DISTILLERY, INC.,
without reinstatement and backwages, are hereby SUSTAINED. No cost.

SO ORDERED.

18. G.R. No. 87266-69 July 30, 1990

ASSOCIATED WORKERS UNION-PTGWO, petitioner,
vs.
THE NATIONAL LABOR RELATIONS COMMISION (EN BANC), METRO PORT SERVICE, INC.,
MARINA PORT SERVICES, INC., ADRIANO S. YUMUL and 10 OTHER INDIVIDUAL
RESPONDENTS REPRESENTED BY ATTY. EPIFANIO JACOSALEM, respondents.

G.R. Nos. 91223-26 JULY 30, 1990

MANILA PORT SERVICES, INC., petitioner,

vs.
HON. ARTHUR G. AMANSEC AND ADRIANO YUMUL, PABLITO REANDELAR, MACARIO DE
LUNA, JR., ADAN MENDOAZA, SMITH CARLOTA, EMERECIANO VERGARA, ROMEO
ABACAN, LEONARDO ROMULO, ELINO JOSE, and CATINDIANO CALAUAG (COLLECTIVELY
CALLED AWUM), respondents.

D.T. Dagum, Jr. and P.T. De Quiroz for petitioner in G.R. Nos. 87266-69.

Ramon N. Nalipay, Jr. for petitioner in G.R. Nos. 91223-26.

Cruz, Durian, Agabin, Atienza, Alday & Tuason for respondent MPSI.

Udarbe & Jacosalem for private respondents in G.R. Nos. 91223-26.

FELICIANO, J.:

These cases have been usually difficult for the Court, not because the issues posed are in
themselves intellectually demanding, but because of problems generated by the procedure adopted
by the parties in coming before this Court. The incidents subject of these cases spawned multiple
cases and petitions before the National Labor Relations Commission ("NLRC"). After the NLRC
rendered a consolidated decision, the parties, in turn, filed multiple separate certiorari petitions to the
Court on a staggered and piecemeal basis. This situation resulted in a number of discrete
discussions of issues actually inter-related, since the Court, at any one time, could only see a small
part of the whole picture and decide only on the basis of what it could see. In what follows, we have
tried to put the whole picture together and to render comprehensive and substantial justice to all the
parties.

On 26 October 1984, petitioner Associated Workers Union ("AWU")PTGWO, the then bargaining
representative of the dockworkers at South Harbor, Port Area, Manila, filed a Notice of Strike against
respondent Metro Port Service, Inc. ("Metro"), the then arrastre contractor in the South Harbor, on
the issues, among others, of unfilled vacancies and union busting. This was docketed as NLRC
Case No. NCR-NS-10-288-84.

On 3 April 1985, the abovementioned case was certified in an Order by the then Minister of Labor
and Employment to the NLRC for compulsory arbitration; the Order also forbade the holding of
strikes or lock-outs. 1The case was docketed as Certified NLRC Case No. 0403-85. In the latter case,
one of the demands raised by AWU was that Metro terminate the employment of respondents Adriano
Yumul and ten (10) others (individual respondents), for having organized, on 26 October 1984, the
Associated Workers Union in Metroport ("AWUM") among the rank-and-file employees of Metro,
ostensibly as a local or chapter of AWU. AWU had earlier expelled individual respondents from
membership in AUW for disloyalty and, pursuant to the closed-shop provision of the existing AWU-Metro
collective bargaining agreement ("CBA"), sought the termination of their employment.

Metro initially resisted AWU's request to terminate the employment of individual respondents,
contending that the termination would be premature as individual respondents had not been afforded
due process, and that the termination would be violative of the status quo agreement in NLRC Case
No. NCR-NS-10-288-84. 2 Metro, however, eventually relented and suspended individual respondents
after AWUdespite the express prohibition in the Order dated 3 April 1985staged a strike against it. On
18 April 1985, Metro executed a Compromise Agreement ("Agreement") with AWU to end the strike, item
No. 2 of which stipulated:

At the instance of the union, [Metro] agrees to preventively suspend [individual

respondents] effective immediately. 3

The Agreement was attested to by then Deputy Labor Minister Carmelo Noriel.

As a result of Metro's implementation of the Agreement, individual respondents on 30 April 1985 filed
a complaint against Metro, docketed as NLRC Case No. NCR-4-1372-85. Metro in that case filed in
turn a third-party complaint against AWU and its officers.

Metro in April 1985 also filed a complaint for illegal strike with damages against AWU and its officers,
docketed as NLRC Case No. NCR-4-1341-85. On 21 June 1985, Labor Arbiter Ceferina Diosana in
an Order directed Metro provisionally to reinstate individual respondents pending resolution of the
issues raised therein, with which Order Metro complied.

On 15 July 1985, AWU filed a petition for injunction against Metro, docketed as NLRC Injunction
Case No. 993, praying for issuance of a temporary restraining order stopping the implementation of
the Order of provisional reinstatement, and for Metro's compliance with the Agreement providing for
the suspension of individual respondents. On 1 August 1985, the NLRC in an En Banc Resolution
directed Metro to comply with the Agreement, and Metro complied and re-suspended individual
respondents. Individual respondents' petition before the NLRC for preliminary mandatory injunction
on 30 August 1985, praying "that pursuant to the Implementing Rules of Batas Pambansa Blg. 130,
[Metro] be ordered to pay their salaries and allowances from and after their initial preventive
suspension of thirty (30) days and until their actual reinstatement," was not acted upon.

All the above-mentioned cases, to wit: (a) Certified NLRC Case No. 0403-85 (NCR No. NS-10-288-
84); (b) NLRC Case No. NCR-4-1341-85; (c) NLRC Case No. NCR-4-1372-85; and (d) NLRC
Injunction Case No. 993, were ordered consolidated before the NLRC en banc.

On 4 September 1986, the NLRC rendered a consolidated Decision. In Certified NLRC Case No.
0403-85, the NLRC ruled that: (a) respondent Metro cannot be compelled to fill up vacancies with
AWU's recommendees; (b) respondent Metro cannot be held liable for union busting, the issue of the
medically impaired workers having become moot and academic; and (c) the compulsory retirement
of AWUs members who have reached the age of 60 years is a valid exercise of management
prerogative.

In NLRC Case No. NCR-4-1372-85, the NLRC, finding that AWU was a national union, and that
individual respondents have the right to organize themselves into a local chapter thereof, the
formation of which was a protected activity and could not be considered as disloyalty, held the
suspension or dismissal of individual respondents as illegal and, in relation to NLRC Injuction Case
No. 993, ordered their reinstatement with backwages, to be paid solidarily by AWU and respondent
Metro.

In NLRC Case No. NCR-4-1341-85, the NLRC found the strike staged by AWU not illegal, holding
that AWU was of the belief, although erroneously, that it could validly stage a strike during the
pendency of its motion for reconsideration of the Minister's Order dated 3 April 1985 enjoining a
strike or lockout.

Both AWU and Metro filed separate motions for reconsideration of the consolidated Decision.

Meanwhile, on 21 July 1986, petitioner Marina Port Services, Inc. ("Marina"), by virtue of a Special
Permit issued by the Philippine Ports Authority, started operations as the arrastre operator at the
Manila South Harbor vice Metro. On November 1986, individual respondents in a
Motion/Manifestation prayed that Marina be included as party-respondent.

On 27 July 1987, the NLRC in a Resolution denied AWU's and Metro's motions for reconsideration of
the consolidated Decision dated 4 September 1986, but (acting on individual respondents'
Motion/Manifestation) with the modification limiting Metro's liability for backwages to wages accruing
up to July 20, 1986 and ordering Marina to reinstate individual respondents with backwages and
allowances starting from 21 July 1986. Marina complied with the Resolution by reinstating individual
respondents through its payroll retroactive to 21 July 1986.

AWU thereafter in G.R. Nos. 87266-69 filed with the Court a Petition for certiorari on 14 March 1989
praying for the reversal of the decision of the NLRC in NLRC Case No. NCR-NS-10-288-84 and
NLRC Injunction Case No. 993 (praying principally for reversal of the order holding that respondent
Metro could not be compelled to fill up vacancies with AWUs recommendees) and in NLRC Case
No. NCR-4-1372-85 (praying chiefly for reversal of the order reinstating the eleven [11] private
respondents to their former positions with backwages payable solidarily by AWU and respondent
Metro). These cases (G.R. Nos. 87266-69) were assigned to the Third Division of the Court.

Marina, meantime, had gone to the Court on certiorari on 14 June 1988 in G.R. Nos. 81256-59
entitled "Marina Port Services, Inc. v. National Labor Relations Commission, Metro Port Service, Inc,
Associated Workers Union["AWU"-PTGWO], and Associated Workers Union in Metro Port [AWUM]"
protesting, on grounds of alleged denial of due process, its inclusion by the NLRC as a party in
NLRC Case No. NCR-4-1372-85 and its being required to reinstate individual respondents with
backwages. In dismissing these cases (G.R. Nos. 81256-59) on 3 August 1988, the Court held that:
 . . . [t]he decision to include Marina in the questioned [NLRC Resolution dated 17
July 1987] is based on Par. "7" of the Special Permit granted to Marina which states
that "Labor and personnel of previous operator, except those positions of trust and
confidence, shall be absorbed by the grantee." Besides, the petitioner was able to file
not only a Motion for Reconsideration of the Questioned Resolution but also a Motion
to Set Aside Motion/Manifestation and Remarks on the Comment of Metro Port. The
lack of due process at the beginning, if any, was cured by the above motions that the
petitioner was able to file. 4

On 13 April 1988, Metro in G.R. No. 82705 (entitled "Metro Port Services, Inc. v. National Labor
Relations Commission, Associated Workers Union-PTGWO, Marina Port Services, Inc., and Adriano
Yumul [and 10 others]") went to this court again and assailed the NLRC ruling in NLRC Case No.
NCR-4-1372-85 and NLRC Injunction Case No. 993. Metro claimed that it should not have been held
solidary liable with AWU because it had merely suspended individual respondents pursuant to the
Agreement dated 18 April 1985 it had executed with AWU and, later, had merely obeyed the
Resolution of the NLRC dated 1 August 1985 ordering Metro to re-suspend individual respondents.
In similarly dismissing Metro's petition, the Court in G.R. No. 82705, held:

. . . Considering that the petitioner was a party to the compromise agreement with
AWU which provided that "at the instance of the union, the company agrees to
preventively suspend Adriano S. Yumul and eleven associates effective immediately"
and accordingly suspended the private respondents despite the suspension being
contrary to law, the petitioner should be made solidarity liable with AWU for the
backwages and allowances that the private respondents may have been entitled to
during their suspension. The petitioner's liability, however, should not extend to the
time that respondent NLRC ordered it to re-suspend the private
respondents. 5 (Emphasis supplied)

Judgment was entered in G.R. Nos. 81256-59 and G.R. No. 82705 on 23 September 1988 and 4
July 1989, respectively, and the cases were remanded to the Labor Arbiter of origin for execution.

On 18 September 1989, the Labor Arbiter issued a writ of execution against Marina to reinstate
individual respondents and to pay them the amount of P154,357.00 representing salary adjustments.
Marina moved to quash the writ of execution questioning the award of P154,357.00, but without
success. Marina thereafter appealed to the NLRC assailing the Labor Arbiter's refusal to quash the
writ of execution.

On 23 November 1989, Marina received an Order from the Executive Labor Arbiter dated 15
November 1989, requiring the release of any garnished deposit from its bank, holding that no
seasonable appeal from the 7 November 1989 Order denying Marina's motion to quash had been
taken. Marina filed a Manifestation dated 23 November 1989, arguing that it had filed an appeal with
the NLRC within the 10-day reglementary period.

On 6 December 1989, the Executive Labor Arbiter issued a writ of execution requiring Marina: (a) to
reinstate individual respondents and to pay them the amount of P154,357.00 representing salary
adjustments; and (b) to implement and honor the legality of the organization and registration of
AWUM as the local chapter of AWU. Marina then once more went to the Court in G.R. Nos. 91223-
26 and filed a Petition for certiorari to invalidate the writ of execution, pleading that: (a) execution
had been ordered without due regard for its right of appeal from the Labor Arbiter's Order; and (b)
execution would result in its being made to pay more than what is called for by the ruling of the Court
in G.R. No. 82705, where the Court affirmed the NLRC ruling that Marina "should be made solidarily
liable with AWU for the backwages and allowances that the private respondents may have been
entitled to during their suspension [although liability] should not extend to the time that respondent
NLRC ordered it to re-suspend the private respondents." These cases (G.R. Nos. 91223-26) were
assigned to the First Division of the Court. On 20 December 1989, a temporary restraining order was
issued by the First Division of the Court to enjoin the implementation of the Executive Labor Arbiter's
Order of 6 December 1989.

On 16 April 1990, G.R. Nos. 91223-26 were consolidated with G.R. Nos. 87266-69.

1. Deliberating on the instant Petition for Certiorari, the Court in G.R. Nos. 87266-69 considers that
petitioner AWU has failed to show grave abuse of discretion or any act without or in excess of
jurisdiction on the part of the NLRC in Certified NLRC Case No. 0403-85 (NCR No. NS-10-288-84).
The NLRC was correct there in holding that respondent Metro cannot be compelled to fill up
vacancies with AWU's recommendees, as the CBA between AWU and respondent Metro granted the
latter the right to "fill or not to fill-up vacancies"; that the issue of the medically impaired employees
had already been raised in another Notice of Strike filed by AWU against respondent Metro on 16
September 1985, and both parties had agreed to abide by the recommendation and decision of an
examining physician selected by them; and that the existing CBA grants respondent Metro the right
to compulsorily retire any member of AWU who had reached 60 years of age, which right has been
exercised by Metro.

2. The NLRC, however, misappreciated the relevant facts in NLRC Case No. NCR-4-1372-85 and
NLRC Injunction Case No. 993. While it is true that AWUM as a local union, being an entity separate
and distinct from AWU, is free to serve the interest of all its members and enjoys the freedom to
disaffiliate, such right to disaffiliate may be exercised, and is thus considered a protected labor
activity, only when warranted by circumstances. Generally, a labor union may disaffiliate from the
mother union to form a local or independent union only during the 60-day freedom
period immediately preceding the expiration of the CBA. 6 Even before the onset of the freedom period
(and despite the closed-shop provision in the CBA between the mother union and management)
disaffiliation may still be carried out, but such disaffiliation must be effected by a majority of the members
in the bargaining unit. 7 This happens when there is a substantial shift in allegiance on the part of the
majority of the members of the union. In such a case, however, the CBA continues to bind the members of
the new or disaffiliated and independent union up to the CBA's expiration date. 8

The record does not show that individual respondents had disaffiliated during the freedom period.
The record does, however, show that only eleven (11) members of AWU (individual respondents)
had decided to disaffiliate from AWU and form AWUM. Respondent Metro had about 4,000
employees, and around 2,000 of these were members of AWU 9 It is evident that individual
respondents had failed to muster the necessary majority in order to justify their disaffiliation. (In fact, it
was only on 5 December 1985 that individual respondents were finally able to register an independent
union called Metroport Workers Union [MWU]. 10 Even then, in the absence of allegation by AWUM [MWU]
of the exact number of its members, the Court presumes that only twenty percent [20%] of the employees
of Metro had joined MWU) 11 Thus, in the referendum held on 7 January 1985 at the PTGWO compound
(where representatives of the Ministry of Labor and Employment were present) to determine whether
individual respondents should be expelled from AWU, 1,229 members (out of 1,695 members present)
voted for expulsion of individual respondents. 12

The individual respondents here have failed to present proof of their allegation that the 1,695
members of AWU were not employees of respondent Metro alone; the Court therefore presumes that
those who voted for their expulsion were bona fide employees of respondent Metro. Moreover,
individual respondents failed to allege that their expulsion for disloyalty violated AWU's constitution
and by-laws. 13 In sum, the attempted disaffiliation of the eleven (11) private respondents from the
petitioner mother union and the effort to organize either a new local of the mother union or an entirely new
and separate union, did not, under the circumstances of this case, constitute protected activities of the
eleven (11) individual respondents.

II

In view of the conclusion reached above in G.R. Nos. 87266-69, i.e., that AWU was justified in
expelling from its membership the eleven (11) individual respondents, the question now arises: how
and to what extent does such conclusion affect the liability of Metro, and Marina (as successor-
employer)? It will be recalled that the Resolutions of this Court in G.R. Nos. 81256-59 and 82705
dismissing the Petitions for certiorari of both Metro and Marina assailing the NLRC consolidated
Decision of 4 September 1986 insofar as their (Metro's and Marina's) liability for reinstatement and
backwages of the individual respondents thereunder is concerned, became final and judgment
entered therein, sometime ago.

1. So far as concerns AWU's liability under the NLRC consolidated Decision, it should in the first
place be pointed out that the Court did not make any pronouncement either in G.R. Nos. 81256-59
or in G.R. No. 82705 concerning AWU's liability. In G.R. No. 82705, the Court merely acted on the
issue raised by petitioner Metro: that Metro should not be liable at all for reinstatement and
backwages considering that Metro was only pressed into suspending individual respondents
because of AWUs threat to strike. In dismissing Metro's Petition, the Court in G.R. No. 82705 in
effect merely held that Metro, whatever the liability of AWU might be in respect of the expulsion of
individual respondents, could not escape liability by throwing all responsibility upon AWU; and that
Metro could not validly plead that it was under duress when it executed the Agreement with AWU
providing for, among other things, the preventive suspension of individual respondents.

The Court is, of course, aware that AWU was a party-respondent in both G.R. Nos. 81256-59 and
82705, and that AWU had in fact filed a Comment in both G.R. Nos. 81256-59 and 82705.
Nonetheless, the Court did not either in G.R. Nos. 82156-59 or in G.R. No. 82705 in fact make a
determination of the legality of AWU's expulsion of individual respondents from its membership. The
Court in G.R. No. 82705 held only that the liability of Metro was solidary in nature, i.e., solidary with
AWU, whatever AWU's liability might be; and it may be well to recall that solidary liability is different
from secondary liability. In G.R. Nos. 81256-59, the Court simply held that Marina was properly
impleaded in the underlying cases and could not be absolved from responsibility for reinstatement
and backwages upon the ground of denial of due process.
2. Thus, so far as concerns the liability of Metro and Marina for reinstatement with backwages of
individual respondents under the consolidated NLRC Decision, the pre-eminent fact is that the
Court's Resolutions in G.R. Nos. 81256-59 and 82705 dismissing their Petitions are already final.
The liabilities of Metro and Marina for reinstatement and backwages under the consolidated NLRC
Decision have become fixed and definite, with the modification decreed by the Court in G.R. No.
82705 in so far as backwages were concerned. Thus, the conclusion we today have reached in G.R.
Nos. 87266-69 cannot benefit Metro and Marina and will not dissolve their already fixed and definite
liabilities.

3. Turning to the question of the backwages due to the eleven (11) individual respondents, three (3)
different time periods are relevant here and must be distinguished from one another:

First Period: From 18 April 1985 to 21 June 1985: the Compromise Agreement
between Metro and AWU to end the strike, in which Metro agreed to preventively
suspend the eleven (11) individual respondents, was effected on 18 April 1985 and
implemented immediately. The Labor Arbiter on 21 June 1985 ordered Metro to
reinstate provisionally the eleven (11) individual respondents and Metro complied.

Second Period: From 1 August 1985 up to 27 July 1987: the NLRC, pursuant to the
urging of AWU, ordered Metro to re-suspend the individual respondents on 1 August
1985 and Metro again complied with this Order. Approximately two (2) years later, on
27 July 1987, NLRC ordered Metro/Marina to reinstate the individual respondents
and Marina complied by reinstating the individual respondents on the payroll, i.e.,
paying their salaries although they were not allowed to work on their jobs.

Third Period: From 28 July 1987 to 18 September 1989: on 18 September 1989, the
Labor Arbiter issued the questioned writ of execution ordering, among other things,
Marina to reinstate formally the individual respondents.

Under the consolidated NLRC Decision, Metro/Marina are liable for the backwages accruing during
the First and Third Periods above indicated. In respect of the Second Period, however, the Court in
G.R. No. 82705, as already pointed out earlier, held that Metro/Marina should not be held liable for
backwages accruing during that period. Strictly speaking, in view of our conclusion above that AWU
was justified in expelling individual respondents from its membership, neither AWU nor Metro/Marina
would be liable to individual respondents for the backwages accruing during this Second Period.

4. In the interest of substantial and expeditious justice, however, we believe that the backwages
accruing during the Second Period should be paid and shared by AWU and by Metro Marina, on a
50-50 basis. We here establish this equitable allocation of ultimate responsibility in order to forestall
further litigation between AWU and Metro/Marina and individual respondents in respect of claims and
countering claims for payment or reimbursement or contribution and to put a definite end to this
prolonged and costly confrontation among the several parties.

The equitable considerations which impel us to hold AWU liable for one-half () of the backwages
during the Second Period include:
 (a) the fact that Metro had been reluctant to comply with the demand of AWU to
terminate the services of individual respondents and had wanted to give the latter
procedural due process, but gave in to the demands of AWU;

(b) that AWU had pressed Metro very hard and indeed went on strike against Metro
when Metro refused simply to terminate the services of the individual respondents;

(c) that AWU, instead of waiting for final judicial determination of the legality of its
expulsion of individual respondents, chose to importune the NLRC to issue the order
requiring the re-suspension of the individual respondents on 1 August 1985, with
which order Metro eventually complied.

5. Turning to Metro/Marina we note that, apart from the finality of the Court's Resolutions in G.R.
Nos. 81256-59 and 82705, there is independent basis for holding Metro/Marina responsible for
reinstatement with backwages accruing throughout the three (3) periods above indicated. The
equitable considerations which lead us to hold Metro/Marina responsible for one-half () of the
backwages accruing during the above Second Period relate to the failure of Metro to accord
individual respondents procedural due process by giving them reasonable opportunity to explain
their side before suspending or dismissing them. Such dismissal was accordingly in violation of the
Labor Code. 14 Notwithstanding AWU's closed-shop clause in the CBA, Metro was bound to conduct its
own inquiry to determine the existence of substantial basis for terminating the employment of individual
respondents. 15That AWU, disregarding the Minister of Labor and Employment's express order, had
threatened to go on strike, and indeed actually went on strike, if Metro had continued with the services of
individual respondents, did not relieve Metro from the duty to accord procedural due process to individual
respondents. 16

6. The portion of the Writ of Execution issued by the Executive Labor Arbiter requiring Marina to pay
salary differentials in the total amount of P154,357.00 accruing during the period from 20 July 1986
up to October 1989, should be modified to conform with the above legal and equitable allocation of
liability for the backwages which had accrued during the three (3) Periods above mentioned during
which the individual respondents were suspended. The salary differentials, as we understands it,
refer to increases in the prevailing wages accruing partly during the Second Period and partly during
the Third Period as above indicated. In other words, the salary differentials accruing from 20 July
1986 up to 27 July 1987 should be borne on a 50-50 basis by AWU on the one hand and
Metro/Marina on the other. The salary differentials accruing from 28 July 1987 up to 18 September
1989 shall be borne exclusively by Marina.

7. The portion of the Writ of Execution issued by the Executive Labor Arbiter which requires Marina
to recognize the legality of the organization and registration of AWUM (now MWU) as a local chapter
of AWU, is inconsistent with the conclusions we have set forth in Part I above, and must be deleted.
What was in fact eventually established by individual respondents was a separate, independent
union called Metro Port Workers Union (MWU) which was not entitled, during the time periods here
relevant, to recognition as the bargaining unit in CBA negotiations.

ACCORDINGLY, the Court Resolved:

 In G.R. Nos. 87266-69:

(a) to DISMISS the Petition for Certiorari in respect of Certified NLRC Case No.
0403-855 (NCR-NS-10-288-84) for lack of merit; and

(b) to GRANT partially the Petition for Certiorari in respect of NLRC Case No. NCR-
4-1372-85 and NLRC Injunction Case No. 993. The consolidated Decision of the
NLRC dated 4 September 1986 ordering AWU and Marina to pay solidarily the
backwages of individual respondents, as well as the NLRC Resolution of 27 July
1987 denying AWUs and Metro's Motions for Reconsideration, are hereby
MODIFIED so as to require AWU and Metro/Marina to pay, on a 50-50 basis, to
individual respondents the backwages which accrued during the Second Period, i.e.,
from 1 August 1985 up to 27 July 1987.

In G.R. Nos. 91223-26:

to GRANT partially the Petition. The Order of the Executive Labor Arbiter dated 6
December 1989 is hereby MODIFIED so as (a) to require AWU and Metro/Marina on
a 50-50 basis to pay the salary differentials accruing during the period from 20 July
1986 up to 27 July 1987, and Marina alone to pay the salary differentials accruing
from 28 July 1987 up to 31 October 1989, and so as (b) to delete the portion
requiring Marina to recognize AWU. (MWU) as the local chapter of AWU. The
Temporary Restraining Order issued by the Court on 20 December 1989 is hereby
LIFTED so as to permit enforcement of the Order of the Executive Labor Arbiter as
herein modified.

No pronouncement as to costs.

SO ORDERED.

19. [G.R. No. L-26346. February 27, 1971.]

PHILIPPINE FEDERATION OF PETROLEUM WORKERS (PFPW) and MALAYANG

MANGGAGAWA SA ESSO, Petitioners, v. COURT OF INDUSTRIAL RELATIONS and ESSO
STANDARD EASTERN, INC., Respondents.

[G.R. No. L-26355. February 27, 1971]

ESSO STANDARD EASTERN, INC., Petitioner, v. PHILIPPINE FEDERATION OF PETROLEUM

WORKERS (PFPW), MALAYANG MANGGAGAWA SA ESSO and the COURT OF INDUSTRIAL
RELATIONS, Respondents.

Padilla Law Office for the ESSO Standard Eastern, Inc.

Lanting & Morabe Law Offices for the Unions.

DECISION

TEEHANKEE, J.:

Two separate appeals from a decision of the Court of Industrial Relations on an industrial dispute
and strike declared on February 19, 1965, by members of the Malayang Manggagawa sa Esso
(MME) and certified on November 5, 1965 to said court by the President of the Philippines.

On November 13, 1965, the striking union, MME, affiliate of the Philippine Federation of Petroleum
Workers and the employer-company, Esso Standard Eastern, Inc. (ESSO), concluded without the
trial courts intervention, a return to work agreement pending the resolution of their labor dispute by
the industrial court, and jointly sought the courts approval thereof, which was granted in a partial,
decision dated November 27, 1965, enjoining the parties comply with the terms thereof.

This gave a peculiar aspect to the case at bar, as noted by the trial court itself in its decision in that
"the parties to the labor dispute have agreed on a set of proposals to be litigated as issues in this
case, and the same parties have by express stipulation reserved determination of other issues in
cases now pending determination in other branches of this Court."cralaw virtua1aw library

Thus, of eleven demands filed by the striking union after the filing of the joint motion for approval of
the return to work agreement dated November 12, 1965 although the trial court had earlier issued
in open court an order on November 5, 1965, for the union to formalize in a petition all its demands
in connection with the case the trial court in its decision at bar dismissed outright four demands
since they "are not any of those specifically provided as litigable issues in these proceedings and are
issues in the other cases pending before the different salas of the court of industrial relations. The
parties themselves by the terms of their Return to Work Agreement of November 12, 1965 have
reserved these cases for judicial determination in the different salas where they are now pending
consideration."cralaw virtua1aw library

These four dismissed demands 1 involved three demands of the striking union for reinstatement with
back wages of its members, strike duration pay and discharge of all scabs, strike breakers or
replacements and the giving back of such positions to the returnees to work, and stoppage of further
acts of discrimination and coercion against the striking unions members and were held by the
trial court to depend on the determination of the legality of the strike as well as the alleged
confabulation between the company and a rival union, the Citizens Labor Union (CLU), which were
issues reserved by the parties agreement for resolution by other branches of the industrial court in
two other pending cases of unfair labor practice (Cases Nos. 4289-ULP and 4301-ULP). The fourth
dismissed demand was for the company to turn over to MME the union dues checked off under the
companys collective bargaining agreement with its rival CLU from employees who are (MME)
members, which the trial court held should be resolved in the pending certification election case
(Case No. 1459-MC).

This left six demands 2 to be passed upon by the trial court in the case below. The irregularity and
undesirability of such a splitting of the issues and piece-meal procedure could not but be noted by
the trial court itself in its decision in this wise: "Before proceeding, however, with the determination of
the demands so mentioned, it must be emphasized that this is a proceeding arising out of a
certification by the President of the Philippines, pursuant to Section 10 of Republic Act No. 875. It
indicates the degree of urgency required in the settlement of the terms and conditions of
employment involved in the labor dispute. If in the course of arriving at a fair and just determination
certain aspects obtaining in the other cases between the parties have to be resolved, or that certain
evidentiary matters might come up for evaluation, which aspects and/or matters may likewise be
subject to a similar or different evaluation in the other cases between the same parties, then this
Court may not shirk from its duty to determine the same, in compliance with the directives of the
presidential certification and the mandates of the law decreeing such certification."cralaw virtua1aw
library

While none of the parties specifically assigned as error this irregular procedure, (since they were
mainly responsible therefor in having split the issues and expressly reserved other issues for
determination in the other case pending in other branches of the industrial court), the Court takes
note thereof and declares that such a procedure was erroneous. As noted by the trial court itself, this
proceeding arises out of a certification by the President of the Philippines under section 10 of
Republic Act No. 875 3 and per se indicates the degree Or urgency required in the settlement of the
terms and conditions of employment involved in the labor dispute. The industrial court, in such
cases, is empowered to act therein with the broad powers and jurisdiction granted it by law, 4
including the power of conciliation and compulsory arbitration; it is empowered to order the return to
work of the workers with or with out backpay, and "shall not be restricted to the specific relief or
demands made by the parties to the industrial dispute, but may include in the award, order or
decision any matter or determination which may be deemed necessary or expedient for the purpose
of settling the dispute or of preventing further industrial disputes." 5

Where the industrial dispute has been certified by the President to the industrial court, therefore, all
issues involved in the industrial dispute should be aired and determined in the case, where the
dispute as certified by the President is docketed. The parties should not be permitted to isolate other
germane issues or demands and reserve them for determination in the other cases pending before
other branches of the industrial court, as was done here. All such other pending cases should be
consolidated in, or at least jointly tried 6 by, the branch which has taken cognizance of the case over
the certified industrial dispute towards the end that all the issues and demands may be finally
determined and the dispute definitely settled, rather than merely arrive at a piece-meal settlement as
in the case at bar, with the added disadvantage as noted by the trial court that in passing upon
certain issues before it, it would have to rule upon certain aspects likewise involved in the other
cases and on which the other branches might reach a contrary evaluation and conclusion.

Concretely applied to the case at bar, the trial court, therefore, should not have approved the return
to work agreement submitted independently and with exclusion of relevant issues by the parties, but
as the branch where the dispute as certified by the President was docketed, required the
consolidation, or arranged with the other branches for the joint trial, of all the other cases pending in
the other branches, with the certification and compulsory arbitration case before it, after which it
could have issued a return to work order, and thus avoided the anomalous situation confronting us
where the full resolution this certified dispute is deferred and made to await and depend on the
separate decisions of the other branches of the industrial court in other cases. Certainly, the issues
involved in said cases and covered by the four demands of the striking union dismissed outright by
the trial court (since the parties were erroneously permitted to reserve them for separate
determination by the other branches of the industrial court, as above stated) dealing as they do
with alleged acts of discrimination and coercion against the members of the striking union (MME)
and of alleged confabulation between the company and the union (CLU) as well as with the legality
of the strike were hardly segregable from the very core of the dispute which the trial court was
empowered and called to settle as a whole.

We believe that this would have been the most expeditious procedure to resolve all issues in the
urgent industrial dispute certified to the industrial court as involving the national interest, unlike that
followed in the case at bar, where the lower court was compelled to hand down its piece-meal
decision instead of conclusively settling the dispute as authorized by law, since resolution of the
other related cases had to await the decision yet to be handed down by the other branches where
they were pending. As a practical matter, this would have saved the time of the industrial court and
parties and would avoid needless duplication of effort and hearings. More importantly, as a matter of
public interest since all the issues involved in the cases which gave rise to the industrial dispute
and strike were all related and did not involve mere economic demands but unfair labor practice
charges which are specially impressed with public interest public policy would have been
subserved by the consolidation or joint trial of all the cases to enable the industrial court to discharge
its task of finally settling the dispute once and for all and preventing further industrial disputes, rather
than leaving a number of related issues unresolved to await the decisions of other branches of said
court.

In the light of this fait accompli which impeded the total settlement of the urgent dispute to the
prejudice of the workers, the Court will proceed to the review of the trial courts decision on the
limited issues and demands taken cognizance of and subject of the present appeals. These six
demands of the striking union were the following:jgc:chanrobles.com.ph

"No. 1. That the position of Assistant truck drivers or truck helpers and fillers should not be
abolished.;

"No. 2. In the event that the Can Plant is closed, all employees therein will be transferred to other
plant duties and their position titled will not be changed nor will their wages presently earned be
reduced;

"No. 3. No change in terms and conditions of employment of employees assigned now to the
Manila International Airport or JOCASP which includes, among others, meal allowances and
overtime shall be made;

"No. 5. That Rodolfo Espiritu and Reynaldo Recio, Vice-President and Secretary, respectively, of
Petitioner union be reinstated immediately;

"No. 7. The retirement age of employees shall be 60, as has been the previous practice of the
Company, and all those who have been retired by the Company at earlier than the age be 60 shall
be reinstated; and

"No. 9. The memorandum of agreement dated January 6, 1965 be declared invalid and that any
loss of benefits by reason of the enforcement of such agreement be restored to the employees
concerned."cralaw virtua1aw library

In ruling upon these demands, the trial court first gave the following background
facts:jgc:chanrobles.com.ph

"The predecessor of the respondent company was Standard Vacuum Co. In 1960, the latter was split
into the present company and Mobil Philippines. The respondent absorbed all the working force in
Luzon (t.s.n. 35, 36, Feb. 18, 1966; 23-24, Feb. 17, 1966). The Pandacan terminal to which most of
the employees involved in this case were assigned is the main distribution center for bulk and
package products both during the time of Standard Vacuum Company and subsequently when the
splitting of this company took place afterwards. Because of this development plus improved and
more efficient operating conditions, respondent company realized that it has extra or excess
personnel, which later on were termed redundant employees.
"On April 8, 1963, respondent company and the Citizens Labor Union (the majority bargaining
representative) executed a Collective Bargaining Agreement (Exhibits M & 1) for a period of three
years (up to July 8, 1966). At the time of signing of this Agreement, almost all if not all of the present
members of the petitioner MME were then members of the contracting union including its incumbent
president.

"Among the pertinent provisions of this Agreement as following and we quote:jgc:chanrobles.com.ph

"Section 1, Article II Nothing in this Agreement contained shall be deemed to limit the Company in
any way in the exercise of the regular and customary functions of Management.

"Section 2 (supra) The Union acknowledges that the Company, in the exercise of these functions
of management, has the sole end exclusive right among others, but not limited to, determine the
number and locations of the work sites; select and direct the working force; assign work including the
transfer of tasks among and between the jobs; change the means, methods, processes and
schedule of operations; determine the complement and schedule of the various units, promote,
transfer, lay off employees; maintain order, suspend, demote, discipline and discharge employees
for causes; and maintain the efficiency of employees.

"It is expressly understood that the exercise by the Company of any of the foregoing functions shall
not alter any of the specific provisions of this Agreement, nor shall they be used to discriminate
against any employee because of membership in the Union. It is further understood that, in
determining reassignments, employees will be assigned normally to related and comparable work
whenever this is feasible and consistent with efficient operations. Such reassignments will be
prompted normally by emergencies, operational needs of the business and/or lack of work.

x x x

"Section 2, Article IX An employee who has completed three (3) consecutive years of service, but
less than ten (10) years of service, and who is terminated by the Company, will be granted a
termination allowance of three (3) weeks base pay for each year of credited service.

"An employee who has completed ten (10) or more consecutive years of service and who is
terminated by the Company will be granted a termination allowance of ore (1) months base pay for
each year of credited service.

x x x

"There appears to be no dispute as far as the validity or this Collective Bargaining Agreement is
concerned. What appears to be in controversy is the interpretation of the different provisions of the
same.

"In the Memorandum dated September 30, 1963 (Exh.15), approximately five months after the
above-mentioned Collective Bargaining Agreement, respondent company offered a special
separation payment due to extensive redundancy existing at its Pandacan Terminal. The
memorandum in question indicated that the same is by application on a voluntary basis, and the
deadline for the filing of applications was set on October 4, 1963.

"On November 8, 1963, another agreement appears to have been executed between the Citizens
Labor Union and respondent company (Exh.17). This agreement while emphasizing that the same
is not a renegotiation of the Agreement of April 8, 1963, superseded and added certain terms and
conditions of the said April 8, 1963 Agreement.

"The relevant portions of the Agreement are quoted as follows:jgc:chanrobles.com.ph

"x x x

"Regular employees may continue to work up to the age of sixty (60) so they may enjoy Social
Security Benefits provided the employee upon examination is found to be medically and physically
fit.

"x x x

"9. This agreement shall not in any way be considered as a renegotiation or change in any term or
condition in the Working Agreement of April 8, 1963 or a waiver of the rights, responsibilities and
obligations of each party to the other as contained therein, and that said Working Agreement of April
8, 1963 will continue in full force and effect until its expiration date, without modification of any kind
whatsoever.

"On January 6, 1965 another Memorandum of Agreement was executed between the Citizens Labor
Union and respondent company (Exh.B). It is to be noted that this Agreement was acknowledged
before a Notary Public on January 15, 1965. Emphasis was again laid in this Agreement that the
same is to be considered as a renegotiation or a change of the Collective Bargaining Agreement on
April 8, 1963. The terms and conditions of this Agreement (Exh.B) are substantial similar to terms
and conditions of the Return to Work Agreement of November 12, 1965, and the retirement age of
eligible employees was placed at 55 years.

"It is well to pause and note certain significant aspects of the circumstances thus far narrated as
follows:chanrob1es virtual 1aw library

(a) The present members of the MME, with the exception of one admitted by petitioner, were all
member of the Citizens Labor Union at the time the Agreement 8, 1963 was executed as well as the
Agreement 8, 1963;

(b) That respondent company, as early as April 8, 1963, has the acknowledged right to terminate
employees covered by the agreement either due to excess of work force or improved means, of
operation;

(c) That the different Agreements, e.g. of April 8, 1963, November 8, 1963, January 6, 1965 cannot
be dissociated and be treated as independent of each other in view of the express provisions in the
latter agreement that whatever has been agreed upon cannot be considered as a renegotiation of
April 8, 1963 Agreement;

(d) That in the several agreements mentioned (Exh.M, Exh 17, Exh.B) the retirement age has
been variously mentioned at either 55 or 60 years of age;

(e) That it was only on the Agreement of January 6, 1965 that the respondent company seemed to
have actively and compulsorily exercised its rights to terminate its employees under certain
conditions due to redundancy;

(f) The principle of seniority seems to be the main and only factor, hence the LIFO lists, meaning last
in-first out, where the less senior employees are first to be terminated. While the Agreement of April
8, 1963 speaks of ability to perform the work and physical fitness (Article X, Exh.M) before length of
service is taken into consideration, yet it is likewise to be noted that this sole criterion or seniority in
respect to termination due to redundancy has not been seriously questioned, nor was it ever made
an issue. In fact petitioner MME in certain portions of the evidence questioned that some employees
who were less senior were said to have been excluded from the lists.

"The succeeding events after January 1, 1965 Agreement and before the strike of February 19, 1965
seem to be in a confused state. At one point petitioner MME it would seem knew of this Agreement
of January 6, 1965 and this was one of the reasons of the strike (t.s.n. 10, Nov. 6, 1965). In another
instance the same petitioner said they saw this Agreement while they were already on strike (t.s.n.
44, Dec. 2, 1965). At any rate it would seem that the petitioner MME was apprised of the terms of the
January 6, 1965 Agreement in the conciliation talks prior to the strike (t.s.n. 35, Dec. 3, 1965). It is
likely therefore, that one of the reasons for the strike of the petitioner on Feb. 19, 1965 was their
disagreement to the said Agreement of Jan. 6, 1965.

"On February 15, 1965, the president of petitioner MME sent a letter to the Superintendent of
respondents Pandacan Terminal (Exh.H and 6) protesting the notice from respondents
Dispatching Office that drivers of tank trucks are being required to proceed to their respective
destination without being accompanied by one (1) truck helper each, as usual. Petitioner claimed
that this was a change in a condition of employment which may not be done without a Court order
referring to the proceedings in 1459-MC quoted above.

"The following day, February 16, 1965, respondent companys Terminal Superintendent answered
That inasmuch as you are bringing to our attention a grievance regarding working conditions, we
suggest that you follow the grievance procedure as stipulated in the Working Agreement under
Article 12 (Exhibit 8).

"Another letter was sent by petitioner MME (Exh.7) stating therein the status quo mentioned during
the hearing of Case No. 1459 MC, that no grievance could be possible, as petitioner claims that
under the contract [it is] the Citizens Labor Union and not the petitioner MME who must bring the
matter as a grievance and the former cannot be expected to file the grievance because "it has in fact
agreed to the abolition of the position of truck helpers and other bargainable positions in the
contract. The letter, also stated the suspension of two (2) truck drivers on February 16, 1966, (sic)
both MME members, for refusal to drive [without] the usual truck helpers. And on February 17, 1965,
two more drivers were suspended, for the same reason.

"The above incidents starting with the hearing of February 22, 1965 up to the dismissal of the four
(4) truck drivers mentioned, is (sic) claimed by the petitioner MME as one of their reasons for
striking.

"On February 19, 1965 petitioner MME struck."cralaw virtua1aw library

The trial court in its decision denied five of the demands, and granted that against the reduction of
the retirement age of the employees from 60 years to 55 years, subject to certain conditions therein
stated, as follows:jgc:chanrobles.com.ph

"(1) By way of supplementing the Partial Decision of this Court of November 27, 1965 and relative to
Demands Nos. 1, 2, 3, 5 and 9.

"(a) Respondent company is allowed to abolish the positions of Assistant Truck Drivers or truck
helpers and fillers;

"(b) The can plant of respondent company is hereby allowed to be closed and those employees if
any, remaining as Can Plant Operators after the redundancy program is completed will be
transferred to other plant duties and, when reassigned, their position titles will not be changed nor
will their wages presently earned be reduced;

"(c) The terms and conditions of employment of employees assigned to the Manila International
Airport of JOCASP shall be the terms embodied in paragraph 5(f) of the Return to Work Agreement
of November 12, 1965;

"(d) The immediate reinstatement of Rodolfo Espiritu and Reynaldo Recio is denied. Respondent
company is, however, enjoined to give preference to the re-employment of three persons;

"(e) The Memorandum Agreement of January 6, 1965 (Exhibit B) is hereby declared valid, without
prejudice to issues arising from the same and now pending in CIR Cases Nos. 3903-ULP, 3934-ULP,
1459-MC, 4289-ULP and 4301-ULP as mentioned in paragraph 7 of the Return to Work Agreement
of November 12, 1965;

"(2) Demand No. 7 is granted subject to the following conditions:jgc:chanrobles.com.ph

"(a) All employees who were retired at 55 years or over and below 60 years shall be entitled to
reinstatement, provided, any benefits received by them on account of said retirement shall first be
reimbursed to respondent company, to start not less than sixty (60) days from receipt of this Decision
and to be deducted monthly from their pay envelopes in twelve equal installments." 7

Hence, these appeals by the parties, after the industrial courts en banc denial of their respective
motions for partial reconsideration of the portions of the decision adverse to them.

1. We shall start this review with the major demand of the striking union (MME) for maintenance of
the retirement age of the companys employees at age 60 in accordance with the collective
bargaining agreement with the CLU and for the reinstatement of those employees retired at an
earlier age under the companys supplementary agreement of January 6, 1965 with the CLU. A
resolution of this issue will help in considering the other demands as denied by respondent court and
appealed from in turn by the MME. As stated above, this was the only demand of the MME granted
by respondent court and from which the company has appealed.

Respondent court thus laid the basis for the granting of this demand: "One of the provisions of the
Agreement of November 8, 1963 is to the effect that regular employees may continue to work up to
the age of 60. Then in the Memorandum of Agreement of January 6, 1965, this age was reduced to
55 years. It must be remembered that the benefits and advantages of a Collective Bargaining
Agreement once made by the duly recognized bargaining representative are open and available to
all employees within the coverage of the agreement. The respondent company having agreed at one
instance to the 60 years age retirement cannot now renege on this provision no matter how
monetarily attractive is the retirement benefit. It is here where the Court should legitimately interfere
because retirement is more than a mere term or condition of employment. It involves the livelihood
and welfare of the employee himself. The same may be subject to bargaining or negotiations, but
once agreed, every employee within the appropriate unit who is expected to avail of such benefit
cannot be deprived of the same by subsequent negotiations of the representative union."
Respondent court, however, ordered that the amounts received by the prematurely retired
employees whose reinstatement it had ordered should be reimbursed to the company by deduction
from their pay envelopes in twelve equal installments.

On appeal, the company contends that its retirement of such employees at age 55 or over and below
60, for a period of one year as provided for in its memorandum of agreement of January 6,1965 with
the CLU as the employees bargaining agent, and in pursuance of its legitimate redundancy
program, was valid and legal.
No error was committed by respondent court since it correctly held that as the retirement age of the
companys workers was definitely fixed at 60 years in the supplemental agreement of November 8,
1963, such retirement age, assuring the very livelihood and welfare of employees and their security
of employment, became the law between the company and each of its employees for the duration of
the stipulated three-year period of their collective bargaining agreement up to July 8, 1966. The
same could no longer be subject to revision or reduction during the life of the agreement without the
consent or ratification of the employees, and no worker could be deprived of such vested contractual
right by subsequent unauthorized negotiations of the representative union. 8

This view is further strengthened when it is taken into account that in December, 1964, a good
number of the companys employees, said to be a majority, disaffiliated from the CLU which had
concluded the subsisting agreement of April 8, 1963 and joined the MME; on January 7, 1965, the
MME filed with the industrial court its petition for certification election (Case 1459-MC) praying that it
be certified, in lieu of the CLU, as the exclusive bargaining agent of all the employees and
authorized to administer the agreement during its remaining term on the ground that it represented
the majority of said employees and that the CLU had lost its majority status and could no longer be
considered as their bargaining representative; at the certification election conducted by the Labor
Department on March 22, 1965, pursuant to the industrial courts order, which the CLU boycotted,
the MME obtained the votes of more than one-half of the rank and file employees of the ESSO
Pandacan Terminal Unit eligible to vote (185 out of 202 employees who voted, from a total 351
employees eligible to vote) and was certified on April 26, 1965 by the industrial court as the sole and
exclusive bargaining representative of the employees.

The case was elevated by the CLU to this Court by its petitions of May 9, 1965 and June 10, 1965,
both entitled Citizens Labor Union-CLU v. C.I.R. 9 Since the bargaining agreement had thereafter
expired on July 8, 1966, and in view of "the manifestation, advanced with vehemence, of both the
CLU and the ESSO that after the secret ballot election held on March 22, 1965, the employee
composition has substantially changed because a great number of the employees and laborers in
the Pandacan Terminal unit have left their employment, retired, or been compulsorily laid off with the
approval of the CIR. On its part, ESSO further claims that the salient facts obtaining in the two cases
before us have been so altered by the lapse of time and by developments shaped and brought about
by the parties themselves, that nothing will be gained if an altered factual situation is compelled to
await a decision applicable to an entirely different set of facts," this Court ordered the remand of the
cases to the industrial court for further action as warranted by the environmental circumstances.

Against the above backdrop, the facts noted by the industrial court that the agreement dated
January 6, 1965 between the CLU and the company was actually acknowledged before a notary
public only on January 15, 1965 (after the MMEs petition for certification election challenging the
CLUs majority status had been filed on January 7, 1965) and that "it was only on the agreement of
January 6, 1965 that the respondent company seemed to have actively and compulsorily exercised
its rights to terminate its employees under certain conditions due to redundancy" gain great
significance.

The company thereby at its own risk, aware as it was of the binding effect of the retirement age of 60
fixed in the subsisting agreement, which by its own terms "is the full settlement between the parties
for the duration (t)hereof" (Article XVI) and of the uncertain majority status of the CLU by virtue of the
disaffiliation of a great number of its members who joined the MME, entered into the so-called
supplementary agreement of January 6, 1965 and sought to enforce the reduced retirement age of
55 therein provided, notwithstanding the express disclaimer therein that it "shall not in any way be
considered as a renegotiation or change in any term or condition in the Working Agreement of April
8, 1963 . . . and that said Working Agreement . . . will continue in full force and effect until its
expiration date, without modification of any kind whatever."cralaw virtua1aw library
Prior to the agreement dated January 6, 1965 or January 15, 1965, the date of its acknowledgment,
as noted by the industrial court, the company had not sought to actively and compulsorily retire its
employees at 55 or to terminate them under its so-called excess employees or redundancy program.
The split of its predecessor company, Stanvac, into ESSO and Mobil Philippines, which caused its
so-called redundant employees allegedly by its absorption of all the working force in Luzon, had
occurred since 5 years ago in 1960. Yet, it had renewed on April 8, 1963 a three-year collective
bargaining agreement with the CLU as the full settlement of the terms and conditions of employment
of its employees for the duration of the agreement.

The company was apparently satisfied with the status quo of its relations with the employees as long
as they all pertained to the CLU, for it had agreed to no cutbacks of redundant employees, nor does
it claim to have incurred losses in its business. 10 Yet, when the MME came on the scene and
claimed to be entitled to be the recognized representative of the employees under the subsisting
agreement, it forced the situation and entered into the agreement of January 6, 1965 with the CLU to
advance the retirement age to 55 and to enforce other cut-backs of its employees, knowing full well
that the very authority of the CLU to represent the employees who had precisely disaffiliated from
the CLU and joined the MME was open to serious question and was being ventilated before the
industrial court.

Then, too, even if the CLU could legally be considered by it as the representative of the employees,
the CLU had no authority to negotiate on, much less waive, the vested contractual right of the
employees to their security of employment up to age 60. It hardly seems disputable, then, that its
agreement of January 6, 1965 with the CLU served both the companys and the CLUs ends to
thwart the majority support for the MME, which had won the certification election held on March 22,
1965. Thus, in their common stand in CLU v. CIR, supra, with the passage of time, they did succeed
in effect in nullifying the results of the election and by virtue of the companys sudden realization of
its redundancy program and unrelenting enforcement thereof, pursuant to its January 6, 1965
agreement with the CLU, were able to use it to represent to this Court in the said case that "the
employee composition has substantially changed because a great number of the employees and
laborers in the Pandacan Terminal unit have left their employment, retired, or been compulsorily laid
off with the approval of the CIR."cralaw virtua1aw library

The industrial courts disauthorization of the advanced retirement must, therefore, be affirmed.
However, in view of the time that has elapsed since its decision of April 27, 1966 without its
reinstatement order for the employees prematurely retired at 55 years or over and below 60 years
having been implemented due to this appeal, and they must by now have reached the stipulated
retirement age of 60, the award should be modified to the effect that all such compulsorily
prematurely retired employees shall be paid back wages from date of such premature retirement to
the date of their contractual compulsory retirement at age 60; they shall be entitled likewise to the
retirement benefits stipulated under the collective bargaining agreement of April 8, 1963 or
subsequent renewals thereof from which must be deducted, however, the amount of any benefits
received by them on account of and at the time of their premature retirement.

2. Conformably to the foregoing, respondent courts denial of the MMEs two demands against the
abolition of the positions of assistant truck drivers or truck helpers and fillers and against the
companys change of the terms and conditions of employment of employees assigned to the MIA or
JOCASP (demands Nos. 1 and 3, resolved in paragraph 1 [a] and [c] of the decisions dispositive
part, supra) should be set aside.

The two separate positions of assistant truck drivers or truck helpers and fillers, with their
corresponding wage rates, were duly provided for and defined in the collective bargaining
agreement. The assistants work in the care of the huge delivery trucks, some of whom have 24,000
liters capacity and several compartments, and in the unloading of products at delivery points and
standing by with a fire extinguisher while the driver operates the trucks pumping unit for unloading,
the fillers work of loading the tank trucks at the terminal compound, and the transfer of their duties to
the driver alone, who was given an increased wage of P1.60 a day for the filling of the truck and
driving without a helper, were discussed by the parties at the trial.

The MME also objected to the assignment to the Manila International Airport or JOCASP units of the
company of employees formerly assigned to the Pandacan terminal, without transportation and meal
allowances which were discontinued by the company, notwithstanding the additional financial burden
on the employees who had made their residence at Pandacan, which instead gave them a wage
increase of P1.60 per day.

Respondent court denied the MMEs demands, ruling that it did not wish to substitute its judgment
"for a purely management function who is in a better position to determine its day to day business
operations."cralaw virtua1aw library

The actions of the company in abolishing the positions and withdrawing the benefits previously
enjoyed by the employees by virtue of its agreement of January 6, 1965 with the CLU, whose right to
represent the employees was being challenged by the MME, were tainted, however, as stated
above, by their common end of thwarting the majority support for the MME. Indeed, as of the time of
the execution of said agreement of January 6, 1965, whereby the CLU strangely enough yielded
hard-won benefits end terms of employment in the collective bargaining agreement, the record does
not indicate that the company was justified in considering the CLU as the majority bargaining
representative, for its loss of majority status was in fact borne out by the results of the March 22,
1965 certification election. The benefits of the subsisting collective bargaining agreement may not be
peremptorily modified without the 30-day notice required by law 11 nor summarily set aside and
disregarded, since relations between capital and labor are not merely contractual but are impressed
with public interest such that labor contracts must yield to the common good. 12 There is no claim
here that the employees had been duly notified by the CLU of, much less that they had ratified, the
modifications provided in the January 6, 1965 agreement which worked against their interest. 13

3. Respondent courts resolution of the MMEs two other demands (Nos. 2 and 5, resolved in
paragraph 1 [b] and [d] of the decisions dispositive part, supra), allowing the closure of the
companys can plant and denying the reinstatement of the MMEs vice president and secretary, the
former having voluntarily applied for and secured termination benefits, apparently bear the MMEs
acquiescence. They have not been assigned as errors in the MMEs brief and respondent courts
action on these two items is affirmed.

4. On the MMEs sixth demand (No. 9), respondent courts resolution declared valid the
memorandum agreement of January 6, 1965 assailed by the MME "without prejudice to issues
arising from the same and now pending in CIR Cases Nos. 3903-ULP, 3934-ULP, 1459-MC, 4289-
ULP and 4301-ULP as mentioned in paragraph 7 of the Return to Work Agreement of November 12,
1965." This appears to be in consonance with the parties express reservation for separate
determination of other issues in the other cases pending in other branches of the industrial court,
dealt with in the first part of this decision. The MME in its brief has not raised specific particulars
wherein its members have been prejudiced by said agreement and on which the Court can pass
judgment. Respondent court, while declaring the said agreement valid, made the express
reservation that it was not passing upon the MMEs charges of discrimination on the part of the
company in the implementation of the agreement and expressly held that "Both parties it must be
reiterated, have reserved these discriminatory aspects for determination in the different cases now
pending, also in this Court. Since these matters are not necessary in the determination of the issues
before this Court certainly their final resolution are left to the various cases in the other salas."
Respondent courts action, as thus qualified, is therefore affirmed.
5. With regard to the MMEs demand that the company turn over to it the union dues checked off
under the companys collective bargaining agreement with the CLU from employees who disaffiliated
from CLU and instead joined it (MME), respondent court had dismissed the same, on the ground that
its resolution properly pertained to the certification election case between the rival unions.
Respondent court committed no error in refusing MMEs demand for the turn over to it of the
checked off dues, since its right thereto depended upon its officially replacing the CLU as the
certified bargaining representative of the employees.

The MME contends in its brief on appeal, however, that respondent court erred in allowing the
company to continue checking off the union dues for the CLU despite the employees disaffiliation
from said union and their written individual revocation of their previous check-off authorizations. The
company in turn justified its action of continuing to make such deductions and remitting the checked-
off dues to the CLU on the ground that its collective bargaining agreement with the CLU provided
that the check-off authorization would be irrevocable for the three-year duration of the agreement as
a security for the union (CLU).

It was error on the part of respondent court to allow the company to continue the check off of dues
for the CLU of employees who had withdrawn their authorization by virtue of their affiliation with the
MME. As stated by Justice Montemayor in Pagkakaisa . . . (PAFLU) v. Enriquez, 14 the employees
check off authorization, even if declared irrevocable, is good only as long as they remain members
of the union concerned, because as such members they were obliged to pay the corresponding dues
and assessments to their union;" (H)owever, the moment that they separated from and left the union
and joined another labor organization, then they were no longer obliged to pay said dues and
assessments; naturally, there would be no longer any reason or occasion for the company to
continue making deductions."cralaw virtua1aw library

However, since after the expiry of the CLUs bargaining agreement on December 31, 1966,
respondent court had directed that all union dues checked off from all employees be deposited in
court pending the results of the new certification election (Case No. 1820-MC) and the company duly
complied therewith, 15 the question has become moot.

ACCORDINGLY, judgment is hereby rendered affirming the decision appealed from insofar as
paragraph 1, sub-paragraphs (b), (d) and (e) as well as paragraph 2, sub-paragraph (a) of the
dispositive part thereof (supra) 16 are concerned; the award in said paragraph 2(a) disauthorizing
the advanced retirement of employees is however modified in the manner indicated in the paragraph
of paragraph 1 of this decision. 17 The respondent courts denial of the two demands covered in
paragraph 1(a) and (c) of the dispositive part of the appealed decision is set abide, and the
abolished positions and withdrawn benefits are ordered restored, as prayed for. With costs in both
cases against Esso Standard Eastern, Inc.

20. G.R. No. 131374 January 26, 2000

ABBOTT LABORATORIES PHILIPPINES, INC., petitioner,

vs.
ABBOTT LABORATORIES EMPLOYEES UNION, MR. CRESENCIANO TRAJANO, in his
capacity as Acting Secretary of The Department Labor and of Employment and MR.
BENEDICTO ERNESTO BITONIO, JR., in his capacity as Director IV of the Bureau of Labor
Relations, respondents.

DAVIDE, JR., C.J.:

This special civil action for certiorari mandamus assails the action of the then Acting Secretary of
Labor and Employment Creseciano B. Trajano contained in its letter dated 19 September
1997,1 informing petitioner Abbott Laboratories Philippines, Inc. (hereafter ABBOTT), thru its counsel
that the Office of the Secretary of Labor cannot act on ABBOTT's appeal from the decision of 31
March 19972 and the Order of 9 July 19973 of the Bureau of Labor Relations, for lack of appellate
jurisdiction.

ABBOTT is a corporation engaged in the manufacture and distribution of pharmaceutical drugs. On

22 February 1996,4 the Abbott Laboratories Employees Union (hereafter ALEU) represented by its
president, Alvin B. Buerano, filed an application for union registration in the Department of Labor and
Employment. ALEU alleged in the application that it is a labor organization with members consisting
of 30 rank-and-file employees in the manufacturing unit of ABBOTT and that there was no certified
bargaining agent in the unit it sought to represent, namely, the manufacturing unit.

On 28 February 1996,5 application was approved by the Bureau of Labor Relations, which in due
course issued Certificate of Registration No. NCR-UR-2-1638-96. Consequently, ALEU became a
legitimate labor organization.

On 2 April 1996,6 ABBOTT filed a petition for cancellation of the Certificate of Registration No. NCR-
UR-2-1638-96 in the Regional Office of the Bureau of Labor Relations. This case was docketed as
Case No. OD-M-9604-006. ABBOTT assailed the certificate of registration since ALEU's application
was not signed by at least 20% of the total 286 rank-and-file employees of the entire employer unit;
and that it omitted to submit copies of its books of account.

On 21 June 1996,7 the Regional Director of the Bureau of Labor Relations decreed the cancellation
of ALEU's registration certificate No. NCR-UR-11-1585-95. 8 In its decision, the Regional Director
adopted the 13 June 19969findings and recommendations of the Med-Arbiter. It ruled that the union
has failed to show that the rank-and-file employees in the manufacturing unit of ABBOTT were
bound by a common interest to justify the formation of a bargaining unit separate from those
belonging to the sales and office staff units. There was, therefore, sufficient reason to assume that
the entire membership of the rank-and-file consisting of 286 employees or the "employer unit" make
up the appropriate bargaining unit. However, it was clear on the record that the union's application
for registration was supported by 30 signatures of its members or barely constituting 10% of the
entire rank-and-file employees of ABBOTT. Thus the Regional Director found that for ALEU's failure
to satisfy the requirements of union registration under Article 234 of the Labor Code, the cancellation
of its certificate of registration was in order.

Forthwith, on 19 August 1996,10 ALEU appealed said cancellation to the Office of the Secretary of
Labor and Employment, which referred the same to the Director of the Bureau of the Labor
Relations. The said appeal was docketed as Case No. BLR-A-10-25-96.

On 31 March 1997,11 The Bureau of Labor Relations rendered judgment reversing the 21 June 1996
decision of the Regional Director, thus:

WHEREFORE, the appeal is GRANTED and the decision of the Regional Director dated 21
June 1996 is hereby REVERSED. Abbott Laboratories Employees Union shall remain in the
 roster of legitimate labor organizations, with all the rights, privilege and obligations
appurtenant thereto.12

It gave the following reasons to justify the reversal: (1) Article 234 of the Labor Code does not
require an applicant union to show proof of the "desirability of more than one bargaining unit within
an employer unit," and the absence of such proof is not a ground for the cancellation of a union's
registration pursuant to Article 239 of Book V, Rule II of the implementing rules of the Labor Code;
(2) the issue pertaining to the appropriateness of a bargaining unit cannot be raised in a cancellation
proceeding but may be treshed out in the exclusion-inclusion process during a certification election;
and (3) the "one-bargaining unit, one-employer unit policy" must not be interpreted in a manner that
shall derogate the right of the employees to self-organization and freedom of association as
guaranteed by Article III, Section 8 of the 1987 Constitution and Article II of the International Labor
Organization's Convention No. 87.

Its motion to reconsider the 31 March 1997 decision of the Bureau of Labor Relations having been
denied for lack of merit in the Order13 of 9 July 1997, ABBOTT appealed to the Secretary of Labor
and Employment. However, in its letter dated 19 September 1997, 14 addressed to ABBOTT's
counsel, the Secretary of Labor and Employment refused to act on ABBOTT's appeal on the ground
that it has no jurisdiction to review the decision of the Bureau of Labor Relations on appeals in
cancellation cases emanating from the Regional Offices. The decision of the Bureau of Labor
Relations therein is final and executory under Section 4, Rule III, Book V of the Rules and
Regulations Implementing the Labor Code, as amended by Department Order No. 09, s. of 1997.
Finally, the Secretary stated:

It has always been the policy of this Office that pleadings denominated as appeal thereto
over decisions of the BLR in cancellation cases coming from the Regional offices are
referred back to the BLR, so that the same may be treated as motions for reconsideration
and disposed of accordingly. However, since your office has already filed a motion for
reconsideration with the BLR which has been denied in its Order dated 09 July 1997, your
recourse should have been a special civil action for certiorari with the Supreme Court.

In view of the foregoing, please be informed that the Office of the Secretary cannot act upon
your Appeal, except to cause the BLR to include it in the records of the case.

Hence, this petition. ABBOTT, premised its argument on the authority of the Secretary of Labor and
Employment to review the decision of the Bureau of Labor Relations and at the same time raised the
issue on the validity of ALEU's certificate of registration.

We find no merit in this petition.

At the outset, it is worthy to note that the present petition assails only the letter of the then Secretary
of Labor & Employment refusing to take cognizance of ABBOTT's appeal for lack of appellate
jurisdiction. Hence, in the resolution of the present petition, it is just appropriate to limit the issue on
the power of the Secretary of Labor and Employment to review the decisions of the Bureau of Labor
Relations rendered in the exercise of its appellate jurisdiction over decisions of the Regional Director
in cases involving cancellations of certificates of registration of labor unions. The issue anent the
validity of ALEU's certificate of registration is subject of the Bureau of Labor Relations decision dated
31 March 1997. However, said decision is not being assailed in the present petition; hence, we are
not at liberty to review the same.1wphi1.nt

Contrary to ABBOTT's contention, there has been no grave abuse of discretion on the part of the
Secretary of Labor and Employment. Its refusal to take cognizance of ALEU's appeal from the
decision of the Bureau of Labor Relations is in accordance with the provisions of Rule VIII, Book V of
the Omnibus Rules Implementing the Labor Code as amended by Department Order No. 09. 15 The
rule governing petitions for cancellation of registration of any legitimate labor organization or worker
association, as it now stands, provides:

Sec. 1. Venue of Action. If the respondent to the petition is a local/chapter, affiliate, or a

workers' association with operations limited to one region, the petition shall be filed with the
Regional Office having jurisdiction over the place where the respondent principally operates.
Petitions filed against federations, national or industry unions, trade union centers, or
workers' associations operating in more than one regional jurisdiction, shall be filed with the
Bureau.

Sec. 3. Cancellation of registration; nature and grounds. Subject to the requirements of

notice and due process, the registration of any legitimate labor organization or worker's
association may be cancelled by the Bureau or the Regional Office upon the filing of an
independent petition for cancellation based on any of the following grounds:

(a) Failure to comply with any of the requirements prescribed under Articles 234, 237
and 238 of the Code;

(b) Violation of any of the provisions of Article 239 of the Code;

(b) Commission of any of the acts enumerated under Article 241 of the Code;
provided, that no petition for cancellation based on this ground may be granted
unless supported by at least thirty percent (30%) of all the members of the
respondent labor organization or workers' association.

Sec. 4. Action on the petition; appeals. The Regional or Bureau Director, as the case may
be, shall have thirty (30) days from submission of the case for resolution within which to
resolve the petition. The decision of the Regional or Bureau Director may be appealed to the
Bureau or the Secretary, as the case may be, within ten (10) days from receipt thereof by the
aggrieved party on the ground of grave abuse of discretion or any violation of these Rules.

The Bureau or the Secretary shall have fifteen (15) days from receipt of the records of the
case within which to decide the appeal. The decision of the Bureau or the Secretary shall be
final and executory.

Clearly, the Secretary of Labor and Employment has no jurisdiction to entertain the appeal of
ABBOTT. The appellate jurisdiction of the Secretary of Labor and Employment is limited only to a
review of cancellation proceedings decided by the Bureau of labor Relations in the exercise of its
exclusive and original jurisdiction. The Secretary of Labor and Employment has no jurisdiction over
decisions of the Bureau of Labor Relations rendered in the exercise of its appellate power to review
the decision of the Regional Director in a petition to cancel the union's certificate of registration, said
decisions being final and inappealable.16 We sustain the analysis and interpretation of the OSG on
this matter, to wit:

From the foregoing, the Office of the Secretary correctly maintained that it cannot take
cognizance of petitioner's appeal from the decision of BLR Director Bitonio. Sections 7 to
917 [of the implementing Rules of the Labor Code] thus provide for two situations:

(1) The first situation involves a petition for cancellation of union registration which is
filed with a Regional Office. A decision of a Regional Office cancelling a union's
certificate of registration may be appealed to the BLR whose decision on the matter
shall be final and inappealable.

(2) The second situation involves a petition for cancellation of certificate of union
registration which is filed directly with the BLR. A decision of the BLR cancelling a
union's certificate of registration may be appealed to the Secretary of Labor whose
decision on the mater shall be final and inappealable.

Respondent Acting Labor Secretary's ruling that the BLR's decision upholding the validity
of respondent union's certificate of registration is final and inappealable is thus in
accordance with aforequoted Omnibus Rules because the petition for cancellation of union
registration was filed by petitioner with a Regional Office, specifically, with the Regional
Office of the BLR, National Capital Region (vide pp. 1-2, Annex 2, Petition). The cancellation
proceedings initiated by petitioner before the Regional Office is covered by the first
situation contemplated by Sections 7 to 9 of the Omnibus Rules. Hence, an appeal from the
decision of the Regional Office may be brought to the BLR whose decision on the matter is
final and inappealable.

In the instant case, upon the cancellation of respondent union's registration by the Regional
Office, respondent union incorrectly appealed said decision to the Office of the Secretary.
Nevertheless, this situation was immediately rectified when the Office of the Secretary motu
propio referred the appeal to the BLR. However, upon reversal by the BLR of the decision of
the Regional Office cancelling registration, petitioner should have immediately elevated the
BLR decision to the Supreme Court in a special civil action for certiorari under Rule 65 of the
Rules of Court.

Under Sections 3 and 4, Rule VIII of Book V of the Rules and Regulations implementing the
Labor Code, as amended by Department Order No. 09, petitions for cancellation of union
registration may be filed with a Regional office, or directly, with the Bureau of Labor
Relations. Appeals from the decision of a Regional Director may be filed with the BLR
Director whose decision shall be final and executory. On the other hand, appeals from the
decisions of the BLR may be filed with the Secretary of Labor whose decision shall be final
and executory.
 Thus, under Sections 7 to 9 of the Omnibus Rules and under Sections 3 and 4 of the
Implementing Rules (as amended by Department Order No. 09), the finality of the BLR
decision is dependent on whether or not the petition for cancellation was filed with the BLR
directly. Under said Rules, if the petition for cancellation is directly filed with the BLR, its
decision cancelling union registration is not yet final and executory as it may still be appealed
to the Office of the Secretary. However, if the petition for cancellation was filed with the
Regional Office, the decision of the BLR resolving an appeal of the decision of said Regional
Office is final and executory.18

It is clear then that the Secretary of Labor and Employment did not commit grave abuse of discretion
in not acting an ABBOTT's appeal. The decisions of the Bureau of Labor Relations on cases brought
before it on appeal from the Regional Director are final and executory. Hence, the remedy of the
aggrieved party is to seasonably avail of the special civil action of certiorari under Rule 65 of the
Rules of Court.19

Even if we relaxed the rule and consider the present petition as a petition for certiorari not only of the
letter of the Secretary of Labor and Employment but also of the decision of the Bureau of the Labor
Relations which overruled the order of cancellation of ALEU's certificate registration, the same would
still be dismissable for being time-barred. Under Sec. 4 of Rule 65 of the 1997 Revised Rules of
Court the special civil action for certiorari should be instituted within a period of sixty (60) days from
notice of the judgment, order or resolution sought to be assailed. ABBOTT received the decision of
the Bureau of Labor Relations on 14 April 1997 and the order denying its motion for reconsideration
of the said decision on 16 July 1997. The present petition was only filed on 28 November 1997, after
the lapse of more than four months. Thus, for failure to avail of the correct remedy within the period
provided by law, the decision of the Bureau of Labor Relations has become final and executory.

WHEREFORE, the petition is DENIED. The challenged order in BLR-A-10-25-96 of the Secretary of
Labor and Employment embodied in its 19 September letter is hereby AFFIRMED.

SO ORDERED.

21. G.R. No. 164301 August 10, 2010

BANK OF THE PHILIPPINE ISLANDS, Petitioner,

vs.
BPI EMPLOYEES UNION-DAVAO CHAPTER-FEDERATION OF UNIONS IN BPI
UNIBANK, Respondent.

DECISION

LEONARDO-DE CASTRO, J.:

May a corporation invoke its merger with another corporation as a valid ground to exempt its
"absorbed employees" from the coverage of a union shop clause contained in its existing Collective
Bargaining Agreement (CBA) with its own certified labor union? That is the question we shall
endeavor to answer in this petition for review filed by an employer after the Court of Appeals decided
in favor of respondent union, which is the employees recognized collective bargaining
representative.

At the outset, we should call to mind the spirit and the letter of the Labor Code provisions on union
security clauses, specifically Article 248 (e), which states, "x x x Nothing in this Code or in any other
law shall stop the parties from requiring membership in a recognized collective bargaining agent as a
condition for employment, except those employees who are already members of another union at
the time of the signing of the collective bargaining agreement." 1 This case which involves the
application of a collective bargaining agreement with a union shop clause should be resolved
principally from the standpoint of the clear provisions of our labor laws, and the express terms of the
CBA in question, and not by inference from the general consequence of the merger of corporations
under the Corporation Code, which obviously does not deal with and, therefore, is silent on the terms
and conditions of employment in corporations or juridical entities.

This issue must be resolved NOW, instead of postponing it to a future time when the CBA is
renegotiated as suggested by the Honorable Justice Arturo D. Brion because the same issue may
still be resurrected in the renegotiation if the absorbed employees insist on their privileged status of
being exempt from any union shop clause or any variant thereof.

We find it significant to note that it is only the employer, Bank of the Philippine Islands (BPI), that
brought the case up to this Court via the instant petition for review; while the employees actually
involved in the case did not pursue the same relief, but had instead chosen in effect to acquiesce to
the decision of the Court of Appeals which effectively required them to comply with the union shop
clause under the existing CBA at the time of the merger of BPI with Far East Bank and Trust
Company (FEBTC), which decision had already become final and executory as to the aforesaid
employees. By not appealing the decision of the Court of Appeals, the aforesaid employees are
bound by the said Court of Appeals decision to join BPIs duly certified labor union. In view of the
apparent acquiescence of the affected FEBTC employees in the Court of Appeals decision, BPI
should not have pursued this petition for review. However, even assuming that BPI may do so, the
same still cannot prosper.

What is before us now is a petition for review under Rule 45 of the Rules of Court of the
Decision2 dated September 30, 2003 of the Court of Appeals, as reiterated in its Resolution 3 of June
9, 2004, reversing and setting aside the Decision4 dated November 23, 2001 of Voluntary Arbitrator
Rosalina Letrondo-Montejo, in CA-G.R. SP No. 70445, entitled BPI Employees Union-Davao
Chapter-Federation of Unions in BPI Unibank v. Bank of the Philippine Islands, et al.

The antecedent facts are as follows:

On March 23, 2000, the Bangko Sentral ng Pilipinas approved the Articles of Merger executed on
January 20, 2000 by and between BPI, herein petitioner, and FEBTC.5 This Article and Plan of
Merger was approved by the Securities and Exchange Commission on April 7, 2000. 6
Pursuant to the Article and Plan of Merger, all the assets and liabilities of FEBTC were transferred to
and absorbed by BPI as the surviving corporation. FEBTC employees, including those in its different
branches across the country, were hired by petitioner as its own employees, with their status and
tenure recognized and salaries and benefits maintained.

Respondent BPI Employees Union-Davao Chapter - Federation of Unions in BPI Unibank

(hereinafter the "Union," for brevity) is the exclusive bargaining agent of BPIs rank and file
employees in Davao City. The former FEBTC rank-and-file employees in Davao City did not belong
to any labor union at the time of the merger. Prior to the effectivity of the merger, or on March 31,
2000, respondent Union invited said FEBTC employees to a meeting regarding the Union Shop
Clause (Article II, Section 2) of the existing CBA between petitioner BPI and respondent Union. 7

The parties both advert to certain provisions of the existing CBA, which are quoted below:

ARTICLE I

Section 1. Recognition and Bargaining Unit The BANK recognizes the UNION as the sole and
exclusive collective bargaining representative of all the regular rank and file employees of the Bank
offices in Davao City.

Section 2. Exclusions

Section 3. Additional Exclusions

Section 4. Copy of Contract

ARTICLE II

Section 1. Maintenance of Membership All employees within the bargaining unit who are members
of the Union on the date of the effectivity of this Agreement as well as employees within the
bargaining unit who subsequently join or become members of the Union during the lifetime of this
Agreement shall as a condition of their continued employment with the Bank, maintain their
membership in the Union in good standing.

Section 2. Union Shop - New employees falling within the bargaining unit as defined in Article I of
this Agreement, who may hereafter be regularly employed by the Bank shall, within thirty (30)
days after they become regular employees, join the Union as a condition of their continued
employment. It is understood that membership in good standing in the Union is a condition of their
continued employment with the Bank.8 (Emphases supplied.)

After the meeting called by the Union, some of the former FEBTC employees joined the Union, while
others refused. Later, however, some of those who initially joined retracted their membership. 9

Respondent Union then sent notices to the former FEBTC employees who refused to join, as well as
those who retracted their membership, and called them to a hearing regarding the matter. When
these former FEBTC employees refused to attend the hearing, the president of the Union requested
BPI to implement the Union Shop Clause of the CBA and to terminate their employment pursuant
thereto.10

After two months of management inaction on the request, respondent Union informed petitioner BPI
of its decision to refer the issue of the implementation of the Union Shop Clause of the CBA to the
Grievance Committee. However, the issue remained unresolved at this level and so it was
subsequently submitted for voluntary arbitration by the parties.11

Voluntary Arbitrator Rosalina Letrondo-Montejo, in a Decision12 dated November 23, 2001, ruled in
favor of petitioner BPIs interpretation that the former FEBTC employees were not covered by the
Union Security Clause of the CBA between the Union and the Bank on the ground that the said
employees were not new employees who were hired and subsequently regularized, but were
absorbed employees "by operation of law" because the "former employees of FEBTC can be
considered assets and liabilities of the absorbed corporation." The Voluntary Arbitrator
concluded that the former FEBTC employees could not be compelled to join the Union, as it was
their constitutional right to join or not to join any organization.

Respondent Union filed a Motion for Reconsideration, but the Voluntary Arbitrator denied the same
in an Order dated March 25, 2002.13

Dissatisfied, respondent then appealed the Voluntary Arbitrators decision to the Court of Appeals. In
the herein assailed Decision dated September 30, 2003, the Court of Appeals reversed and set
aside the Decision of the Voluntary Arbitrator.14 Likewise, the Court of Appeals denied herein
petitioners Motion for Reconsideration in a Resolution dated June 9, 2004.

The Court of Appeals pertinently ruled in its Decision:

A union-shop clause has been defined as a form of union security provision wherein non-members
may be hired, but to retain employment must become union members after a certain period.

There is no question as to the existence of the union-shop clause in the CBA between the petitioner-
union and the company. The controversy lies in its application to the "absorbed" employees.

This Court agrees with the voluntary arbitrator that the ABSORBED employees are distinct and
different from NEW employees BUT only in so far as their employment service is concerned. The
distinction ends there. In the case at bar, the absorbed employees length of service from its former
employer is tacked with their employment with BPI. Otherwise stated, the absorbed employees
service is continuous and there is no gap in their service record.

This Court is persuaded that the similarities of "new" and "absorbed" employees far outweighs
the distinction between them. The similarities lies on the following, to wit: (a) they have a new
employer; (b) new working conditions; (c) new terms of employment and; (d) new company policy to
follow. As such, they should be considered as "new" employees for purposes of applying the
provisions of the CBA regarding the "union-shop" clause.
To rule otherwise would definitely result to a very awkward and unfair situation wherein the
"absorbed" employees shall be in a different if not, better situation than the existing BPI employees.
The existing BPI employees by virtue of the "union-shop" clause are required to pay the monthly
union dues, remain as members in good standing of the union otherwise, they shall be terminated
from the company, and other union-related obligations. On the other hand, the "absorbed"
employees shall enjoy the "fruits of labor" of the petitioner-union and its members for nothing in
exchange. Certainly, this would disturb industrial peace in the company which is the paramount
reason for the existence of the CBA and the union.

The voluntary arbitrators interpretation of the provisions of the CBA concerning the coverage of the
"union-shop" clause is at war with the spirit and the rationale why the Labor Code itself allows the
existence of such provision.

The Supreme Court in the case of Manila Mandarin Employees Union vs. NLRC (G.R. No. 76989,
September 29, 1987) rule, to quote:

"This Court has held that a valid form of union security, and such a provision in a collective
bargaining agreement is not a restriction of the right of freedom of association guaranteed by the
Constitution.

A closed-shop agreement is an agreement whereby an employer binds himself to hire only members
of the contracting union who must continue to remain members in good standing to keep their jobs. It
is "THE MOST PRIZED ACHIEVEMENT OF UNIONISM." IT ADDS MEMBERSHIP AND
COMPULSORY DUES. By holding out to loyal members a promise of employment in the closed-
shop, it wields group solidarity." (Emphasis supplied)

Hence, the voluntary arbitrator erred in construing the CBA literally at the expense of industrial
peace in the company.

With the foregoing ruling from this Court, necessarily, the alternative prayer of the petitioner to
require the individual respondents to become members or if they refuse, for this Court to direct
respondent BPI to dismiss them, follows.15

Hence, petitioners present recourse, raising the following issues:

WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT THE
FORMER FEBTC EMPLOYEES SHOULD BE CONSIDERED NEW EMPLOYEES OF BPI
FOR PURPOSES OF APPLYING THE UNION SHOP CLAUSE OF THE CBA

II

WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT THE
VOLUNTARY ARBITRATORS INTERPRETATION OF THE COVERAGE OF THE UNION
 SHOP CLAUSE IS "AT WAR WITH THE SPIRIT AND THE RATIONALE WHY THE LABOR
CODE ITSELF ALLOWS THE EXISTENCE OF SUCH PROVISION"16

In essence, the sole issue in this case is whether or not the former FEBTC employees that were
absorbed by petitioner upon the merger between FEBTC and BPI should be covered by the Union
Shop Clause found in the existing CBA between petitioner and respondent Union.

Petitioner is of the position that the former FEBTC employees are not new employees of BPI for
purposes of applying the Union Shop Clause of the CBA, on this note, petitioner points to Section 2,
Article II of the CBA, which provides:

New employees falling within the bargaining unit as defined in Article I of this Agreement, who may
hereafter be regularly employed by the Bank shall, within thirty (30) days after they become regular
employees, join the Union as a condition of their continued employment. It is understood that
membership in good standing in the Union is a condition of their continued employment with the
Bank.17 (Emphases supplied.)

Petitioner argues that the term "new employees" in the Union Shop Clause of the CBA is qualified by
the phrases "who may hereafter be regularly employed" and "after they become regular employees"
which led petitioner to conclude that the "new employees" referred to in, and contemplated by, the
Union Shop Clause of the CBA were only those employees who were "new" to BPI, on account of
having been hired initially on a temporary or probationary status for possible regular employment at
some future date. BPI argues that the FEBTC employees absorbed by BPI cannot be considered as
"new employees" of BPI for purposes of applying the Union Shop Clause of the CBA. 18

According to petitioner, the contrary interpretation made by the Court of Appeals of this particular
CBA provision ignores, or even defies, what petitioner assumes as its clear meaning and scope
which allegedly contradicts the Courts strict and restrictive enforcement of union security
agreements.

We do not agree.

Section 2, Article II of the CBA is silent as to how one becomes a "regular employee" of the BPI for
the first time. There is nothing in the said provision which requires that a "new" regular employee first
undergo a temporary or probationary status before being deemed as such under the union shop
clause of the CBA.

"Union security" is a generic term which is applied to and comprehends "closed shop," "union shop,"
"maintenance of membership" or any other form of agreement which imposes upon employees the
obligation to acquire or retain union membership as a condition affecting employment. There is union
shop when all new regular employees are required to join the union within a certain period for their
continued employment. There is maintenance of membership shop when employees, who are union
members as of the effective date of the agreement, or who thereafter become members, must
maintain union membership as a condition for continued employment until they are promoted or
transferred out of the bargaining unit or the agreement is terminated. A closed-shop, on the other
hand, may be defined as an enterprise in which, by agreement between the employer and his
employees or their representatives, no person may be employed in any or certain agreed
departments of the enterprise unless he or she is, becomes, and, for the duration of the agreement,
remains a member in good standing of a union entirely comprised of or of which the employees in
interest are a part.19

In the case of Liberty Flour Mills Employees v. Liberty Flour Mills, Inc.,20 we ruled that:

It is the policy of the State to promote unionism to enable the workers to negotiate with
management on the same level and with more persuasiveness than if they were to
individually and independently bargain for the improvement of their respective conditions. To
this end, the Constitution guarantees to them the rights "to self-organization, collective bargaining
and negotiations and peaceful concerted actions including the right to strike in accordance with law."
There is no question that these purposes could be thwarted if every worker were to choose to go his
own separate way instead of joining his co-employees in planning collective action and presenting a
united front when they sit down to bargain with their employers. It is for this reason that the law has
sanctioned stipulations for the union shop and the closed shop as a means of encouraging the
workers to join and support the labor union of their own choice as their representative in the
negotiation of their demands and the protection of their interest vis--vis the employer. (Emphasis
ours.)

In other words, the purpose of a union shop or other union security arrangement is to guarantee the
continued existence of the union through enforced membership for the benefit of the workers.

All employees in the bargaining unit covered by a Union Shop Clause in their CBA with management
are subject to its terms. However, under law and jurisprudence, the following kinds of
employees are exempted from its coverage, namely, employees who at the time the union shop
agreement takes effect are bona fide members of a religious organization which prohibits its
members from joining labor unions on religious grounds;21employees already in the service and
already members of a union other than the majority at the time the union shop agreement
took effect;22 confidential employees who are excluded from the rank and file bargaining
unit;23 and employees excluded from the union shop by express terms of the agreement.

When certain employees are obliged to join a particular union as a requisite for continued
employment, as in the case of Union Security Clauses, this condition is a valid restriction of the
freedom or right not to join any labor organization because it is in favor of unionism. This Court, on
occasion, has even held that a union security clause in a CBA is not a restriction of the right of
freedom of association guaranteed by the Constitution. 24

Moreover, a closed shop agreement is an agreement whereby an employer binds himself to hire only
members of the contracting union who must continue to remain members in good standing to keep
their jobs. It is "the most prized achievement of unionism." It adds membership and compulsory
dues. By holding out to loyal members a promise of employment in the closed shop, it wields group
solidarity.25

Indeed, the situation of the former FEBTC employees in this case clearly does not fall within the first
three exceptions to the application of the Union Shop Clause discussed earlier. No allegation or
evidence of religious exemption or prior membership in another union or engagement as a
confidential employee was presented by both parties. The sole category therefore in which petitioner
may prove its claim is the fourth recognized exception or whether the former FEBTC employees are
excluded by the express terms of the existing CBA between petitioner and respondent.

To reiterate, petitioner insists that the term "new employees," as the same is used in the Union Shop
Clause of the CBA at issue, refers only to employees hired by BPI as non-regular employees
who later qualify for regular employment and become regular employees, and not those who, as a
legal consequence of a merger, are allegedly automatically deemed regular employees of BPI.
However, the CBA does not make a distinction as to how a regular employee attains such a status.
Moreover, there is nothing in the Corporation Law and the merger agreement mandating the
automatic employment as regular employees by the surviving corporation in the merger.

It is apparent that petitioner hinges its argument that the former FEBTC employees were absorbed
by BPI merely as a legal consequence of a merger based on the characterization by the Voluntary
Arbiter of these absorbed employees as included in the "assets and liabilities" of the dissolved
corporation - assets because they help the Bank in its operation and liabilities because redundant
employees may be terminated and company benefits will be paid to them, thus reducing the Banks
financial status. Based on this ratiocination, she ruled that the same are not new employees of BPI
as contemplated by the CBA at issue, noting that the Certificate of Filing of the Articles of Merger
and Plan of Merger between FEBTC and BPI stated that "x x x the entire assets and liabilities of FAR
EASTERN BANK & TRUST COMPANY will be transferred to and absorbed by the BANK OF THE
PHILIPPINE ISLANDS x x x (underlining supplied)." 26 In sum, the Voluntary Arbiter upheld the
reasoning of petitioner that the FEBTC employees became BPI employees by "operation of law"
because they are included in the term "assets and liabilities."

Absorbed FEBTC Employees are Neither Assets nor Liabilities

In legal parlance, however, human beings are never embraced in the term "assets and liabilities."
Moreover, BPIs absorption of former FEBTC employees was neither by operation of law nor by legal
consequence of contract. There was no government regulation or law that compelled the merger of
the two banks or the absorption of the employees of the dissolved corporation by the surviving
corporation. Had there been such law or regulation, the absorption of employees of the non-
surviving entities of the merger would have been mandatory on the surviving corporation. 27 In the
present case, the merger was voluntarily entered into by both banks presumably for some mutually
acceptable consideration. In fact, the Corporation Code does not also mandate the absorption of the
employees of the non-surviving corporation by the surviving corporation in the case of a merger.
Section 80 of the Corporation Code provides:

SEC. 80. Effects of merger or consolidation. The merger or consolidation, as provided in the
preceding sections shall have the following effects:

1. The constituent corporations shall become a single corporation which, in case of merger,
shall be the surviving corporation designated in the plan of merger; and, in case of
consolidation, shall be the consolidated corporation designated in the plan of consolidation;
 2. The separate existence of the constituent corporations shall cease, except that of the
surviving or the consolidated corporation;

3. The surviving or the consolidated corporation shall possess all the rights, privileges,
immunities and powers and shall be subject to all the duties and liabilities of a corporation
organized under this Code;

4. The surviving or the consolidated corporation shall thereupon and thereafter possess all
the rights, privileges, immunities and franchises of each of the constituent corporations; and
all property, real or personal, and all receivables due on whatever account, including
subscriptions to shares and other choses in action, and all and every other interest of, or
belonging to, or due to each constituent corporation, shall be taken and deemed to be
transferred to and vested in such surviving or consolidated corporation without further act or
deed; and

5. The surviving or the consolidated corporation shall be responsible and liable for all the
liabilities and obligations of each of the constituent corporations in the same manner as if
such surviving or consolidated corporation had itself incurred such liabilities or obligations;
and any claim, action or proceeding pending by or against any of such constituent
corporations may be prosecuted by or against the surviving or consolidated corporation, as
the case may be. Neither the rights of creditors nor any lien upon the property of any of such
constituent corporations shall be impaired by such merger or consolidated.

Significantly, too, the Articles of Merger and Plan of Merger dated April 7, 2000 did not contain any
specific stipulation with respect to the employment contracts of existing personnel of the non-
surviving entity which is FEBTC. Unlike the Voluntary Arbitrator, this Court cannot uphold the
reasoning that the general stipulation regarding transfer of FEBTC assets and liabilities to BPI as set
forth in the Articles of Merger necessarily includes the transfer of all FEBTC employees into the
employ of BPI and neither BPI nor the FEBTC employees allegedly could do anything about it. Even
if it is so, it does not follow that the absorbed employees should not be subject to the terms
and conditions of employment obtaining in the surviving corporation.

The rule is that unless expressly assumed, labor contracts such as employment contracts and
collective bargaining agreements are not enforceable against a transferee of an enterprise, labor
contracts being in personam, thus binding only between the parties. A labor contract merely creates
an action in personam and does not create any real right which should be respected by third parties.
This conclusion draws its force from the right of an employer to select his employees and to decide
when to engage them as protected under our Constitution, and the same can only be restricted by
law through the exercise of the police power.28

Furthermore, this Court believes that it is contrary to public policy to declare the former FEBTC
employees as forming part of the assets or liabilities of FEBTC that were transferred and absorbed
by BPI in the Articles of Merger. Assets and liabilities, in this instance, should be deemed to refer
only to property rights and obligations of FEBTC and do not include the employment contracts of its
personnel. A corporation cannot unilaterally transfer its employees to another employer like chattel.
Certainly, if BPI as an employer had the right to choose who to retain among FEBTCs employees,
FEBTC employees had the concomitant right to choose not to be absorbed by BPI. Even though
FEBTC employees had no choice or control over the merger of their employer with BPI, they had a
choice whether or not they would allow themselves to be absorbed by BPI. Certainly nothing
prevented the FEBTCs employees from resigning or retiring and seeking employment elsewhere
instead of going along with the proposed absorption.

Employment is a personal consensual contract and absorption by BPI of a former FEBTC employee
without the consent of the employee is in violation of an individuals freedom to contract. It would
have been a different matter if there was an express provision in the articles of merger that as a
condition for the merger, BPI was being required to assume all the employment contracts of all
existing FEBTC employees with the conformity of the employees. In the absence of such a provision
in the articles of merger, then BPI clearly had the business management decision as to whether or
not employ FEBTCs employees. FEBTC employees likewise retained the prerogative to allow
themselves to be absorbed or not; otherwise, that would be tantamount to involuntary servitude.

There appears to be no dispute that with respect to FEBTC employees that BPI chose not to employ
or FEBTC employees who chose to retire or be separated from employment instead of "being
absorbed," BPIs assumed liability to these employees pursuant to the merger is FEBTCs liability
to them in terms of separation pay,29retirement pay30 or other benefits that may be due them
depending on the circumstances.

Legal Consequences of Mergers

Although not binding on this Court, American jurisprudence on the consequences of voluntary
mergers on the right to employment and seniority rights is persuasive and illuminating. We quote the
following pertinent discussion from the American Law Reports:

Several cases have involved the situation where as a result of mergers, consolidations, or
shutdowns, one group of employees, who had accumulated seniority at one plant or for one
employer, finds that their jobs have been discontinued except to the extent that they are offered
employment at the place or by the employer where the work is to be carried on in the future. Such
cases have involved the question whether such transferring employees should be entitled to carry
with them their accumulated seniority or whether they are to be compelled to start over at the bottom
of the seniority list in the "new" job. It has been recognized in some cases that the accumulated
seniority does not survive and cannot be transferred to the "new" job.

In Carver v Brien (1942) 315 Ill App 643, 43 NE2d 597, the shop work of three formerly separate
railroad corporations, which had previously operated separate facilities, was consolidated in the
shops of one of the roads. Displaced employees of the other two roads were given preference for
the new jobs created in the shops of the railroad which took over the work. A controversy arose
between the employees as to whether the displaced employees were entitled to carry with them to
the new jobs the seniority rights they had accumulated with their prior employers, that is, whether the
rosters of the three corporations, for seniority purposes, should be "dovetailed" or whether the
transferring employees should go to the bottom of the roster of their new employer. Labor
representatives of the various systems involved attempted to work out an agreement which, in effect,
preserved the seniority status obtained in the prior employment on other roads, and the action was
for specific performance of this agreement against a demurring group of the original employees of
the railroad which was operating the consolidated shops. The relief sought was denied, the court
saying that, absent some specific contract provision otherwise, seniority rights were ordinarily limited
to the employment in which they were earned, and concluding that the contract for which specific
performance was sought was not such a completed and binding agreement as would support such
equitable relief, since the railroad, whose concurrence in the arrangements made was essential to
their effectuation, was not a party to the agreement.

Where the provisions of a labor contract provided that in the event that a trucker absorbed the
business of another private contractor or common carrier, or was a party to a merger of lines, the
seniority of the employees absorbed or affected thereby should be determined by mutual
agreement between the trucker and the unions involved, it was held in Moore v International
Brotherhood of Teamsters, etc. (1962, Ky) 356 SW2d 241, that the trucker was not required to
absorb the affected employees as well as the business, the court saying that they could find no such
meaning in the above clause, stating that it dealt only with seniority, and not with initial employment.
Unless and until the absorbing company agreed to take the employees of the company whose
business was being absorbed, no seniority problem was created, said the court, hence the provision
of the contract could have no application. Furthermore, said the court, it did not require that the
absorbing company take these employees, but only that if it did take them the question of seniority
between the old and newemployees would be worked out by agreement or else be submitted to the
grievance procedure.31 (Emphasis ours.)

Indeed, from the tenor of local and foreign authorities, in voluntary mergers, absorption of the
dissolved corporations employees or the recognition of the absorbed employees service with their
previous employer may be demanded from the surviving corporation if required by provision of law
or contract. The dissent of Justice Arturo D. Brion tries to make a distinction as to the terms and
conditions of employment of the absorbed employees in the case of a corporate merger or
consolidation which will, in effect, take away from corporate management the prerogative to make
purely business decisions on the hiring of employees or will give it an excuse not to apply the CBA in
force to the prejudice of its own employees and their recognized collective bargaining agent. In this
regard, we disagree with Justice Brion.

Justice Brion takes the position that because the surviving corporation continues the personality of
the dissolved corporation and acquires all the latters rights and obligations, it is duty-bound to
absorb the dissolved corporations employees, even in the absence of a stipulation in the plan of
merger. He proposes that this interpretation would provide the necessary protection to labor as it
spares workers from being "left in legal limbo."

However, there are instances where an employer can validly discontinue or terminate the
employment of an employee without violating his right to security of tenure. Among others, in case of
redundancy, for example, superfluous employees may be terminated and such termination would be
authorized under Article 283 of the Labor Code.32

Moreover, assuming for the sake of argument that there is an obligation to hire or absorb all
employees of the non-surviving corporation, there is still no basis to conclude that the terms and
conditions of employment under a valid collective bargaining agreement in force in the surviving
corporation should not be made to apply to the absorbed employees.

The Corporation Code and the Subject Merger Agreement are Silent on Efficacy, Terms and
Conditions of Employment Contracts

The lack of a provision in the plan of merger regarding the transfer of employment contracts to the
surviving corporation could have very well been deliberate on the part of the parties to the merger, in
order to grant the surviving corporation the freedom to choose who among the dissolved
corporations employees to retain, in accordance with the surviving corporations business needs. If
terminations, for instance due to redundancy or labor-saving devices or to prevent losses, are done
in good faith, they would be valid. The surviving corporation too is duty-bound to protect the rights of
its own employees who may be affected by the merger in terms of seniority and other conditions of
their employment due to the merger. Thus, we are not convinced that in the absence of a stipulation
in the merger plan the surviving corporation was compelled, or may be judicially compelled, to
absorb all employees under the same terms and conditions obtaining in the dissolved corporation as
the surviving corporation should also take into consideration the state of its business and its
obligations to its own employees, and to their certified collective bargaining agent or labor union.

Even assuming we accept Justice Brions theory that in a merger situation the surviving corporation
should be compelled to absorb the dissolved corporations employees as a legal consequence of the
merger and as a social justice consideration, it bears to emphasize his dissent also recognizes that
the employee may choose to end his employment at any time by voluntarily resigning. For the
employee to be "absorbed" by BPI, it requires the employees implied or express consent. It is
because of this human element in employment contracts and the personal, consensual nature
thereof that we cannot agree that, in a merger situation, employment contracts are automatically
transferable from one entity to another in the same manner that a contract pertaining to purely
proprietary rights such as a promissory note or a deed of sale of property is perfectly and
automatically transferable to the surviving corporation.

That BPI is the same entity as FEBTC after the merger is but a legal fiction intended as a tool to
adjudicate rights and obligations between and among the merged corporations and the persons that
deal with them. Although in a merger it is as if there is no change in the personality of the employer,
there is in reality a change in the situation of the employee. Once an FEBTC employee is absorbed,
there are presumably changes in his condition of employment even if his previous tenure and salary
rate is recognized by BPI. It is reasonable to assume that BPI would have different rules and
regulations and company practices than FEBTC and it is incumbent upon the former FEBTC
employees to obey these new rules and adapt to their new environment. Not the least of the
changes in employment condition that the absorbed FEBTC employees must face is the fact that
prior to the merger they were employees of an unorganized establishment and after the merger they
became employees of a unionized company that had an existing collective bargaining agreement
with the certified union. This presupposes that the union who is party to the collective bargaining
agreement is the certified union that has, in the appropriate certification election, been shown to
represent a majority of the members of the bargaining unit.
Likewise, with respect to FEBTC employees that BPI chose to employ and who also chose to be
absorbed, then due to BPIs blanket assumption of liabilities and obligations under the articles of
merger, BPI was bound to respect the years of service of these FEBTC employees and to pay the
same, or commensurate salaries and other benefits that these employees previously enjoyed with
FEBTC.

As the Union likewise pointed out in its pleadings, there were benefits under the CBA that the
former FEBTC employees did not enjoy with their previous employer. As BPI employees, they
will enjoy all these CBA benefits upon their "absorption." Thus, although in a sense BPI is continuing
FEBTCs employment of these absorbed employees, BPIs employment of these absorbed
employees was not under exactly the same terms and conditions as stated in the latters
employment contracts with FEBTC. This further strengthens the view that BPI and the former
FEBTC employees voluntarily contracted with each other for their employment in the surviving
corporation.

Proper Appreciation of the Term "New Employees" Under the CBA

In any event, it is of no moment that the former FEBTC employees retained the regular status that
they possessed while working for their former employer upon their absorption by petitioner. This fact
would not remove them from the scope of the phrase "new employees" as contemplated in the
Union Shop Clause of the CBA, contrary to petitioners insistence that the term "new employees"
only refers to those who are initially hired as non-regular employees for possible regular
employment.

The Union Shop Clause in the CBA simply states that "new employees" who during the effectivity of
the CBA "may be regularly employed" by the Bank must join the union within thirty (30) days from
their regularization. There is nothing in the said clause that limits its application to only new
employees who possess non-regular status, meaning probationary status, at the start of their
employment. Petitioner likewise failed to point to any provision in the CBA expressly excluding from
the Union Shop Clause new employees who are "absorbed" as regular employees from the
beginning of their employment. What is indubitable from the Union Shop Clause is that upon the
effectivity of the CBA, petitioners new regular employees (regardless of the manner by which they
became employees of BPI) are required to join the Union as a condition of their continued
employment.

The dissenting opinion of Justice Brion dovetails with Justice Carpios view only in their restrictive
interpretation of who are "new employees" under the CBA. To our dissenting colleagues, the phrase
"new employees" (who are covered by the union shop clause) should only include new employees
who were hired as probationary during the life of the CBA and were later granted regular status.
They propose that the former FEBTC employees who were deemed regular employees from the
beginning of their employment with BPI should be treated as a special class of employees and be
excluded from the union shop clause.

Justice Brion himself points out that there is no clear, categorical definition of "new employee" in the
CBA. In other words, the term "new employee" as used in the union shop clause is used broadly
without any qualification or distinction. However, the Court should not uphold an interpretation of the
term "new employee" based on the general and extraneous provisions of the Corporation Code on
merger that would defeat, rather than fulfill, the purpose of the union shop clause. To reiterate, the
provision of the Article 248(e) of the Labor Code in point mandates that nothing in the said Code or
any other law should stop the parties from requiring membership in a recognized collective
bargaining agent as a condition of employment.

Significantly, petitioner BPI never stretches its arguments so far as to state that the absorbed
employees should be deemed "old employees" who are not covered by the Union Shop Clause. This
is not surprising.

By law and jurisprudence, a merger only becomes effective upon approval by the Securities and
Exchange Commission (SEC) of the articles of merger. In Associated Bank v. Court of Appeals, 33 we
held:

The procedure to be followed is prescribed under the Corporation Code. Section 79 of said Code
requires the approval by the Securities and Exchange Commission (SEC) of the articles of merger
which, in turn, must have been duly approved by a majority of the respective stockholders of the
constituent corporations. The same provision further states that the merger shall be effective only
upon the issuance by the SEC of a certificate of merger. The effectivity date of the merger is crucial
for determining when the merged or absorbed corporation ceases to exist; and when its rights,
privileges, properties as well as liabilities pass on to the surviving corporation. (Emphasis ours.)

In other words, even though BPI steps into the shoes of FEBTC as the surviving corporation, BPI
does so at a particular point in time, i.e., the effectivity of the merger upon the SECs issuance of a
certificate of merger. In fact, the articles of merger themselves provided that both BPI and FEBTC
will continue their respective business operations until the SEC issues the certificate of merger and
in the event SEC does not issue such a certificate, they agree to hold each other blameless for the
non-consummation of the merger.

Considering the foregoing principle, BPI could have only become the employer of the FEBTC
employees it absorbed after the approval by the SEC of the merger. If the SEC did not approve the
merger, BPI would not be in the position to absorb the employees of FEBTC at all. Indeed, there is
evidence on record that BPI made the assignments of its absorbed employees in BPI effective April
10, 2000, or after the SECs approval of the merger.34 In other words, BPI became the employer of
the absorbed employees only at some point after the effectivity of the merger, notwithstanding the
fact that the absorbed employees years of service with FEBTC were voluntarily recognized by BPI.

Even assuming for the sake of argument that we consider the absorbed FEBTC employees as "old
employees" of BPI who are not members of any union (i.e., it is their date of hiring by FEBTC and
not the date of their absorption that is considered), this does not necessarily exclude them from the
union security clause in the CBA. The CBA subject of this case was effective from April 1, 1996 until
March 31, 2001. Based on the allegations of the former FEBTC employees themselves, there were
former FEBTC employees who were hired by FEBTC after April 1, 1996 and if their date of hiring
by FEBTC is considered as their date of hiring by BPI, they would undeniably be considered "new
employees" of BPI within the contemplation of the Union Shop Clause of the said CBA. Otherwise, it
would lead to the absurd situation that we would discriminate not only between new BPI employees
(hired during the life of the CBA) and former FEBTC employees (absorbed during the life of the
CBA) but also among the former FEBTC employees themselves. In other words, we would be
treating employees who are exactly similarly situated (i.e., the group of absorbed FEBTC
employees) differently. This hardly satisfies the demands of equality and justice.

Petitioner limited itself to the argument that its absorbed employees do not fall within the term "new
employees" contemplated under the Union Shop Clause with the apparent objective of excluding all,
and not just some, of the former FEBTC employees from the application of the Union Shop Clause.

However, in law or even under the express terms of the CBA, there is no special class of employees
called "absorbed employees." In order for the Court to apply or not apply the Union Shop Clause, we
can only classify the former FEBTC employees as either "old" or "new." If they are not "old"
employees, they are necessarily "new" employees. If they are new employees, the Union Shop
Clause did not distinguish between new employees who are non-regular at their hiring but who
subsequently become regular and new employees who are "absorbed" as regular and permanent
from the beginning of their employment. The Union Shop Clause did not so distinguish, and so
neither must we.

No Substantial Distinction Under the CBA Between Regular Employees Hired After
Probationary Status and Regular Employees Hired After the Merger

Verily, we agree with the Court of Appeals that there are no substantial differences between a newly
hired non-regular employee who was regularized weeks or months after his hiring and a new
employee who was absorbed from another bank as a regular employee pursuant to a merger, for
purposes of applying the Union Shop Clause. Both employees were hired/employed only after the
CBA was signed. At the time they are being required to join the Union, they are both already regular
rank and file employees of BPI. They belong to the same bargaining unit being represented by the
Union. They both enjoy benefits that the Union was able to secure for them under the CBA. When
they both entered the employ of BPI, the CBA and the Union Shop Clause therein were already in
effect and neither of them had the opportunity to express their preference for unionism or not. We
see no cogent reason why the Union Shop Clause should not be applied equally to these two types
of new employees, for they are undeniably similarly situated.

The effect or consequence of BPIs so-called "absorption" of former FEBTC employees should be
limited to what they actually agreed to, i.e. recognition of the FEBTC employees years of service,
salary rate and other benefits with their previous employer. The effect should not be stretched so far
as to exempt former FEBTC employees from the existing CBA terms, company policies and rules
which apply to employees similarly situated. If the Union Shop Clause is valid as to other new
regular BPI employees, there is no reason why the same clause would be a violation of the
"absorbed" employees freedom of association.

Non-Application of Union Shop Clause Contrary to the Policy of the Labor Code and Inimical
to Industrial Peace

It is but fair that similarly situated employees who enjoy the same privileges of a CBA should be
likewise subject to the same obligations the CBA imposes upon them. A contrary interpretation of the
Union Shop Clause will be inimical to industrial peace and workers solidarity. This unfavorable
situation will not be sufficiently addressed by asking the former FEBTC employees to simply pay
agency fees to the Union in lieu of union membership, as the dissent of Justice Carpio suggests.
The fact remains that other new regular employees, to whom the "absorbed employees" should be
compared, do not have the option to simply pay the agency fees and they must join the Union or
face termination.

Petitioners restrictive reading of the Union Shop Clause could also inadvertently open an avenue,
which an employer could readily use, in order to dilute the membership base of the certified union in
the collective bargaining unit (CBU). By entering into a voluntary merger with a non-unionized
company that employs more workers, an employer could get rid of its existing union by the simple
expedient of arguing that the "absorbed employees" are not new employees, as are commonly
understood to be covered by a CBAs union security clause. This could then lead to a new majority
within the CBU that could potentially threaten the majority status of the existing union and, ultimately,
spell its demise as the CBUs bargaining representative. Such a dreaded but not entirely far-fetched
scenario is no different from the ingenious and creative "union-busting" schemes that corporations
have fomented throughout the years, which this Court has foiled time and again in order to preserve
and protect the valued place of labor in this jurisdiction consistent with the Constitutions mandate of
insuring social justice.

There is nothing in the Labor Code and other applicable laws or the CBA provision at issue that
requires that a new employee has to be of probationary or non-regular status at the beginning of the
employment relationship. An employer may confer upon a new employee the status of regular
employment even at the onset of his engagement. Moreover, no law prohibits an employer from
voluntarily recognizing the length of service of a new employee with a previous employer in relation
to computation of benefits or seniority but it should not unduly be interpreted to exclude them from
the coverage of the CBA which is a binding contractual obligation of the employer and employees.

Indeed, a union security clause in a CBA should be interpreted to give meaning and effect to its
purpose, which is to afford protection to the certified bargaining agent and ensure that the employer
is dealing with a union that represents the interests of the legally mandated percentage of the
members of the bargaining unit.

The union shop clause offers protection to the certified bargaining agent by ensuring that future
regular employees who (a) enter the employ of the company during the life of the CBA; (b) are
deemed part of the collective bargaining unit; and (c) whose number will affect the number of
members of the collective bargaining unit will be compelled to join the union. Such compulsion has
legal effect, precisely because the employer by voluntarily entering in to a union shop clause in a
CBA with the certified bargaining agent takes on the responsibility of dismissing the new regular
employee who does not join the union.

Without the union shop clause or with the restrictive interpretation thereof as proposed in the
dissenting opinions, the company can jeopardize the majority status of the certified union by
excluding from union membership all new regular employees whom the Company will "absorb" in
future mergers and all new regular employees whom the Company hires as regular from the
beginning of their employment without undergoing a probationary period. In this manner, the
Company can increase the number of members of the collective bargaining unit and if this increase
is not accompanied by a corresponding increase in union membership, the certified union may lose
its majority status and render it vulnerable to attack by another union who wishes to represent the
same bargaining unit.35

Or worse, a certified union whose membership falls below twenty percent (20%) of the total
members of the collective bargaining unit may lose its status as a legitimate labor organization
altogether, even in a situation where there is no competing union. 36 In such a case, an interested
party may file for the cancellation of the unions certificate of registration with the Bureau of Labor
Relations.37

Plainly, the restrictive interpretation of the union shop clause would place the certified unions very
existence at the mercy and control of the employer. Relevantly, only BPI, the employer appears to
be interested in pursuing this case. The former FEBTC employees have not joined BPI in this
appeal.

For the foregoing reasons, Justice Carpios proposal to simply require the former FEBTC to pay
agency fees is wholly inadequate to compensate the certified union for the loss of additional
membership supposedly guaranteed by compliance with the union shop clause. This is apart from
the fact that treating these "absorbed employees" as a special class of new employees does not
encourage worker solidarity in the company since another class of new employees (i.e. those whose
were hired as probationary and later regularized during the life of the CBA) would not have the
option of substituting union membership with payment of agency fees.

Justice Brion, on the other hand, appears to recognize the inherent unfairness of perpetually
excluding the "absorbed" employees from the ambit of the union shop clause. He proposes that this
matter be left to negotiation by the parties in the next CBA. To our mind, however, this proposal does
not sufficiently address the issue. With BPI already taking the position that employees "absorbed"
pursuant to its voluntary mergers with other banks are exempt from the union shop clause, the
chances of the said bank ever agreeing to the inclusion of such employees in a future CBA is next to
nil more so, if BPIs narrow interpretation of the union shop clause is sustained by this Court.

Right of an Employee not to Join a Union is not Absolute and Must Give Way to the Collective Good
of All Members of the Bargaining Unit

The dissenting opinions place a premium on the fact that even if the former FEBTC employees are
not old employees, they nonetheless were employed as regular and permanent employees without a
gap in their service. However, an employees permanent and regular employment status in itself
does not necessarily exempt him from the coverage of a union shop clause.

In the past this Court has upheld even the more stringent type of union security clause, i.e., the
closed shop provision, and held that it can be made applicable to old employees who are already
regular and permanent but have chosen not to join a union. In the early case of Juat v. Court of
Industrial Relations,38 the Court held that an old employee who had no union may be compelled to
join the union even if the collective bargaining agreement (CBA) imposing the closed shop provision
was only entered into seven years after of the hiring of the said employee. To quote from that
decision:

A closed-shop agreement has been considered as one form of union security whereby only union
members can be hired and workers must remain union members as a condition of continued
employment. The requirement for employees or workers to become members of a union as a
condition for employment redounds to the benefit and advantage of said employees because by
holding out to loyal members a promise of employment in the closed-shop the union wields group
solidarity. In fact, it is said that "the closed-shop contract is the most prized achievement of
unionism."

xxxx

This Court had categorically held in the case of Freeman Shirt Manufacturing Co., Inc., et al. vs.
Court of Industrial Relations, et al., G.R. No. L-16561, Jan. 28, 1961, that the closed-shop proviso of
a collective bargaining agreement entered into between an employer and a duly authorized labor
union is applicable not only to the employees or laborers that are employed after the collective
bargaining agreement had been entered into but also to old employees who are not members of any
labor union at the time the said collective bargaining agreement was entered into. In other words, if
an employee or laborer is already a member of a labor union different from the union that entered
into a collective bargaining agreement with the employer providing for a closed-shop, said employee
or worker cannot be obliged to become a member of that union which had entered into a collective
bargaining agreement with the employer as a condition for his continued employment. (Emphasis
and underscoring supplied.)

Although the present case does not involve a closed shop provision that included even old
employees, the Juat example is but one of the cases that laid down the doctrine that the right not to
join a union is not absolute. Theoretically, there is nothing in law or jurisprudence to prevent an
employer and a union from stipulating that existing employees (who already attained regular and
permanent status but who are not members of any union) are to be included in the coverage of a
union security clause. Even Article 248(e) of the Labor Code only expressly exempts old employees
who already have a union from inclusion in a union security clause.39

Contrary to the assertion in the dissent of Justice Carpio, Juat has not been overturned by Victoriano
v. Elizalde Rope Workers Union40 nor by Reyes v. Trajano.41 The factual milieus of these three cases
are vastly different.

In Victoriano, the issue that confronted the Court was whether or not employees who were members
of the Iglesia ni Kristo (INK) sect could be compelled to join the union under a closed shop provision,
despite the fact that their religious beliefs prohibited them from joining a union. In that case, the
Court was asked to balance the constitutional right to religious freedom against a host of other
constitutional provisions including the freedom of association, the non-establishment clause, the
non-impairment of contracts clause, the equal protection clause, and the social justice provision. In
the end, the Court held that "religious freedom, although not unlimited, is a fundamental personal
right and liberty, and has a preferred position in the hierarchy of values." 42
However, Victoriano is consistent with Juat since they both affirm that the right to refrain from joining
a union is not absolute. The relevant portion of Victoriano is quoted below:

The right to refrain from joining labor organizations recognized by Section 3 of the Industrial Peace
Act is, however, limited. The legal protection granted to such right to refrain from joining is withdrawn
by operation of law, where a labor union and an employer have agreed on a closed shop, by virtue of
which the employer may employ only member of the collective bargaining union, and the employees
must continue to be members of the union for the duration of the contract in order to keep their jobs.
Thus Section 4 (a) (4) of the Industrial Peace Act, before its amendment by Republic Act No. 3350,
provides that although it would be an unfair labor practice for an employer "to discriminate in regard
to hire or tenure of employment or any term or condition of employment to encourage or discourage
membership in any labor organization" the employer is, however, not precluded "from making an
agreement with a labor organization to require as a condition of employment membership therein, if
such labor organization is the representative of the employees." By virtue, therefore, of a closed
shop agreement, before the enactment of Republic Act No. 3350, if any person, regardless of his
religious beliefs, wishes to be employed or to keep his employment, he must become a member of
the collective bargaining union. Hence, the right of said employee not to join the labor union is
curtailed and withdrawn.43 (Emphases supplied.)

If Juat exemplified an exception to the rule that a person has the right not to join a union, Victoriano
merely created an exception to the exception on the ground of religious freedom.

Reyes, on the other hand, did not involve the interpretation of any union security clause. In that
case, there was no certified bargaining agent yet since the controversy arose during a certification
election. In Reyes, the Court highlighted the idea that the freedom of association included the right
not to associate or join a union in resolving the issue whether or not the votes of members of the INK
sect who were part of the bargaining unit could be excluded in the results of a certification election,
simply because they were not members of the two contesting unions and were expected to have
voted for "NO UNION" in view of their religious affiliation. The Court upheld the inclusion of the votes
of the INK members since in the previous case of Victoriano we held that INK members may not be
compelled to join a union on the ground of religious freedom and even without Victoriano every
employee has the right to vote "no union" in a certification election as part of his freedom of
association. However, Reyes is not authority for Justice Carpios proposition that an employee who
is not a member of any union may claim an exemption from an existing union security clause
because he already has regular and permanent status but simply prefers not to join a union.

The other cases cited in Justice Carpios dissent on this point are likewise inapplicable. Basa v.
Federacion Obrera de la Industria Tabaquera y Otros Trabajadores de Filipinas, 44 Anucension v.
National Labor Union,45 and Gonzales v. Central Azucarera de Tarlac Labor Union46 all involved
members of the INK. In line with Victoriano, these cases upheld the INK members claimed
exemption from the union security clause on religious grounds. In the present case, the former
FEBTC employees never claimed any religious grounds for their exemption from the Union Shop
Clause. As for Philips Industrial Development, Inc. v. National Labor Relations Corporation 47 and
Knitjoy Manufacturing, Inc. v. Ferrer-Calleja,48 the employees who were exempted from joining the
respondent union or who were excluded from participating in the certification election were found to
be not members of the bargaining unit represented by respondent union and were free to form/join
their own union. In the case at bar, it is undisputed that the former FEBTC employees were part of
the bargaining unit that the Union represented. Thus, the rulings in Philips and Knitjoy have no
relevance to the issues at hand.

Time and again, this Court has ruled that the individual employees right not to join a union may be
validly restricted by a union security clause in a CBA49 and such union security clause is not a
violation of the employees constitutional right to freedom of association. 50

It is unsurprising that significant provisions on labor protection of the 1987 Constitution are found in
Article XIII on Social Justice. The constitutional guarantee given the right to form unions 51 and the
State policy to promote unionism52 have social justice considerations. In Peoples Industrial and
Commercial Employees and Workers Organization v. Peoples Industrial and Commercial
Corporation,53 we recognized that "[l]abor, being the weaker in economic power and resources than
capital, deserve protection that is actually substantial and material."

The rationale for upholding the validity of union shop clauses in a CBA, even if they impinge upon
the individual employees right or freedom of association, is not to protect the union for the unions
sake. Laws and jurisprudence promote unionism and afford certain protections to the certified
bargaining agent in a unionized company because a strong and effective union presumably benefits
all employees in the bargaining unit since such a union would be in a better position to demand
improved benefits and conditions of work from the employer. This is the rationale behind the State
policy to promote unionism declared in the Constitution, which was elucidated in the above-cited
case of Liberty Flour Mills Employees v. Liberty Flour Mills, Inc.54

In the case at bar, since the former FEBTC employees are deemed covered by the Union Shop
Clause, they are required to join the certified bargaining agent, which supposedly has gathered the
support of the majority of workers within the bargaining unit in the appropriate certification
proceeding. Their joining the certified union would, in fact, be in the best interests of the former
FEBTC employees for it unites their interests with the majority of employees in the bargaining unit. It
encourages employee solidarity and affords sufficient protection to the majority status of the union
during the life of the CBA which are the precisely the objectives of union security clauses, such as
the Union Shop Clause involved herein. We are indeed not being called to balance the interests of
individual employees as against the State policy of promoting unionism, since the employees, who
were parties in the court below, no longer contested the adverse Court of Appeals decision.
Nonetheless, settled jurisprudence has already swung the balance in favor of unionism, in
recognition that ultimately the individual employee will be benefited by that policy. In the hierarchy of
constitutional values, this Court has repeatedly held that the right to abstain from joining a labor
organization is subordinate to the policy of encouraging unionism as an instrument of social justice.

Also in the dissenting opinion of Justice Carpio, he maintains that one of the dire consequences to
the former FEBTC employees who refuse to join the union is the forfeiture of their retirement
benefits. This is clearly not the case precisely because BPI expressly recognized under the merger
the length of service of the absorbed employees with FEBTC. Should some refuse to become
members of the union, they may still opt to retire if they are qualified under the law, the applicable
retirement plan, or the CBA, based on their combined length of service with FEBTC and BPI.
Certainly, there is nothing in the union shop clause that should be read as to curtail an employees
eligibility to apply for retirement if qualified under the law, the existing retirement plan, or the CBA as
the case may be.

In sum, this Court finds it reasonable and just to conclude that the Union Shop Clause of the CBA
covers the former FEBTC employees who were hired/employed by BPI during the effectivity of the
CBA in a manner which petitioner describes as "absorption." A contrary appreciation of the facts of
this case would, undoubtedly, lead to an inequitable and very volatile labor situation which this Court
has consistently ruled against. 1avvphi1

In the case of former FEBTC employees who initially joined the union but later withdrew their
membership, there is even greater reason for the union to request their dismissal from the employer
since the CBA also contained a Maintenance of Membership Clause.

A final point in relation to procedural due process, the Court is not unmindful that the former FEBTC
employees refusal to join the union and BPIs refusal to enforce the Union Shop Clause in this
instance may have been based on the honest belief that the former FEBTC employees were not
covered by said clause. In the interest of fairness, we believe the former FEBTC employees should
be given a fresh thirty (30) days from notice of finality of this decision to join the union before the
union demands BPI to terminate their employment under the Union Shop Clause, assuming said
clause has been carried over in the present CBA and there has been no material change in the
situation of the parties.

WHEREFORE, the petition is hereby DENIED, and the Decision dated September 30, 2003 of the
Court of Appeals is AFFIRMED, subject to the thirty (30) day notice requirement imposed herein.
Former FEBTC employees who opt not to become union members but who qualify for retirement
shall receive their retirement benefits in accordance with law, the applicable retirement plan, or the
CBA, as the case may be.

SO ORDERED.

22. G.R. No. 147590 April 2, 2007

ANTONIO C. CARAG, Petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, ISABEL G. PANGANIBAN-ORTIGUERRA, as
Executive Labor Arbiter, NAFLU, and MARIVELES APPAREL CORPORATION LABOR
UNION, Respondents.

DECISION

CARPIO, J.:

The Case
This is a petition for review on certiorari1 assailing the Decision dated 29 February 20002 and the
Resolution dated 27 March 20013 of the Court of Appeals (appellate court) in CA-G.R. SP Nos.
54404-06. The appellate court affirmed the decision dated 17 June 1994 4 of Labor Arbiter Isabel
Panganiban-Ortiguerra (Arbiter Ortiguerra) in RAB-III-08-5198-93 and the resolution dated 5 January
19955 of the National Labor Relations Commission (NLRC) in NLRC CA No. L-007731-94.

Arbiter Ortiguerra held that Mariveles Apparel Corporation (MAC), MAC's Chairman of the Board
Antonio Carag (Carag), and MAC's President Armando David (David) (collectively, respondents) are
guilty of illegal closure and are solidarily liable for the separation pay of MAC's rank and file
employees. The NLRC denied the motion to reduce bond filed by MAC and Carag.

The Facts

National Federation of Labor Unions (NAFLU) and Mariveles Apparel Corporation Labor Union
(MACLU) (collectively, complainants), on behalf of all of MAC's rank and file employees, filed a
complaint against MAC for illegal dismissal brought about by its illegal closure of business. In their
complaint dated 12 August 1993, complainants alleged the following:

2. Complainant NAFLU is the sole and exclusive bargaining agent representing all rank and
file employees of [MAC]. That there is an existing valid Collective Bargaining Agreement
(CBA) executed by the parties and that at the time of the cause of action herein below
discussed happened there was no labor dispute between the Union and Management except
cases pending in courts filed by one against the other.

3. That on July 8, 1993, without notice of any kind filed in accordance with pertinent
provisions of the Labor Code, [MAC], for reasons known only by herself [sic] ceased
operations with the intention of completely closing its shop or factory. Such intentions [sic]
was manifested in a letter, allegedly claimed by [MAC] as its notice filed only on the same
day that the operations closed.

4. That at the time of closure, employees who have rendered one to two weeks work were
not paid their corresponding salaries/wages, which remain unpaid until time [sic] of this
writing.

5. That there are other benefits than those above-mentioned which have been unpaid by
[MAC] at the time it decided to cease operations, benefits gained by the workers both by and
under the CBA and by operations [sic] of law.

6. That the closure made by [MAC] in the manner and style done is perce [sic] illegal, and
had caused tremendous prejudice to all of the employees, who suffered both mental and
financial anguish and who in view thereof merits [sic] award of all damages (actual,
exemplary and moral), [illegible] to set [an] example to firms who in the future will [illegible]
the idea of simply prematurely closing without complying [with] the basic requirement of
Notice of Closure.6 (Emphasis supplied)
Upon receipt of the records of the case, Arbiter Ortiguerra summoned the parties to explore options
for possible settlement. The non-appearance of respondents prompted Arbiter Ortiguerra to declare
the case submitted for resolution "based on the extant pleadings."

In their position paper dated 3 January 1994, complainants moved to implead Carag and David, as
follows:

x x x x In the present case, it is unfortunate for respondents that the records and evidence clearly
demonstrate that the individual complainants are entitled to the reliefs prayed for in their complaint.
However, any favorable judgment the Honorable Labor Arbiter may render in favor of herein
complainants will go to naught should the Office fails [sic] to appreciate the glaring fact that the
respondents [sic] corporation is no longer existing as it suddenly stopped business operation since
[sic] 8 July 1993. Under this given circumstance, the complainants have no option left but to implead
Atty. ANTONIO CARAG, in his official capacity as Chairman of the Board along with MR. ARMANDO
DAVID as President. Both are also owners of the respondent corporation with office address at 10th
Floor, Gamon Centre, Alfaro Street, Salcedo Village[,] Makati[,] Metro Manila although they may be
collectively served with summons and other legal processes through counsel of record Atty. Joshua
Pastores of 8th Floor, Hanston Bldg., Emerald Avenue, Ortigas[,] Pasig, Metro Manila. This inclusion
of individual respondents as party respondents in the present case is to guarantee the satisfaction of
any judgment award on the basis of Article 212(c) of the Philippine Labor Code, as amended, which
says:

"Employer includes any person acting in the interest of an employer, directly or indirectly. It does not,
however, include any labor organization or any of its officers or agents except when acting as
employer."

The provision was culled from Section 2, Republic Act 602, the Minimum Wage Act. If the employer
is an artificial person, it must have an officer who can be presumed to be the employer, being "the
person acting in the interest of the employer." The corporation is the employer, only in the technical
sense. (A.C. Ransom Labor Union CCLU VS. NLRC, G.R. 69494, June 10, 1986). Where the
employer-corporation, AS IN THE PRESENT CASE, is no longer existing and unable to satisfy the
judgment in favor of the employee, the officer should be held liable for acting on behalf of the
corporation. (Gudez vs. NLRC, G.R. 83023, March 22, 1990). Also in the recent celebrated case of
Camelcraft Corporation vs. NLRC, G.R. 90634-35 (June 6, 1990), Carmen contends that she is not
liable for the acts of the company, assuming it had [acted] illegally, because Camelcraft in a distinct
and separate entity with a legal personality of its own. She claims that she is only an agent of the
company carrying out the decisions of its board of directors, "We do not agree," said the Supreme
Court. "She is, in fact and legal effect, the corporation, being not only its president and general
manager but also its owner." The responsible officer of an employer can be held personally liable not
to say even criminally liable for nonpayment of backwages. This is the policy of the law. If it were
otherwise, corporate employers would have devious ways to evade paying backwages. (A.C.
Ransom Labor Union-CCLU V. NLRC, G.R. 69494, June 10, 1986). If no definite proof exists as to
who is the responsible officer, the president of the corporation who can be deemed to be its chief
operation officer shall be presumed to be the responsible officer. In Republic Act 602, for example,
criminal responsibility is with the "manager" or in his default, the person acting as such
(Ibid.)7 (Emphasis supplied)
Atty. Joshua L. Pastores (Atty. Pastores), as counsel for respondents, submitted a position paper
dated 21 February 1994 and stated that complainants should not have impleaded Carag and David
because MAC is actually owned by a consortium of banks. Carag and David own shares in MAC
only to qualify them to serve as MAC's officers.

Without any further proceedings, Arbiter Ortiguerra rendered her Decision dated 17 June 1994
granting the motion to implead Carag and David. In the same Decision, Arbiter Ortiguerra declared
Carag and David solidarily liable with MAC to complainants.

The Ruling of the Labor Arbiter

In her Decision dated 17 June 1994, Arbiter Ortiguerra ruled as follows:

This is a complaint for illegal dismissal brought about by the illegal closure and cessation of business
filed by NAFLU and Mariveles Apparel Corporation Labor Union for and in behalf of all rank and file
employees against respondents Mariveles Apparel Corporation, Antonio Carag and Armando David
[who are] its owners, Chairman of the Board and President, respectively.

This case was originally raffled to the sala of Labor Arbiter Adolfo V. Creencia. When the latter went
on sick leave, his cases were re-raffled and the instant case was assigned to the sala of the
undersigned. Upon receipt of the record of the case, the parties were summoned for them to be able
to explore options for settlement. The respondents however did not appear prompting this Office to
submit the case for resolution based on extant pleadings, thus this decision.

The complainants claim that on July 8, 1993 without notice of any kind the company ceased its
operation as a prelude to a final closing of the firm. The complainants allege that up to the present
the company has remained closed.

The complainants bewail that at the time of the closure, employees who have rendered one to two
weeks of work were not given their salaries and the same have remained unpaid.

The complainants aver that respondent company prior to its closure did not even bother to serve
written notice to employees and to the Department of Labor and Employment at least one month
before the intended date of closure. The respondents did not even establish that its closure was
done in good faith. Moreover, the respondents did not pay the affected employees separation pay,
the amount of which is provided in the existing Collective Bargaining Agreement between the
complainants and the respondents.

The complainants pray that they be allowed to implead Atty. Antonio Carag and Mr. Armando David[,]
owners and responsible officer[s] of respondent company to assure the satisfaction of the judgment,
should a decision favorable to them be rendered. In support of their claims, the complainants
invoked the ruling laid down by the Supreme Court in the case of A.C. Ransom Labor Union CCLU
vs. NLRC, G.R. No. 69494, June 10, 1986 where it was held that [a] corporate officer can be held
liable for acting on behalf of the corporation when the latter is no longer in existence and there are
valid claims of workers that must be satisfied.
The complainants pray for the declaration of the illegality of the closure of respondents' business.
Consequently, their reinstatement must be ordered and their backwages must be paid. Should
reinstatement be not feasible, the complainants pray that they be paid their separation pay in
accordance with the computation provided for in the CBA. Computations of separation pay due to
individual complainants were adduced in evidence (Annexes "C" to "C-44", Complainants' Position
Paper). The complainants also pray for the award to them of attorney's fee[s].

The respondents on the other hand by way of controversion maintain that the present complaint was
filed prematurely. The respondents deny having totally closed and insist that respondent company is
only on a temporary shut-down occasioned by the pending labor unrest. There being no permanent
closure any claim for separation pay must not be given due course.

Respondents opposed the impleader of Atty. Antonio C. Carag and Mr. Armando David saying that
they are not the owners of Mariveles Apparel Corporation and they are only minority stockholders
holding qualifying shares. Piercing the veil of corporate fiction cannot be done in the present case for
such remedy can only be availed of in case of closed or family owned corporations.

Respondents pray for the dismissal of the present complaint and the denial of complainants' motion
to implead Atty. Antonio C. Carag and Mr. Armando David as party respondents.

This Office is now called upon to resolve the following issues:

1. Whether or not the respondents are guilty of illegal closure;

2. Whether or not individual respondents could be held personally liable; and

3. Whether or not the complainants are entitled to an award of attorney's fees.

After a judicious and impartial consideration of the record, this Office is of the firm belief that the
complainants must prevail.

The respondents described the cessation of operations in its premises as a temporary shut-down.
While such posturing may have been initially true, it is not so anymore. The cessation of operations
has clearly exceeded the six months period fixed in Article 286 of the Labor Code. The temporary
shutdown has ripened into a closure or cessation of operations for causes not due to serious
business losses or financial reverses. Consequently, the respondents must pay the displaced
employees separation pay in accordance with the computation prescribed in the CBA, to wit, one
month pay for every year of service. It must be stressed that respondents did not controvert the
verity of the CBA provided computation.

The complainants claim that Atty. Antonio Carag and Mr. Armando David should be held jointly and
severally liable with respondent corporation. This bid is premised on the belief that the impleader of
the aforesaid officers will guarantee payment of whatever may be adjudged in complainants' favor by
virtue of this case. It is a basic principle in law that corporations have personality distinct and
separate from the stockholders. This concept is known as corporate fiction. Normally, officers acting
for and in behalf of a corporation are not held personally liable for the obligation of the corporation. In
instances where corporate officers dismissed employees in bad faith or wantonly violate labor
standard laws or when the company had already ceased operations and there is no way by which a
judgment in favor of employees could be satisfied, corporate officers can be held jointly and
severally liable with the company. This Office after a careful consideration of the factual backdrop of
the case is inclined to grant complainants' prayer for the impleader of Atty. Antonio Carag and Mr.
Armando David, to assure that valid claims of employees would not be defeated by the closure of
respondent company.

The complainants pray for the award to them of moral and exemplary damages, suffice it to state
that they failed to establish their entitlement to aforesaid reliefs when they did not adduce persuasive
evidence on the matter.

The claim for attorney's fee[s] will be as it is hereby resolved in complainants' favor. As a
consequence of the illegal closure of respondent company, the complainants were compelled to
litigate to secure benefits due them under pertinent laws. For this purpose, they secured the services
of a counsel to assist them in the course of the litigation. It is but just and proper to order the
respondents who are responsible for the closure and subsequent filing of the case to pay attorney's
fee[s].

WHEREFORE, premises considered, judgment is hereby rendered declaring respondents jointly and
severally guilty of illegal closure and they are hereby ordered as follows:

1. To pay complainants separation pay computed on the basis of one (1) month for every
year of service, a fraction of six (6) months to be considered as one (1) year in the total
amount of P49,101,621.00; and

2. To pay complainants attorney's fee in an amount equivalent to 10% of the judgment

award.

The claims for moral, actual and exemplary damages are dismissed for lack of evidence.

SO ORDERED.8 (Emphasis supplied)

MAC, Carag, and David, through Atty. Pastores, filed their Memorandum before the NLRC on 26
August 1994. Carag, through a separate counsel, filed an appeal dated 30 August 1994 before the
NLRC. Carag reiterated the arguments in respondents' position paper filed before Arbiter Ortiguerra,
stating that:

2.1 While Atty. Antonio C. Carag is the Chairman of the Board of MAC and Mr. Armando
David is the President, they are not the owners of MAC;

2.2 MAC is owned by a consortium of banks, as stockholders, and Atty. Antonio C. Carag
and Mr. Armando David are only minority stockholders of the corporation, owning only
qualifying shares;
 2.3 MAC is not a family[-]owned corporation, that in case of a close [sic] corporation, piercing
the corporate veil its [sic] possible to hold the stockholders liable for the corporation's
liabilities;

2.4 MAC is a corporation with a distinct and separate personality from that of the
stockholders; piercing the corporate veil to hold the stockholders liable for corporate liabilities
is only true [for] close corporations (family corporations); this is not the prevailing situation in
MAC;

2.5 Atty. Antonio Carag and Mr. Armando David are professional managers and the
extension of shares to them are just qualifying shares to enable them to occupy subject
position.9

Respondents also filed separate motions to reduce bond.

The Ruling of the NLRC

In a Resolution promulgated on 5 January 1995, the NLRC Third Division denied the motions to
reduce bond. The NLRC stated that to grant a reduction of bond on the ground that the appeal is
meritorious would be tantamount to ruling on the merits of the appeal. The dispositive portion of the
Resolution of the NLRC Third Division reads, thus:

PREMISES CONSIDERED, Motions to Reduce Bond for both respondents are hereby DISMISSED
for lack of merit. Respondents are directed to post cash or surety bond in the amount of forty eight
million one hundred one thousand six hundred twenty one pesos (P48,101,621.00) within an
unextendible period of fifteen (15) days from receipt hereof.

No further Motions for Reconsideration shall be entertained.

SO ORDERED.10

Respondents filed separate petitions for certiorari before this Court under Rule 65 of the 1964 Rules
of Court. Carag filed his petition, docketed as G.R. No. 118820, on 13 February 1995. In the
meantime, we granted MAC's prayer for the issuance of a temporary restraining order to enjoin the
NLRC from enforcing Arbiter Ortiguerra's Decision. On 31 May 1995, we granted complainants'
motion for consolidation of G.R. No. 118820 with G.R. No. 118839 (MAC v. NLRC, et al.) and G.R.
No. 118880 (David v. Arbiter Ortiguerra, et al.). On 12 July 1999, after all the parties had filed their
memoranda, we referred the consolidated cases to the appellate court in accordance with our
decision in St. Martin Funeral Home v. NLRC.11Respondents filed separate petitions before the
appellate court.

The Ruling of the Appellate Court

On 29 February 2000, the appellate court issued a joint decision on the separate petitions. The
appellate court identified two issues as essential: (1) whether Arbiter Ortiguerra properly held Carag
and David, in their capacities as corporate officers, jointly and severally liable with MAC for the
money claims of the employees; and (2) whether the NLRC abused its discretion in denying the
separate motions to reduce bond filed by MAC and Carag.

The appellate court held that the absence of a formal hearing before the Labor Arbiter is not a cause
for Carag and David to impute grave abuse of discretion. The appellate court found that Carag and
David, as the most ranking officers of MAC, had a direct hand at the time in the illegal dismissal of
MAC's employees. The failure of Carag and David to observe the notice requirement in closing the
company shows malice and bad faith, which justifies their solidary liability with MAC. The appellate
court also found that the circumstances of the present case do not warrant a reduction of the appeal
bond. Thus:

IN VIEW WHEREOF, the petitions are DISMISSED. The decision of Labor Arbiter Isabel
Panganiban-Ortiguerra dated June 17, 1994, and the Resolution dated January 5, 1995, issued by
the National Labor Relations Commission are hereby AFFIRMED. As a consequence of dismissal,
the temporary restraining order issued on March 2, 1995, by the Third Division of the Supreme Court
is LIFTED. Costs against petitioners.

SO ORDERED.12 (Emphasis in the original)

The appellate court denied respondents' separate motions for reconsideration. 13

In a resolution dated 20 June 2001, this Court's First Division denied the petition for Carag's failure
to show sufficiently that the appellate court committed any reversible error to warrant the exercise of
our discretionary appellate jurisdiction. Carag filed a motion for reconsideration of our resolution
denying his petition. In a resolution dated 13 August 2001, this Court's First Division denied Carag's
reconsideration with finality.

Despite our 13 August 2001 resolution, Carag filed a second motion for reconsideration with an
omnibus motion for leave to file a second motion for reconsideration. This Court's First Division
referred the motion to the Court En Banc. In a resolution dated 25 June 2002, the Court En Banc
resolved to grant the omnibus motion for leave to file a second motion for reconsideration, reinstated
the petition, and required respondents to comment on the petition. On 25 November 2003, the Court
En Banc resolved to suspend the rules to allow the second motion for reconsideration. This Court's
First Division referred the petition to the Court En Banc on 14 July 2004, and the Court En Banc
accepted the referral on 15 March 2005.

The Issues

Carag questions the appellate court's decision of 29 February 2000 by raising the following issues
before this Court:

1. Has petitioner Carag's right to due process been blatantly violated by holding him
personally liable for over P50 million of the corporation's liability, merely as board chairman
and solely on the basis of the motion to implead him in midstream of the proceedings as
additional respondent, without affording him the right to present evidence and in violation of
 the accepted procedure prescribed by Rule V of the NLRC Rules of Procedure, as to render
the ruling null and void?

2. Assuming, arguendo, that he had been accorded due process, is the decision holding him
solidarily liable supported by evidence when the only pleadings (not evidence) before the
Labor Arbiter and that of the Court of Appeals are the labor union's motion to implead him as
respondent and his opposition thereto, without position papers, without evidence submitted,
and without hearing on the issue of personal liability, and even when bad faith or malice, as
the only legal basis for personal liability, was expressly found absent and wanting by [the]
Labor Arbiter, as to render said decision null and void?

3. Did the NLRC commit grave abuse of discretion in denying petitioner's motion to reduce
appeal bond?14

The Ruling of the Court

We find the petition meritorious.

On Denial of Due Process to Carag and David

Carag asserts that Arbiter Ortiguerra rendered her Decision of 17 June 1994 without issuing
summons on him, without requiring him to submit his position paper, without setting any hearing,
without giving him notice to present his evidence, and without informing him that the case had been
submitted for decision - in violation of Sections 2,15 3,16 4,17 5(b),18 and 11(c) 19 of Rule V of The New
Rules of Procedure of the NLRC.20

It is clear from the narration in Arbiter Ortiguerra's Decision that she only summoned complainants
and MAC, and not Carag, to a conference for possible settlement. In her Decision, Arbiter Ortiguerra
stated that she scheduled the conference "upon receipt of the record of the case." At the time of the
conference, complainants had not yet submitted their position paper which contained the motion to
implead Carag. Complainants could not have submitted their position paper before the conference
since procedurally the Arbiter directs the submission of position papers only after the
conference.21 Complainants submitted their position paper only on 10 January 1994, five months
after filing the complaint. In short, at the time of the conference, Carag was not yet a party to the
case. Thus, Arbiter Ortiguerra could not have possibly summoned Carag to the conference.

Carag vigorously denied receiving summons to the conference, and complainants have not
produced any order of Arbiter Ortiguerra summoning Carag to the conference. A thorough search of
the records of this case fails to show any order of Arbiter Ortiguerra directing Carag to attend the
conference. Clearly, Arbiter Ortiguerra did not summon Carag to the conference.

When MAC failed to appear at the conference, Arbiter Ortiguerra declared the case submitted for
resolution. In her Decision, Arbiter Ortiguerra granted complainants' motion to implead Carag and at
the same time, in the same Decision, found Carag personally liable for the debts of MAC consisting
of P49,101,621 in separation pay to complainants. Arbiter Ortiguerra never issued summons to
Carag, never called him to a conference for possible settlement, never required him to submit a
position paper, never set the case for hearing, never notified him to present his evidence, and never
informed him that the case was submitted for decision - all in violation of Sections 2, 3, 4, 5(b), and
11(c) of Rule V of The New Rules of Procedure of the NLRC.

Indisputably, there was utter absence of due process to Carag at the arbitration level. The procedure
adopted by Arbiter Ortiguerra completely prevented Carag from explaining his side and presenting
his evidence. This alone renders Arbiter Ortiguerra's Decision a nullity insofar as Carag is
concerned. While labor arbiters are not required to conduct a formal hearing or trial, they have no
license to dispense with the basic requirements of due process such as affording respondents the
opportunity to be heard. In Habana v. NLRC,22 we held:

The sole issue to be resolved is whether private respondents OMANFIL and HYUNDAI were denied
due process when the Labor Arbiter decided the case solely on the basis of the position paper and
supporting documents submitted in evidence by Habana and De Guzman.

We rule in the affirmative. The manner in which this case was decided by the Labor Arbiter left much
to be desired in terms of respect for the right of private respondents to due process -

First, there was only one conciliatory conference held in this case. This was on 10 May 1996.
During the conference, the parties did not discuss at all the possibility of amicable settlement
due to petitioner's stubborn insistence that private respondents be declared in default.

Second, the parties agreed to submit their respective motions - petitioner's motion to declare
respondents in default and private respondents' motion for bill of particulars - for the
consideration of the Labor Arbiter. The Labor Arbitration Associate, one Ms. Gloria Vivar,
then informed the parties that they would be notified of the action of the Labor Arbiter on the
pending motions.

xxx

Third, since the conference on 10 May 1996 no order or notice as to what action was taken
by the Labor Arbiter in disposing the pending motions was ever received by private
respondents. They were not declared in default by the Labor Arbiter nor was petitioner
required to submit a bill of particulars.

Fourth, neither was there any order or notice requiring private respondents to file their
position paper, nor an order informing the parties that the case was already submitted for
decision. What private respondents received was the assailed decision adverse to them.

It is clear from the foregoing that there was an utter absence of opportunity to be heard at the
arbitration level, as the procedure adopted by the Labor Arbiter virtually prevented private
respondents from explaining matters fully and presenting their side of the controversy. They had no
chance whatsoever to at least acquaint the Labor Arbiter with whatever defenses they might have to
the charge that they illegally dismissed petitioner. In fact, private respondents presented their
position paper and documentary evidence only for the first time on appeal to the NLRC.
The essence of due process is that a party be afforded a reasonable opportunity to be heard and to
submit any evidence he may have in support of his defense. Where, as in this case, sufficient
opportunity to be heard either through oral arguments or position paper and other pleadings is not
accorded a party to a case, there is undoubtedly a denial of due process.

It is true that Labor Arbiters are not bound by strict rules of evidence and of procedure. The manner
by which Arbiters dispose of cases before them is concededly a matter of discretion. However, that
discretion must be exercised regularly, legally and within the confines of due process. They are
mandated to use every reasonable means to ascertain the facts of each case, speedily, objectively
and without regard to technicalities of law or procedure, all in the interest of justice and for the
purpose of accuracy and correctness in adjudicating the monetary awards.

In this case, Carag was in a far worse situation. Here, Carag was not issued summons, not accorded
a conciliatory conference, not ordered to submit a position paper, not accorded a hearing, not given
an opportunity to present his evidence, and not notified that the case was submitted for resolution.
Thus, we hold that Arbiter Ortiguerra's Decision is void as against Carag for utter absence of due
process. It was error for the NLRC and the Court of Appeals to uphold Arbiter Ortiguerra's decision
as against Carag.

On the Liability of Directors for Corporate Debts

This case also raises this issue: when is a director personally liable for the debts of the corporation?
The rule is that a director is not personally liable for the debts of the corporation, which has a
separate legal personality of its own. Section 31 of the Corporation Code lays down the exceptions
to the rule, as follows:

Liability of directors, trustees or officers. - Directors or trustees who wilfully and knowingly vote for or
assent to patently unlawful acts of the corporation or who are guilty of gross negligence or bad faith
in directing the affairs of the corporation or acquire any personal or pecuniary interest in conflict with
their duty as such directors or trustees shall be liable jointly and severally for all damages resulting
therefrom suffered by the corporation, its stockholders or members and other persons.

xxxx

Section 31 makes a director personally liable for corporate debts if he wilfully and knowingly votes
for or assents to patently unlawful acts of the corporation. Section 31 also makes a director
personally liable if he is guilty of gross negligence or bad faith in directing the affairs of the
corporation.

Complainants did not allege in their complaint that Carag wilfully and knowingly voted for or
assented to any patently unlawful act of MAC. Complainants did not present any evidence showing
that Carag wilfully and knowingly voted for or assented to any patently unlawful act of MAC. Neither
did Arbiter Ortiguerra make any finding to this effect in her Decision.

Complainants did not also allege that Carag is guilty of gross negligence or bad faith in directing the
affairs of MAC. Complainants did not present any evidence showing that Carag is guilty of gross
negligence or bad faith in directing the affairs of MAC. Neither did Arbiter Ortiguerra make any
finding to this effect in her Decision.

Arbiter Ortiguerra stated in her Decision that:

In instances where corporate officers dismissed employees in bad faith or wantonly violate labor
standard laws or when the company had already ceased operations and there is no way by which a
judgment in favor of employees could be satisfied, corporate officers can be held jointly and
severally liable with the company.23

After stating what she believed is the law on the matter, Arbiter Ortiguerra stopped there and did not
make any finding that Carag is guilty of bad faith or of wanton violation of labor standard laws.
Arbiter Ortiguerra did not specify what act of bad faith Carag committed, or what particular labor
standard laws he violated.

To hold a director personally liable for debts of the corporation, and thus pierce the veil of corporate
fiction, the bad faith or wrongdoing of the director must be established clearly and convincingly.24 Bad
faith is never presumed.25 Bad faith does not connote bad judgment or negligence. Bad faith imports
a dishonest purpose. Bad faith means breach of a known duty through some ill motive or interest.
Bad faith partakes of the nature of fraud.26In Businessday Information Systems and Services, Inc. v.
NLRC,27 we held:

There is merit in the contention of petitioner Raul Locsin that the complaint against him should be
dismissed. A corporate officer is not personally liable for the money claims of discharged corporate
employees unless he acted with evident malice and bad faith in terminating their employment. There
is no evidence in this case that Locsin acted in bad faith or with malice in carrying out the
retrenchment and eventual closure of the company (Garcia vs. NLRC, 153 SCRA 640), hence, he
may not be held personally and solidarily liable with the company for the satisfaction of the judgment
in favor of the retrenched employees.

Neither does bad faith arise automatically just because a corporation fails to comply with the notice
requirement of labor laws on company closure or dismissal of employees. The failure to give notice
is not an unlawful act because the law does not define such failure as unlawful. Such failure to give
notice is a violation of procedural due process but does not amount to an unlawful or criminal act.
Such procedural defect is called illegal dismissal because it fails to comply with mandatory
procedural requirements, but it is not illegal in the sense that it constitutes an unlawful or criminal
act.

For a wrongdoing to make a director personally liable for debts of the corporation, the wrongdoing
approved or assented to by the director must be a patently unlawful act. Mere failure to comply with
the notice requirement of labor laws on company closure or dismissal of employees does not
amount to a patently unlawful act. Patently unlawful acts are those declared unlawful by law which
imposes penalties for commission of such unlawful acts. There must be a law declaring the act
unlawful and penalizing the act.
An example of a patently unlawful act is violation of Article 287 of the Labor Code, which states that
"[V]iolation of this provision is hereby declared unlawful and subject to the penal provisions provided
under Article 288 of this Code." Likewise, Article 288 of the Labor Code on Penal Provisions and
Liabilities, provides that "any violation of the provision of this Code declared unlawful or penal in
nature shall be punished with a fine of not less than One Thousand Pesos (P1,000.00) nor more
than Ten Thousand Pesos (P10,000.00), or imprisonment of not less than three months nor more
than three years, or both such fine and imprisonment at the discretion of the court."

In this case, Article 28328 of the Labor Code, requiring a one-month prior notice to employees and the
Department of Labor and Employment before any permanent closure of a company, does not state
that non-compliance with the notice is an unlawful act punishable under the Code. There is no
provision in any other Article of the Labor Code declaring failure to give such notice an unlawful act
and providing for its penalty.

Complainants did not allege or prove, and Arbiter Ortiguerra did not make any finding, that Carag
approved or assented to any patently unlawful act to which the law attaches a penalty for its
commission. On this score alone, Carag cannot be held personally liable for the separation pay of
complainants.

This leaves us with Arbiter Ortiguerra's assertion that "when the company had already ceased
operations and there is no way by which a judgment in favor of employees could be satisfied,
corporate officers can be held jointly and severally liable with the company." This assertion echoes
the complainants' claim that Carag is personally liable for MAC's debts to complainants "on the basis
of Article 212(e) of the Labor Code, as amended," which says:

'Employer' includes any person acting in the interest of an employer, directly or indirectly. The term
shall not include any labor organization or any of its officers or agents except when acting as
employer. (Emphasis supplied)

Indeed, complainants seek to hold Carag personally liable for the debts of MAC based solely on
Article 212(e) of the Labor Code. This is the specific legal ground cited by complainants, and used
by Arbiter Ortiguerra, in holding Carag personally liable for the debts of MAC.

We have already ruled in McLeod v. NLRC29 and Spouses Santos v. NLRC30 that Article 212(e) of the
Labor Code, by itself, does not make a corporate officer personally liable for the debts of the
corporation. The governing law on personal liability of directors for debts of the corporation is still
Section 31 of the Corporation Code. Thus, we explained in McLeod:

Personal liability of corporate directors, trustees or officers attaches only when (1) they assent to a
patently unlawful act of the corporation, or when they are guilty of bad faith or gross negligence in
directing its affairs, or when there is a conflict of interest resulting in damages to the corporation, its
stockholders or other persons; (2) they consent to the issuance of watered down stocks or when,
having knowledge of such issuance, do not forthwith file with the corporate secretary their written
objection; (3) they agree to hold themselves personally and solidarily liable with the corporation; or
(4) they are made by specific provision of law personally answerable for their corporate action.
http://elibrary.supremecourt.gov.ph/DOCUMENTS/SUPREME_COURT/Decisions/2007/jan2007.zip
%3E9,df%7C2007/jan2007/146667.htm -

xxx

The ruling in A.C. Ransom Labor Union-CCLU v.

NLRC,http://elibrary.supremecourt.gov.ph/DOCUMENTS/SUPREME_COURT/Decisions/2007/jan20
07.zip%3E9,df%7C2007/jan2007/146667.htm - which the Court of Appeals cited, does not apply to
this case. We quote pertinent portions of the ruling, thus:

(a) Article 265 of the Labor Code, in part, expressly provides:

"Any worker whose employment has been terminated as a consequence of an unlawful lockout shall
be entitled to reinstatement with full backwages."

Article 273 of the Code provides that:

"Any person violating any of the provisions of Article 265 of this Code shall be punished by a fine
of not exceeding five hundred pesos and/or imprisonment for not less than one (1) day nor
more than six (6) months."

(b) How can the foregoing provisions be implemented when the employer is a corporation? The
answer is found in Article 212 (c) of the Labor Code which provides:

"(c) 'Employer' includes any person acting in the interest of an employer, directly or indirectly. The
term shall not include any labor organization or any of its officers or agents except when acting as
employer."

The foregoing was culled from Section 2 of RA 602, the Minimum Wage Law. Since RANSOM is an
artificial person, it must have an officer who can be presumed to be the employer, being the "person
acting in the interest of (the) employer" RANSOM. The corporation, only in the technical sense, is
the employer.

The responsible officer of an employer corporation can be held personally, not to say even criminally,
liable for non-payment of back wages. That is the policy of the law.

xxxx

(c) If the policy of the law were otherwise, the corporation employer can have devious ways for
evading payment of back wages. In the instant case, it would appear that RANSOM, in 1969,
foreseeing the possibility or probability of payment of back wages to the 22 strikers,
organized ROSARIO to replace RANSOM, with the latter to be eventually phased out if the 22
strikers win their case. RANSOM actually ceased operations on May 1, 1973, after the December
19, 1972 Decision of the Court of Industrial Relations was promulgated against RANSOM.
http://elibrary.supremecourt.gov.ph/DOCUMENTS/SUPREME_COURT/Decisions/2007/jan2007.zip
%3E9,df%7C2007/jan2007/146667.htm - (Emphasis supplied)
Clearly, in A.C. Ransom, RANSOM, through its President, organized ROSARIO to evade payment of
backwages to the 22 strikers. This situation, or anything similar showing malice or bad faith on the
part of Patricio, does not obtain in the present case. In Santos v. NLRC,
http://elibrary.supremecourt.gov.ph/DOCUMENTS/SUPREME_COURT/Decisions/2007/jan2007.zip
%3E9,df%7C2007/jan2007/146667.htm - the Court held, thus:

It is true, there were various cases when corporate officers were themselves held by the Court to be
personally accountable for the payment of wages and money claims to its employees. In A.C.
Ransom Labor Union-CCLU vs. NLRC, for instance, the Court ruled that under the Minimum Wage
Law, the responsible officer of an employer corporation could be held personally liable for
nonpayment of backwages for "(i)f the policy of the law were otherwise, the corporation employer
(would) have devious ways for evading payment of backwages." In the absence of a clear
identification of the officer directly responsible for failure to pay the backwages, the Court considered
the President of the corporation as such officer. The case was cited in Chua vs. NLRC in holding
personally liable the vice-president of the company, being the highest and most ranking official of the
corporation next to the President who was dismissed for the latter's claim for unpaid wages.

A review of the above exceptional cases would readily disclose the attendance of facts and
circumstances that could rightly sanction personal liability on the part of the company officer. In A.C.
Ransom, the corporate entity was a family corporation and execution against it could not be
implemented because of the disposition posthaste of its leviable assets evidently in order to
evade its just and due obligations. The doctrine of "piercing the veil of corporate fiction" was
thus clearly appropriate. Chua likewise involved another family corporation, and this time the
conflict was between two brothers occupying the highest ranking positions in the company. There
were incontrovertible facts which pointed to extreme personal animosity that resulted, evidently in
bad faith, in the easing out from the company of one of the brothers by the other.

The basic rule is still that which can be deduced from the Court's pronouncement in Sunio vs.
National Labor Relations Commission, thus:

We come now to the personal liability of petitioner, Sunio, who was made jointly and severally
responsible with petitioner company and CIPI for the payment of the backwages of private
respondents. This is reversible error. The Assistant Regional Director's Decision failed to disclose
the reason why he was made personally liable. Respondents, however, alleged as grounds thereof,
his being the owner of one-half () interest of said corporation, and his alleged arbitrary dismissal of
private respondents.

Petitioner Sunio was impleaded in the Complaint in his capacity as General Manager of petitioner
corporation. There appears to be no evidence on record that he acted maliciously or in bad faith in
terminating the services of private respondents. His act, therefore, was within the scope of his
authority and was a corporate act.

It is basic that a corporation is invested by law with a personality separate and distinct from those of
the persons composing it as well as from that of any other legal entity to which it may be related.
Mere ownership by a single stockholder or by another corporation of all or nearly all of the capital
stock of a corporation is not of itself sufficient ground for disregarding the separate corporate
personality. Petitioner Sunio, therefore, should not have been made personally answerable for the
payment of private respondents' back
salaries.http://elibrary.supremecourt.gov.ph/DOCUMENTS/SUPREME_COURT/Decisions/2007/jan2
007.zip%3E9,df%7C2007/jan2007/146667.htm -

Thus, the rule is still that the doctrine of piercing the corporate veil applies only when the corporate
fiction is used to defeat public convenience, justify wrong, protect fraud, or defend crime. In the
absence of malice, bad faith, or a specific provision of law making a corporate officer liable, such
corporate officer cannot be made personally liable for corporate liabilities. Neither Article 212[e] nor
Article 273 (now 272) of the Labor Code expressly makes any corporate officer personally liable for
the debts of the corporation. As this Court ruled in H.L. Carlos Construction, Inc. v. Marina Properties
Corporation:http://elibrary.supremecourt.gov.ph/DOCUMENTS/SUPREME_COURT/Decisions/2007/j
an2007.zip%3E9,df%7C2007/jan2007/146667.htm -

We concur with the CA that these two respondents are not liable. Section 31 of the Corporation
Code (Batas Pambansa Blg. 68) provides:

"Section 31. Liability of directors, trustees or officers. - Directors or trustees who willfully and
knowingly vote for or assent to patently unlawful acts of the corporation or who are guilty of gross
negligence or bad faith ... shall be liable jointly and severally for all damages resulting therefrom
suffered by the corporation, its stockholders and other persons."

The personal liability of corporate officers validly attaches only when (a) they assent to a patently
unlawful act of the corporation; or (b) they are guilty of bad faith or gross negligence in directing its
affairs; or (c) they incur conflict of interest, resulting in damages to the corporation, its stockholders
or other persons.31 (Boldfacing in the original; boldfacing with underscoring supplied)

Thus, it was error for Arbiter Ortiguerra, the NLRC, and the Court of Appeals to hold Carag
personally liable for the separation pay owed by MAC to complainants based alone on Article 212(e)
of the Labor Code. Article 212(e) does not state that corporate officers are personally liable for the
unpaid salaries or separation pay of employees of the corporation. The liability of corporate officers
for corporate debts remains governed by Section 31 of the Corporation Code.

WHEREFORE, we GRANT the petition. We SET ASIDE the Decision dated 29 February 2000 and
the Resolution dated 27 March 2001 of the Court of Appeals in CA-G.R. SP Nos. 54404-06 insofar
as petitioner Antonio Carag is concerned.

SO ORDERED.

23. G.R. No. 167988 February 6, 2007

MA. CONCEPCION L. REGALADO, Petitioner,

vs.
ANTONIO S. GO, Respondent.

DECISION
CHICO-NAZARIO, J.:

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, of the
Resolution1 dated 30 August 2004 of the Court of Appeals, finding petitioner Ma. Concepcion L.
Regalado (Atty. Regalado) guilty of indirect contempt. Likewise assailed in this petition is the
Resolution2 denying her Motion for Reconsideration. The dispositive portion of the Resolution reads:

WHEREFORE, Atty. Ma. Concepcion Regalado of De Borja Medialdea Bello Guevarra and Gerodias
Law Offices is declared GUILTY of INDIRECT CONTEMPT and is ordered to pay a fine of Five
Thousand Pesos (P5,000), with a STERN WARNING that a repetition of the same or similar acts in
the future will be dealt with more severely. The imposed fine should be paid to this Court upon finality
hereof.

Let a copy of this resolution be furnished the Bar Confidant (sic), the Integrated Bar of the
Philippines and the Court Administrator for investigation and possible administrative sanction. 3

The present controversy stemmed from the complaint of illegal dismissal filed before the Labor
Arbiter by herein respondent Antonio S. Go against Eurotech Hair Systems, Inc. (EHSI), and its
President Lutz Kunack and General Manager Jose E. Barin.

In a Decision4 dated 29 December 2000, the Labor Arbiter ruled that respondent Go was illegally
dismissed from employment, the decretal portion of which reads:

WHEREFORE, premises considered, judgment is hereby rendered as follows:

1. Declaring [EHSI, Kunack and Barin] guilty of illegal dismissal;

2. Considering that reinstatement would not be feasible because of strained relations, [EHSI,
Kunack and Barin] are ordered to pay [herein respondent Go] backwages in the amount of
Php900,000.00 (Php60,000 x 15 months), separation pay of Php180,000.00 (one month pay
for every year of service = Php60,000 x 3 years);

3. Ordering [EHSI, Kunack and Barin] to pay [respondent Go] Php500,000.00 as moral
damages;

4. Ordering [EHSI, Kunack and Barin] to pay [respondent Go] Php300,000 as exemplary
damages;

5. Ordering the payment of ten percent (10%) of the total monetary award as attorneys fees
in the sum of Php188,000.00.

All other claims are hereby dismissed for lack of merit.

On appeal to the National Labor Relations Commission (NLRC), EHSI, Kunack and Barin employed
the legal services of De Borja Medialdea Bello Guevarra and Gerodias Law Offices where herein
petitioner Atty. Regalado worked as an associate.5
On 11 June 2001, the NLRC rendered a Decision6 reversing the Labor Arbiters decision and
declaring that respondent Gos separation from employment was legal for it was attended by a just
cause and was validly effected by EHSI, Kunack and Barin. The dispositive part of the decision
reads:

WHEREFORE, the appealed decision is set aside. The complaint below is dismissed for being
without merit.

For lack of patent or palpable error, the Motion for Reconsideration interposed by respondent Go
was denied by the NLRC in an Order7 dated 20 December 2001.

Aggrieved, respondent Go elevated the adverse decision to the Court of Appeals which was
docketed as CA-G.R. SP No. 69909 entitled, Antonio S. Go v. National Labor Relations
Commission, Eurotech Hair Systems, Inc., Lutz Kunack and Jose Barin.

On 9 July 2003, the Court of Appeals promulgated a Decision8 setting aside the ruling of the NLRC
and reinstating the decision of the Labor Arbiter adjudging EHSI, Kunack and Barin guilty of illegal
dismissal. The appellate court thus ordered EHSI, Kunack and Barin to pay respondent Go full
backwages, separation pay, moral and exemplary damages. The fallo of the decision reads:

WHEREFORE, the petition for certiorari is GRANTED. The assailed decision of the NLRC
promulgated on July 30, 2001 and its Order dated December 20, 2001 are SET ASIDE while the
decision of Labor Arbiter Waldo Emerson R. Gan dated December 29, 2000 declaring the dismissal
of [herein respondent Go] as illegal is hereby REINSTATED with the modification that [EHSI] is
hereby Ordered to pay [respondent Go]:

1. His full backwages from the time of his illegal dismissal until the finality of this decision;

2. Separation pay equal to one month pay for every year of service;

3. Moral damages in the amount of P50,000.00; and

4. Exemplary damages in the amount of P20,000.00

The award of attorneys fees is DELETED.

EHSI, Kunack and Barin were able to receive a copy of the decision through registered mail on 17
July 2003 while respondent Go received his copy on 21 July 2003.9

On 16 July 2003, after the promulgation of the Court of Appeals decision but prior to the receipt of
the parties of their respective copies, the parties decided to settle the case and signed a Release
Waiver and Quitclaim10 with the approval of the Labor Arbiter. In view of the amicable settlement, the
Labor Arbiter, on the same day, issued an Order11 dismissing the illegal dismissal case with
prejudice. The order thus reads:
In view of the Release, Waiver and Quitclaim voluntarily executed by the [herein respondent] Antonio
S. Go, let the instant case be as it is hereby DISMISSED WITH PREJUDICE.

The execution of the compromise agreement was attended by the counsel for EHSI, Kunack and
Barin, petitioner Atty. Regalado, and respondent Go, but in the absence and without the knowledge
of respondent Gos lawyer.12

After the receipt of a copy of the Court of Appeals decision, respondent Go, through counsel, filed,
on 29 July 2003, a Manifestation with Omnibus Motion13 seeking to nullify the Release Waiver and
Quitclaim dated 16 July 2003 on the ground of fraud, mistake or undue influence. In the same
motion, respondent Go, through counsel, moved that petitioner Atty. Regalado be made to explain
her unethical conduct for directly negotiating with respondent Go without the knowledge of his
counsel. The motion thus prays:

WHEREFORE, premises considered, it is most respectfully prayed for the Honorable Court to
declare Null and Void the dismissal of the instant (sic), with prejudice, by Labor (sic) Waldo Emerson
Gan, as well as the Release Waiver and Quitclaim dated July 16, 2003 signed by [herein respondent
Go] for having been obtained through mistake, fraud or undue influence committed by [EHSI,
Kunack and Barin] and their counsels (sic).

It is likewise prayed for [EHSI, Kunack and Barins] counsel, particularly Atty. Ma. Concepcion
Regalado, to be required to explain why no disciplinary action should be taken against them (sic) for
their (sic), unethical conduct of directly negotiating with [respondent Go] without the presence of
undersigned counsel, and for submitting the Release, Waiver and Quitclaim before Labor Arbiter
Waldo Emerson Gan knowing fully well that the controversy between [respondent Go] and [EHSI] is
still pending before this Honorable Court.

[Respondent Go] likewise prays for such other relief [as may be] just and equitable under the
premises.14

For their part, EHSI, Kunack and Barin submitted a Manifestation and Motion with Leave of
Court15 praying that CA-G.R. SP No. 69909 be considered settled with finality in view of the amicable
settlement among the parties which resulted in the dismissal of respondent Gos complaint with
prejudice in the Labor Arbiters Order dated 16 July 2003.

In addition, EHSI, Kunack and Barin also filed a Motion for Reconsideration16 with an ad
cautelam that in case of unfavorable action on their foregoing Manifestation and Motion, the
appellate court should reconsider its decision dated 9 July 2003.

Acting on the motions, the appellate court issued a Resolution 17 on 19 November 2003 annulling the
Order of the Labor Arbiter dated 16 July 2003 for lack of jurisdiction. It also denied for lack of merit
EHSI, Kunack and Barins Motion for Reconsideration Ad Cautelam. In the same resolution,
petitioner Atty. Regalado was ordered to explain why she should not be cited for contempt of court
for violating Canon 9 of the Canons of Professional Ethics. The decretal portion of the Resolution
reads:
WHEREFORE, premises considered, the Manifestation with Omnibus Motion is PARTIALLY
GRANTED. The order of Labor Arbiter Gan dismissing the case with prejudice is hereby declared
NULL and VOID for lack of jurisdiction. [EHSI, Kunack and Barins] counsel, [herein petitioner] Atty.
Ma. Concepcion Regalado is ordered to SHOW CAUSE within five (5) days from receipt of this
Resolution why she should not be cited for contempt of court for directly negotiating with [herein
respondent Go] in violation of Canon 9 of the Canons of Professional Ethics. On the other hand, the
Motion for Reconsideration Ad Cautelam is hereby denied for lack of merit.

EHSI, Kunack and Barin thus filed a Petition for Review on Certiorari before this Court, assailing the
Court of Appeals decision promulgated on 9 July 2003 and its Resolution dated 19 November 2003,
denying their Motion for Reconsideration. The case is cognized by another division of this Court.

For her part, petitioner Atty. Regalado submitted a Compliance 18 and explained that she never took
part in the negotiation for the amicable settlement of the illegal dismissal case with respondent Go
which led to the execution of a compromise agreement by the parties on 16 July 2003. EHSI,
Kunack and Barin, through a Mr. Ragay, a former EHSI employee and a close ally of respondent Go,
were the ones who negotiated the settlement.

Further, petitioner Atty. Regalado maintained that she never met personally respondent Go, not until
16 July 2003, when the latter appeared before the Labor Arbiter for the execution of the Release
Waiver and Quitclaim. Petitioner Atty. Regalado claimed that she was in fact apprehensive to release
the money to respondent Go because the latter cannot present any valid identification card to prove
his identity. It was only upon the assurance of Labor Arbiter Gan that Antonio S. Go and the person
representing himself as such were one and the same, that the execution of the agreement was
consummated.

Considering the circumstances, petitioner Atty. Regalado firmly stood that there was no way that she
had directly dealt with respondent Go, to the latters damage and prejudice, and misled him to enter
into an amicable settlement with her client.

On 30 August 2004, the Court of Appeals issued a Resolution19 disregarding petitioner Atty.
Regalados defenses and adjudging her guilty of indirect contempt under Rule 71 of the Revised
Rules of Court. As declared by the appellate court, even granting arguendo that petitioner Atty.
Regalado did not participate in the negotiation process, she was nonetheless under the obligation to
restrain her clients from doing acts that she herself was prohibited to perform as mandated by
Canon 16 of the Canons of Professional Ethics. However, instead of preventing her clients from
negotiating with respondent Go who was unassisted by his counsel, Atty. Regalado actively
participated in the consummation of the compromise agreement by dealing directly with respondent
Go and allowing him to sign the Release Waiver and Quitclaim without his lawyer.

Undaunted, petitioner Atty. Regalado filed a Motion for Reconsideration which was also denied by
the appellate court for lack of merit.20

Hence, this instant Petition for Review on Certiorari,21 raising the following issues:

I.
WHETHER OR NOT THE COURT OF APPEALS COMPLETELY VIOLATED PETITIONERS
CONSTITUTIONAL RIGHTS.

II.

WHETHER OR NOT THE COURT OF APPEALS TOTALLY DISREGARDED THE MANDATORY

PROVISION OF RULE 71 OF THE 1997 RULES OF CIVIL PROCEDURE.

III.

WHETHER OR NOT THE COURT OF APPEALS COMMITTED A MANIFEST ERROR OF LAW IN

RULING THAT PETITIONER IS ESTOPPED FROM CHALLENGING ITS AUTHORITY TO
ENTERTAIN THE CONTEMPT CHARGES AGAINST HER.

IV.

WHETHER OR NOT THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN DISREGARDING THE
OVERWHELMING EVIDENCE ON RECORD TO EFFECT THAT PETITIONER DID NOT COMMIT
ANY CONTUMACIOUS CONDUCT.

V.

WHETHER OR NOT THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION
AND COMMITTED A GROSS MISAPPRECIATION OF FACTS IN FINDING THE PETITIONER
GUILTY OF INDIRECT CONTEMPT ON THE BASIS OF THE CONFLICTING,
UNCORROBORATED, AND UNVERIFIED ASSERTIONS OF THE RESPONDENT.

Considering that the issues raised herein are both questions of law and fact, and consistent with our
policy that this Court is not a trier of facts, we shall address only the pure questions of law and leave
the factual issues, which are supported by evidence, as found by the appellate court. It is an oft-
repeated principle that in the exercise of the Supreme Courts power of review, the Court is not a trier
of facts and does not normally undertake the re-examination of the evidence presented by the
contending parties during the trial of the case considering that the findings of facts of the Court of
Appeals, if supported by evidence, are conclusive and binding upon this Court. 22 1awphi1.net

Contempt of court is a defiance of the authority, justice or dignity of the court; such conduct as tends
to bring the authority and administration of the law into disrespect or to interfere with or prejudice
parties litigant or their witnesses during litigation.23 It is defined as disobedience to the Court by
acting in opposition to its authority, justice, and dignity. It signifies not only a willful disregard or
disobedience of the courts orders, but such conduct as tends to bring the authority of the court and
the administration of law into disrepute or in some manner to impede the due administration of
justice.24
The power to punish for contempt is inherent in all courts and is essential to the preservation of
order in judicial proceedings and to the enforcement of judgments, orders, and mandates of the
court, and consequently, to the due administration of justice.25

Thus, contempt proceedings has a dual function: (1) vindication of public interest by punishment of
contemptuous conduct; and (2) coercion to compel the contemnor to do what the law requires him to
uphold the power of the Court, and also to secure the rights of the parties to a suit awarded by the
Court.26

In our jurisdiction, the Rules of Court penalizes two types of contempt, namely direct contempt and
indirect contempt. 27

Direct contempt is committed in the presence of or so near a court as to obstruct or interrupt the
proceedings before the same, and includes disrespect toward the court, offensive personalities
toward others, or refusal to be sworn or answer as a witness, or to subscribe an affidavit or
deposition when lawfully required to do so.28

On the other hand, Section 3, Rule 71 of the Rules of Court enumerates particular acts which
constitute indirect contempt, thus:

(a) Misbehavior of an officer of a court in the performance of his official duties or in his official
transactions;

(b) Disobedience of or resistance to a lawful writ, process, order, or judgment of a court,

including the act of a person who, after being dispossessed or ejected from any real property
by the judgment or process of any court of competent jurisdiction, enters or attempts or
induces another to enter into or upon such real property, for the purpose of executing acts of
ownership or possession, or in any manner disturbs the possession given to the person
adjudged to be entitled thereto;

(c) Any abuse of or any unlawful interference with the processes or proceedings of a court
not constituting direct contempt under Section 1 of this Rule;

(d) Any improper conduct tending, directly or indirectly, to impede, obstruct, or degrade the
administration of justice;

(e) Assuming to be an attorney or an officer of a court, and acting as such without authority;

(f) Failure to obey a subpoena duly served;

(g) The rescue, or attempted rescue, of a person or property in the custody of an officer by
virtue of an order or process of a court held by him.

But nothing in this section shall be so construed as to prevent the court from issuing process to bring
the respondent into court, or from holding him in custody pending such proceedings. (Emphasis
supplied.)29
Section 4, Rule 71 of the same Rules provides how proceedings for indirect contempt should be
commenced, thus:

SEC. 4. How proceedings commenced. Proceedings for indirect contempt may be initiated motu
proprio by the court against which the contempt was committed by an order or any other formal
charge requiring the respondent to show cause why he should not be punished for contempt.

In all other cases, charges for indirect contempt shall be commenced by a verified petition with
supporting particulars and certified true copies of documents or papers involved therein, and upon
full compliance with the requirements for filing initiatory pleadings for civil actions in the court
concerned. If the contempt charges arose out of or are related to a principal action pending in the
court, the petition for contempt shall allege that fact but said petition shall be docketed, heard and
decided separately, unless the court in its discretion orders the consolidation of the contempt charge
and the principal action for joint hearing and decision. (Emphases supplied.)

As can be gleaned above, the provisions of the Rules are unequivocal. Indirect contempt
proceedings may be initiated only in two ways: (1) motu proprio by the court; or (2) through a verified
petition and upon compliance with the requirements for initiatory pleadings. Procedural requirements
as outlined must be complied with.

There is no doubt that the complained acts of Atty. Regalado would fall under paragraphs (a) and (d)
of Section 3, Rule 71, as in fact, she was adjudged guilty of indirect contempt. But were the
proceedings conducted in convicting petitioner done in accordance with law?

In the instant case, the indirect contempt proceedings was initiated by respondent Go through a
Manifestation with Omnibus Motion.30 It was based on the aforesaid Motion that the appellate court
issued a Resolution31dated 19 November 2003, requiring petitioner Atty. Regalado to show cause
why she should not be cited for contempt.

Clearly, respondent Gos Manifestation with Omnibus Motion was the catalyst which set everything in
motion and led to the eventual conviction of Atty. Regalado. It was respondent Go who brought to
the attention of the appellate court the alleged misbehavior committed by petitioner Atty. Regalado.
Without such positive act on the part of respondent Go, no indirect contempt charge could have
been initiated at all.

Indeed, the appellate court itself, in its Resolution dated 30 August 2004, made categorical findings
as to how the contempt charge was initiated, to wit:

In the present case, [respondents Go] Manifestation With Omnibus Motion which led to our 19
November 2003 Resolution requiring Atty. Regalado to explain why she should not be cited for
contempt, x x x.32

We cannot, therefore, argue that the Court of Appeals on its own initiated the indirect contempt
charge without contradicting the factual findings made by the very same court which rendered the
questioned resolution.
It is true in Leonidas v. Judge Supnet,33 this Court ruled that the contempt proceedings was
considered commenced by the court motu proprio even if the show cause order came after the filing
of the motions to cite for contempt filed by the adverse party. The Decision thus reads:

Thus, independently of the motions filed by the Tamondong Spouses, it was the Pasay MTC which
commenced the contempt proceedings motu proprio. No verified petition is required if proceedings
for indirect contempt are initiated in this manner, and the absence of a verified petition does not
affect the procedure adopted.

It is true that the Tamondong Spouses did file a Motion To Cite Plaintiff For Contempt Of Court, dated
May 17, 2000. In this pleading they prayed that Union Bank be declared in indirect contempt of court
for its disobedience to the Pasay MTCs Order dated May 9, 2000. This Order dated May 9, 2000
specifically directed Union Bank to "return immediately to the defendants the replevied motor
vehicle." However, the Tamondong Spouses unverified motion dated May 17, 2000 cannot invalidate
the contempt proceedings because these proceedings were initiated by respondent judge motu
proprio in accordance with Section 4, Rule 71 of the 1997 Rules of Civil Procedure.

This above-cited case, however, has no application in the case at bar for the factual milieu of the
cases are different from each other. In Leonidas, there was an order of the court that was utterly
violated by Union Bank. Thus, even in the absence of the motion of spouses Tamondong to cite
Union Bank in contempt, the court a quo on its own can verily initiate the action. In the present case,
the appellate court could not have acquired knowledge of petitioner Atty. Regalados misbehavior
without respondent Gos Manifestation with Omnibus Motion reiterating the alleged deceitful conduct
committed by the former.

Having painstakingly laid down that the instant case was not initiated by the court motu proprio
necessitates us to look into the second mode of filing indirect contempt proceedings.

In cases where the court did not initiate the contempt charge, the Rules prescribe that a verified
petition which has complied with the requirements of initiatory pleadings as outlined in the heretofore
quoted provision of second paragraph, Section 4, Rule 71 of the Rules of Court, must be filed.

The manner upon which the case at bar was commenced is clearly in contravention with the
categorical mandate of the Rules. Respondent Go filed a Manifestation with Omnibus Motion, which
was unverified and without any supporting particulars and documents. Such procedural flaw
notwithstanding, the appellate court granted the motion and directed petitioner Atty. Regalado to
show cause why she should not be cited for contempt. Upon petitioner Atty. Regalados compliance
with the appellate courts directive, the tribunal proceeded in adjudging her guilty of indirect contempt
and imposing a penalty of fine, completely ignoring the procedural infirmities in the commencement
of the indirect contempt action.

It bears to stress that the power to punish for contempt is not limitless. It must be used sparingly with
caution, restraint, judiciousness, deliberation, and due regard to the provisions of the law and the
constitutional rights of the individual. 34
The limitations in the exercise of the power to punish for indirect contempt are delineated by the
procedural guidelines specified under Section 4, Rule 71 of the Rules of Court. Strict compliance
with such procedural guidelines is mandatory considering that proceedings against person alleged to
be guilty of contempt are commonly treated as criminal in nature. 35

As explained by Justice Florenz Regalado,36 the filing of a verified petition that has complied with the
requirements for the filing of initiatory pleading, is mandatory, and thus states:

1. This new provision clarifies with a regularity norm the proper procedure for commencing contempt
proceedings. While such proceeding has been classified as special civil action under the former
Rules, the heterogenous practice tolerated by the courts, has been for any party to file a motion
without paying any docket or lawful fees therefore and without complying with the requirements for
initiatory pleadings, which is now required in the second paragraph of this amended section.

xxxx

Henceforth, except for indirect contempt proceedings initiated motu propio by order of or a formal
charge by the offended court, all charges shall be commenced by a verified petition with full
compliance with the requirements therefore and shall be disposed in accordance with the second
paragraph of this section.

Time and again we rule that the use of the word "shall" underscores the mandatory character of the
Rule. The term "shall" is a word of command, and one which has always or which must be given a
compulsory meaning, and it is generally imperative or mandatory.37

In Enriquez v. Enriquez,38 this Court applied the word "shall" by giving it mandatory and imperative
import and ruled that non-compliance with the mandatory requirements of the Rules goes into the
very authority of the court to acquire jurisdiction over the subject matter of the case, thus:

"However, the 1997 Rules of Civil Procedure, as amended, which took effect on July 1, 1997, now
require that appellate docket and other lawful fees must be paid within the same period for taking an
appeal. This is clear from the opening sentence of Section 4, Rule 41 of the same rules that,
"(W)ithin the period for taking an appeal, the appellant shall pay to the clerk of court which rendered
the judgment or final order appealed from, the full amount of the appellate court docket and other
lawful fees."

xxxx

Time and again, this Court has consistently held that payment of docket fee within the prescribed
period is mandatory for the perfection of an appeal. Without such payment, the appellate court does
not acquire jurisdiction over the subject matter of the action and the decision sought to be appealed
from becomes final and executory.39(Emphases supplied.)

In United States v. de la Santa,40 which bears parallelism in the instant case, we held:
The objection in this case is not, strictly speaking, to the sufficiency of the complaint, but goes
directly to the jurisdiction of the court over the crime with which the accused was charged. x
x x. (Emphasis supplied.)

Even if the contempt proceedings stemmed from the main case over which the court already
acquired jurisdiction, the Rules direct that the petition for contempt be treated independently of the
principal action. Consequently, the necessary prerequisites for the filing of initiatory pleadings, such
as the filing of a verified petition, attachment of a certification on non-forum shopping, and the
payment of the necessary docket fees, must be faithfully observed.41

We now proceed to the issue of estoppel raised by the Court of Appeals. When petitioner Atty.
Regalado brought to the attention of the appellate court through a Motion for Reconsideration the
remedial defect attendant to her conviction, the Court of Appeals, instead of rectifying the palpable
and patent procedural error it earlier committed, altogether disregarded the glaring mistake by
interposing the doctrine of estoppel. The appellate court ruled that having actively participated in the
contempt proceedings, petitioner Atty. Regalado is now barred from impugning the Court of Appeals
jurisdiction over her contempt case citing the case of People v. Regalario. 42

We do not agree.

Laches is defined as the "failure or neglect for an unreasonable and unexplained length of time, to
do that which, by exercising due diligence, could or should have been done earlier, it is negligence
or omission to assert a right within a reasonable length of time, warranting a presumption that the
party entitled to assert it either has abandoned it or declined to assert it." 43

The ruling in People v. Regalario44 that was based on the landmark doctrine enunciated in Tijam v.
Sibonghanoy45 on the matter of jurisdiction by estoppel is the exception rather than the
rule. Estoppel by laches may be invoked to bar the issue of lack of jurisdiction only in cases in which
the factual milieu is analogous to that in the cited case. In such controversies, laches should have
been clearly present; that is, lack of jurisdiction must have been raised so belatedly as to warrant the
presumption that the party entitled to assert it had abandoned or declined to assert it. 46

In Sibonghanoy,47 the defense of lack of jurisdiction was raised for the first time in a motion to
dismiss filed by the Surety48 almost 15 years after the questioned ruling had been rendered. 49 At
several stages of the proceedings, in the court a quo as well as in the Court of Appeals, the Surety
invoked the jurisdiction of the said courts to obtain affirmative relief and submitted its case for final
adjudication on the merits. It was only when the adverse decision was rendered by the Court of
Appeals that it finally woke up to raise the question of jurisdiction.50

Clearly, the factual settings attendant in Sibonghanoy are not present in the case at bar. Petitioner
Atty. Regalado, after the receipt of the Court of Appeals resolution finding her guilty of contempt,
promptly filed a Motion for Reconsideration assailing the said courts jurisdiction based on
procedural infirmity in initiating the action. Her compliance with the appellate courts directive to show
cause why she should not be cited for contempt and filing a single piece of pleading to that effect
could not be considered as an active participation in the judicial proceedings so as to take the case
within the milieu of Sibonghanoy. Rather, it is the natural fear to disobey the mandate of the court
that could lead to dire consequences that impelled her to comply.

The provisions of the Rules are worded in very clear and categorical language. In case where the
indirect contempt charge is not initiated by the courts, the filing of a verified petition which fulfills the
requirements on initiatory pleadings is a prerequisite. Beyond question now is the mandatory
requirement of a verified petition in initiating an indirect contempt proceeding. Truly, prior to the
amendment of the 1997 Rules of Civil Procedure, mere motion without complying with the
requirements for initiatory pleadings was tolerated by the courts.51 At the onset of the 1997 Revised
Rules of Civil Procedure, however, such practice can no longer be countenanced.

Evidently, the proceedings attendant to the conviction of petitioner Atty. Regalado for indirect
contempt suffered a serious procedural defect to which this Court cannot close its eyes without
offending the fundamental principles enunciated in the Rules that we, ourselves, had promulgated.

The other issues raised on the merits of the contempt case have become moot and academic.

WHEREFORE, premises considered, the instant Petition is GRANTED. The indirect contempt
proceedings before the Court of Appeals is DECLARED null and void.

SO ORDERED.

24. G.R. No. 101619 July 8, 1992

SANYO PHILIPPINES WORKERS UNION-PSSLU LOCAL CHAPTER NO. 109 AND/OR ANTONIO
DIAZ, PSSLU NATIONAL PRESIDENT, petitioners,
vs.
HON. POTENCIANO S. CANIZARES, in his capacity as Labor Arbiter, BERNARDO YAP,
RENATO BAYBON, SALVADOR SOLIBEL, ALLAN MISTERIO, EDGARDO TANGKAY,
LEONARDO DIONISIO, ARNEL SALVO, REYNALDO RICOHERMOSO, BENITO VALENCIA,
GERARDO LASALA AND ALEXANDER ATANASIO, respondents.

MEDIALDEA, J.:

This petition seeks to nullify: 1) the order of respondent Labor Arbiter Potenciano Caizares dated
August 6, 1991 deferring the resolution of the motion to dismiss the complaint of private respondents
filed by petitioner Sanyo Philippines Workers Union-PSSLU Local Chapter No. 109 (PSSLU, for
brevity) on the ground that the labor arbiter had no jurisdiction over said complaint and 2) the order
of the same respondent clarifying its previous order and ruling that it had jurisdiction over the case.

The facts of the case are as follows:

PSSLU had an existing CBA with Sanyo Philippines Inc. (Sanyo, for short) effective July 1, 1989 to
June 30, 1994. The same CBA contained a union security clause which provided:

Sec. 2. All members of the union covered by this agreement must retain their
membership in good standing in the union as condition of his/her continued
employment with the company. The union shall have the right to demand from the
company the dismissal of the members of the union by reason of their voluntary
resignation from membership or willful refusal to pay the Union Dues or by reasons
of their having formed, organized, joined, affiliated, supported and/or aided directly or
indirectly another labor organization, and the union thus hereby guarantees and
holds the company free and harmless from any liability whatsoever that may arise
consequent to the implementation of the provision of this article. (pp. 5-6, Rollo)

In a letter dated February 7, 1990, PSSLU, through its national president, informed the management
of Sanyo that the following employees were notified that their membership with PSSLU were
cancelled for anti-union, activities, economic sabotage, threats, coercion and intimidation, disloyalty
and for joining another union: Benito Valencia, Bernardo Yap, Arnel Salvo, Renato Baybon, Eduardo
Porlaje, Salvador Solibel, Conrado Sarol, Angelito Manzano, Allan Misterio, Reynaldo Ricohermoso,
Mario Ensay and Froilan Plamenco. The same letter informed Sanyo that the same employees
refused to submit themselves to the union's grievance investigation committee (p. 53, Rollo). It
appears that many of these employees were not members of PSSLU but of another union, KAMAO.

On February 14, 1990, some officers of KAMAO, which included Yap, Salvo, Baybon, Solibel,
Valencia, Misterio and Ricohermoso, executed a pledged of cooperation with PSSLU promising
cooperation with the latter union and among others, respecting, accepting and honoring the CBA
between Sanyo and specifically:

1. That we shall remain officers and members of KAMAO until we finally decide to
rejoin Sanyo Phil. Workers Union-PSSLU;

2. That henceforth, we support and cooperate with the duly elected union officers of
Sanyo Phil. Workers Union-PSSLU in any and all its activities and programs to insure
industrial peace and harmony;

3. That we collectively accept, honor, and respect the Collective Bargaining

Agreement entered into between Sanyo Phil. Inc. and Sanyo Phil. Workers Union-
PSSLU dated February 7, 1990;

4 That we collectively promise not to engage in any activities inside company

premises contrary to law, the CBA and existing policies;

5 That we are willing to pay our individual agency fee in accordance with the
provision of the Labor Code, as amended;

6 That we collectively promise not to violate this pledge of cooperation. (p. 55, Rollo)
On March 4, 1991, PSSLU through its national and local presidents, wrote another letter to Sanyo
recommending the dismissal of the following non-union workers: Bernardo Yap, Arnel Salvo, Renato
Baybon, Reynaldo Ricohermoso, Salvador Solibel, Benito Valencia, and Allan Misterio, allegedly
because: 1) they were engaged and were still engaging in anti-union activities; 2) they willfully
violated the pledge of cooperation with PSSLU which they signed and executed on February 14,
1990; and 3) they threatened and were still threatening with bodily harm and even death the officers
of the union (pp. 37-38, Rollo).

Also recommended for dismissal were the following union members who allegedly joined, supported
and sympathized with a minority union, KAMAO: Gerardo Lasala, Legardo Tangkay, Alexander
Atanacio, and Leonardo Dionisio.

The last part of the said letter provided:

The dismissal of the above-named union members is without prejudice to receive

(sic) their termination pay if management decide (sic) to grant them benefits in
accordance with law. The union hereby holds the company free and harmless from
any liability that may arise consequent to the implementation by the company of our
recommendations for the dismissal of the above-mentioned workers.

It is however suggested that the Grievance Machinery be convened pursuant to

Section 3, Article XV of the Collective Bargaining Agreement (CBA) before their
actual dismissal from the company. (p. 38, Rollo)

Pursuant to the above letter of the union, the company sent a memorandum to the same workers
advising them that:

As per the attached letter from the local union President SPWU and the federation
President, PSSLU, requesting management to put the herein mentioned employees
on preventive suspension, effective immediately, preliminary to their subsequent
dismissal, please be informed that the following employees are under preventive
suspension effective March 13, 1991 to wit:

1. Bernardo Yap

2. Renato Baybon

3. Salvador Solibel

4. Allan Misterio

5. Edgardo Tangkay

6. Leonardo Dionisio

7. Arnel Salvo
 8. Reynaldo Ricohermoso

9. Benito Valencia

10. Gerardo Lasala

11. Alexander Atanacio

The above listed employees shall not be allowed within company premises without
the permission of management.

As per request of the union's letter to management, should the listed employees fail
to appeal the decision of the union for dismissal, then effective March 23, 1991, said
listed employees shall be considered dismissed from the company. (p 39, Rollo)

The company received no information on whether or not said employees appealed to PSSLU.
Hence, it considered them dismissed as of March 23, 1991 (p. 40, Rollo).

On May 20, 1991, the dismissed employees filed a complaint (pp. 32-35, Rollo) with the NLRC for
illegal dismissal. Named respondent were PSSLU and Sanyo.

On June 20, 1991, PSSLU filed a motion to dismiss the complaint alleging that the Labor Arbiter was
without jurisdiction over the case, relying on Article 217 (c) of P.D. 442, as amended by Section 9 of
Republic Act No. 6715 which provides that cases arising from the interpretation or implementation of
the collective bargaining agreements shall be disposed of by the labor arbiter by referring the same
to the grievance machinery and voluntary arbitration.

The complainants opposed the motion to dismiss complaint on these grounds: 1) the series of
conferences before the National Conciliation and Mediation Board had been terminated; 2) the
NLRC Labor Arbiter had jurisdiction over the case which was a termination dispute pursuant to
Article 217 (2) of the Labor Code; and 3) there was nothing in the CBA which needs interpretation or
implementation (pp. 44-46, Rollo).

On August 7, 1991, the respondent Labor Arbiter issued the first questioned order. It held that:

xxx xxx xxx

While there are seemingly contradictory provisions in the aforecited article of the
Labor Code, the better interpretation will be to give effect to both, and termination
dispute being clearly spelled as falling under the jurisdiction of the Labor Arbiter, the
same shall be respected. The jurisdiction of the grievance machinery and voluntary
arbitration shall cover other controversies.

However, the resolution of the instant issue shall be suspended until both parties
have fully presented their respective positions and the said issue shall be included in
the final determination of the above-captioned case.
 WHEREFORE, the instant Motions to Dismiss are hereby held pending.

Consequently, the parties are hereby directed to submit their position papers and
supporting documents pursuant to Section 2, Rule VII of the Rules of the
Commission on or before the hearing on the merit of this case scheduled on August
29, 1991 at 11:00 a.m. (p. 23, Rollo)

On August 27, 1991, PSSLU filed another motion to resolve motion to dismiss complaint with a
prayer that the Labor Arbiter resolve the issue of jurisdiction.

On September 4, 1991, the respondent Labor Arbiter issued the second questioned order which held
that it was assuming jurisdiction over the complaint of private respondents, in effect, holding that it
had jurisdiction over the case.

On September 19, 1991, PSSLU filed this petition alleging that public respondent Labor Arbiter
cannot assume jurisdiction over the complaint of public respondents because it had no jurisdiction
over the dispute subject of said complaint. It is their submission that under Article 217 (c) of the
Labor Code, in relation to Article 261 thereof, as well as Policy Instruction No. 6 of the Secretary of
Labor, respondent Arbiter has no jurisdiction and authority to take cognizance of the complaint
brought by private respondents which involves the implementation of the union security clause of the
CBA. The function of the Labor Arbiter under the same law and rule is to refer this case to the
grievance machinery and voluntary arbitration.

In its comment, private respondents argue that Article 217(a) 2 and 4 of the Labor Code is explicit, to
wit:

Art. 217. Jurisdiction of the Labor Arbiters and the Commission.

a) Except as otherwise provided under this Code, the Labor Arbiters shall have
original and exclusive jurisdiction to hear and decide . . . the following cases involving
all workers, . . . :

xxx xxx xxx

2) Termination disputes,

xxx xxx xxx

4) Claims for actual, moral, exemplary and other forms of damages arising from the
employer-employee relations.

The private respondents also claimed that insofar as Salvo, Baybon, Ricohermoso, Solibel, Valencia,
Misterio and Lasala were concerned, they joined another union, KAMAO during the freedom period
which commenced on May 1, 1989 up to June 30, 1989 or before the effectivity of the July 1, 1989
CBA. Hence, they are not covered by the provisions of the CBA between Sanyo and PSSLU. Private
respondents Tangkay, Atanacio and Dionisio admit that in September 1989, they resigned from
KAMAO and rejoined PSSLU (pp.
66(a)-68, Rollo).

For its part, public respondent, through the Office of the Solicitor General, is of the view that a
distinction should be made between a case involving "interpretation or implementation of collective
bargaining agreement or "interpretation" or "enforcement" of company personnel policies, on the one
hand and a case involving termination, on the other hand. It argued that the case at bar does not
involve an "interpretation or implementation" of a collective bargaining agreement or "interpretation
or enforcement" of company policies but involves a "termination." Where the dispute is just in the
interpretation, implementation or enforcement stage, it may be referred to the grievance machinery
set up in the CBA or by voluntary arbitration. Where there was already actual
termination, i.e., violation of rights, it is already cognizable by the Labor Arbiter.

Article 217 of the Labor Code defines the jurisdiction of the Labor Arbiter.

Art. 217. Jurisdiction of Labor Arbiters and the Commission. a) Except as otherwise
provided under this Code the Labor Arbiters shall have original and exclusive
jurisdiction to hear and decide within thirty (30) calendar days after the submission of
the case by the parties for decision without extension even in the absence of
stenographic notes, the following cases involving all workers, whether agricultural or
non-agricultural:

1. Unfair labor practice cases;

2. Termination disputes;

3. If accompanied with a claim for reinstatement, those cases that workers may file
involving wages, rates of pay, hours of work and other terms and conditions of
employment;

4. Claims for actual, moral, exemplary and other forms of damages arising from the
employer-employee relations;

5. Cases arising from any violation of Article 264 of this Code, including questions
involving the legality of strikes and lockouts;

6. Except claims for Employees Compensation, Social Security, Medicare and

maternity benefits, all other claims, arising from employer-employee relations,
including those of persons in domestic or household service, involving an amount
exceeding five thousand pesos (P5,000.00) regardless of whether accompanied with
a claim for reinstatement.

(b) The Commission shall have exclusive appellate jurisdiction over all cases decided
by Labor Arbiters.
 (c) Cases arising from the interpretation or implementation of collective bargaining
agreements and those arising from the interpretation or enforcement of company
personnel policies shall be disposed of by the Labor Arbiter by referring the same to
the grievance machinery and voluntary arbitration as may be provided in said
agreements.

It is clear from the above article that termination cases fall under the jurisdiction of the Labor Arbiter.
It should be noted however that said article at the outset excepted from the said provision cases
otherwise provided for in other provisions of the same Code, thus the phrase "Except as otherwise
provided under this Code . . . ." Under paragraph (c) of the same article, it is expressly provided that
"cases arising from the interpretation or implementation of collective bargaining agreements and
those arising from the interpretation and enforcement of company personnel policies shall be
disposed of by the Labor Arbiter by referring the same to the grievance machinery and voluntary
arbitration as may be provided in said agreements.

It was provided in the CBA executed between PSSLU and Sanyo that a member's voluntary
resignation from membership, willful refusal to pay union dues and his/her forming, organizing,
joining, supporting, affiliating or aiding directly or indirectly another labor union shall be a cause for it
to demand his/her dismissal from the company. The demand for the dismissal and the actual
dismissal by the company on any of these grounds is an enforcement of the union security clause in
the CBA. This act is authorized by law provided that enforcement should not be characterized by
arbitrariness (Manila Mandarin Employee Union v. NLRC, G.R. No. 76989, 29 Sept. 1987, 154
SCRA 368) and always with due process (Tropical Hut Employees Union v. Tropical Food Market,
Inc., L-43495-99, Jan. 20, 1990).

The reference to a Grievance Machinery and Voluntary Arbitrators for the adjustment or resolution of
grievances arising from the interpretation or implementation of their CBA and those arising from the
interpretation or enforcement of company personnel policies is mandatory. The law grants to
voluntary arbitrators original and exclusive jurisdiction to hear and decide all unresolved grievances
arising from the interpretation or implementation of the Collective Bargaining Agreement and those
arising from the interpretation or enforcement of company personnel policies (Art. 261, Labor Code).

In its order of September 4, 1991, respondent Labor Arbiter explained its decision to assume
jurisdiction over the complaint, thus:

The movants failed to show (1) the provisions of the CBA to be implemented, and (2)
the grievance machinery and voluntary arbitrator already formed and properly
named. What self-respecting judge would refer a case from his responsibility to a
shadow? To whom really and specifically shall the case be indorsed or referred? In
brief, they could have shown the (1) existence of the grievance machinery and (2) its
being effective.

Furthermore, the aforecited law merely directs the "referral" cases. It does not
expressly confer jurisdiction on the grievance machinery or voluntary arbitration
panel, created or to be created. Article 260 of the Labor Code describes the
formation of the grievance and voluntary arbitration. All this of course shall be on
 voluntary basis. Is there another meaning of voluntary arbitration? (The herein
complainant have strongly opposed the motion to dismiss. Would they go willingly to
the grievance machinery and voluntary arbitration which are installed by their
opponents if directed to do so?) (p. 26, Rollo)

The failure of the parties to the CBA to establish the grievance machinery and its unavailability is not
an excuse for the Labor Arbiter to assume jurisdiction over disputes arising from the implementation
and enforcement of a provision in the CBA. In the existing CBA between PSSLU and Sanyo, the
procedure and mechanics of its establishment had been clearly laid out as follows:

ARTICLE XV GRIEVANCE MACHINERY

Sec. 1. Whenever any controversy should arise between the company and the union
as to the interpretation or application of the provision of this agreement, or whenever
any difference shall exist between said parties relative to the terms and conditions of
employment, an earnest effort shall be made to settle such controversy in
substantially the following manner:

First step. (Thru Grievance) The dispute shall initially be resolved by conference
between the management to be represented by the Management's authorized
representatives on the one hand, and the Union to be represented by a committee
composed of the local union president and one of the local union officer appointed by
the local union president, on the other hand within three days from date of
concurrence of grievance action. In the absence of the local union president, he
(shall) appoint another local union officer to take over in his behalf. Where a
controversy personally affects an employee, he shall not be allowed to be a member
of the committee represented by the union.

Second step. (Thru Arbitrator mutually chosen) Should such dispute remain unsettled
after twenty (20) days from the first conference or after such period as the parties
may agree upon in specified cases, it shall be referred to an arbitrator chosen by the
consent of the company and the union. In the event of failure to agree on the choice
of voluntary arbitrator, the National Conciliation and Mediation Board, Department of
Labor and Employment shall be requested to choose an Arbitrator in accordance with
voluntary arbitration procedures.

Sec. 2. The voluntary Arbitrator shall have thirty (30) days to decide the issue
presented to him and his decision shall be final, binding and executory upon the
parties. He shall have no authority to add or subtract from and alter any provision of
this agreement. The expenses of voluntary arbitration including the fee of the
arbitrator shall be shared equally by the company and the union. In the event the
arbitrator chosen either by the mutual agreement of the company and the union by
(the) way of voluntary arbitration or by the National Conciliation and Mediation Board
(NCMB) failed to assume his position, died, become disabled or any other manner
failed to function and or reach a decision, the company and the union shall by mutual
agreement choose another arbitrator; in the event of failure to agree on the choice of
 a new voluntary arbitrator, the matter shall again be referred back to the NCMB who
shall be requested again to choose a new arbitrator as above provided. Any
grievance not elevated or processed as above provided within the stipulated period
shall be deemed settled and terminated.

Sec. 3. It is hereby agreed that decisions of the union relative to their members, for
implementation by the COMPANY, should be resolved for review thru the Grievance
Machinery; and management be invited to participate in the Grievance procedure to
be undertaken by the union relative to (the) case of the union against members. (pp.
134-135, Rollo)

All that needs to be done to set the machinery into motion is to call for the convening thereof. If the
parties to the CBA had not designated their representatives yet, they should be ordered to do so.

The procedure introduced in RA 6715 of referring certain grievances originally and exclusively to the
grievance machinery and when not settled at this level, to a panel of voluntary arbitrators outlined in
CBA's does not only include grievances arising from the interpretation or implementation of the CBA
but applies as well to those arising from the implementation of company personnel policies. No other
body shall take cognizance of these cases. The last paragraph of Article 261 enjoins other bodies
from assuming jurisdiction thereof:

The commission, its Regional Offices and the Regional Directors of the Department
of Labor and Employment shall not entertain disputes, grievances or matters under
the exclusive and original jurisdiction of the Voluntary Arbitrator or panel of voluntary
arbitrators and shall immediately dispose and refer the same to the grievance
machinery or voluntary arbitration provided in the Collective Bargaining Agreement.

In the instant case, however, We hold that the Labor Arbiter and not the Grievance Machinery
provided for in the CBA has the jurisdiction to hear and decide the complaints of the private
respondents. While it appears that the dismissal of the private respondents was made upon the
recommendation of PSSLU pursuant to the union security clause provided in the CBA, We are of the
opinion that these facts do not come within the phrase "grievances arising from the interpretation or
implementation of (their) Collective Bargaining Agreement and those arising from the interpretation
or enforcement of company personnel policies," the jurisdiction of which pertains to the Grievance
Machinery or thereafter, to a voluntary arbitrator or panel of voluntary arbitrators. Article 260 of the
Labor Code on grievance machinery and voluntary arbitrator states that "(t)he parties to a Collective
Bargaining Agreement shall include therein provisions that will ensure the mutual observance of its
terms and conditions. They shall establish a machinery for the adjustment and resolution of
grievances arising from the interpretation or implementation of their Collective Bargaining Agreement
and those arising from the interpretation or enforcement of company personnel policies." It is further
provided in said article that the parties to a CBA shall name or designate their respective
representatives to the grievance machinery and if the grievance is not settled in that level, it shall
automatically be referred to voluntary arbitrators (or panel of voluntary arbitrators) designated in
advance by the parties. It need not be mentioned that the parties to a CBA are the union and the
company. Hence, only disputes involving the union and the company shall be referred to the
grievance machinery or voluntary arbitrators.
In the instant case, both the union and the company are united or have come to an agreement
regarding the dismissal of private respondents. No grievance between them exists which could be
brought to a grievance machinery. The problem or dispute in the present case is between the union
and the company on the one hand and some union and non-union members who were dismissed,
on the other hand. The dispute has to be settled before an impartial body. The grievance machinery
with members designated by the union and the company cannot be expected to be impartial against
the dismissed employees. Due process demands that the dismissed workers grievances be
ventilated before an impartial body. Since there has already been an actual termination, the matter
falls within the jurisdiction of the Labor Arbiter.

ACCORDINGLY, the petition is DISMISSED. Public respondent Labor Arbiter is directed to resolve
the complaints of private respondents immediately.

SO ORDERED.