G.R. No.
157802 October 13, 2010 The respondent opposed the petitioners’ motion to dismiss,5 insisting that his
MATLING INDUSTRIAL AND COMMERCIAL CORPORATION, RICHARD K.
SPENCER, CATHERINE SPENCER, AND ALEX MANCILLA, Petitioners,
vs.
RICARDO R. COROS, Respondent.
DECISION
BERSAMIN, J.:
This case reprises the jurisdictional conundrum of whether a complaint for illegal
dismissal is cognizable by the Labor Arbiter (LA) or by the Regional Trial Court
(RTC). The determination of whether the dismissed officer was a regular employee
or a corporate officer unravels the conundrum. In the case of the regular
employee, the LA has jurisdiction; otherwise, the RTC exercises the legal authority
to adjudicate.
In this appeal via petition for review on certiorari, the petitioners challenge the
decision dated September 13, 20021and the resolution dated April 2, 2003,2 both
promulgated in C.A.-G.R. SP No. 65714 entitled Matling Industrial and Commercial
Corporation, et al. v. Ricardo R. Coros and National Labor Relations Commission,
whereby by the Court of Appeals (CA) sustained the ruling of the National Labor
Relations Commission (NLRC) to the effect that the LA had jurisdiction because
the respondent was not a corporate officer of petitioner Matling Industrial and
Commercial Corporation (Matling).
Antecedents
After his dismissal by Matling as its Vice President for Finance and Administration,
the respondent filed on August 10, 2000 a complaint for illegal suspension and
illegal dismissal against Matling and some of its corporate officers (petitioners) in
the NLRC, Sub-Regional Arbitration Branch XII, Iligan City.3
The petitioners moved to dismiss the complaint,4 raising the ground, among
others, that the complaint pertained to the jurisdiction of the Securities and
Exchange Commission (SEC) due to the controversy being intra-corporate
inasmuch as the respondent was a member of Matling’s Board of Directors aside
from being its Vice-President for Finance and Administration prior to his
termination.
status as a member of Matling’s Board of Directors was doubtful, considering that
he had not been formally elected as such; that he did not own a single share of
stock in Matling, considering that he had been made to sign in blank an undated
indorsement of the certificate of stock he had been given in 1992; that Matling had
taken back and retained the certificate of stock in its custody; and that even
assuming that he had been a Director of Matling, he had been removed as the
Vice President for Finance and Administration, not as a Director, a fact that the
notice of his termination dated April 10, 2000 showed.
On October 16, 2000, the LA granted the petitioners’ motion to dismiss,6 ruling that
the respondent was a corporate officer because he was occupying the position of
Vice President for Finance and Administration and at the same time was a
Member of the Board of Directors of Matling; and that, consequently, his removal
was a corporate act of Matling and the controversy resulting from such removal
was under the jurisdiction of the SEC, pursuant to Section 5, paragraph (c) of
Presidential Decree No. 902.
Ruling of the NLRC
The respondent appealed to the NLRC,7 urging that:
I
THE HONORABLE LABOR ARBITER COMMITTED GRAVE ABUSE OF
DISCRETION GRANTING APPELLEE’S MOTION TO DISMISS WITHOUT
GIVING THE APPELLANT AN OPPORTUNITY TO FILE HIS OPPOSITION
THERETO THEREBY VIOLATING THE BASIC PRINCIPLE OF DUE PROCESS.
II
THE HONORABLE LABOR ARBITER COMMITTED AN ERROR IN DISMISSING
THE CASE FOR LACK OF JURISDICTION.
On March 13, 2001, the NLRC set aside the dismissal, concluding that the
respondent’s complaint for illegal dismissal was properly cognizable by the LA, not
by the SEC, because he was not a corporate officer by virtue of his position in
Matling, albeit high ranking and managerial, not being among the positions listed in
Matling’s Constitution and By-Laws.8 The NLRC disposed thuswise:
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WHEREFORE, the Order appealed from is SET ASIDE. A new one is entered
declaring and holding that the case at bench does not involve any intracorporate
matter. Hence, jurisdiction to hear and act on said case is vested with the Labor
Arbiter, not the SEC, considering that the position of Vice-President for Finance
and Administration being held by complainant-appellant is not listed as among
respondent's corporate officers.
Accordingly, let the records of this case be REMANDED to the Arbitration Branch
of origin in order that the Labor Arbiter below could act on the case at bench, hear
both parties, receive their respective evidence and position papers fully observing
the requirements of due process, and resolve the same with reasonable dispatch.
SO ORDERED.
The petitioners sought reconsideration,9 reiterating that the respondent, being a
member of the Board of Directors, was a corporate officer whose removal was not
within the LA’s jurisdiction.
The petitioners later submitted to the NLRC in support of the motion for
reconsideration the certified machine copies of Matling’s Amended Articles of
Incorporation and By Laws to prove that the President of Matling was thereby
granted "full power to create new offices and appoint the officers thereto, and the
minutes of special meeting held on June 7, 1999 by Matling’s Board of Directors to
prove that the respondent was, indeed, a Member of the Board of Directors. 10
Nonetheless, on April 30, 2001, the NLRC denied the petitioners’ motion for
reconsideration.11
Ruling of the CA
The petitioners elevated the issue to the CA by petition for certiorari, docketed as
C.A.-G.R. No. SP 65714, contending that the NLRC committed grave abuse of
discretion amounting to lack of jurisdiction in reversing the correct decision of the
LA.
In its assailed decision promulgated on September 13, 2002,12 the CA dismissed
the petition for certiorari, explaining:
For a position to be considered as a corporate office, or, for that matter, for one to
be considered as a corporate officer, the position must, if not listed in the by-laws,
have been created by the corporation's board of directors, and the occupant
thereof appointed or elected by the same board of directors or stockholders. This
is the implication of the ruling in Tabang v. National Labor Relations Commission,
which reads:
"The president, vice president, secretary and treasurer are commonly regarded as
the principal or executive officers of a corporation, and modern corporation
statutes usually designate them as the officers of the corporation. However, other
offices are sometimes created by the charter or by-laws of a corporation, or the
board of directors may be empowered under the by-laws of a corporation to create
additional offices as may be necessary.
It has been held that an 'office' is created by the charter of the corporation and the
officer is elected by the directors or stockholders. On the other hand, an 'employee'
usually occupies no office and generally is employed not by action of the directors
or stockholders but by the managing officer of the corporation who also determines
the compensation to be paid to such employee."
This ruling was reiterated in the subsequent cases of Ongkingco v. National Labor
Relations Commission and De Rossi v. National Labor Relations Commission.
The position of vice-president for administration and finance, which Coros used to
hold in the corporation, was not created by the corporation’s board of directors but
only by its president or executive vice-president pursuant to the by-laws of the
corporation. Moreover, Coros’ appointment to said position was not made through
any act of the board of directors or stockholders of the corporation. Consequently,
the position to which Coros was appointed and later on removed from, is not a
corporate office despite its nomenclature, but an ordinary office in the corporation.
Coros’ alleged illegal dismissal therefrom is, therefore, within the jurisdiction of the
labor arbiter.
WHEREFORE, the petition for certiorari is hereby DISMISSED.
SO ORDERED.
The CA denied the petitioners’ motion for reconsideration on April 2, 2003.13
Issue
Thus, the petitioners are now before the Court for a review on certiorari, positing
that the respondent was a stockholder/member of the Matling’s Board of Directors
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as well as its Vice President for Finance and Administration; and that the CA
consequently erred in holding that the LA had jurisdiction.
The decisive issue is whether the respondent was a corporate officer of Matling or
not. The resolution of the issue determines whether the LA or the RTC had
jurisdiction over his complaint for illegal dismissal.
Ruling
The appeal fails.
I bargaining agreements and those arising from the interpretation or
The Law on Jurisdiction in Dismissal Cases
As a rule, the illegal dismissal of an officer or other employee of a private employer
is properly cognizable by the LA. This is pursuant to Article 217 (a) 2 of the Labor
Code, as amended, which provides as follows:
Article 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, 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;
and
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 (₱5,000.00) 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
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. (As amended
by Section 9, Republic Act No. 6715, March 21, 1989).
Where the complaint for illegal dismissal concerns a corporate officer, however,
the controversy falls under the jurisdiction of the Securities and Exchange
Commission (SEC), because the controversy arises out of intra-corporate or
partnership relations between and among stockholders, members, or associates,
or between any or all of them and the corporation, partnership, or association of
which they are stockholders, members, or associates, respectively; and between
such corporation, partnership, or association and the State insofar as the
controversy concerns their individual franchise or right to exist as such entity; or
because the controversy involves the election or appointment of a director, trustee,
officer, or manager of such corporation, partnership, or association.14 Such
controversy, among others, is known as an intra-corporate dispute.
Effective on August 8, 2000, upon the passage of Republic Act No.
8799,15 otherwise known as The Securities Regulation Code, the SEC’s jurisdiction
over all intra-corporate disputes was transferred to the RTC, pursuant to Section
5.2 of RA No. 8799, to wit:
5.2. The Commission’s jurisdiction over all cases enumerated under Section 5
of Presidential Decree No. 902-A is hereby transferred to the Courts of general
jurisdiction or the appropriate Regional Trial Court: Provided, that the Supreme
Court in the exercise of its authority may designate the Regional Trial Court
branches that shall exercise jurisdiction over these cases. The Commission shall
retain jurisdiction over pending cases involving intra-corporate disputes submitted
for final resolution which should be resolved within one (1) year from the
enactment of this Code. The Commission shall retain jurisdiction over pending
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suspension of payments/rehabilitation cases filed as of 30 June 2000 until finally
disposed.
Considering that the respondent’s complaint for illegal dismissal was commenced
on August 10, 2000, it might come under the coverage of Section 5.2 of RA No.
8799, supra, should it turn out that the respondent was a corporate, not a regular,
officer of Matling.
II
Was the Respondent’s Position of Vice President
for Administration and Finance a Corporate Office?
We must first resolve whether or not the respondent’s position as Vice President
for Finance and Administration was a corporate office. If it was, his dismissal by
the Board of Directors rendered the matter an intra-corporate dispute cognizable
by the RTC pursuant to RA No. 8799.
The petitioners contend that the position of Vice President for Finance and
Administration was a corporate office, having been created by Matling’s President
pursuant to By-Law No. V, as amended,16 to wit:
BY LAW NO. V
Officers
The President shall be the executive head of the corporation; shall preside over
the meetings of the stockholders and directors; shall countersign all certificates,
contracts and other instruments of the corporation as authorized by the Board of
Directors; shall have full power to hire and discharge any or all employees of the
corporation; shall have full power to create new offices and to appoint the officers
thereto as he may deem proper and necessary in the operations of the corporation
and as the progress of the business and welfare of the corporation may demand;
shall make reports to the directors and stockholders and perform all such other
duties and functions as are incident to his office or are properly required of him by
the Board of Directors. In case of the absence or disability of the President, the
Executive Vice President shall have the power to exercise his functions.
The petitioners argue that the power to create corporate offices and to appoint the
individuals to assume the offices was delegated by Matling’s Board of Directors to
its President through By-Law No. V, as amended; and that any office the President
created, like the position of the respondent, was as valid and effective a creation
as that made by the Board of Directors, making the office a corporate office. In
justification, they cite Tabang v. National Labor Relations Commission,17 which
held that "other offices are sometimes created by the charter or by-laws of a
corporation, or the board of directors may be empowered under the by-laws of a
corporation to create additional officers as may be necessary."
The respondent counters that Matling’s By-Laws did not list his position as Vice
President for Finance and Administration as one of the corporate offices; that
Matling’s By-Law No. III listed only four corporate officers, namely: President,
Executive Vice President, Secretary, and Treasurer; 18 that the corporate offices
contemplated in the phrase "and such other officers as may be provided for in the
by-laws" found in Section 25 of the Corporation Code should be clearly and
expressly stated in the By-Laws; that the fact that Matling’s By-Law No. III dealt
with Directors & Officers while its By-Law No. V dealt with Officers proved that
there was a differentiation between the officers mentioned in the two provisions,
with those classified under By-Law No. V being ordinary or non-corporate officers;
and that the officer, to be considered as a corporate officer, must be elected by the
Board of Directors or the stockholders, for the President could only appoint an
employee to a position pursuant to By-Law No. V.
We agree with respondent.
Section 25 of the Corporation Code provides:
Section 25. Corporate officers, quorum.--Immediately after their election, the
directors of a corporation must formally organize by the election of a president,
who shall be a director, a treasurer who may or may not be a director, a secretary
who shall be a resident and citizen of the Philippines, and such other officers as
may be provided for in the by-laws. Any two (2) or more positions may be held
concurrently by the same person, except that no one shall act as president and
secretary or as president and treasurer at the same time.
The directors or trustees and officers to be elected shall perform the duties
enjoined on them by law and the by-laws of the corporation. Unless the articles of
incorporation or the by-laws provide for a greater majority, a majority of the number
of directors or trustees as fixed in the articles of incorporation shall constitute a
quorum for the transaction of corporate business, and every decision of at least a
majority of the directors or trustees present at a meeting at which there is a
quorum shall be valid as a corporate act, except for the election of officers which
shall require the vote of a majority of all the members of the board.
Directors or trustees cannot attend or vote by proxy at board meetings.
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Conformably with Section 25, a position must be expressly mentioned in the By-
Laws in order to be considered as a corporate office. Thus, the creation of an
office pursuant to or under a By-Law enabling provision is not enough to make a
position a corporate office. Guerrea v. Lezama,19 the first ruling on the matter, held
that the only officers of a corporation were those given that character either by the
Corporation Code or by the By-Laws; the rest of the corporate officers could be
considered only as employees or subordinate officials. Thus, it was held
in Easycall Communications Phils., Inc. v. King:20
An "office" is created by the charter of the corporation and the officer is elected by
the directors or stockholders. On the other hand, an employee occupies no office
and generally is employed not by the action of the directors or stockholders but by
the managing officer of the corporation who also determines the compensation to
be paid to such employee.
In this case, respondent was appointed vice president for nationwide expansion by
Malonzo, petitioner’'s general manager, not by the board of directors of petitioner.
It was also Malonzo who determined the compensation package of respondent.
Thus, respondent was an employee, not a "corporate officer." The CA was
therefore correct in ruling that jurisdiction over the case was properly with the
NLRC, not the SEC (now the RTC).
This interpretation is the correct application of Section 25 of the Corporation Code,
which plainly states that the corporate officers are the President, Secretary,
Treasurer and such other officers as may be provided for in the By-Laws.
Accordingly, the corporate officers in the context of PD No. 902-A are exclusively
those who are given that character either by the Corporation Code or by the
corporation’s By-Laws.
A different interpretation can easily leave the way open for the Board of Directors
to circumvent the constitutionally guaranteed security of tenure of the employee by
the expedient inclusion in the By-Laws of an enabling clause on the creation of just
any corporate officer position.
It is relevant to state in this connection that the SEC, the primary agency
administering the Corporation Code, adopted a similar interpretation of Section 25
of the Corporation Code in its Opinion dated November 25, 1993,21 to wit:
Thus, pursuant to the above provision (Section 25 of the Corporation Code),
whoever are the corporate officers enumerated in the by-laws are the exclusive
Officers of the corporation and the Board has no power to create other Offices
without amending first the corporate By-laws. However, the Board may create
appointive positions other than the positions of corporate Officers, but the
persons occupying such positions are not considered as corporate officers
within the meaning of Section 25 of the Corporation Code and are not
empowered to exercise the functions of the corporate Officers, except those
functions lawfully delegated to them. Their functions and duties are to be
determined by the Board of Directors/Trustees.
Moreover, the Board of Directors of Matling could not validly delegate the power to
create a corporate office to the President, in light of Section 25 of the Corporation
Code requiring the Board of Directors itself to elect the corporate officers. Verily,
the power to elect the corporate officers was a discretionary power that the law
exclusively vested in the Board of Directors, and could not be delegated to
subordinate officers or agents.22 The office of Vice President for Finance and
Administration created by Matling’s President pursuant to By Law No. V was an
ordinary, not a corporate, office.
To emphasize, the power to create new offices and the power to appoint the
officers to occupy them vested by By-Law No. V merely allowed Matling’s
President to create non-corporate offices to be occupied by ordinary employees of
Matling. Such powers were incidental to the President’s duties as the executive
head of Matling to assist him in the daily operations of the business.
The petitioners’ reliance on Tabang, supra, is misplaced. The statement
in Tabang, to the effect that offices not expressly mentioned in the By-Laws but
were created pursuant to a By-Law enabling provision were also considered
corporate offices, was plainly obiter dictum due to the position subject of the
controversy being mentioned in the By-Laws. Thus, the Court held therein that the
position was a corporate office, and that the determination of the rights and
liabilities arising from the ouster from the position was an intra-corporate
controversy within the SEC’s jurisdiction.
In Nacpil v. Intercontinental Broadcasting Corporation,23 which may be the more
appropriate ruling, the position subject of the controversy was not expressly
mentioned in the By-Laws, but was created pursuant to a By-Law enabling
provision authorizing the Board of Directors to create other offices that the Board
of Directors might see fit to create. The Court held there that the position was a
corporate office, relying on the obiter dictum in Tabang.
Considering that the observations earlier made herein show that the soundness of
their dicta is not unassailable, Tabang and Nacpil should no longer be controlling.
III
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Did Respondent’s Status as Director and
Stockholder Automatically Convert his Dismissal
into an Intra-Corporate Dispute?
Yet, the petitioners insist that because the respondent was a Director/stockholder
of Matling, and relying on Paguio v. National Labor Relations
Commission24 and Ongkingko v. National Labor Relations Commission,25 the
NLRC had no jurisdiction over his complaint, considering that any case for illegal
dismissal brought by a stockholder/officer against the corporation was an intra-
corporate matter that must fall under the jurisdiction of the SEC conformably with
the context of PD No. 902-A.
The petitioners’ insistence is bereft of basis.
To begin with, the reliance on Paguio and Ongkingko is misplaced. In both rulings,
the complainants were undeniably corporate officers due to their positions being
expressly mentioned in the By-Laws, aside from the fact that both of them had
been duly elected by the respective Boards of Directors. But the herein
respondent’s position of Vice President for Finance and Administration was not
expressly mentioned in the By-Laws; neither was the position of Vice President for
Finance and Administration created by Matling’s Board of Directors. Lastly, the
President, not the Board of Directors, appointed him.
True it is that the Court pronounced in Tabang as follows:
Also, an intra-corporate controversy is one which arises between a stockholder
and the corporation. There is no distinction, qualification or any exemption
whatsoever. The provision is broad and covers all kinds of controversies between
stockholders and corporations.26
However, the Tabang pronouncement is not controlling because it is too sweeping
and does not accord with reason, justice, and fair play. In order to determine
whether a dispute constitutes an intra-corporate controversy or not, the Court
considers two elements instead, namely: (a) the status or relationship of the
parties; and (b) the nature of the question that is the subject of their controversy.
This was our thrust in Viray v. Court of Appeals:27
The establishment of any of the relationships mentioned above will not necessarily
always confer jurisdiction over the dispute on the SEC to the exclusion of regular
courts. The statement made in one case that the rule admits of no exceptions or
distinctions is not that absolute. The better policy in determining which body has
jurisdiction over a case would be to consider not only the status or relationship of
the parties but also the nature of the question that is the subject of their
controversy.
Not every conflict between a corporation and its stockholders involves corporate
matters that only the SEC can resolve in the exercise of its adjudicatory or quasi-
judicial powers. If, for example, a person leases an apartment owned by a
corporation of which he is a stockholder, there should be no question that a
complaint for his ejectment for non-payment of rentals would still come under the
jurisdiction of the regular courts and not of the SEC. By the same token, if one
person injures another in a vehicular accident, the complaint for damages filed by
the victim will not come under the jurisdiction of the SEC simply because of the
happenstance that both parties are stockholders of the same corporation. A
contrary interpretation would dissipate the powers of the regular courts and distort
the meaning and intent of PD No. 902-A.
In another case, Mainland Construction Co., Inc. v. Movilla,28 the Court reiterated
these determinants thuswise:
In order that the SEC (now the regular courts) can take cognizance of a case, the
controversy must pertain to any of the following relationships:
a) between the corporation, partnership or association and the public;
b) between the corporation, partnership or association and its
stockholders, partners, members or officers;
c) between the corporation, partnership or association and the State as far
as its franchise, permit or license to operate is concerned; and
d) among the stockholders, partners or associates themselves.
The fact that the parties involved in the controversy are all stockholders or that the
parties involved are the stockholders and the corporation does not necessarily
place the dispute within the ambit of the jurisdiction of SEC. The better policy to be
followed in determining jurisdiction over a case should be to consider concurrent
factors such as the status or relationship of the parties or the nature of the
question that is the subject of their controversy. In the absence of any one of these
factors, the SEC will not have jurisdiction. Furthermore, it does not necessarily
follow that every conflict between the corporation and its stockholders would
involve such corporate matters as only the SEC can resolve in the exercise of its
adjudicatory or quasi-judicial powers.29
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The criteria for distinguishing between corporate officers who may be ousted from
office at will, on one hand, and ordinary corporate employees who may only be
terminated for just cause, on the other hand, do not depend on the nature of the
services performed, but on the manner of creation of the office. In the respondent’s
case, he was supposedly at once an employee, a stockholder, and a Director of
Matling. The circumstances surrounding his appointment to office must be fully
considered to determine whether the dismissal constituted an intra-corporate
controversy or a labor termination dispute. We must also consider whether his
status as Director and stockholder had any relation at all to his appointment and
subsequent dismissal as Vice President for Finance and Administration.
Obviously enough, the respondent was not appointed as Vice President for
Finance and Administration because of his being a stockholder or Director of
Matling. He had started working for Matling on September 8, 1966, and had been
employed continuously for 33 years until his termination on April 17, 2000, first as
a bookkeeper, and his climb in 1987 to his last position as Vice President for
Finance and Administration had been gradual but steady, as the following
sequence indicates:
1966 – Bookkeeper
1968 – Senior Accountant
1969 – Chief Accountant
1972 – Office Supervisor
1973 – Assistant Treasurer
1978 – Special Assistant for Finance
1980 – Assistant Comptroller
1983 – Finance and Administrative Manager
1985 – Asst. Vice President for Finance and Administration
1987 to April 17, 2000 – Vice President for Finance and Administration
Even though he might have become a stockholder of Matling in 1992, his
promotion to the position of Vice President for Finance and Administration in 1987
was by virtue of the length of quality service he had rendered as an employee of
Matling. His subsequent acquisition of the status of Director/stockholder had no
relation to his promotion. Besides, his status of Director/stockholder was
unaffected by his dismissal from employment as Vice President for Finance and
Administration.1avvphi1
In Prudential Bank and Trust Company v. Reyes,30 a case involving a lady bank
manager who had risen from the ranks but was dismissed, the Court held that her
complaint for illegal dismissal was correctly brought to the NLRC, because she
was deemed a regular employee of the bank. The Court observed thus:
It appears that private respondent was appointed Accounting Clerk by the Bank on
July 14, 1963. From that position she rose to become supervisor. Then in 1982,
she was appointed Assistant Vice-President which she occupied until her illegal
dismissal on July 19, 1991. The bank’s contention that she merely holds an
elective position and that in effect she is not a regular employee is belied by
the nature of her work and her length of service with the Bank. As earlier
stated, she rose from the ranks and has been employed with the Bank since 1963
until the termination of her employment in 1991. As Assistant Vice President of the
Foreign Department of the Bank, she is tasked, among others, to collect checks
drawn against overseas banks payable in foreign currency and to ensure the
collection of foreign bills or checks purchased, including the signing of transmittal
letters covering the same. It has been stated that "the primary standard of
determining regular employment is the reasonable connection between the
particular activity performed by the employee in relation to the usual trade or
business of the employer. Additionally, "an employee is regular because of the
nature of work and the length of service, not because of the mode or even the
reason for hiring them." As Assistant Vice-President of the Foreign Department of
the Bank she performs tasks integral to the operations of the bank and her length
of service with the bank totaling 28 years speaks volumes of her status as a
regular employee of the bank. In fine, as a regular employee, she is entitled to
security of tenure; that is, her services may be terminated only for a just or
authorized cause. This being in truth a case of illegal dismissal, it is no wonder
then that the Bank endeavored to the very end to establish loss of trust and
confidence and serious misconduct on the part of private respondent but, as will be
discussed later, to no avail.
WHEREFORE, we deny the petition for review on certiorari, and affirm the
decision of the Court of Appeals.
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Costs of suit to be paid by the petitioners.
SO ORDERED.
G.R. No. 146728 February 11, 2004
GENERAL MILLING CORPORATION, petitioner,
vs
HON. COURT OF APPEALS, GENERAL MILLING CORPORATION
INDEPENDENT LABOR UNION (GMC-ILU), and RITO
MANGUBAT, respondents.
DECISION
QUISUMBING, J.:
decision1
Before us is a petition for certiorari assailing the dated July 19, 2000, of
the Court of Appeals in CA-G.R. SP No. 50383, which earlier reversed the
decision2 dated January 30, 1998 of the National Labor Relations Commission
(NLRC) in NLRC Case No. V-0112-94.
The antecedent facts are as follows:
In its two plants located at Cebu City and Lapu-Lapu City, petitioner
General Milling Corporation (GMC) employed 190 workers. They were all
members of private respondent General Milling Corporation Independent
Labor Union (union, for brevity), a duly certified bargaining agent.
On April 28, 1989, GMC and the union concluded a collective bargaining
agreement (CBA) which included the issue of representation effective for a
term of three years. The CBA was effective for three years retroactive to
December 1, 1988. Hence, it would expire on November 30, 1991.
On November 29, 1991, a day before the expiration of the CBA, the union
sent GMC a proposed CBA, with a request that a counter-proposal be
submitted within ten (10) days.
As early as October 1991, however, GMC had received collective and
individual letters from workers who stated that they had withdrawn from
their union membership, on grounds of religious affiliation and personal
differences. Believing that the union no longer had standing to negotiate a
CBA, GMC did not send any counter-proposal.
On December 16, 1991, GMC wrote a letter to the union’s officers, Rito
Mangubat and Victor Lastimoso. The letter stated that it felt there was no
basis to negotiate with a union which no longer existed, but that
management was nonetheless always willing to dialogue with them on
matters of common concern and was open to suggestions on how the
company may improve its operations.
In answer, the union officers wrote a letter dated December 19, 1991
disclaiming any massive disaffiliation or resignation from the union and
submitted a manifesto, signed by its members, stating that they had not
withdrawn from the union.
On January 13, 1992, GMC dismissed Marcia Tumbiga, a union member,
on the ground of incompetence. The union protested and requested GMC
to submit the matter to the grievance procedure provided in the CBA.
GMC, however, advised the union to "refer to our letter dated December
16, 1991."3
Thus, the union filed, on July 2, 1992, a complaint against GMC with the NLRC,
Arbitration Division, Cebu City. The complaint alleged unfair labor practice on the
part of GMC for: (1) refusal to bargain collectively; (2) interference with the right to
self-organization; and (3) discrimination. The labor arbiter dismissed the case with
the recommendation that a petition for certification election be held to determine if
the union still enjoyed the support of the workers.lawphi1.nêt
The union appealed to the NLRC.
On January 30, 1998, the NLRC set aside the labor arbiter’s decision. Citing Article
253-A of the Labor Code, as amended by Rep. Act No. 6715,4 which fixed the
terms of a collective bargaining agreement, the NLRC ordered GMC to abide by
the CBA draft that the union proposed for a period of two (2) years beginning
December 1, 1991, the date when the original CBA ended, to November 30, 1993.
The NLRC also ordered GMC to pay the attorney’s fees.5
In its decision, the NLRC pointed out that upon the effectivity of Rep. Act No. 6715,
the duration of a CBA, insofar as the representation aspect is concerned, is five (5)
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years which, in the case of GMC-Independent Labor Union was from December 1,
1988 to November 30, 1993. All other provisions of the CBA are to be renegotiated
not later than three (3) years after its execution. Thus, the NLRC held that
respondent union remained as the exclusive bargaining agent with the right to
renegotiate the economic provisions of the CBA. Consequently, it was unfair labor
practice for GMC not to enter into negotiation with the union.
The NLRC likewise held that the individual letters of withdrawal from the union
submitted by 13 of its members from February to June 1993 confirmed the
pressure exerted by GMC on its employees to resign from the union. Thus, the
NLRC also found GMC guilty of unfair labor practice for interfering with the right of
its employees to self-organization.
With respect to the union’s claim of discrimination, the NLRC found the claim
unsupported by substantial evidence.
On GMC’s motion for reconsideration, the NLRC set aside its decision of January
30, 1998, through a resolution dated October 6, 1998. It found GMC’s doubts as to
the status of the union justified and the allegation of coercion exerted by GMC on
the union’s members to resign unfounded. Hence, the union filed a petition
for certiorari before the Court of Appeals. For failure of the union to attach the
required copies of pleadings and other documents and material portions of the
record to support the allegations in its petition, the CA dismissed the petition on
February 9, 1999. The same petition was subsequently filed by the union, this time
with the necessary documents. In its resolution dated April 26, 1999, the appellate
court treated the refiled petition as a motion for reconsideration and gave the
petition due course.
On July 19, 2000, the appellate court rendered a decision the dispositive portion of
which reads:
WHEREFORE, the petition is hereby GRANTED. The NLRC Resolution of
October 6, 1998 is hereby SET ASIDE, and its decision of January 30,
1998 is, except with respect to the award of attorney’s fees which is
hereby deleted, REINSTATED.6
A motion for reconsideration was seasonably filed by GMC, but in a resolution
dated October 26, 2000, the CA denied it for lack of merit.
Hence, the instant petition for certiorari alleging that:
I
THE COURT OF APPEALS DECISION VIOLATED THE CONSTITUTIONAL
RULE THAT NO DECISION SHALL BE RENDERED BY ANY COURT WITHOUT
EXPRESSING THEREIN CLEARLY AND DISTINCTLY THE FACTS AND THE
LAW ON WHICH IT IS BASED.
II
THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN
REVERSING THE DECISION OF THE NATIONAL LABOR RELATIONS
COMMISSION IN THE ABSENCE OF ANY FINDING OF SUBSTANTIAL ERROR
OR GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION.
III
THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN NOT
APPRECIATING THAT THE NLRC HAS NO JURISDICTION TO DETERMINE
THE TERMS AND CONDITIONS OF A COLLECTIVE BARGAINING
AGREEMENT.7
Thus, in the instant case, the principal issue for our determination is whether or not
the Court of Appeals acted with grave abuse of discretion amounting to lack or
excess of jurisdiction in (1) finding GMC guilty of unfair labor practice for violating
the duty to bargain collectively and/or interfering with the right of its employees to
self-organization, and (2) imposing upon GMC the draft CBA proposed by the
union for two years to begin from the expiration of the original CBA.lawphi1.nêt
On the first issue, Article 253-A of the Labor Code, as amended by Rep. Act No.
6715, states:
ART. 253-A. Terms of a collective bargaining agreement. – Any
Collective Bargaining Agreement that the parties may enter into shall,
insofar as the representation aspect is concerned, be for a term of five (5)
years. No petition questioning the majority status of the incumbent
bargaining agent shall be entertained and no certification election shall be
conducted by the Department of Labor and Employment outside of the
sixty-day period immediately before the date of expiry of such five year
term of the Collective Bargaining Agreement. All other provisions of the
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 Collective Bargaining Agreement shall be renegotiated not later than three
(3) years after its execution....
The law mandates that the representation provision of a CBA should last for five
years. The relation between labor and management should be undisturbed until
the last 60 days of the fifth year. Hence, it is indisputable that when the union
requested for a renegotiation of the economic terms of the CBA on November 29,
1991, it was still the certified collective bargaining agent of the workers, because it
was seeking said renegotiation within five (5) years from the date of effectivity of
the CBA on December 1, 1988. The union’s proposal was also submitted within
the prescribed 3-year period from the date of effectivity of the CBA, albeit just
before the last day of said period. It was obvious that GMC had no valid reason to
refuse to negotiate in good faith with the union. For refusing to send a counter-
proposal to the union and to bargain anew on the economic terms of the CBA, the
company committed an unfair labor practice under Article 248 of the Labor Code,
which provides that:
ART. 248. Unfair labor practices of employers. – It shall be unlawful for
an employer to commit any of the following unfair labor practice:
...
(g) To violate the duty to bargain collectively as prescribed by this
Code;
...
Article 252 of the Labor Code elucidates the meaning of the phrase "duty
to bargain collectively," thus:
ART. 252. Meaning of duty to bargain collectively. – The duty
to bargain collectively means the performance of a mutual
obligation to meet and convene promptly and expeditiously in
good faith for the purpose of negotiating an agreement....
We have held that the crucial question whether or not a party has met his
statutory duty to bargain in good faith typically turn$ on the facts of the
individual case.8 There is no per se test of good faith in bargaining.9Good
faith or bad faith is an inference to be drawn from the facts.10 The effect of
an employer’s or a union’s actions individually is not the test of good-faith
bargaining, but the impact of all such occasions or actions, considered as
a whole.11
Under Article 252 abovecited, both parties are required to perform their mutual
obligation to meet and convene promptly and expeditiously in good faith for the
purpose of negotiating an agreement. The union lived up to this obligation when it
presented proposals for a new CBA to GMC within three (3) years from the
effectivity of the original CBA. But GMC failed in its duty under Article 252. What it
did was to devise a flimsy excuse, by questioning the existence of the union and
the status of its membership to prevent any negotiation.
It bears stressing that the procedure in collective bargaining prescribed by the
Code is mandatory because of the basic interest of the state in ensuring lasting
industrial peace. Thus:
ART. 250. Procedure in collective bargaining. – The following
procedures shall be observed in collective bargaining:
(a) When a party desires to negotiate an agreement, it shall serve
a written notice upon the other party with a statement of its
proposals. The other party shall make a reply thereto not later
than ten (10) calendar days from receipt of such notice.
(Underscoring supplied.)
GMC’s failure to make a timely reply to the proposals presented by the union is
indicative of its utter lack of interest in bargaining with the union. Its excuse that it
felt the union no longer represented the workers, was mainly dilatory as it turned
out to be utterly baseless.
We hold that GMC’s refusal to make a counter-proposal to the union’s proposal for
CBA negotiation is an indication of its bad faith. Where the employer did not even
bother to submit an answer to the bargaining proposals of the union, there is a
clear evasion of the duty to bargain collectively.12
Failing to comply with the mandatory obligation to submit a reply to the union’s
proposals, GMC violated its duty to bargain collectively, making it liable for unfair
labor practice. Perforce, the Court of Appeals did not commit grave abuse of
discretion amounting to lack or excess of jurisdiction in finding that GMC is, under
the circumstances, guilty of unfair labor practice.
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Did GMC interfere with the employees’ right to self-organization? The CA found
that the letters between February to June 1993 by 13 union members signifying
their resignation from the union clearly indicated that GMC exerted pressure on its
employees. The records show that GMC presented these letters to prove that the
union no longer enjoyed the support of the workers. The fact that the resignations
of the union members occurred during the pendency of the case before the labor
arbiter shows GMC’s desperate attempts to cast doubt on the legitimate status of
the union. We agree with the CA’s conclusion that the ill-timed letters of
resignation from the union members indicate that GMC had interfered with the right
of its employees to self-organization. Thus, we hold that the appellate court did not
commit grave abuse of discretion in finding GMC guilty of unfair labor practice for
interfering with the right of its employees to self-organization.
Finally, did the CA gravely abuse its discretion when it imposed on GMC the draft
CBA proposed by the union for two years commencing from the expiration of the
original CBA?
The Code provides:
ART. 253. Duty to bargain collectively when there exists a collective
bargaining agreement. – .... It shall be the duty of both parties to keep
the status quo and to continue in full force and effect the terms and
conditions of the existing agreement during the 60-day period [prior to its
expiration date] and/or until a new agreement is reached by the parties.
(Underscoring supplied.)
The provision mandates the parties to keep the status quo while they are still in the
process of working out their respective proposal and counter proposal. The
general rule is that when a CBA already exists, its provision shall continue to
govern the relationship between the parties, until a new one is agreed upon. The
rule necessarily presupposes that all other things are equal. That is, that neither
party is guilty of bad faith. However, when one of the parties abuses this grace
period by purposely delaying the bargaining process, a departure from the general
rule is warranted.
In Kiok Loy vs. NLRC,13 we found that petitioner therein, Sweden Ice Cream Plant,
refused to submit any counter proposal to the CBA proposed by its employees’
certified bargaining agent. We ruled that the former had thereby lost its right to
bargain the terms and conditions of the CBA. Thus, we did not hesitate to impose
on the erring company the CBA proposed by its employees’ union - lock, stock and
barrel. Our findings in Kiok Loy are similar to the facts in the present case, to wit:
… petitioner Company’s approach and attitude – stalling the negotiation by
a series of postponements, non-appearance at the hearing conducted, and
undue delay in submitting its financial statements, lead to no other
conclusion except that it is unwilling to negotiate and reach an agreement
with the Union. Petitioner has not at any instance, evinced good faith or
willingness to discuss freely and fully the claims and demands set forth by
the Union much less justify its objection thereto.14
Likewise, in Divine Word University of Tacloban vs. Secretary of Labor and
Employment,15 petitioner therein, Divine Word University of Tacloban, refused to
perform its duty to bargain collectively. Thus, we upheld the unilateral imposition
on the university of the CBA proposed by the Divine Word University Employees
Union. We said further:
That being the said case, the petitioner may not validly assert that its
consent should be a primordial consideration in the bargaining process. By
its acts, no less than its action which bespeak its insincerity, it has forfeited
whatever rights it could have asserted as an employer. 16
Applying the principle in the foregoing cases to the instant case, it would be unfair
to the union and its members if the terms and conditions contained in the old CBA
would continue to be imposed on GMC’s employees for the remaining two (2)
years of the CBA’s duration. We are not inclined to gratify GMC with an extended
term of the old CBA after it resorted to delaying tactics to prevent negotiations.
Since it was GMC which violated the duty to bargain collectively, based on Kiok
Loy and Divine Word University of Tacloban, it had lost its statutory right to
negotiate or renegotiate the terms and conditions of the draft CBA proposed by the
union.
We carefully note, however, that as strictly distinguished from the facts of this
case, there was no pre-existing CBA between the parties in Kiok Loy and Divine
Word University of Tacloban. Nonetheless, we deem it proper to apply in this case
the rationale of the doctrine in the said two cases. To rule otherwise would be to
allow GMC to have its cake and eat it too.
Under ordinary circumstances, it is not obligatory upon either side of a labor
controversy to precipitately accept or agree to the proposals of the other. But an
erring party should not be allowed to resort with impunity to schemes feigning
negotiations by going through empty gestures.17 Thus, by imposing on GMC the
provisions of the draft CBA proposed by the union, in our view, the interests of
equity and fair play were properly served and both parties regained equal footing,
Page 11 of 161
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which was lost when GMC thwarted the negotiations for new economic terms of
the CBA.
The findings of fact by the CA, affirming those of the NLRC as to the
reasonableness of the draft CBA proposed by the union should not be disturbed
since they are supported by substantial evidence. On this score, we see no cogent
reason to rule otherwise. Hence, we hold that the Court of Appeals did not commit
grave abuse of discretion amounting to lack or excess of jurisdiction when it
imposed on GMC, after it had committed unfair labor practice, the draft CBA
proposed by the union for the remaining two (2) years of the duration of the original
CBA. Fairness, equity, and social justice are best served in this case by sustaining
the appellate court’s decision on this issue.
WHEREFORE, the petition is DISMISSED and the assailed decision dated July
19, 2000, and the resolution dated October 26, 2000, of the Court of Appeals in
CA-G.R. SP No. 50383, are AFFIRMED. Costs against petitioner.
SO ORDERED.
[G.R. No. 141471. September 18, 2000]
COLEGIO DE SAN JUAN DE LETRAN, petitioner, vs. ASSOCIATION OF
EMPLOYEES AND FACULTY OF LETRAN and ELEONOR
AMBAS, respondents.
DECISION
KAPUNAN, J.:
This is a petition for review on certiorari seeking the reversal of the Decision
of the Court of Appeals, promulgated on 9 August 1999, dismissing the petition
filed by Colegio de San Juan de Letran (hereinafter, "petitioner") and affirming the
Order of the Secretary of Labor, dated December 2, 1996, finding the petitioner
guilty of unfair labor practice on two (2) counts.
The facts, as found by the Secretary of Labor and affirmed by the Court of
Appeals, are as follows:
"On December 1992, Salvador Abtria, then President of respondent union,
Association of Employees and Faculty of Letran, initiated the renegotiation of its
Collective Bargaining Agreement with petitioner Colegio de San Juan de Letran for
the last two (2) years of the CBA's five (5) year lifetime from 1989-1994. On the
same year, the union elected a new set of officers wherein private respondent
Eleanor Ambas emerged as the newly elected President (Secretary of Labor and
Employment's Order dated December 2, 1996, p. 12).
Ambas wanted to continue the renegotiation of the CBA but petitioner, through Fr.
Edwin Lao, claimed that the CBA was already prepared for signing by the parties.
The parties submitted the disputed CBA to a referendum by the union members,
who eventually rejected the said CBA (Ibid, p. 2).
Petitioner accused the union officers of bargaining in bad faith before the National
Labor Relations Commission (NLRC). Labor Arbiter Edgardo M. Madriaga decided
in favor of petitioner. However, the Labor Arbiter's decision was reversed on
appeal before the NLRC (Ibid, p. 2).
On January 1996, the union notified the National Conciliation and Mediation Board
(NCMB) of its intention to strike on the grounds (sic) of petitioner's: non-
compliance with the NLRC (1) order to delete the name of Atty. Federico Leynes
as the union's legal counsel; and (2) refusal to bargain (Ibid, p. 1).
On January 18, 1996, the parties agreed to disregard the unsigned CBA and to
start negotiation on a new five-year CBA starting 1994-1999. On February 7, 1996,
the union submitted its proposals to petitioner, which notified the union six days
later or on February 13, 1996 that the same had been submitted to its Board of
Trustees. In the meantime, Ambas was informed through a letter dated February
15, 1996 from her superior that her work schedule was being changed from
Monday to Friday to Tuesday to Saturday. Ambas protested and requested
management to submit the issue to a grievance machinery under the old CBA
(Ibid, p. 2-3).
Due to petitioner's inaction, the union filed a notice of strike on March 13, 1996.
The parties met on March 27, 1996 before the NCMB to discuss the ground rules
for the negotiation. On March 29, 1996, the union received petitioner's letter
dismissing Ambas for alleged insubordination. Hence, the union amended its
notice of strike to include Ambas' dismissal. (Ibid, p. 2-3).
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On April 20, 1996, both parties again discussed the ground rules for the CBA
renegotiation. However, petitioner stopped the negotiations after it purportedly
received information that a new group of employees had filed a petition for
certification election (Ibid, p. 3).
On June 18, 1996, the union finally struck. On July 2, 1996, public respondent the
Secretary of Labor and Employment assumed jurisdiction and ordered all striking
employees including the union president to return to work and for petitioner to
accept them back under the same terms and conditions before the actual strike.
Petitioner readmitted the striking members except Ambas. The parties then
submitted their pleadings including their position papers which were filed on July
17, 1996 ( Ibid, pp. 2-3).
On December 2, 1996, public respondent issued an order declaring petitioner
guilty of unfair labor practice on two counts and directing the reinstatement of
private respondent Ambas with backwages. Petitioner filed a motion for
reconsideration which was denied in an Order dated May 29, 1997 (Petition, pp. 8-
9)."[1]
Having been denied its motion for reconsideration, petitioner sought a review
of the order of the Secretary of Labor and Employment before the Court of
Appeals. The appellate court dismissed the petition and affirmed the findings of the
Secretary of Labor and Employment. The dispositive portion of the decision of the
Court of Appeals sets forth:
WHEREFORE, foregoing premises considered, this Petition is DISMISSED, for
being without merit in fact and in law.
With cost to petitioner.
SO ORDERED.[2]
Hence, petitioner comes to this Court for redress.
Petitioner ascribes the following errors to the Court of Appeals:
I
THE HONORABLE COURT OF APPEALS ERRED AND ACTED WITH GRAVE
ABUSE OF DISCRETION IN AFFIRMING THE RULING OF THE SECRETARY
OF LABOR AND EMPLOYMENT WHICH DECLARES PETITIONER LETRAN
GUILTY OF REFUSAL TO BARGAIN (UNFAIR LABOR PRACTICE) FOR
SUSPENDING THE COLLECTIVE BARGAINING NEGOTIATIONS WITH
RESPONDENT AEFL, DESPITE THE FACT THAT THE SUSPENSION OF THE
NEGOTIATIONS WAS BROUGHT ABOUT BY THE FILING OF A PETITION FOR
CERTIFICATION ELECTION BY A RIVAL UNION WHO CLAIMED TO
COMMAND THE MAJORITY OF THE EMPLOYEES WITHIN THE BARGAINING
UNIT.
II
THE HONORABLE COURT OF APPEALS ERRED AND ACTED WITH GRAVE
ABUSE OF DISCRETION IN AFFIRMING THE RULING OF THE SECRETARY
OF LABOR AND EMPLOYMENT WHICH DECLARES PETITIONER LETRAN
GUILTY OF UNFAIR LABOR PRACTICE FOR DISMISSING RESPONDENT
AMBAS, DESPITE THE FACT THAT HER DISMISSAL WAS CAUSED BY HER
INSUBORDINATE ATTITUDE, SPECIFICALLY, HER REFUSAL TO FOLLOW
THE PRESCRIBED WORK SCHEDULE.[3]
The twin questions of law before this Court are the following: (1) whether
petitioner is guilty of unfair labor practice by refusing to bargain with the union
when it unilaterally suspended the ongoing negotiations for a new Collective
Bargaining Agreement (CBA) upon mere information that a petition for certification
has been filed by another legitimate labor organization? (2) whether the
termination of the union president amounts to an interference of the employees'
right to self-organization?
The petition is without merit.
After a thorough review of the records of the case, this Court finds that
petitioner has not shown any compelling reason sufficient to overturn the ruling of
the Court of Appeals affirming the findings of the Secretary of Labor and
Employment. It is axiomatic that the findings of fact of the Court of Appeals are
conclusive and binding on the Supreme Court and will not be reviewed or
disturbed on appeal. In this case, the petitioner failed to show any extraordinary
circumstance justifying a departure from this established doctrine.
As regards the first issue, Article 252 of the Labor Code defines the meaning
of the phrase "duty to bargain collectively," as follows:
Art. 252. Meaning of duty to bargain collectively. - The duty to bargain collectively
means the performance of a mutual obligation to meet and convene promptly and
expeditiously in good faith for the purpose of negotiating an agreement with
respect to wages, hours of work and all other terms and conditions of employment
including proposals for adjusting any grievances or questions arising under such
Page 13 of 161
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agreement and executing a contract incorporating such agreements if requested
by either party but such duty does not compel any party to agree to a proposal or
to make any concession.
Noteworthy in the above definition is the requirement on both parties of the
performance of the mutual obligation to meet and convene promptly and
expeditiously in good faith for the purpose of negotiating an
agreement.Undoubtedly, respondent Association of Employees and Faculty of
Letran (AEFL) (hereinafter, "union") lived up to this requisite when it presented its
proposals for the CBA to petitioner on February 7, 1996. On the other hand,
petitioner devised ways and means in order to prevent the negotiation.
Petitioner's utter lack of interest in bargaining with the union is obvious in its
failure to make a timely reply to the proposals presented by the latter. More than a
month after the proposals were submitted by the union, petitioner still had not
made any counter-proposals. This inaction on the part of petitioner prompted the
union to file its second notice of strike on March 13, 1996. Petitioner could only
offer a feeble explanation that the Board of Trustees had not yet convened to
discuss the matter as its excuse for failing to file its reply. This is a clear violation of
Article 250 of the Labor Code governing the procedure in collective bargaining, to
wit:
Art. 250. Procedure in collective bargaining. - The following procedures shall be
observed in collective bargaining:
(a) When a party desires to negotiate an agreement, it shall serve a written notice
upon the other party with a statement of its proposals. The other party shall make
a reply thereto not later than ten (10) calendar days from receipt of such notice.[4]
xxx
As we have held in the case of Kiok Loy vs. NLRC,[5] the company's refusal to
make counter-proposal to the union's proposed CBA is an indication of its bad
faith. Where the employer did not even bother to submit an answer to the
bargaining proposals of the union, there is a clear evasion of the duty to bargain
collectively.[6] In the case at bar, petitioner's actuation show a lack of sincere desire
to negotiate rendering it guilty of unfair labor practice.
Moreover, the series of events that transpired after the filing of the first notice
of strike in January 1996 show petitioner's resort to delaying tactics to ensure that
negotiation would not push through. Thus, on February 15, 1996, or barely a few
days after the union proposals for the new CBA were submitted, the union
president was informed by her superior that her work schedule was being changed
from Mondays to Fridays to Tuesdays to Saturdays. A requestfrom the union
president that the issue be submitted to a grievance machinery was subsequently
denied. Thereafter, the petitioner and the union met on March 27, 1996 to discuss
the ground rules for negotiation. However, just two days later, or on March 29,
1996, petitioner dismissed the union president for alleged insubordination. In its
final attempt to thwart the bargaining process, petitioner suspended the negotiation
on the ground that it allegedly received information that a new group of employees
called the Association of Concerned Employees of Colegio (ACEC) had filed a
petition for certification election. Clearly, petitioner tried to evade its duty to bargain
collectively.
Petitioner, however, argues that since it has already submitted the union's
proposals to the Board of Trustees and that a series of conferences had already
been undertaken to discuss the ground rules for negotiation such should already
be considered as acts indicative of its intention to bargain. As pointed out earlier,
the evidence on record belie the assertions of petitioner.
Petitioner, likewise, claims that the suspension of negotiation was proper
since by the filing of the petition for certification election the issue on majority
representation of the employees has arose. According to petitioner, the authority of
the union to negotiate on behalf of the employees was challenged when a rival
union filed a petition for certification election. Citing the case of Lakas Ng
Manggagawang Makabayan v. Marcelo Enterprises,[7] petitioner asserts that in
view of the pendency of the petition for certification election, it had no duty to
bargain collectively with the union.
We disagree. In order to allow the employer to validly suspend the bargaining
process there must be a valid petition for certification election raising a legitimate
representation issue. Hence, the mere filing of a petition for certification election
does not ipso facto justify the suspension of negotiation by the employer. The
petition must first comply with the provisions of the Labor Code and its
Implementing Rules. Foremost is that a petition for certification election must be
filed during the sixty-day freedom period. The "Contract Bar Rule" under Section 3,
Rule XI, Book V, of the Omnibus Rules Implementing the Labor Code, provides
that: " . If a collective bargaining agreement has been duly registered in
accordance with Article 231 of the Code, a petition for certification election or a
motion for intervention can only be entertained within sixty (60) days prior to the
expiry date of such agreement." The rule is based on Article 232, [8] in relation to
Articles 253, 253-A and 256 of the Labor Code. No petition for certification election
for any representation issue may be filed after the lapse of the sixty-day freedom
period. The old CBA is extended until a new one is signed. The rule is that despite
the lapse of the formal effectivity of the CBA the law still considers the same as
continuing in force and effect until a new CBA shall have been validly
executed.[9] Hence, the contract bar rule still applies.[10] The purpose is to ensure
Page 14 of 161
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stability in the relationship of the workers and the company by preventing frequent
modifications of any CBA earlier entered into by them in good faith and for the
stipulated original period.[11]
In the case at bar, the lifetime of the previous CBA was from 1989-1994. The
petition for certification election by ACEC, allegedly a legitimate labor organization,
was filed with the Department of Labor and Employment (DOLE) only on May 26,
1996. Clearly, the petition was filed outside the sixty-day freedom period. Hence,
the filing thereof was barred by the existence of a valid and existing collective
bargaining agreement. Consequently, there is no legitimate representation issue
and, as such, the filing of the petition for certification election did not constitute a
bar to the ongoing negotiation. Reliance, therefore, by petitioner of the ruling
in Lakas Ng Manggagawang Makabayan v. Marcelo Enterprises [12] is misplaced
since that case involved a legitimate representation issue which is not present in
the case at bar.
Significantly, the same petition for certification election was dismissed by the
Secretary of Labor on October 25, 1996. The dismissal was upheld by this Court in
a Resolution, dated April 21, 1997.[13]
In view of the above, there is no doubt that petitioner is guilty of unfair labor
practice by its stern refusal to bargain in good faith with respondent union.
Concerning the issue on the validity of the termination of the union president,
we hold that the dismissal was effected in violation of the employees' right to self-
organization.
To justify the dismissal, petitioner asserts that the union president was
terminated for cause, allegedly for insubordination for her failure to comply with the
new working schedule assigned to her, and pursuant to its managerial prerogative
to discipline and/or dismiss its employees. While we recognize the right of the
employer to terminate the services of an employee for a just or authorized cause,
nevertheless, the dismissal of employees must be made within the parameters of
law and pursuant to the tenets of equity and fair play. [14] The employer's right to
terminate the services of an employee for just or authorized cause must be
exercised in good faith.[15] More importantly, it must not amount to interfering with,
restraining or coercing employees in the exercise of their right to self-organization
because it would amount to, as in this case, unlawful labor practice under Article
248 of the Labor Code.
The factual backdrop of the termination of Ms. Ambas leads us to no other
conclusion that she was dismissed in order to strip the union of a leader who would
fight for the right of her co-workers at the bargaining table. Ms. Ambas, at the time
of her dismissal, had been working for the petitioner for ten (10) years already. In
fact, she was a recipient of a loyalty award. Moreover, for the past ten (10) years
her working schedule was from Monday to Friday.However, things began to
change when she was elected as union president and when she started
negotiating for a new CBA. Thus, it was when she was the union president and
during the period of tense and difficult negotiations when her work schedule was
altered from Mondays to Fridays to Tuesdays to Saturdays. When she did not
budge, although her schedule was changed, she was outrightly dismissed for
alleged insubordination.[16] We quote with approval the following findings of the
Secretary of Labor on this matter, to wit:
"Assuming arguendo that Ms. Ambas was guilty, such disobedience was not,
however, a valid ground to teminate her employment. The disputed management
action was directly connected with Ms. Ambas' determination to change the
complexion of the CBA. As a matter of fact, Ms. Ambas' unflinching position in
faithfully and truthfully carrying out her duties and responsibilities to her Union and
its members in getting a fair share of the fruits of their collective endeavors was the
proximate cause for her dismissal, the charge of insubordination being merely a
ploy to give a color of legality to the contemplated management action to dismiss
her. Thus, the dismissal of Ms. Ambas was heavily tainted with and evidently done
in bad faith. Manifestly, it was designed to interfere with the members' right to self-
organization.
Admittedly, management has the prerogative to discipline its employees for
insubordination. But when the exercise of such management right tends to
interfere with the employees' right to self-organization, it amounts to union-busting
and is therefore a prohibited act. The dismissal of Ms. Ambas was clearly designed
to frustrate the Union in its desire to forge a new CBA with the College that is
reflective of the true wishes and aspirations of the Union members. Her dismissal
was merely a subterfuge to get rid of her, which smacks of a pre-conceived plan to
oust her from the premises of the College. It has the effect of busting the Union,
stripping it of its strong-willed leadership. When management refused to treat the
charge of insubordination as a grievance within the scope of the Grievance
Machinery, the action of the College in finally dismissing her from the service
became arbitrary, capricious and whimsical, and therefore violated Ms. Ambas'
right to due process."[17]
In this regard, we find no cogent reason to disturb the findings of the Court of
Appeals affirming the findings of the Secretary of Labor and Employment. The right
to self-organization of employees must not be interfered with by the employer on
the pretext of exercising management prerogative of disciplining its employees. In
this case, the totality of conduct of the employer shows an evident attempt to
restrain the employees from fully exercising their rights under the law. This cannot
be done under the Labor Code.
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 WHEREFORE, premises considered, the petition is DENIED for lack of merit.
SO ORDERED.
G.R. No. 99395 June 29, 1993
ST. LUKE'S MEDICAL CENTER, INC., petitioner,
vs.
HON. RUBEN O. TORRES and ST. LUKE'S MEDICAL CENTER ASSOCIATION-
ALLIANCE OF FILIPINO WORKERS ("SLMCEA-AFW"), respondents.
Sofronio A. Ona for petitioner.
Edgar R. Martir for respondent union.
MELO, J.:
In response to the mandate under Article 263(g) of the Labor Code and amidst the
labor controversy between petitioner St. Luke's Medical Center and private
respondent St. Luke's Medical Center Employees Association-Alliance of Filipino
Workers (SLMCEA-AFW), then Secretary of Labor Ruben D. Torres, issued the
Order of January 28, 1991 requiring the parties to execute and finalize their 1990-
1993 collective bargaining agreement (CBA) to retroact to the expiration of the
anterior CBA. The parties were also instructed to incorporate in the new CBA the
disposition on economic and non-economic issues spelled out in said Order (p.
48, Rollo). Separate motions for re-evaluation from the parties were to no avail;
hence, the petition at bar premised on the following ascriptions of error, to wit:
I squabble splitting its leadership between Del Prado and Purita Ramirez, resulting
PUBLIC RESPONDENT HON. SECRETARY OF LABOR ACTED
IN EXCESS OF JURISDICTION AND/OR COMMITTED GRAVE
ABUSE OF DISCRETION WHEN HE VIOLATED PETITIONER'S
RIGHT TO DUE PROCESS, PUBLIC RESPONDENT
COMPLETELY IGNORED THE LATTER'S EVIDENCE AND
ISSUED THE QUESTIONED AWARDS ON THE BASIS OF
ARBITRARY GUESSWORKS, CONJECTURES AND
INFERENCES.
II
PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF
DISCRETION WHEN HE CURTAILED THE PARTIES' RIGHT TO
FREE COLLECTIVE BARGAINING, AND WHEN HE GRANTED
MONETARY AWARDS AND ADDITIONAL BENEFITS TO THE
EMPLOYEES GROSSLY DISPROPORTIONATE TO THE
OPERATING INCOME OF PETITIONER.
III
PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF
DISCRETION WHEN HE ADOPTED/CONSIDERED THE
ALLEGATIONS OF THE UNION THAT THE HOSPITAL
OFFERED SALARY AND MEAL ALLOWANCE INCREASES IN
THE AMOUNT OF P1,140,00 FOR THE FIRST YEAR AND
P700.00 ACROSS THE BOARD MONTHLY SALARY
INCREASES FOR THE SECOND AND THIRD YEARS OF THE
NEW CBA.
IV
FINALLY, PUBLIC RESPONDENT COMMITTED GRAVE ABUSE
OF DISCRETION WHEN HE GAVE HIS AWARD RETROACTIVE
EFFECT.
When the collective bargaining agreement for the period August 1, 1987 to July 30,
1990 was forged between petitioner and private respondent, the incumbent
national president of AFW, the federation to which the local union SLMCEA is
affiliated, was Gregorio del Prado.
Before the expiration of the 1987-90 CBA, the AFW was plagued by internal
in the filing by AFW and Del Prado of a petition later docketed before the
Department of Labor as NCR-00-M-90-05-077, where a declaration was sought on
the legitimacy of Del Prado's faction as bona fide officers of the federation.
Pending resolution of said case, herein private respondent SLMCEA-AFW brought
to the attention of petitioner via a letter dated July 4, 1990 that the 1987-1990 was
about to expire, and manifested in the process that private respondent wanted to
renew the CBA. This development triggered round-table talks on which occasions
petitioner proposed, among other items, a maximum across-the-board monthly
salary increase of P375.00 per employee, to which proposal private respondent
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demanded a P1,500.00 hike or 50% increase based on the latest salary rate of First year — P1,140.00 broken down as follows: P510.00 in
each employee, whichever is higher. compliance with the government mandated daily salary increase
of P17.00; and P630.00 CBA across the board monthly salary
In the meantime, relative to the interpleader case (NCR-00-M-90-05-070) initiated increase.
by petitioner to settle the question as to who between Del Prado and Diwa was
authorized to collect federation dues assessed from hospital employees, the Med- Second year — P700.00 across the board monthly salary
Arbiter recognized Del Prado's right (p. 423, Rollo). This resolution of July 31, increase.
1990 was elevated to the Labor Secretary.
Third year — P700.00 across the board monthly salary increase.
That talks that then ensued between petitioner and private respondent were
disturbed anew when the other wing in the AFW headed by Purita Ramirez, It is understood that the second and third year salary increases
expressed its objections to the on-going negotiations, and when a petition for shall not be chargeable to future government mandated wage
certification election was filed by the Association of Democratic Labor Organization increases. (p. 47, Rollo.)
of petitioner. However, private respondent emerged victorious after the elections
and was thus certified as the exclusive bargaining entity of petitioner's rank and file
As earlier stated, both parties moved for reconsideration of the above order, but
employees.
both motions were denied. Consequently, petitioner St. Luke's filed the instant
petition, a special civil action on certiorari.
Following the decision dated September 14, 1990 in NCR-00-M-90-05-077 (pp.
444-445, Rollo) which upheld the legitimacy of Del Prado's
In assailing the Order of January 28, 1991, petitioner St. Luke's focuses on public
status including the other officers, Bayani Diwa of the Ramirez Wing
respondent's disposition of the economic issues.
appealed; the two cases — NCR-00-M-90-05-070 for interpleader and NCR-00-90-
05-077 — were consolidated.
First, petitioner finds highly questionable the very basis of public respondent's
decision to award P1,140.00 as salary and meal allowance increases for the first
On September 17, 1990, private respondent wrote petitioner for the resumption of
year and P700.00 across-the-board monthly salary increases for the succeeding
their negotiations concerning the union's proposed CBA. Petitioner reacted by
second and third years of the new CBA. According to petitioner, private respondent
writing a letter on September 20, 1990 expressing willingness to negotiate a new
SLMCEA-AFW misled public respondent into believing that said amounts were the
CBA for the rank and file employees who are not occupying confidential positions.
last offer of petitioner St. Luke's immediately prior to the deadlock. Petitioner
Negotiations thus resumed. However, a deadlock on issues, especially that vehemently denies having made such offer, claiming that its only offer consists of
bearing on across-the-board monthly and meal allowances followed and to pre-
the following:
empt the impending strike as voted upon by a majority of private respondent's
membership, petitioner lodged the petition below. The Secretary of Labor
immediately assumed jurisdiction and the parties submitted their respective Non-Economic Issues:
pleadings.
St. Luke's submits that it is adopting the non-economic issues
On January 22, 1991, a resolution was issued in the consolidated cases which proposed and agreed upon in its Collective Bargaining Agreement
eventually declared Gregorio del Prado and his group as the legitimate officials of with SLMCEA-AFW for the period covering 1987, 1990. Copy of
the AFW and the acknowledged group to represent AFW (pp. 320-321, Rollo). the CBA is attached as Annex "F" hereof.

On January 28, 1991, public respondent Secretary of Labor issued the Order now Economic Issue
under challenge. Said Order contained a disposition on both the economic and
non-economic issues raised in the petition. On the economic issues, he thus ruled: St. Luke's respectfully offers to give an increase to all its rank and
file employees computed as follows:

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 First Year — P900 (P700.00 basic + P200.00 food e) Sick leave — 855,000
allowance) for an over all total food allowance of
P320.00. f) Funeral, Paternity, Maternity leaves, retirement
pay — 820,000
Second Year — P400
B. P230 added to meal allowance
Third Year — P400
a) P230 x 1,500 x 12 — 4,140,000
plus the union will be allowed to operate and manage one (1)
canteen for free to augment their funds. Although the profit shall C. One day added to sick leave
be divided equally between union and SLMC, the operation of the
canteen will generate for them a monthly income of no less than a) (Ave. pay P3,000 = P1,140) divided by 30 x 1,500 — 222,000
P15,000.00, and likewise provide cheap and subsidized food to
Union members.
D. Sick leave cash conversion base reduced from 60 to 45 days
The wage increase as proposed shall be credited to whatever
increases in the minimum wage or to any across the board a) (P3,300 = P1,140)/30 x 1,200 — 2,664,000
increases that may be mandated by the government or the DOLE.
(pp. 20-21, Rollo.) E. Retirement benefits adjustment — 500,000

Petitioner charges that public respondent, in making such award, erroneously —————
relied on the extrapolated figures provided by respondent SLMCEA-AFW, which
grossly inflated petitioner St. Luke's net income. Petitioner contends that if the FIRST YEAR ADDITIONAL COST P 36,561,000
disputed award are sustained, the wage increases and benefits shall total
approximately P194,403,000.00 which it claims is excessive and unreasonable, YR II
considering that said aggregate amount is more than its projected income for the
next three years. To illustrate its point, petitioner submits the following
A. Yr I increase except sick leave cash conversion
computation:

from 60 to 45 — P33,897,000
YR I

B. P700 added to monthly basic pay

A. P1,40 added to basic pay

a) P700 x 1,500 x 12 — 2,600,000

a) P1,140 x 1,500 (no. of employees) x 12 (months) — P
20,520,000
b) 13th month pay: P1,140 x 1,500 — 1,710,000
c) Overtime pay, 20% of payroll — 4,104,000
b) 13th month pay: P700 x 1,500 — 1,050,000
c) Overtime, pay, 20% of P12.6 M — 2,520,000
d) Holiday pay, PM/Night pay — 630,000
e) Sick leave: 15 days x 700/30 x 1,500 — 525,000
f) Funeral, paternity, maternity leaves, retirement pay — 504,000
————

d) Holiday pay, PM/Night pay — 1,026,000 SECOND YEAR ADDITIONAL COST P51,726,000

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 YR III salary for the second and third years of the new CBA. It raises doubts on the
veracity of the minutes presented by private respondent SLMCEA-AFW to prove
A. Yr I and Yr II increases — 88,287,000 that negotiations were held, particularly on October 26, 1990, when petitioner
allegedly made said offer as its last ditch effort for a compromise prior to the
deadlock. According to petitioner, these minutes, unsigned by petitioner, were
B. P700 added to basic pay
merely concocted by private respondent SLMCEA-AFW.
a) P700 x 1,500 x 12 — 12,600,000
b) 13th month pay: P700 x 1,500 — 1,050,000 Finally, petitioner attacks the Order of January 28, 1991 for being violative of
Article 253-A of the Labor Code, particularly its provisions on retroactivity. Said
c) Overtime pay, 20% of P12.6 M — 2,520,000
Article pertinently provides:
d) Holiday pay, PM/Night pay — 630,000
e) Sick leave — 525,000
f) Funeral, paternity, maternity, leaves, xxx xxx xxx
retirement pay — 504,000
———— Any agreement on such other provisions of the collective
bargaining agreement entered into within six (6) months from the
THIRD YEAR ADDITIONAL COST — 106,116,000 date of expiry of the term of such other provisions as fixed in the
collective bargaining agreement, shall retroact to the day
TOTAL THREE-YEAR ADDITIONAL immediately following such date. If any such agreement is entered
into beyond six months, the parties shall agree on the duration of
retroactivity thereof. In case of a deadlock in the renegotiation of
BENEFIT/WAGES — 194,403,000 the collective bargaining agreement, the parties may exercise their
rights under this Code.
(pp. 14-16, Rollo).
Petitioner argues that in granting retroactive effect to the enforceability of the CBA,
On the basis of the foregoing, petitioner St. Luke's concludes that it would be in a public respondent committed an act contrary to the above provision of law, pointing
very poor position to even produce the resources necessary to pay the wage out that the old CBA expired on July 30, 1990 and the questioned order was
increases of its rank and file employees. issued on January 28, 1991. Petitioner theorizes that following Article 13 of the
Civil Code which provides that there are 30 days in one month, the questioned
Petitioner also impugns public respondent's awards on grounds of prematurity, Order of January 28, 1991 was issued beyond the six-month period, graphically
emphasizing that the awards in question even preceded collective bargaining shown thus:
negotiations which have to take place first between both litigants. It denies entering
into a round of negotiations with private respondent SLMCEA-AFW on the theory July 30, 1990 Expiration
that the meetings referred to by the latter were merely informal ones, without any
binding effect on the parties because AFW is torn between two factions vying for July 31 = 1 day
the right to represent it. Thus, petitioner maintains that nothing conclusive on the August 1-31, 1990 = 31 days
terms and conditions of the proposed CBA could be arrived at when the other September 1-30, 1990 = 30 days
party, private respondent SLMCEA-AFW is confronted with an unresolved October 1-31, 1990 = 31 days
representation issue. November 1-30, 1990 = 30 days
December 1-31, 1990 = 31 days
Petitioner argues further that since no formal negotiations were conducted, it could January 1-28, 1991 = 28 days
not have possibly made an offer of P1,140.00 as salary and meal allowance —————————
increases for the first year and an increase of P700.00 across-the-board monthly TOTAL = 182 days

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 (6 months and 2 days)
(p. 34, Rollo.)
Traversing petitioner's arguments, private respondent SLMCEA-AFW contends
that the formulation of the terms and conditions of the CBA awards is well
supported by the factual findings of public respondent which established that
petitioner failed to refute private respondent's allegation that during their last
meeting on October 26, 1990, petitioner stood pat on its offer of P1,140.00 as
salary and meal allowance increases for the first year of the new CBA and
P700.00 across-the-board salary increases for the second and third years thereof.
Said awards, it said, are well within the means of petitioner because its reported
net income of P15 million, P11 million, and 13 million for 1987, 1988, and 1989,
respectively, have been actually understated. Moreover, private respondent claims
that petitioner, in actual terms, does not have to pay the alleged amount of
P194,403,000.00 for wages and benefits in favor of its employees. Such amount,
according to private respondent, is bloated and excessive. Private respondent in
substantiating such claim made the following analysis:
First P1,140.00 total salary increase for the first year (1990-1991)
of the new CBA is divided into: P510.00 in compliance with the
government mandated daily salary increase of P17.00 and
P630.00 CBA across the board monthly salary increase, thus, the
whole P1,140.00 salary increase is payable only beginning August
1, 1990 (reckoned from the CBA July 30, 1990 expiry date) up to
October 31, 1990 only following the November 1, 1990 effectivity
of WAGE ORDER NO. NCR-01 which granted the said P17.00
daily wage increase or P510.00 monthly of
which herein petitioner promptly complied with and paid to its
employees and therefore deductible from P1,140.00 total monthly
salary increase (Annex "A" — Petitioner and Annex "13" hereof);
Second, the remaining P630.00 CBA across the board monthly
salary increase takes effect on November 1, 1990 up to January 7,
1991 only following the January 8, 1991 effectivity of WAGE
ORDER NO. NCR-02 which mandated P12.00 daily wage
increase or P630.00 monthly, hence, reducing the P630.00 CBA
monthly salary increase to P270.00 CBA monthly salary increase
effective January 8, 1991 and onwards till July 31, 1991 (Annexes
"22" and "23" hereof);
Third, that out of an estimated workforce of 1,264 regular
employees inclusive of about 209 supervisors, unit, junior area,
division department managers and top level executives, all
occupying permanent positions, and approximately 55 regular but
highly confidential employees, only 1,000 rank-and-file
regular/permanent employees (casuals, contractuals, probies and
security guards excluded) are entitled to the CBA benefits for
three (3) years (1990-1993) (as private respondent SLMCEA-AFW
gathered and analyzed from the petitioner's Personnel Strength
Report hereto attached as Annex "28" hereof) vis-a-vis the
generalized and inflated 1,500 employees as total workforce
purportedly entitled to CBA benefits per its self-serving and
incredible computation;
Fourth, the petitioner's computed 20% overtime pay of the basic
salary is unrealistic and overstated in view of its extreme cost-
cutting/ savings measures on all expenditures, most specially, on
overtime work adopted since last year and a continuing
management priority project up to the present; and
Fifth, due to the above consideration, the total real award of
wages and fringe benefits is far less than the true annual hefty
operating net income of the petitioner.
The net result is that the first year award of P1,140.00 monthly
salary increase of which P510.00 monthly salary increase is made
in compliance with the P510.00 monthly wage increase at P17.00
daily wage increase effective November 1, 1990 under Wage
Order No. NCR-01 (Annex "13" hereof) or with the intended
P630.00 CBA monthly salary increase is further reduced by
P360.00 monthly wage increase at P12.00 daily wage increase
effective January 8, 1991 under Wage Order No.
NCR-02 (Annex "22" hereof), thereby leaving a downgraded or
watered down CBA monthly increase of P270.00 only.
Comparatively speaking, the 13% monthly salary increase of each
employee average basic monthly salary of P2,500.00 in 1987 or
P325.00 monthly salary increase granted by the petitioner under
the first old CBA (1987-1990) is better than the much diluted
P270.00 CBA monthly salary increase (in lieu of the awarded
P630.00 CBA monthly salary increase for the first year of the new
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 CBA under Order, dated January 28, 1991, of public respondent).
(Annexes "A" and "G" — Petition). (pp. 390-391, Rollo.)
Private respondent concludes that petitioner's version that it will have to pay
P194,403,000.00 is not true because this will be drastically reduced by 40% to
60% in real terms due to a smaller number of employees covered. It is further
explained that the government-decreed wage increases abovementioned already
form part of the P1,140.00 wage and meal allowance increases, not to mention the
strict cost-cutting measures and practices on overtime and expense items adopted
by petitioner since 1990.
With respect to public respondent's ruling that the CBA awards should be given
retroactive effect, private respondent agrees with the Labor Secretary's view that
Article 253-A of the Labor Code does not apply to arbitral awards such as those
involved in the instant case. According to private respondent, Article 253-A of the
Labor Code is clear and plain on its face as referring only to collective bargaining
agreements entered into by management and the certified exclusive bargaining
agent of all rank-and-file employees therein within six (6) months from the expiry of
the old CBA.
These foregoing contentions and arguments of private respondent have been
similarly put forward by the Office of the Solicitor General in its Consolidated
Comment filed on November 23, 1991. The Solicitor General share a the views of
private respondent SLMCEA-AFW.
We are now tasked to rule on the petition. Do petitioner's evidence and arguments
provide adequate basis for the charge of alleged grave abuse of discretion
committed by public respondent in his Order of January 28, 1991 as to warrant its
annulment by this Court? This is the sole issue in the case at bar. Consequently,
this Court would apply the following yardstick in resolving the aforestated issue:
that public respondent, in the exercise of his power to assume over subject labor
dispute, acted whimsically, capriciously, or in an arbitrary, despotic manner by
reason of passion or personal hostility which was so patent and gross as to
amount to an evasion of positive duty or to a virtual refusal to perform a duty
enjoined or to act at all in contemplation of law (San Sebastian College vs. Court of
Appeals, 197 SCRA 138 [1991]).
Subjected to and measure by this test, the challenged Order, we believe, can
withstand even the most rigorous scrutiny.
Petitioner assails the Order of January 28, 1991 on three grounds:
(a) unreasonable and baselessness; (b) prematurity; and (c) violation of Article
253-A of the Labor Code.
We rule that the Order, particularly in its disposition on the economic issues, was
not arbitrarily imposed by public respondent. A perusal of the Order shows that
public respondent took into consideration the parties' respective contentions, a
clear indication that he was keenly aware of their contrary positions. Both sides
having been heard, they were allowed to present their respective evidence. The
due process requirement was thus clearly observed. Considering public
respondent's expertise on the subject and his observance of the cardinal principles
of due process, the assailed Order deserves to be accorded great respect by this
Court.
Equally worth mentioning is the fact that in resolving the economic issues, public
respondent merely adopted in toto petitioner's proposals. Consequently, petitioner
cannot now claim that the awards are unreasonable and baseless. Neither can it
deny having made such proposals, as it attempted to do in its Motion for
Reconsideration of the challenged Order before public respondent and which it
continues to pursue in the instant petition. It is too late in the day for such
pretense, especially so because petitioner failed to controvert private respondent's
allegation contained in its Comment to the petition before the Labor Secretary that
petitioner had offered as its last proposal said salary and meal allowance
increases. As correctly pointed out by public respondent, petitioner failed, when it
had the chance, to rebut the same in its Reply to said Comment, considering that
the resolution of the labor dispute at that was still pending. Any objection on this
point is thus deemed waived.
We do not see merit in petitioner's theory that the awards were granted
prematurely. In its effort to persuade this Court along this point, petitioner denies
having negotiated with private respondent SLMCEA-AFW. Petitioner collectively
refers to all the talks conducted with private respondent as mere informal
negotiations due to the representation issue involving AFW. Petitioner thus argues
that in the absence of any formal negotiations, no collective bargaining could have
taken place. Public respondent, petitioner avers, should have required the parties
instead to negotiate rather than prematurely issuing his order.
We cannot agree with this line of reasoning. It is immaterial whether the
representation issue within AFW has been resolved with finality or not. Said
squabble could not possibly serve as a bar to any collective bargaining since AFW
is not the real party-in-interest to the talks; rather, the negotiations were confined
to petitioner and the local union SLMCEA which is affiliated to AFW. Only the
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collective bargaining agent, the local union SLMCEA in this case, possesses legal
standing to negotiate with petitioner. A duly registered local union affiliated with a
national union or federation does not lose its legal personality or independence
(Adamson and Adamson, Inc. vs. The Court of Industrial Relations and Adamson
and Adamson Supervising Union (FFW), 127 SCRA 268 [1984]). In Elisco-Elirol
Labor Union (NAFLU) vs. Noriel (180 SCRA 681 [1977]), then Justice Teehankee
re-echoed the words of Justice Esguerra in Liberty Cotton Mills Workers Union
vs. Liberty Cotton Mills, Inc. (66 SCRA 512 [1975]), thus:
(T)he locals are separate and distinct units primarily designed to
secure and maintain an equality of bargaining power between the
employer and their employee-members in the economic struggle
for the fruits of the joint productive effort of labor and capital;
and the association of the locals into the national union (as
PAFLU) was in furtherance of the same end. These associations
are consensual entities capable of entering into such legal
relations with their members. The essential purpose was the
affiliation of the local unions into a common enterprise to increase
by collective action the common 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. (at p. 688; emphasis in
the original.)
Appending "AFW" to the local union's name does not mean that the federation
absorbed the latter. No such merger can be construed. Rather, what is conveyed
is the idea of affiliation, with the local union and the larger national federation
retaining their separate personalities.
Petitioner cannot pretend to be unaware of these legal principles since they enjoy
the benefit of legal advice from their distinguished counsel. Thus, we are
constrained to agree with the position of the Solicitor General that petitioner
conveniently used the representation issue within AFW to skirt entering into
bargaining negotiations with the private respondent.
Too, petitioner is in error in contending that the order was prematurely issued. It
must be recalled that immediately after the deadlock in the talks, it was petitioner
which filed a petition with the Secretary of Labor for the latter to assume
jurisdiction over the labor dispute. In effect, petitioner submitted itself to the public
respondent's authority and recognized the latter's power to settle the labor dispute
pursuant to article 263(g) of the Labor Code granting him the power and authority
to decide the dispute. It cannot, therefore, be said that public respondent's
decision to grant the awards is premature and pre-emptive of the parties' right to
collectively bargain, simply because the Order of January 28, 1991 was
unfavorable to one or the other party, for as we held in Saulog Transit,
Inc. vs. Lazaro, (128 SCRA 591 [1984]):
It is a settled rule that a party cannot invoke the jurisdiction of a
court to secure affirmative relief against his opponent and after
failing to obtain such relief, repudiate or question that same
jurisdiction. A party cannot invoke jurisdiction at one time and
reject it at another time in the same controversy to suit its interests
and convenience. The Court frowns upon and does not tolerate
the undesirable practice of same litigants who submit voluntarily a
cause and then accepting the judgment when favorable to them
and attacking it for lack of jurisdiction when adverse. (Tajonera v.
Lamaroxa, 110 SCRA 447, citingTijam v. Sibonghanoy, 23 SCRA
35). (at p. 601.)
Finally, the effectivity of the Order of January 28, 1991, must retroact to the date of
the expiration of the previous CBA, contrary to the position of petitioner. Under the
circumstances of the case, Article 253-A cannot be property applied to herein
case. As correctly stated by public respondent in his assailed Order of April 12,
1991 dismissing petitioner's Motion for Reconsideration —
Anent the alleged lack of basis for the retroactivity provisions
awarded, we would stress that the provision of law invoked by the
Hospital, Article 253-A of the Labor Code, speak of agreements by
and between the parties, and not arbitral awards . . . (p.
818, Rollo.)
Therefore, in the absence of a specific provision of law prohibiting retroactivity of
the effectivity of arbitral awards issued by the Secretary of Labor pursuant to
Article 263 (g) of the Labor Code, such as herein involved, public respondent is
deemed vested with plenary and discretionary powers to determine the effectivity
thereof.
WHEREFORE, the instant petition is hereby DISMISSED for lack of merit.
SO ORDERED.
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G.R. No. 110854 February 13, 1995 8, North Harbor and its offices and said positions
are [sic] listed in ANNEX "A" hereof.
PIER 8 ARRASTRE & STEVEDORING SERVICES, INC., petitioner,
vs. As such representative the UNION is designated
HON. MA. NIEVES ROLDAN-CONFESOR, in her capacity as Secretary of as the collective bargaining agent with respect to
Labor and Employment, and GENERAL MARITIME & STEVEDORES UNION and concerning the terms and conditions of
(GMSU), respondents. employment and the interpretations and
implementation of the provisions and conditions of
this Agreement.

PUNO, J.: Annex "A" of the CBA is the listing of positions covered thereby.
These are:
Petitioner corporation and private respondent labor union entered into a three-year
Collective Bargaining Agreement (CBA) with expiry date on November 27, 1991. 1. Foremen;
During the freedom period the National Federation of Labor Unions (NAFLU) 2. Gang bosses;
questioned the majority status of Private respondent through a petition for 3. Winchmen;
certification election. The election conducted on February 27, 1992 was won by 4. Signalmen;
private respondent. On March 19, 1992, private respondent was certified as the 5. Stevedores;
sole and exclusive bargaining agent of petitioner's rank-and-file employees. 6. Dockworkers;
7. Tallymen;
8. Checkers;
On June 22, 1992, private respondent's CBA proposals were received by
9. Forklift and crane operators;
petitioner. Counter-proposals were made by petitioner. Negotiations collapsed, and
on August 24, 1992, private-respondent filed a Notice of Strike with the National 10. Sweepers;
Conciliation and Mediation Board (NCMB). The NCMB tried but failed to settle the 11. Mechanics;
12. Utilitymen;
parties' controversy.
13. Carpenters; and
14. Other rank and file employees;
On September 30, 1992, public respondent Secretary of Labor assumed
jurisdiction over the dispute. She resolved the bargaining deadlock between the
The company argues in the first instance that under Article 212(m)
parties through an Order, dated March 4, 1993, which reads, in part:
in relation to Article 245 of the Labor Code, supervisors are
ineligible for. membership in a labor organization of rank and file.
xxx xxx xxx Being supervisors, foremen should be excluded from the
bargaining unit.
A. The non-economic issues
The Company likewise seeks the exclusion on the ground of lack
1. Scope/coverage of the CBA. Article I of the 1988 CBA provides: of community of interest and divergence in functions, mode of
compensation and working conditions of the following:
The Company recognizes the Union as the sole
and exclusive collective bargaining representative 1. Accounting clerk;
of all the stevedores, dockworkers, gang bosses, 2. Audit clerk;
foremen, rank and file employees working at Pier 3. Collector;
4. Payroll clerk;

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 5. Nurse;
6. Chief biller;
7. Biller;
8. Teller/biller;
9. Personnel clerk;
10. Timekeeper;
11. Asst. timekeeper;
12. Legal secretary;
13. Telephone operator;
14. Janitor/Utility; and
15. Clerk
These positions, the Company argues, cannot be lumped together
with the stevedores or dockworkers who mostly comprise the
bargaining unit. Further, notwithstanding the check-off provisions
of the CBA, the incumbents in these positions have never paid
union dues. Finally, some of them occupy confidential positions
and therefore ought to be excluded from the bargaining unit.
The Union generally argues that the Company's proposed
exclusions retrogressive. . . .
We see no compelling justification to order the modification of
Article I of the 1988 CBA as worded. For by lumping together
stevedores and other rank and file employees, the obvious intent
of the parties was to treat all employees not disqualified from
COMPANY
union membership as members of one bargaining unit. This is
regardless of working conditions, mode of compensation, place of
work, or other considerations. In the absence of mutual agreement
of the parties or evidence that the present compositions of the
bargaining unit is detrimental to the individual and
5. Vacation organizational
and sick leave 17 days vacation and sick leave
rights either of the employees or of the Company, this expressed
intent cannot be set aside. 17 days sick leave per year
for employment with at least
It may well be that as a consequence of Republic Act No. 6715, five years of service.
foremen are ineligible to join the union of the rank and file. But this
provision can be invoked only upon proof that the foremen sought
to be excluded from the bargaining unit are cloaked with effective
recommendatory powers such as to qualify them under the legal
definitions of supervisors.
xxx xxx xxx
7. Effectivity of the CBA. The Union demands that the CBA should
be fully retroactive to 28 November 1991. The Company is
opposed on the ground that under Article 253-A of the labor code,
the six-month period within which the parties must come to an
agreement so that the same will be automatically retroactive is
long past.
The Union's demand for full retroactivity, we note, will result in
undue financial burden to the Company. On the other hand, the
Company's reliance on Article 253-A is misplaced as this applies
only to the renegotiated terms of an existing CBA. Here, the
deadlock arose from negotiations for a new CBA.
These considered, the CBA shall be effective from the time we
assumed jurisdiction over the dispute, that is, on 22 September
1992, and shall remain e effective for five (5) years thereafter. It
shall be understood that except for the representation aspect all
other provisions thereof shall be renegotiated not later than three
(3) years after its effectivity, consistently with Article 253-A of the
Labor Code.
B. The economic issues
The comparative positions of the parties are:
UNION
xxx xxx xxx
i) For all covered employees
and 17 days sick than gang
gang bosses:
15 working days vacation and
15 working days sick leave
for those with at least 1 year
of service
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 20 working days vacation and Same as the above schedule
20 working days sick leave except that:
for those with more than one
year of service up to 5 years 1) the condition that a gang
of service bosses must have worked for at
least 120 days in a calendar
25 working days vacation and year shall be reduced to 110
25 working days sick leave days; and
for those with more than 5
years of service up to 10 2) where the above number of
years of service days worked is not met, the
gang boss shall still be entitled
30 working days vacation and to vacation and sick leave with
30 working days sick leave pay, as follows:
for those with more than 10 109 - 90 days worked: 90%
years of service 89 - 75 days worked: 50%

Provided that in the case Provided that in the case of a xxx xxx xxx
of a rotation worker, he rotation worker, he must have
7. Death aid P1,500.00 to heirs P10,000.00 to heirs of covered
must have work for at worked for 140 days in a
of covered employees employees
least 160 days in a year calendar year as a condition
for availment for availment.
P5,000.00 assistance for death
of immediate member of
Provided, further that in the
covered employee's family
event a rotation worker fails
to complete 140 days work in
xxx xxx xxx
a calendar year, he shall still
be entitled to vacation and 12.Emergency
sick leave with pay, as follows: loan
139 - 120 days worked: 90% a) amount of P700.00 but 30 days salary payable
119 - 110 days worked: 50% damage through
entitlement to dwelling by fire payroll deduction in twelve
shall
ii) For Gang bosses:

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 be included monthly installments provided that the gang
boss must have
b) cash bond None The company shall put up worked for at least 115
a cash days in a
for loss, damage bond of not less than calendar year
P40,000.00
or accident for winchmen, crane and
forklift xxx xxx xxx
operators.
8. Death aid P3,000.00 to the heirs of each covered employee

xxx xxx xxx

xxx xxx xxx

12. Emergency loan 30 days pay, payable through payroll

Balancing the right of the Company to remain viable and to just
returns to its investments with right of the Union members to just
rewards for their labors, we find the following award to be fair and
reasonable:
xxx xxx xxx
6.Vacation and Sick
Leave
a) Non-rotation workers 17 days vacation/17 days
sick leave
for those with at least 1
year of service
b) Rotation workers other 17 days vacation/17 days
sick leave,
than gang boss provided that the covered
worker
must have worked for at
least 155 days
in a calendar year
deductions of 1/12 of monthly salary
WHEREFORE, the Pier 8 Arrastre and Stevedoring Services and
the General Maritime Services Union are hereby ordered to
execute new collective bargaining agreement the incorporating the
dispositions herein contained. These shall be in addition to all
other existing terms, conditions and benefits of employment,
except those specifically deleted herein, which have previously
governed the relations of the parties. All other disputed items not
specifically touched upon herein are deemed denied, without
prejudice to such other agreements as the parties may have
reached in the meantime. The collective bargaining agreement so
executed shall be effective from 22 September 1992 and up to five
years thereafter, subject to renegotiation on the third year of its
effectivity pursuant to Article 253-A of the Labor Code.1
Petitioner sought partial reconsideration of the Order. On June 8, 1993, public
respondent affirmed her findings, except for the date of effectivity of the Collective
Bargaining Agreement which was changed to September 30, 1992. This is the
date when she assumed jurisdiction over the deadlock.
Petitioner now assails the Order as follows:

I
c) Gang bosses 17 days vacation/17 days
sick leave,

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 THE HONORABLE SECRETARY OF LABOR COMMITTED
GRAVE ABUSE OF DISCRETION IN NOT EXCLUDING
CERTAIN POSITIONS FROM THE BARGAINING AGREEMENT
UNIT
II
THE HONORABLE SECRETARY OF LABOR COMMITTED
GRAVE ABUSE OF DISCRETION IN MAKING THE CBA
EFFECTIVE ON SEPTEMBER 30, 1992 WHEN SHE ASSUMED
JURISDICTION OVER THE LABOR DISPUTE AND NOT MARCH
4, 1993 WHEN SHE RENDERED JUDGMENT OVER THE
DISPUTE
III
THE HONORABLE SECRETARY OF LABOR COMMITTED
GRAVE ABUSE OF DISCRETION IN REDUCING THE NUMBER
OF DAYS AN EMPLOYEE SHOULD ACTUALLY WORK TO BE
ENTITLED TO VACATION AND SICK LEAVE BENEFITS
IV
THE HONORABLE SECRETARY OF LABOR COMMITTED
GRAVE ABUSE OF DISCRETION IN INCREASING WITHOUT
FACTUAL BASIS THE DEATH AID AND EMERGENCY LOAN 2
The petition is partially meritorious.
Firstly, petitioner questions public respondent for not excluding four (4) foremen, a
legal secretary, a timekeeper and an assistant timekeeper from the bargaining unit
composed of rank-and-file employees represented by private respondent.
Petitioner argues that: (1) the failure of private respondent to object when the
foremen and legal secretary were prohibited from voting in the certification election
constitutes an admission that such employees holdsupervisory/confidential
positions; and (2) the primary duty and responsibility of the timekeeper and
assistant timekeeper is "to enforce company rules and regulations by reporting to
petitioner . . . those workers who committed infractions, such as those caught
abandoning their posts." and hence, they should not be considered as rank-and-
file employees.
The applicable law governing the proper composition of bargaining unit is Article
245 of the labor Code, as amended, which provides as follows:
Art. 245. Ineligibility of managerial employees to join any labor
organization; 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 212(m) of the same Code, as well as Book V, Rule 1, Section 1(o) of the
Omnibus Rules Implementing the Labor Code, as amended by the Rules and
Regulations Implementing R.A.. 6715, differentiate managerial, supervisory, and
rank-and-file employees, thus:
"Managerial Employee" is one who is vested with powers or
prerogatives to lay down and execute management policies and/or
to hire, transfer, suspend, layoff 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
the Book.
This Court has ruled on numerous occasions that the test of supervisory or
managerial status is whether an employee possesses authority to act in the
interest of his employer which authority is not merely routinary or clerical in nature
but requires use of independent judgment. 3 What governs the determination of the
nature of employment is not the employee's title, but his job description. If the
nature of the employee's job does not fall under the definition of "managerial" or
"supervisory" in the Labor Code, he is eligible to be a member of the rank-and-file
bargaining unit. 4
Foremen are chief and often especially-trained workmen who work with and
commonly are in charge of a group of employees in an industrial plant or in
construction work. 5 They are the persons designated by the employer-
management to direct the work of employees and to superintend and oversee
them. 6 They are representatives of the employer-management with authority over
particular groups of workers, processes, operations, or sections of a plant or an
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entire organization. In the modern industrial plant, they are at once a link in the
chain of command and the bridge between the management and labor. 7 In the
performance their work, foremen definitely use their independent judgment and are
empowered to make recommendations for managerial action with respect to those
employees under their control. Foremen fall squarely under the category
of supervisory employees, and cannot be part of rank-and-file unions.
Upon the other hand, legal secretaries are neither managers nor supervisors. Their
work is basically routinary and clerical. However, they should be differentiated from
rank-and-file employees because they, 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. 8 Legal secretaries therefore fall under the
category of confidential employees. Thus, to them applies our holding in the case
of Philips Industrial Development, Inv., v. NLRC, 210 SCRA 339 (1992), that:
. . . By the very functions, they assist confidential capacity to, or
have access to confidential. matters of, persons to, exercise
managerial functions in the field of labor relations. 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, 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
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, 9 this court explicitly
made this rationale applicable to confidential employees:
This rationale holds true also for confidential
employees . . ., 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. . . .
We thus hold that public respondent acted with grave abuse of discretion in not
excluding the four foremen and legal secretary from the bargaining unit composed
of rank-and-file employees.
As for the timekeeper and assistant timekeeper it is clear from petitioner's own
pleadings that they are, neither managerial nor supervisory employees. They are
merely tasked to report those who commit infractions against company rules and
regulations. This reportorial function is routinary and clerical. They do not
determine the fate of those who violate company policy rules and regulations
function. It follows that they cannot be excluded from the subject bargaining unit.
The next issue is the date when the new CBA of the parties should be given effect.
Public respondent fixed the effectivity date on September 30, 1992. when she
assumed jurisdiction over the dispute. Petitioner maintains it should be March 4.
1993, when public respondent rendered judgment over the dispute.
The applicable laws are Articles 253 and 253- A of the Labor Code, thus:
Art. 253. Duty to bargain collectively when there exists a collective
bargaining agreement. — When there is a collective bargaining
agreement, the duty to bargain collectively shall also mean that
neither party shall terminate nor modify such agreement during its
lifetime. However, either party can serve a written notice to
terminate or modify the agreement at least sixty (60) days prior to
its expiration date. It shall be the duty of both parties to keep
the status quo and to continue in full force and effect the terms
and conditions of the existing agreement during the 60-day period
and/or until a new agreement is reached by the parties.
and;
Art. 253-A. Terms of a collective bargaining agreement. — Any
Collective Bargaining Agreement that the parties may enter into
shall, insofar as the representation aspect is concerned, be for a
term of five (5) years. No petition questioning the majority status of
the incumbent bargaining agent shall be entertained and no
certification election shall be conducted by the Department of
Labor and Employment outside the sixty-day period immediately
before the date of expiry of such five year term of the Collective
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 Bargaining Agreement. All other provisions of the Collective
Bargaining Agreement shall be renegotiated not later than three
(3) years after its execution. Any agreement on such other
provisions of the Collective Bargaining Agreement entered into
within six (6) months from the date of expiry of the term of such
other provisions as fixed in such Collective Bargaining Agreement,
shall retroact to the day immediately following such date. If any
such agreement is entered into beyond six months, the parties
shall agree on the duration of collective bargaining agreement, the
parties may exercise their rights under this Code.
In Union of Filipino Employees v. NLRC, 192 SCRA 414 (1990), this court
interpreted the above law as follows:
In light of the foregoing, this Court upholds the pronouncement of
the NLRC holding the CBA to be signed by the parties effective
upon the promulgation of the assailed resolution. It is clear and
explicit from Article 253-A that any agreement on such other
provisions of the CBA shall be given retroactive effect only when it
is entered into within six (6) months from its expiry date. If the
agreement was entered into outside the six (6) month period, then
the parties shall agree on the duration of the retroactivity thereof.
The assailed resolution which incorporated the CBA to be signed
by the parties was promulgated June 5, 1989, the expiry date of
the past CBA. Based on the provision of Section 253-A, its
retroactivity should be agreed upon. by the parties. But since no
agreement to that effect was made, public respondent did not
abuse its discretion in giving the said CBA a prospective effect.
The action of the public respondent is within the ambit of its
authority vested by existing law.
In the case of Lopez Sugar Corporation v. Federation of Free Workers, 189 SCRA
179 (1991), this Court reiterated the rule that although a CBA has expired, it
continues to have legal effects as between the parties until a new CBA has been
entered into. It is the duty of both parties to the to keep the status quo, and to
continue in full force and effect the terms and conditions of the existing agreement
during the 60-day freedom period and/or until a new agreement is reached by the
parties. 10 Applied to the case at bench, the legal effects of the immediate past
CBA between petitioner and private respondent terminated, and the effectivity of
the new CBA began, only on March 4, 1993 when public respondent resolved their
dispute.
Finally, we find no need to discuss at length the merits of the third and fourth
assignments of error. The questioned Order relevantly states:
In the resolution of the economic issues, the Company urges us to
consider among others, present costs of living, its financial
capacity, the present wages being paid by the other cargo
handlers at the North Harbor, and the fact that the present
average wage of its workers is P127.75 a day, which is higher
than the statutory minimum wage of P118.00 a day. The
Company's evidence, consisting of its financial statements for the
past three years, shows that its net income was P743,423.45 for
1989, P2,108,569.03 for 1990, and P1,479,671.84 for 1991, or an
average of P1,443,885.10 over the three-year period. It argues
that for just the first year of effectivity of the CBA, the Company's
proposals on wages, effect thereof on overtime, 13th month pay,
and vacation and sick leave commutation, will cost about
P520,723,44, or 35.19% of its net income for 1991. The Company
likewise urges us to consider the multiplier effect of its proposals
on the second and third years of the CBA. As additional argument,
the Company manifests that a portion of its pier will undergo a six-
month to one-year renovation starting January 1993.
On the other hand, the Union's main line of argument — that is,
aside from being within the financial capacity of the Company to
grant, its demands are fair and reasonable — is not supported by
evidence controverting the Company's own presentation of its
financial capacity. The Union in fact uses statements of the
Company for 1989-1991, although it interprets these data as
sufficient justification for its own proposals. It also draws our
attention to the bargaining history of the parties, particularly the
1988 negotiations during which the company was able to grant
wage increases despite operational losses.
Balancing the right of the Company to remain viable and to just
returns to its investments with right of the Union members to just
rewards for their labors, we find the following award to be fair and
reasonable . . . . 11
It is evident that the above portion of the impugned Order is based on well-studied
evidence. The conclusions reached by public respondent in the discharge of her
statutory duty as compulsory arbitrator, demand the high respect of this Court. The
study and settlement of these disputes fall within public respondent's distinct
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administrative expertise. She is especially trained for this delicate task, and she
has within her cognizance such data and information as will assist her in striking
the equitable balance between the needs of management, labor and the public.
Unless there is clear showing of grave abuse of discretion, this Court cannot and
will not interfere with the labor expertise of public respondent Secretary of Labor.
IN VIEW WHEREOF, public respondents Order, dated March 4, 1993, and
Resolution, dated June 8, 1993, are hereby MODIFIED to exclude foremen and
legal secretaries from the rank-and-file bargaining unit represented by private
respondent union, and to fix the date of effectivity of the five-year collective
bargaining agreement between petitioner corporation and private respondent union
on March 4, 1993. No costs.
SO ORDERED.
G.R. No. 127598 January 27, 1999
MANILA ELECTRIC COMPANY, petitioner,
vs.
THE HONORABLE SECRETARY OF LABOR LEONARDO QUISUMBING AND
MERALCO EMPLOYEES AND WORKERS ASSOCIATION
(MEWA), respondents.
MARTINEZ, J.:
In this petition for certiorari, the Manila Electric Company (MERALCO) seeks to
annul the orders of the Secretary of Labor dated August 19, 1996 and December
28, 1996, wherein the Secretary required MERALCO and its rank and file union —
the Meralco Workers Association (MEWA) — to execute a collective bargaining
agreement (CBA) for the remainder of the parties' 1992-1997 CBA cycle, and to
incorporate in this new CBA the Secretary's dispositions on the disputed economic
and non-economic issues.
MEWA is the duly recognized labor organization of the rank-and-file employees of
MERALCO.
On September 7, 1995, MEWA informed MERALCO of its intention to re-negotiate
the terms and conditions of their existing 1992-1997 Collective Bargaining
Agreement (CBA) covering the remaining period of two years starting from
December 1, 1995 to November 30, 1997. 1 MERALCO signified its willingness to
re-negotiate through its letter dated October 17, 19952 and formed a CBA
negotiating panel for the purpose. On November 10, 1995, MEWA submitted its
proposal3 to MERALCO, which, in turn, presented a counter-proposal. Thereafter,
collective bargaining negotiations proceeded. However, despite the series of
meetings between the negotiating panels of MERALCO and MEWA, the parties
failed to arrive at "terms and conditions acceptable to both of them."
On April 23, 1996, MEWA filed a Notice of Strike with the National Capital Region
Branch of the National Conciliation and Mediation Board (NCMB) of the
Department of Labor and Employment (DOLE) which was docketed as NCMB-
NCR-NS-04-152-96, on the grounds of bargaining deadlock and unfair labor
practices. The NCMB then conducted a series of conciliation meetings but the
parties failed to reach an amicable settlement. Faced with the imminence of a
strike, MERALCO on May 2, 1996, filed an Urgent Petition4 with the Department of
Labor and Employment which was docketed as OS-AJ No. 0503[1]96 praying that
the Secretary assume jurisdiction over the labor dispute and to enjoin the striking
employees to go back to work.
The Labor Secretary granted the petition through its Order5 of May 8, 1996, the
dispositive portion of which reads:
WHEREFORE, premises considered, this Office now assumes
jurisdiction over the labor dispute obtaining between the parties
pursuant to Article 263(g) of the Labor Code. Accordingly, the
parties are here enjoined from committing any act that may
exacerbate the situation. To speed up the resolution of the
dispute, the parties are also directed to submit their respective
Position Papers within ten (10) days from receipt.
Undersecretary Jose M. Espanol, Jr. is deputized to conduct
conciliation conferences between the parties to bridge their
differences and eventually hammer out a solution that is mutually
acceptable. He shall be assisted by the Legal Service.
SO ORDERED.
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Thereafter, the parties submitted their respective memoranda and on August 19,
1996, the Secretary resolved the labor dispute through an Order, 6 containing the
following awards:
ECONOMIC DEMANDS
Wage increase — P2,300.00 for the first year
covering the period from December 1, 1995 to
November 30, 1996
— P2,200.00 for
the second year
covering the
period December
1, 1996 to
November 30,
1997.
Red Circle Rate (RCR) Allowance — all RCR allowances
(promotional increases that go beyond the maximum range of a
job classification salary) shall be integrated into the basic salary of
employees effective December 1, 1995.
Longevity Allowance — the integration of the longevity allowance
into the basic wage is denied; the present policy is maintained.
Longevity Increase — the present longevity bonus is maintained
but the bonus shall be incorporated into the new CBA.
Sick Leave — MEWA's demand for upgrading is denied; the
company's present policy is maintained. However, those who have
not used the sick leave benefit during a particular year shall be
entitled to a one-day sick leave incentive.
Sick leave reserve — the present reserve of 25 days shall be
reduced to 15 days; the employee has the option either to convert
the excess of 10 days to cash or let it remain as long as he wants.
In case he opts to let it remain, he may later on convert it into cash
at his retirement or separation.
Vacation Leave — MEWA's demand for upgrading denied & the
company's present policy is maintained which must be
incorporated into the new CBA but scheduled vacation leave may
be rounded off to one full day at a time in case of a benefit
involving a fraction of a day;
Union Leave — of MEWA's officers, directors or
stewards assigned to perform union duties or
legitimate union activity is increased from 30 to 40
Mondays per month.
Maternity, Paternity and Funeral leaves — the existing policy is to
be maintained and must be incorporated in the new CBA unless a
new law granting paternity leave benefit is enacted which is
superior to what the company has already granted.
Birthday Leave — union's demand is granted. If birthday falls on
the employee's rest day or on a non-working holiday, the worker
shall be entitled to go on leave with pay on the next working day.
Group Hospitalization & Surgical Insurance Plan (GHSIP) and
Health Maintenance Plan (HMP) — present policy is maintained
insofar as the cost sharing is concerned — 70% for the Company
and 30% for MEWA.
Health Maintenance Plan (HMP) for dependents — subsidized
dependents increased from three to five dependents.
Longevity Bonus — is increased from P140.00 to P200.00 for
even year of service to be received by the employee after serving
the Company for 5 years.
Christmas Bonus and Special Christmas Grant — MEWA's
demand of one month salary as Christmas Bonus two month's
salary as Special Christmas Grant is granted and to be
incorporated in the new CBA.
Midyear Bonus — one month's pay to be included in the CBA.
Anniversary Bonus — union's demand is denied.
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Christmas Gift Certificate — company has the discretion as to
whether it will give it to its employees.
Retirement Benefits:
a. Full retirement-present policy is
maintained;
b. one cavan of rice per month is
granted to retirees;
c. special retirement leave and
allowance-present policy is
maintained;
d. HMP coverage for retirees —
HMP coverage is granted to
retirees who have not reached
the age of 70, with MERALCO
subsidizing 100% of the monthly
premium; those over 70 are
entitled to not more than 30 days
of hospitalization at the J.F.
Cotton Hospital with the company
shouldering the entire cost.
e. HMP coverage for retiree's
dependents is denied.
f. Monthly pension of P3,000.00
for each retiree is denied.
g. Death benefit for retiree's
beneficiaries is denied.
Optional retirement — union's demand is denied;
present policy is maintained; employee is eligible
for optional retirement if he has rendered at least
18 years of service.
Dental, Medical and Hospitalization Benefits — grant of all the
allowable medical, surgical, dental and annual physical
examination benefits, including free medicine whenever the same
is not available at the JFCH.
Resignation benefits — union's demand is denied.
Night work — union demand is denied but present policy must be
incorporated in CBA.
Shortswing — work in another shift within the same day shall be
considered as the employee's work for the following day and the
employee shall be given additional four (4) hours straight time and
the applicable excess time premium if he works beyond 8 hours in
the other shift.
High Voltage allowance — is increased from P45.00 to P55.00 to
be given to any employee authorized by the Safety Division to
perform work on or near energized bare lines & bus including
stockman drivers & crane operators and other crew members on
ground.
High Pole Allowance — is increased from P30.00 to P40.00 to be
given to those authorized to climb poles up to at least 60 ft. from
the ground. Members of the team including stockman drivers,
crane operators and other crew members on the ground, are
entitled to this benefit.
Towing Allowance — where stockmen drive tow trailers with long
poles and equipment on board, they shall be entitled to a towing
allowance of P20.00 whether they perform the job on regular shift
or on overtime.
Employee's Cooperative — a loan of P3 M seed money is granted
to the proposed establishment of a cooperative, payable in twenty
(20) years starting one year from the start of operations.
Holdup Allowance — the union demand is denied; the present
policy shall be maintained.
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Meal and Lodging Allowance — shall be increased effective to lunch and transportation
December 1, 1995 as follows: allowance.

Breakfast — from P25.00 to P35.00 c. The collector shall be entitled

Lunch — from P35.00 to P45.00
Dinner — from P35.00 to P45.00
Lodging — from P135.00 to P180.00 a night in all
MERALCO franchise areas.
Payroll Treatment for Accident while on Duty — an employee shall
be paid his salary and allowance if any is due plus average excess
time for the past 12 months from the time of the accident up to the
time of full recovery and placing of the employee back to normal
duty or an allowance of P2,000.00, whichever is higher.
Housing and Equity Assistance Loan — is increased to
P60,000.00; those who have already availed of the privilege shall
be allowed to get the difference.
Benefits for Collectors:
a. Company shall reduce
proportionately the quota and
monthly average product level
(MAPL) in terms of equivalent bill
assignment when an employee is
on sick leave and paid vacation
leave.
Political Demands:
b. When required to work on
Saturdays, Sundays and
holidays, an employee shall
receive P60.00 lunch allowance
and applicable transportation
allowance as determined by the
Company and shall also receive
an additional compensation to
one day fixed portion in addition
to an incentive pay of P25.00 for
every delinquent account
disconnected.
d. When a collector voluntarily
performs other work on regular
shift or overtime, he shall be
entitled to remuneration based on
his computed hourly
compensation and the
reimbursement of actually
incurred transportation expenses.
e. Collectors shall be provided
with bobcat belt bags every year.
f. Collector's cash bond shall be
deposited under his capital
contribution to MESALA.
g. Collectors quota and MAPL
shall be proportionately reduced
during typhoons, floods,
earthquakes and other similar
force majeure events when it is
impossible for a collector to
perform collection work.
a. Scope of the collective
bargaining unit — the collective
bargaining unit shall be
composed of all regular rank-and-
file employees hired by the
company in all its offices and
operative centers throughout its
franchise area and those it may

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employ by reason of expansion, regular
reorganization or as a result of employees of the
operational exigencies. rights, duties and
benefits of Union
b. Union recognition and security membership.
—
iii. The right of all
i. The union shall rank-and-file
be recognized by employees to join
the Company as the union shall be
sole and recognized in
exclusive accordance with
bargaining the maintenance
representative of of membership
the rank-and-file principle as a
employees form of union
included in the security.
bargaining unit.
The Company c. Transfer of assignment and job
shall agree to security —
meet only with
Union officers i. No transfer of
and its authorized an employee
representatives from one position
on all matters to another shall
involving the be made if
Union and all motivated by
issues arising considerations of
from the sex, race, creed,
implementation political and
and interpretation religious belief,
of the new CBA. seniority or union
activity.
ii. The union shall
meet with the ii. If the transfer is
newly regularized due to the
employees for a reorganization or
period not to decentralization,
exceed four (4) the distance from
hours, on the employee's
company time, to residence shall
acquaint the new be considered

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 unless the majority of the members. The
transfer is Company shall honor only those
accepted by the individual authorizations signed
employee. If the by the majority of the union
transfer is members and collectively
extremely submitted by the union to the
necessary, the Company's Salary Administration.
transfer shall be
made within the e. Payroll Reinstatement — shall
offices in the be in accordance with Article 223,
same district. p. 3 of the Labor Code.

iii. Personnel f. Union Representation in

hired through Committees — the union is
agencies or allowed to participate in policy
contractors to formulation and in the decision-
perform the work making process on matters
done by covered affecting their rights and welfare,
employees shall particularly in the Uniform
not exceed one Committee, the Safety Committee
month. If and other committees that may
extension is be formed in the future.
necessary the
union shall be
Signing Bonus — P4,000.00 per member of the bargaining unit for
informed. But the the conclusion of the CBA.
Company shall
not permanently
contract out Existing benefits already granted by the Company but which are
regular or not expressly or impliedly repealed in the new agreement shall
permanent remain subsisting and shall be included in the new agreement to
positions that are be signed by the parties effective December 1, 1995.
necessary in the
normal operation On August 30, 1996, MERALCO filed a motion for reconsideration7 alleging that
of the Company. the Secretary of Labor committed grave abuse of discretion amounting to lack or
excess of jurisdiction:
d. Check off Union Dues —
where the union increases its 1. in awarding to MEWA a package that would
dues as approved by the Board of cost at least P1.142 billion, a package that is
Directors, the Company shall grossly excessive and exorbitant, would not be
check off such increase from the affordable to MERALCO and would imperil its
salaries of union members after viability as a public utility affected with national
the union submits check off interest.
authorizations signed by the

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 2. in ordering the grant of a P4,500.00 wage
increase, as well as a new and improved fringe
benefits, under the remaining two (2) years of the
CBA for the-rank-and-file employees.
3. in ordering the "incorporation into the CBA of all
existing employee benefits, on the one hand, and
those that MERALCO has unilaterally granted to
its employees by virtue of voluntary company
policy or practice, on the other hand."
4. in granting certain "political demands"
presented by the union.
5. in ordering the CBA to be "effective December
1995" instead of August 19, 1996 when he
resolved the dispute.
MERALCO filed a supplement to the motion for reconsideration on September 18,
1995, alleging that the Secretary of Labor did not properly appreciate the effect of
the awarded wages and benefits on MERALCO's financial viability.
MEWA likewise filed a motion asking the Secretary of Labor to reconsider its Order
on the wage increase, leaves, decentralized filing of paternity and maternity
leaves, bonuses, retirement benefits, optional retirement, medical, dental and
hospitalization benefits, short swing and payroll treatment. On its political
demands, MEWA asked the Secretary to rule on its proposal to institute a Code of
Discipline for its members and the union's representation in the administration of
the Pension Fund.
On December 28, 1996, the Secretary issued an Order 8 resolving the parties'
separate motions, the modifications of the August 19, 1996 Order being
highlighted hereunder:
1) Effectivity of Agreement — December 1, 1995 to November 30,
1997.
Economic Demands
2) Wage Increase:
First year — P2,200.00 per
month;
Second year — P2,200.00 per
month.
3) Integration of Red Circle Rate (RCR) and Longevity Allowance
into Basic Salary — the RCR allowance shall be integrated into
the basic salary of employees as of August 19, 1996 (the date of
the disputed Order).
4) Longevity Bonus — P170 per year of service starting from 10
years of continuous service.
5) Vacation Leave — The status quo shall be maintained as to the
number of vacation leave but employees' scheduled vacation may
be taken one day at a time in the manner that this has been
provided in the supervisory CBA.
6) Sick Leave Reserve — is reduced to 15 days, with any excess
payable at the end of the year. The employee has the option to
avail of this cash conversion or to accumulate his sick leave
credits up to 25 days for conversion to cash at retirement or
separation from the service.
7) Birthday Leave — the grant of a day off when an employee's
birthday falls on a non-working day is deleted.
8) Retirement Benefits for Retirees — The benefits granted shall
be effective on August 19, 1996, the date of the disputed order up
to November 30, 1997, which is the date the CBA expires and
shall apply to those who are members of the bargaining unit at the
time the award is made.
One sack of rice per quarter of the year shall be
given to those retiring between August 19, 1996
and November 30, 1997.
On HMP Coverage for Retirees — The parties
"maintain the status quo, that is, with the
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 Company complying with the present
arrangement and the obligations to retirees as is."
9) Medical, Dental and Hospitalization Benefits — The cost of
medicine unavailable at the J.F. Cotton Hospital shall be in
accordance with MERALCO's Memorandum dated September 14,
1976.
10) GHSIP and HMP for Dependents — The number of
dependents to be subsidized shall be reduced from 5 to 4
provided that their premiums are proportionately increased.
11) Employees' Cooperative — The original award of P3 million
pesos as seed money for the proposed Cooperative is reduced to
P1.5 million pesos.
12) Shortswing — the original award is deleted.
13) Payroll Treatment for Accident on Duty — Company ordered
to continue its present practice on payroll treatment for accident
on duty without need to pay the excess time the Union demanded.
Political Demands:
14) Scope of the collective bargaining unit — The bargaining unit
shall be composed of all rank and file employees hired by the
Company in accordance with the original Order.
15) Union recognition and security — The incorporation of a
closed shop form of union security in the CBA; the Company is
prohibited from entertaining individuals or groups of individuals
only on matters that are exclusively within the domain of the union;
the Company shall furnish the Union with a complete list of newly
regularized employees within a week from regularization so that
the Union can meet these employees on the Union's and the
employee's own time.
16) Transfer of assignment and job security — Transfer is a
prerogative of the Company but the transfer must be for a valid
business reason, made in good faith and must be reasonably
exercised. The CBA shall provide that "No transfer of an employee
from one position to another, without the employee's written
consent, shall be made if motivated by considerations of sea,
race, creed, political and religious belief, age or union activity.
17) Contracting Out — The Company has the prerogative to
contract out services provided that this move is based on valid
business reasons in accordance with law, is made in good faith, is
reasonably exercised and, provided further that if the contracting
out involves more than six months, the Union must be consulted
before its implementation.
18) Check off of union dues
In any increase of union dues or contributions for
mandatory activities, the union must submit to the
Company a copy of its board resolution increasing
the union dues or authorizing such contributions;
If a board resolution is submitted, the Company
shall deduct union dues from all union members
after a majority of the union members have
submitted their individual written authorizations.
Only those check-off authorization submitted by
the union shall be honored by the Company.
With respect to special assessments, attorney's
fees, negotiation fees or any other extraordinary
fees individual authorization shall be necessary
before the company may so deduct the same.
19) Union Representation in Committees — The union is granted
representation in the Safety Committee, the Uniform Committee
and other committees of a similar nature and purpose involving
personnel welfare, rights and benefits as well as duties.
Dissatisfied, petitioner filed this petition contending that the Secretary of Labor
gravely abused his discretion:
1) . . . in awarding wage increases of P2,200.00
for 1996 and P2,200 for 1997.
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2) . . . in awarding the following economic
benefits:
a. Two months Christmas bonus;
b. Rice Subsidy and retirement
benefits for retirees;
c. Loan for the employees'
cooperative;
d. Social benefits such as GHSIP
and HMP for dependents,
employees' cooperative and
housing equity assistance loan;
e. Signing bonus;
f. Integration of the Red Circle
Rate Allowance.
g. Sick leave reserve of 15 days
h. The 40-day union leave;
i. High pole/high voltage and
towing allowance; and
j. Benefits for collectors
3) . . . in expanding the scope of the bargaining
unit to all regular rank and file employees hired by
the company in all its offices and operating
centers and those it may employ by reason of
expansion, reorganization or as a result of
operational exigencies;
4) . . . in ordering for a closed shop when his
original order for a maintenance of membership
arrangement was not questioned by the parties;
5) . . . in ordering that Meralco should consult the
union before any contracting out for more than six
months;
6) . . . in decreeing that the union be allowed to
have representation in policy and decision making
into matters affecting "personnel welfare, rights
and benefits as well as duties;"
7) . . . in ruling for the inclusion of all terms and
conditions of employment in the collective
bargaining agreement;
8) . . . in exercising discretion in determining the
retroactivity of the CBA;
Both MEWA and the Solicitor General, on behalf of the Secretary of Labor, filed
their comments to the petition. While the case was also set for oral argument on
Feb. 10, 1997, this hearing was cancelled due to MERALCO not having received
the comment of the opposing parties. The parties were instead required to submit
written memoranda, which they did. Subsequently, both petitioner and private
respondent MEWA also filed replies to the opposing parties' Memoranda, all of
which We took into account in the resolution of this case.
The union disputes the allegation of MERALCO that the Secretary abused his
discretion in issuing the assailed orders arguing that he acted within the scope of
the powers granted him by law and by the Constitution. The union contends that
any judicial review is limited to an examination of the Secretary's decision-
making/discretion — exercising process to determine if this process was attended
by some capricious or whimsical act that constitutes "grave abuse"; in the absence
of such abuse, his findings — considering that he has both jurisdiction and
expertise to make them — are valid.
The union's position is anchored on two premises:
First, no reviewable abuse of discretion could have attended the Secretary's
arbitral award because the Secretary complied with constitutional norms in
rendering the disputed award. The union posits that the yardstick for comparison
and for the determination of the validity of the Secretary's actions should be the
specific standards laid down by the Constitution itself. To the union, these
standards include the State policy on the promotion of workers' welfare,9 the
principle of distributive justice, 10 the right of the State to regulate the use of
Page 38 of 161
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property, 11 the obligation of the State to protect workers, both organized and
unorganized, and insure their enjoyment of "humane conditions of work" and a
"living wage," and the right of labor to a just share in the fruits of production. 12
Second, no reversible abuse of discretion attended the Secretary's decision
because the Secretary took all the relevant evidence into account, judiciously
weighed them, and rendered a decision based on the facts and law. Also, the
arbitral award should not be reversed given the Secretary's expertise in his field
and the general rule that findings of fact based on such expertise is generally
binding on this Court.
To put matters in proper perspective, we go back to basic principles. The
Secretary of Labor's statutory power under Art. 263 (g) of the Labor Code to
assume jurisdiction over a labor dispute in an industry indispensable to the
national interest, and, to render an award on compulsory arbitration, does not
exempt the exercise of this power from the judicial review that Sec. 1, Art. 8 of the
Constitution mandates. This constitutional provision states:
Judicial power includes the duty of the courts of
justice to settle actual controversies involving
rights which are legally demandable and
enforceable, and to determine whether or not
there has been a grave abuse of discretion
amounting to lack or excess of jurisdiction on the
part of any branch or instrumentality of the
government.
Under this constitutional mandate, every legal power of the Secretary of Labor
under the Labor Code, or, for that matter, any act of the Executive, that is attended
by grave abuse of discretion is subject to review by this Court in an appropriate
proceeding. To be sure, the existence of an executive power alone — whether
granted by statute or by the Constitution — cannot exempt the executive action
from judicial oversight, interference or reversal when grave abuse of discretion is,
or is alleged to be, present. This is particularly true when constitutional norms are
cited as the applicable yardsticks since this Court is the final interpreter of the
meaning and intent of the Constitution. 13
The extent of judicial review over the Secretary of Labor's arbitral award is not
limited to a determination of grave abuse in the manner of the secretary's exercise
of his statutory powers. This Court is entitled to, and must — in the exercise of its
judicial power — review the substance of the Secretary's award when grave abuse
of discretion is alleged to exist in the award, i.e., in the appreciation of and the
conclusions the Secretary drew from the evidence presented.
The natural and ever present limitation on the Secretary's acts is, of course, the
Constitution. And we recognize that indeed the constitutional provisions the union
cited are State policies on labor and social justice that can serve as standards in
assessing the validity of a Secretary of Labor's actions. However, we note that
these provisions do not provide clear, precise and objective standards of conduct
that lend themselves to easy application. We likewise recognize that the
Constitution is not a lopsided document that only recognizes the interests of the
working man; it too protects the interests of the property owner and employer as
well. 14
For these reasons — and more importantly because a ruling on the breadth and
scope of the suggested constitutional yardsticks is not absolutely necessary in the
disposition of this case — we shall not use these yardsticks in accordance with the
time-honored practice of avoiding constitutional interpretations when a decision
can be reached using non-constitutional standards. We have repeatedly held that
one of the essential requisites for a successful judicial inquiry into constitutional
questions is that the resolution of the constitutional question must be necessary in
deciding the case. 15
In this case we believe that the more appropriate and available standard — and
one does not require a constitutional interpretation — is simply the standard of
reasonableness. In layman's terms, reasonableness implies the absence of
arbitrariness; 16 in legal parlance, this translates into the exercise of proper
discretion and to the observance of due process. Thus, the question we have to
answer in deciding this case is whether the Secretary's actions have been
reasonable in light of the parties positions and the evidence they presented.
MEWA's second premise — i.e., that the Secretary duly considered the evidence
presented — is the main issue that we shall discuss at length below. Additionally,
MEWA implied that we should take great care before reading an abuse of
discretion on the part of the Secretary because of his expertise on labor issues and
because his findings of fact deserve the highest respect from this Court.
This Court has recognized the Secretary of Labor's distinct expertise in the study
and settlement of labor disputes falling under his power of compulsory
arbitration. 17 It is also well-settled that factual findings of labor administrative
officials, if supported by substantial evidence, are entitled not only to great respect
but even to finality. 18 We, therefore, have no difficulty in accepting the
union's caveat on how to handle a Secretary of Labor's arbitral award.
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But at the same time, we also recognize the possibility that abuse of discretion
may attend the exercise of the Secretary's arbitral functions; his findings in an
arbitration case are usually based on position papers and their supporting
documents (as they are in the present case), and not on the thorough examination
of the parties' contending claims that may be present in a court trial and in the
face-to-face adversarial process that better insures the proper presentation and
appreciation of evidence. 19 There may also be grave abuse of discretion where
the board, tribunal or officer exercising judicial function fails to consider evidence
adduced by the present. 20 Given the parties' positions on the justiciability of the
issues before us, the question we have to answer is one that goes into the
substance of the Secretary's disputed orders: Did the Secretary properly consider
and appreciate the evidence presented before him?
We find, based on our consideration of the parties' positions and the evidence on
record, that the Secretary of Labor disregarded and misappreciated evidence,
particularly with respect to the wage award. The Secretary of Labor apparently
also acted arbitrarily and even whimsically in considering a number of legal points;
even the Solicitor General himself considered that the Secretary gravely abused
his discretion on at least three major points: (a) on the signing bonus issue; (b) on
the inclusion of confidential employees in the rank and file bargaining unit, and (c)
in mandating a union security "closed-shop" regime in the bargaining unit.
We begin with a discussion on the wages issue. The focal point in the
consideration of the wage award is the projected net income for 1996 which
became the basis for the 1996 wage award, which in turn — by extrapolation —
became the basis for the (2nd Year) 1997 award. MERALCO projected that the net
operating income for 1996 was 14.7% above the 1999 level or a total net operating
income of 4.171 Billion, while the union placed the 1996 net operating income at
5.795 Billion.
MERALCO based its projection on the increase of the income for the first 6 months
of 1996 over the same period in 1995. The union, on the other hand, projected that
the 1996 income would increase by 29% to 35% because the "consumption of
electric power is at its highest during the last two quarters with the advent of the
Yuletide season." The union likewise relied heavily on a newspaper report citing an
estimate by an all Asia capital financial analyst that the net operating income would
amount to 5.795 Billion. 21
Based essentially on these considerations, the Secretary made the following
computations and ordered his disputed wage award:
Projected net operating
income for 1996 5,795,000,000
Principals and interests 1,426,571,703
Dividends at 1995 rate 1,636,949,000
Net Amount left with the Company 2,729,479,297
Add: Tax credit equivalent to 35% of labor cost 231,804,940
Company's net operating income 2,961,284,237
For 1997, the projected income is P7,613,612 which can easily
absorb the incremental increase of P2,200 per month or a total of
P4,500 during the last year of the CBA period.
xxx xxx xxx
An overriding aim is to estimate the amount that is left with the
Company after the awarded wages and benefits and the
company's customary obligations are paid. This amount can be
the source of an item not found in the above computations but
which the Company must provide for, that is — the amount the
company can use for expansion.
Considering the expansion plans stated in the Company's
Supplement that calls for capital expenditures of 6 billion, 6.263
billion and 5.802 billion for 1996, 1997 and 1998 respectively, We
conclude that our original award of P2,300 per month for the first
year and P2,200 for the second year will still leave much by way of
retained income that can be used for expansion." 22 (Emphasis
ours.)
We find after considering the records that the Secretary gravely abused his
discretion in making this wage award because he disregarded evidence on record.
Where he considered MERALCO's evidence at all, he apparently misappreciated
this evidence in favor of claims that do not have evidentiary support. To our mind,
the MERALCO projection had every reason to be reliable because it mas based on
actual and undisputed figures for the first six months of 1996. 23 On the other hand,
the union projection was based on a speculation of Yuletide consumption that the
union failed to substantiate. In fact, as against the union's unsubstantiated Yuletide
consumption claim, MERALCO adduced evidence in the form of historical
consumption data showing that a lengthy consumption does not tend to rise during
the Christmas period. 24 Additionally, the All-Asia Capital Report was nothing more
than a newspaper report that did not show any specific breakdown or
Page 40 of 161
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computations. While the union claimed that its cited figure is based on approach" instead promotes a "play safe" attitude that leads to more deadlocks
MERALCO's 10-year income stream, 25 no data or computation of this 10-year than to successfully negotiated CBAs.
stream appear in the record.
After considering the various factors the parties cited, we believe that the interests
While the Secretary is not expected to accept the company-offered figures of both labor and management are best served by a wage increase of P1,900.00
wholesale in determining a wage award, we find it a grave abuse of discretion to per month for the first year and another P1,900.00 per month for the second year
completely disregard data that is based on actual and undisputed record of of the two-year CBA term. Our reason for this is that these increases sufficiently
financial performance in favor of the third-hand and unfounded claims the protects the interest of the worker as they are roughly 15% of the monthly average
Secretary eventually relied upon. At the very least, the Secretary should have salary of P11,600.00. 26 They likewise sufficiently consider the employer's costs
properly justified his disregard of the company figures. The Secretary should have and its overall wage structure, while at the same time, being within the range that
also reasonably insured that the figure that served as the starting point for his will not disrupt the wage trends in Philippine industries.
computation had some substantial basis.
The record shows that MERALCO, throughout its long years of existence, was
Both parties extensely discussed the factors that the decision maker should never remiss in its obligation towards its employees. In fact, as a manifestation of
consider in making a wage award. While We do not seek to enumerate in this its strong commitment to the promotion of the welfare and well-being of its
decision the factors that should affect wage determination, we must emphasize employees, it has consistently improved their compensation package. For
that a collective bargaining dispute such as this one requires due consideration instance, MERALCO has granted salary increases 27 through the collective
and proper balancing of the interests of the parties to the dispute and of those who bargaining agreement the amount of which since 1980 for both rank-and-file and
might be affected by the dispute. To our mind, the best way in approaching this supervisory employees were as follows:
task holistically is to consider the available objective facts, including, where
applicable, factors such as the bargaining history of the company, the trends and AMOUNT OF CBA INCREASES DIFFERENCE
amounts of arbitrated and agreed wage awards and the company's previous
CBAs, and industry trends in general. As a rule, affordability or capacity to pay CBA COVERAGE RANK-AND-FILE SUPERVISORY AMOUNT PERCENT
should be taken into account but cannot be the sole yardstick in determining the 1980 230 342.5 112.5 48.91%
wage award, especially in a public utility like MERALCO. In considering a public 1981 210 322.5 112.5 53.57
utility, the decision maker must always take into account the "public interest"
aspects of the case; MERALCO's income and the amount of money available for 1982 200 312.5 112.5 56.25
operating expenses — including labor costs — are subject to State regulation. We TOTAL 640 977.5 337.5 52.73
must also keep in mind that high operating costs will certainly and eventually be 1983 320 432.5 112.5 35.16
passed on to the consuming public as MERALCO has bluntly warned in its
1984 350 462.5 112.5 32.14
pleadings.
1985 370 482.5 112.5 30.41
We take note of the "middle ground" approach employed by the Secretary in this TOTAL 1,040.00 1,377.50 337.5 32.45
case which. we do not necessarily find to be the best method of resolving a wage 1986 860 972.5 112.5 13.08
dispute. Merely finding the midway point between the demands of the company
1987 640 752.5 112.5 17.58
and the union, and "splitting the difference" is a simplistic solution that fails to
recognize that the parties may already be at the limits of the wage levels they can 1988 600 712.5 112.5 18.75
afford. It may lead to the danger too that neither of the parties will engage in TOTAL 2,100.00 2,437.50 337.5 16.07
principled bargaining; the company may keep its position artificially low while the 1989 1,100.00 1,212.50 112.5 10.23
union presents an artificially high position, on the fear that a "Solomonic" solution
cannot be avoided. Thus, rather than encourage agreement, a "middle ground 1990 1,200.00 1,312.50 112.5 9.38
1991 1,300.00 1,412.50 112.5 8.65

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TOTAL 3,600.00 3,937.50 337.5
1992 1,400.00 1,742.50 342.5
1993 1,350.00 1,682.50 332.5
1994 1,150.00 1,442.50 292.5
TOTAL 3,900.00 4,867.50 967.5
Based on the above-quoted table, specifically under the column "RANK-AND-
FILE," it is easily discernible that the total wage increase of P3,800.00 for 1996 to
1997 which we are granting in the instant case is significantly higher than the total
increases given in 1992 to 1994, or a span of three (3) years, which is only
P3,900.00 a month. Thus, the Secretary's grant of P2,200.00 monthly wage
increase in the assailed order is unreasonably high a burden for MERALCO to
shoulder.
We now go to the economic issues.
1. CHRISTMAS BONUS
MERALCO questions the Secretary's award of "Christmas bonuses" on the ground
that what it had given its employees were special bonuses to mark or celebrate
"special occasions," such as when the Asia Money Magazine recognized
MERALCO as the "best managed company in Asia." These grants were given on
or about Christmas time, and the timing of the grant apparently led the Secretary to
the conclusion that what were given were Christmas bonuses given by way of a
"company practice" on top of the legally required 13th month pay.
The Secretary in granting the two-month bonus, considered the following factual
finding, to wit:
We note that each of the grant mentioned in the
commonly adopted table of grants has a special
description. Christmas bonuses were given in
1988 and 1989. However, the amounts of
bonuses given differed. In 1988, it was P1,500. In
1989, it was 1/2 month salary. The use of
"Christmas bonus" title stopped after 1989. In
1990, what was given was a "cash gift" of 1/2
month's salary. The grants thereafter bore
9.38 different titles and were for varying amounts.
Significantly, the Company explained the reason
24.46
for the 1995 bonuses and this explanation was not
24.63 substantially contradicted by the Union.
25.43
24.81 What comes out from all these is that while the
Company has consistently give some amount by
way of bonuses since 1988, these awards were
not given uniformly as Christmas bonuses or
special Christmas grants although they may have
been given at or about Christmas time.
xxx xxx xxx
The Company is not therefore correct in its
position that there is no established practice of
giving Christmas bonuses that has ripened to the
status of being a term and condition of
employment. Regardless of its nomenclature and
purpose, the act of giving this bonus in the spirit of
Christmas has ripened into a Company
practice. 28
It is MERALCO's position that the Secretary erred when he recognized that there
was an "established practice" of giving a two-month Christmas bonus based on the
fact that bonuses were given on or about Christmas time. It points out that the
"established practice" attributed to MERALCO was neither for a considerable
period of time nor identical in either amount or purpose. The purpose and title of
the grants were never the same except for the Christmas bonuses of 1988 and
1989, and were not in the same amounts.
We do not agree.
As a rule, a bonus is not a demandable and enforceable obligation; 29 it may
nevertheless be granted on equitable considerations 30 as when the giving of such
bonus has been the company's long and regular practice. 31 To be considered a
"regular practice," the giving of the bonus should have been done over a long
period of time, and must be shown to have been consistent and deliberate. 32 Thus
we have ruled in National Sugar Refineries Corporation vs. NLRC: 33
The test or rationale of this rule on long practice requires an
indubitable showing that the employer agreed to continue giving
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 the benefits knowing fully well that said employees are not
covered by the law requiring payment thereof.
In the case at bar, the record shows that MERALCO, aside from complying with
the regular 13th month bonus, has further been giving its employees an additional
Christmas bonus at the tail-end of the year since 1988. While the special bonuses
differed in amount and bore different titles, it can not be denied that these were
given voluntarily and continuously on or about Christmas time. The considerable
length of time MERALCO has been giving the special grants to its employees
indicates a unilateral and voluntary act on its part, to continue giving said benefits
knowing that such act was not required by law.
Indeed, a company practice favorable to the employees has been established and
the payments made by MERALCO pursuant thereto ripened into benefits enjoyed
by the employees. Consequently, the giving of the special bonus can no longer be
withdrawn by the company as this would amount to a diminution of the employee's
existing benefits. 34
We can not, however, affirm the Secretary's award of a two-month special
Christmas bonus to the employees since there was no recognized company
practice of giving a two-month special grant. The two-month special bonus was
given only in 1995 in recognition of the employees prompt and efficient response
during the calamities. Instead, a one-month special bonus, We believe, is
sufficient, this being merely a generous act on the part of MERALCO.
2. RICE SUBSIDY and RETIREMENT BENEFITS for RETIREES
It appears that the Secretary of Labor originally ordered the increase of the
retirement pay, rice subsidy and medical benefits of MERALCO retirees. This
ruling was reconsidered based on the position that retirees are no longer
employees of the company and therefore are no longer bargaining members who
can benefit from a compulsory arbitration award. The Secretary, however, ruled
that all members of the bargaining unit who retire between August 19, 1996 and
November 30, 1997 (i.e., the term of the disputed CBA under the Secretary's
disputed orders) are entitled to receive an additional rice subsidy.
The question squarely brought in this petition is whether the Secretary can issue
an order that binds the retirement fund. The company alleges that a separate and
independent trust fund is the source of retirement benefits for MERALCO retirees,
while the union maintains that MERALCO controls these funds and may therefore
be compelled to improve this benefit in an arbitral award.
The issue requires a finding of fact on the legal personality of the retirement fund.
In the absence of any evidence on record indicating the nature of the retirement
fund's legal personality, we rule that the issue should be remanded to the
Secretary for reception of evidence as whether or not the MERALCO retirement
fund is a separate and independent trust fund. The existence of a separate and
independent juridical entity which controls an irrevocable retirement trust fund
means that these retirement funds are beyond the scope of collective bargaining:
they are administered by an entity not a party to the collective bargaining and the
funds may not be touched without the trustee's conformity.
On the other hand, MERALCO control over these funds means that MERALCO
may be compelled in the compulsory arbitration of a CBA deadlock where it is the
employer, to improve retirement benefits since retirement is a term or condition of
employment that is a mandatory subject of bargaining.
3. EMPLOYEES' COOPERATIVE
The Secretary's disputed ruling requires MERALCO to provide the employees
covered by the bargaining unit with a loan of 1.5 Million as seed money for the
employees formation of a cooperative under the Cooperative Law, R.A. 6938. We
see nothing in this law — whether expressed or implied — that requires employers
to provide funds, by loan or otherwise, that employees can use to form a
cooperative. The formation of a cooperative is a purely voluntary act under this
law, and no party in any context or relationship is required by law to set up a
cooperative or to provide the funds therefor. In the absence of such legal
requirement, the Secretary has no basis to order the grant of a 1.5 million loan to
MERALCO employees for the formation of a cooperative. Furthermore, we do not
see the formation of an employees cooperative, in the absence of an agreement
by the collective bargaining parties that this is a bargainable term or condition of
employment, to be a term or condition of employment that can be imposed on the
parties on compulsory arbitration.
4. GHSIP, HMP BENEFITS FOR DEPENDENTS and HOUSING EQUITY LOAN
MERALCO contends that it is not bound to bargain on these benefits because
these do not relate to "wages, hours of work and other terms and conditions of
employment" hence, the denial of these demands cannot result in a bargaining
impasse.
The GHSIP, HMP benefits for dependents and the housing equity loan have been
the subject of bargaining and arbitral awards in the past. We do not see any
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reason why MERALCO should not now bargain on these benefits. Thus, we agree
with the Secretary's ruling:
. . . Additionally and more importantly, GHSIP and
HMP, aside from being contributory plans, have
been the subject of previous rulings from this
Office as bargainable matters. At this point, we
cannot do any less and must recognize that
GHSIP and HMP are matters where the union can
demand and negotiate for improvements within
the framework of the collective bargaining
system. 35
Moreover, MERALCO have long been extending these benefits to the employees
and their dependents that they now become part of the terms and conditions of
employment. In fact, MERALCO even pledged to continue giving these benefits.
Hence, these benefits should be incorporated in the new CBA.
With regard to the increase of the housing equity grant, we find P60,000.00
reasonable considering the prevailing economic crisis.
5. SIGNING BONUS
On the signing bonus issue, we agree with the positions commonly taken by
MERALCO and by the Office of the Solicitor General that the signing bonus is a
grant motivated by the goodwill generated when a CBA is successfully negotiated
and signed between the employer and the union. In the present case, this goodwill
does not exist. In the words of the Solicitor General:
When negotiations for the last two years of the
1992-1997 CBA broke down and the parties
sought the assistance of the NCMB, but which
failed to reconcile their differences, and when
petitioner MERALCO bluntly invoked the
jurisdiction of the Secretary of Labor in the
resolution of the labor dispute, whatever goodwill
existed between petitioner MERALCO and
respondent union disappeared. . . . . 36
In contractual terms, a signing bonus is justified by and is the consideration paid
for the goodwill that existed in the negotiations that culminated in the signing of a
CBA. Without the goodwill, the payment of a signing bonus cannot be justified and
any order for such payment, to our mind, constitutes grave abuse of discretion.
This is more so where the signing bonus is in the not insignificant total amount of
P16 Million.
6. RED-CIRCLE-RATE ALLOWANCE
An RCR allowance is an amount, not included in the basic salary, that is granted
by the company to an employee who is promoted to a higher position grade but
whose actual basic salary at the time of the promotion already exceeds the
maximum salary for the position to which he or she is promoted. As an allowance,
it applies only to specific individuals whose salary levels are unique with respect to
their new and higher positions. It is for these reasons that MERALCO prays that it
be allowed to maintain the RCR allowance as a separate benefit and not be
integrated in the basic salary.
The integration of the RCR allowance in the basic salary of the employees had
consistently been raised in the past CBAs (1989 and 1992) and in those cases, the
Secretary decreed the integration of the RCR allowance in the basic salary. We do
not see any reason why it should not be included in the present CBA. In fact, in the
1995 CBA between MERALCO and the supervisory union (FLAMES), the
integration of the RCR allowance was recognized. Thus, Sec. 4 of the CBA
provides:
All Red-Circle-date Allowance as of December 1,
1995 shall be integrated in the basic salary of the
covered employees who as of such date are
receiving such allowance. Thereafter, the
company rules on RCR allowance shall continue
to be observed/applied. 37
For purposes of uniformity, we affirm the Secretary's order on the integration of the
RCR allowance in the basic salary of the employees.
7. SICK LEAVE RESERVE OF 15 DAYS
MERALCO assails the Secretary's reduction of the sick leave reserve benefit from
25 days to 15 days, contending that the sick leave reserve of 15 days has reached
the lowest safe level that should be maintained to give employees sufficient buffer
in the event they fall ill.
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We find no compelling reason to deviate from the Secretary's ruling that the sick
leave reserve is reduced to 15 days, with any excess convertible to cash at the
end of the year. The employee has the option to avail of this cash conversion or to
accumulate his sick leave credits up to 25 days for conversion to cash at his
retirement or separation from the service. This arrangement is, in fact, beneficial to
MERALCO. The latter admits that "the diminution of this reserve does not seriously
affect MERALCO because whatever is in reserve are sick leave credits that are
payable to the employee upon separation from service. In fact, it may be to
MERALCO's financial interest to pay these leave credits now under present salary
levels than pay them at future higher salary levels. 38
8. 40-DAY UNION LEAVE
MERALCO objects to the demanded increase in union leave because the union
leave granted to the union is already substantial. It argues that the union has not
demonstrated any real need for additional union leave.
The thirty (30) days union leave granted by the Secretary, to our mind, constitute
sufficient time within which the union can carry out its union activities such as but
not limited to the election of union officers, selection or election of appropriate
bargaining agents, conduct referendum on union matters and other union-related
matters in furtherance of union objectives. Furthermore, the union already enjoys a
special union leave with pay for union authorized representatives to attend work
education seminars, meetings, conventions and conferences where union
representation is required or necessary, and Paid-Time-off for union officers,
stewards and representatives for purpose of handling or processing grievances.
9. HIGH VOLTAGE/HIGH POLE/TOWING ALLOWANCE
MERALCO argues that there is no justification for the increase of these
allowances. The personnel concerned will not receive any additional risk during the
life of the current CBA that would justify the increase demanded by the union. In
the absence of such risk, then these personnel deserve only the same salary
increase that all other members of the bargaining unit will get as a result of the
disputed CBA. MERALCO likewise assails the grant of the high voltage/high pole
allowance to members of the team who are not exposed to the high voltage/high
pole risks. The risks that justify the higher salary and the added allowance are
personal to those who are exposed to those risks. They are not granted to a team
because some members of the team are not exposed to the given risks.
The increase in the high-voltage allowance (from P45.00 to P55.00), high-pole
allowance (from P30.00 to P40.00), and towing allowance is justified considering
the heavy risk the employees concerned are exposed to. The high-voltage
allowance is granted to an employee who is authorized by the company to actually
perform work on or near energized bare lines and bus, while the high-pole
allowance is given to those authorized to climb poles on a height of at least 60 feet
from the ground to work thereat. The towing allowance, on the other hand, is
granted to the stockman drivers who tow trailers with long poles and equipment on
board. Based on the nature of the job of these concerned employees, it is
imperative to give them these additional allowances for taking additional risks.
These increases are not even commensurate to the danger the employees
concerned are subjected to. Besides, no increase has been given by the company
since 1992. 39
We do not, however, subscribe to the Secretary's order granting these allowances
to the members of the team who are not exposed to the given risks. The reason is
obvious no risk, no pay. To award them the said allowances would be manifestly
unfair for the company and even to those who are exposed to the risks, as well as
to the other members of the bargaining unit who do not receive the said
allowances.
10. BENEFITS FOR COLLECTORS
MERALCO opposes the Secretary's grant of benefits for collectors on the ground
that this is grossly unreasonable both in scope and on the premise it is founded.
We have considered the arguments of the opposing parties regarding these
benefits and find the Secretary's ruling on the (a) lunch allowance; (b)
disconnection fee for delinquent accounts; (c) voluntary performance of other work
at the instance of the Company; (d) bobcat belt bags; and (e) reduction of quota
and MAPL during typhoons and other force majeure events, reasonable
considering the risks taken by the company personnel involved, the nature of the
employees' functions and responsibilities and the prevailing standard of living. We
do not however subscribe to the Secretary's award on the following:
(a) Reduction of quota and MAPL when the
collector is on sick leave because the previous
CBA has already provided for a reduction of this
demand. There is no need to further reduce this.
(b) Deposit of cash bond at MESALA because this
is no longer necessary in view of the fact that
collectors are no longer required to post a bond.
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We shall now resolve the non-economic issues.
1. SCOPE OF THE BARGAINING UNIT
The Secretary's ruling on this issue states that:
a. Scope of the collective bargaining unit. The
union is demanding that the collective bargaining
unit shall be composed of all regular rank and file
employees hired by the company in all its offices
and operating centers through its franchise and
those it may employ by reason of expansion,
reorganization or as a result of operational
exigencies. The law is that only managerial
employees are excluded from any collective
bargaining unit and supervisors are now allowed
to form their own union (Art. 254 of the Labor
Code as amended by R.A. 6715 ). We grant the
union demand.
Both MERALCO and the Office of the Solicitor General dispute this ruling because
it disregards the rule. We have established on the exclusion of confidential
employees from the rank and file bargaining unit.
In Pier 8 Arrastre vs. Confesor and General Maritime and Stevedores Union, 40 we
ruled that:
Put another way, the confidential employee does
not share in the same "community of interest" that
might otherwise make him eligible to join his rank
and file co-workers, precisely because of a conflict
in those interests.
Thus, in Metrolab Industries vs. Roldan-Confesor, 41 We ruled:
. . . that the Secretary's order should exclude the
confidential employees from the regular rank and
file employees qualified to become members of
the MEWA bargaining unit.
From the foregoing disquisition, it is clear that employees holding a confidential
position are prohibited from joining the union of the rank and file employees.
2. ISSUE OF UNION SECURITY
The Secretary in his Order of August 19, 1996, 42 ruled that:
b. Union recognition and security. The Union is
proposing that it be recognized by the Company
as sole and exclusive bargaining representative of
the rank and file employees included in the
bargaining unit for the purpose of collective
bargaining regarding rates of pay, wages, hours of
work and other terms and conditions of
employment. For this reason, the Company shall
agree to meet only with the Union officers and its
authorized representatives on all matters involving
the Union as an organization and all issues arising
from the implementation and interpretation of the
new CBA. Towards this end, the Company shall
not entertain any individual or group of individuals
on matters within the exclusive domain of the
Union.
Additionally, the Union is demanding that the right
of all rank and file employees to join the Union
shall be recognized by the Company. Accordingly,
all rank and file employees shall join the Union.
xxx xxx xxx
These demands are fairly reasonable. We grant
the same in accordance with the maintenance of
membership principle as a form of union security.
The Secretary reconsidered this portion of his original order when he said in his
December 28, 1996 order that:
. . . . When we decreed that all rank and file
employees shall join the Union, we were actually
decreeing the incorporation of a closed shop form
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 of union security in the CBA between the parties.
In Ferrer v. NLRC, 224 SCRA 410, the Supreme
Court ruled that a CBA provision for a closed shop
is a valid form of union security and is not a
restriction on the right or freedom of association
guaranteed by the Constitution, citing Lirag v.
Blanco, 109 SCRA 87.
MERALCO objected to this ruling on the grounds that: (a) it was never questioned
by the parties; (b) there is no evidence presented that would justify the restriction
on employee's union membership; and (c) the Secretary cannot rule on the union
security demand because this is not a mandatory subject for collective bargaining
agreement.
We agree with MERALCO's contention.
An examination of the records of the case shows that the union did not ask for a
closed shop security regime; the Secretary in the first instance expressly stated
that a maintenance of membership clause should govern; neither MERALCO nor
MEWA raised the issue of union security in their respective motions for
reconsideration of the Secretary's first disputed order; and that despite the parties
clear acceptance of the Secretary's first ruling, the Secretary motu
proprio reconsidered his maintenance of membership ruling in favor of the more
stringent union shop regime.
Under these circumstances, it is indubitably clear that the Secretary gravely
abused his discretion when he ordered a union shop in his order of December 28,
1996. The distinctions between a maintenance of membership regime from a
closed shop and their consequences in the relationship between the union and the
company are well established and need no further elaboration.
Consequently, We rule that the maintenance of membership regime should govern
at MERALCO in accordance with the Secretary's order of August 19, 1996 which
neither party disputed.
3. THE CONTRACTING OUT ISSUE
This issue is limited to the validity of the requirement that the union be consulted
before the implementation of any contracting out that would last for 6 months or
more. Proceeding from our ruling in San Miguel Employees Union-PTGWO vs.
Bersamira, 43 (where we recognized that contracting out of work is a proprietary
right of the employer in the exercise of an inherent management prerogative) the
issue we see is whether the Secretary's consultation requirement is reasonable or
unduly restrictive of the company's management prerogative. We note that the
Secretary himself has considered that management should not be hampered in the
operations of its business when he said that:
We feel that the limitations imposed by the union
advocates are too specific and may not be
applicable to the situations that the company and
the union may face in the future. To our mind, the
greater risk with this type of limitation is that it will
tend to curtail rather than allow the business
growth that the company and the union must
aspire for. Hence, we are for the general
limitations we have stated above because they
will allow a calibrated response to specific future
situations the company and the union may face. 44
Additionally, We recognize that contracting out is not unlimited; rather, it is a
prerogative that management enjoys subject to well-defined legal limitations. As
we have previously held, the company can determine in its best business judgment
whether it should contract out the performance of some of its work for as long as
the employer is motivated by good faith, and the contracting out must not have
been resorted to circumvent the law or must not have been the result of malicious
or arbitrary action. 45 The Labor Code and its implementing rules also contain
specific rules governing contracting out (Department or Labor Order No. 10, May
30, 1997, Sections 1-25).
Given these realities, we recognize that a balance already exists in the parties'
relationship with respect to contracting out; MERALCO has its legally defined and
protected management prerogatives while workers are guaranteed their own
protection through specific labor provisions and the recognition of limits to the
exercise of management prerogatives. From these premises, we can only
conclude that the Secretary's added requirement only introduces an imbalance in
the parties' collective bargaining relationship on a matter that the law already
sufficiently regulates. Hence, we rule that the Secretary's added requirement,
being unreasonable, restrictive and potentially disruptive should be struck down.
4. UNION REPRESENTATION IN COMMITTEES
As regards this issue, We quote with approval the holding of the Secretary in his
Order of December 28, 1996, to wit:
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 We see no convincing reason to modify our
original Order on union representation in
committees. It reiterates what the Article 211
(A)(g) of the Labor Code provides: "To ensure the
participation of workers in decision and policy-
making processes affecting their rights, duties and
welfare. Denying this opportunity to the Union is to
lay the claim that only management has the
monopoly of ideas that may improve management
strategies in enhancing the Company's growth.
What every company should remember is that
there might be one among the Union members
who may offer productive and viable ideas on
expanding the Company's business horizons. The
Union's participation in such committees might
just be the opportune time for dormant ideas to
come forward. So, the Company must welcome
this development (see also PAL v. NLRC, et. al.,
G.R. 85985, August 13, 1995). It must be
understood, however, that the committees
referred to here are the Safety Committee, the
Uniform Committee and other committees of a
similar nature and purpose involving personnel
welfare, rights and benefits as well as duties."
We do not find merit in MERALCO's contention that the above-quoted ruling of the
Secretary is an intrusion into the management prerogatives of MERALCO. It is
worthwhile to note that all the Union demands and what the Secretary's order
granted is that the Union be allowed to participate in policy formulation and
decision-making process on matters affecting the Union members' rights, duties
and welfare as required in Article 211 (A) (g) of the Labor Code. And this can only
be done when the Union is allowed to have representatives in the Safety
Committee, Uniform Committee and other committees of a similar nature.
Certainly, such participation by the Union in the said committees is not in the
nature of a co-management control of the business of MERALCO. What is granted
by the Secretary is participation and representation. Thus, there is no impairment
of management prerogatives.
5. INCLUSION OF ALL TERMS AND CONDITIONS IN THE CBA
MERALCO also decries the Secretary's ruling in both the assailed Orders that —
All other benefits being enjoyed by the Company's
employees but which are not expressly or
impliedly repealed in this new agreement shall
remain subsisting and shall likewise be included in
the new collective bargaining agreement to be
signed by the parties effective December 1,
1995.46
claiming that the above-quoted ruling intruded into the employer's freedom to
contract by ordering the inclusion in the new CBA all other benefits presently
enjoyed by the employees even if they are not incorporated in the new CBA. This
matter of inclusion, MERALCO argues, was never discussed and agreed upon in
the negotiations; nor presented as issues before the Secretary; nor were part of
the previous CBA's between the parties.
We agree with MERALCO.
The Secretary acted in excess of the discretion allowed him by law when he
ordered the inclusion of benefits, terms and conditions that the law and the parties
did not intend to be reflected in their CBA.
To avoid the possible problems that the disputed orders may bring, we are
constrained to rule that only the terms and conditions already existing in the
current CBA and was granted by the Secretary (subject to the modifications
decreed in this decision) should be incorporated in the CBA, and that the
Secretary's disputed orders should accordingly be modified.
6. RETROACTIVITY OF THE CBA
Finally, MERALCO also assails the Secretary's order that the effectivity of the new
CBA shall retroact to December 1, 1995, the date of the commencement of the last
two years of the effectivity of the existing CBA. This retroactive date, MERALCO
argues, is contrary to the ruling of this Court in Pier 8 Arrastre and Stevedoring
Services, Inc. vs. Roldan-Confessor 47 which mandates that the effective date of
the new CBA should be the date the Secretary of Labor has resolved the labor
dispute.
On the other hand, MEWA supports the ruling of the Secretary on the theory that
he has plenary power and discretion to fix the date of effectivity of his arbitral
award citing our ruling in St. Lakes Medical Center, Inc. vs.
Torres. 48 MEWA also contends that if the arbitral award takes effect on the date of
the Secretary Labor's ruling on the parties' motion for reconsideration (i.e., on
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December 28, 1996), an anomaly situation will result when CBA would be more
than the 5-year term mandated by Article 253-A of the Labor Code.
However, neither party took into account the factors necessary for a proper
resolution of this aspect. Pier 8, for instance, does not involve a mid-term
negotiation similar to this case, while St. Lukes does not take the "hold over"
principle into account, i.e., the rule that although a CBA has expired, it continues to
have legal effects as between the parties until a new CBA has been entered
into. 49
Art. 253-A serves as the guide in determining when the effectivity of the CBA at
bar is to take effect. It provides that the representation aspect of the CBA is to be
for a term of 5 years, while
. . . [A]ll other provisions of the Collective
Bargaining Agreement shall be re-negotiated not
later than 3 years after its execution. Any
agreement on such other provision of the
Collective Bargaining Agreement entered into
within 6 months from the date of expiry of the term
of such other provisions as fixed in such
Collective Bargaining Agreement shall retroact to
the day immediately following such date. If such
agreement is entered into beyond 6 months, the
parties shall agree on the duration of the
effectivity thereof. . . . .
Under these terms, it is clear that the 5-year term requirement is specific to the
representation aspect. What the law additionally requires is that a CBA must be re-
negotiated within 3 years "after its execution." It is in this re-negotiation that gives
rise to the present CBA deadlock.
If no agreement is reached within 6 months from the expiry date of the 3 years that
follow the CBA execution, the law expressly gives the parties — not anybody else
— the discretion to fix the effectivity of the agreement.
Significantly, the law does not specifically cover the situation where 6 months have
elapsed but no agreement has been reached with respect to effectivity. In this
eventuality, we hold that any provision of law should then apply for the law abhors
a vacuum. 50
One such provision is the principle of hold over, i.e., that in the absence of a new
CBA, the parties must maintain thestatus quo and must continue in full force and
effect the terms and conditions of the existing agreement until a new agreement is
reached. 51 In this manner, the law prevents the existence of a gap in the
relationship between the collective bargaining parties. Another legal principle that
should apply is that in the absence of an agreement between the parties, then, an
arbitrated CBA takes on the nature of any judicial or quasi-judicial award; it
operates and may be executed only respectively unless there are legal
justifications for its retroactive application.
Consequently, we find no sufficient legal ground on the other justification for the
retroactive application of the disputed CBA, and therefore hold that the CBA
should be effective for a term of 2 years counted from December 28, 1996 (the
date of the Secretary of Labor's disputed order on the parties' motion for
reconsideration) up to December 27, 1999.
WHEREFORE, the petition is granted and the orders of public respondent
Secretary of Labor dated August 19, 1996 and December 28, 1996 are set aside to
the extent set forth above. The parties are directed to execute a Collective
Bargaining Agreement incorporating the terms and conditions contained in the
unaffected portion is of the Secretary of Labor's orders of August 19, 1996 and
December 28, 1996, and the modifications set forth above. The retirement fund
issue is remanded to the Secretary of Labor for reception of evidence and
determination of the legal personality of the MERALCO retirement
fund.1âwphi1.nêt
SO ORDERED.
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G.R. No. 127598 February 22, 2000 Union leave - 40 days (typo error) 30 days

MANILA ELECTRIC COMPANY, petitioner, High voltage/pole - not apply to those who are members of a team
vs. not exposed to the risk
Hon. SECRETARY OF LABOR LEONARDO QUISUMBING and MERALCO
EMPLOYEES and WORKERS ASSOCIATION (MEWA), respondent. Collectors - no need for cash bond, no
need to reduce quota and
MAPL
RESOLUTION
exclude confidential
YNARES-SANTIAGO, J.: CBU - include
employees

In the Decision promulgated on January 27, 1999, the Court disposed of the case Union security - maintenance of membership closed shop
as follows:
Contracting out - no need to consult union consult first

WHEREFORE, the petition is granted and the orders of public respondent
Secretary of Labor dated August 19, 1996 and December 28, 1996 are set
aside to the extent set forth above. The parties are directed to execute a
Collective Bargaining Agreement incorporating the terms and conditions
contained in the unaffected portions of the Secretary of Labor's orders of
August 19, 1996 and December 28, 1996, and the modifications set forth
above. The retirement fund issue is remanded to the Secretary of Labor
for reception of evidence and determination of the legal personality of the
MERALCO retirement fund.1
The modifications of the public respondent's resolutions include the following:
Secretary's
January 27, 1999 decision
resolution
Wages - P1,900.00 for 1995-96 P2,200.00
All benefits - existing terms and conditions all terms
Dec. 28, 1996-Dec. 27,
Retroactivity - from Dec. 1, 1995
199(9)
Dissatisfied with the Decision, some alleged members of private respondent union
(Union for brevity) filed a motion for intervention and a motion for reconsideration
of the said Decision. A separate intervention was likewise made by the
supervisor's union (FLAMES2) of petitioner corporation alleging that it has bona
fide legal interest in the outcome of the case.3 The Court required the "proper
parties" to file a comment to the three motions for reconsideration but the Solicitor-
General asked that he be excused from filing the comment because the "petition
filed in the instant case was granted" by the Court.4 Consequently, petitioner filed
its own consolidated comment. An "Appeal Seeking Immediate Reconsideration"
was also filed by the alleged newly elected president of the Union. 5 Other
subsequent pleadings were filed by the parties and intervenors.

X'mas bonus - modified to one month 2 months The issues raised in the motions for reconsideration had already been passed
upon by the Court in the January 27, 1999 decision. No new arguments were
Retirees - remanded to the Secretary granted
presented for consideration of the Court. Nonetheless, certain matters will be
Loan to coops - denied granted considered herein, particularly those involving the amount of wages and the
retroactivity of the Collective Bargaining Agreement (CBA) arbitral awards.
GHSIP, HMP
and Petitioner warns that if the wage increase of P2,200.00 per month as ordered by
Housing loans - granted up to P60,000.00 granted the Secretary is allowed, it would simply pass the cost covering such increase to
the consumers through an increase in the rate of electricity. This is a non sequitur.
Signing bonus - denied granted The Court cannot be threatened with such a misleading argument. An increase in

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the prices of electric current needs the approval of the appropriate regulatory
government agency and does not automatically result from a mere increase in the
wages of petitioner's employees. Besides, this argument presupposes that
petitioner is capable of meeting a wage increase. The All Asia Capital report upon
which the Union relies to support its position regarding the wage issue cannot be
an accurate basis and conclusive determinant of the rate of wage increase.
Section 45 of Rule 130 Rules of Evidence provides:
Commercial lists and the like. — Evidence of statements of matters of
interest to persons engaged in an occupation contained in a list, register,
periodical, or other published compilation is admissible as tending to prove
the truth of any relevant matter so stated if that compilation is published for
use by persons engaged in that occupation and is generally used and
relied upon by them therein.
Under the afore-quoted rule, statement of matters contained in a periodical, may
be admitted only "if that compilation is published for use by persons engaged in
that occupation and is generally used and relied upon by them therein." As
correctly held in our Decision dated January 27, 1999, the cited report is a mere
newspaper account and not even a commercial list. At most, it is but an analysis or
opinion which carries no persuasive weight for purposes of this case as no
sufficient figures to support it were presented. Neither did anybody testify to its
accuracy. It cannot be said that businessmen generally rely on news items such as
this in their occupation. Besides, no evidence was presented that the publication
was regularly prepared by a person in touch with the market and that it is generally
regarded as trustworthy and reliable. Absent extrinsic proof of their accuracy,
these reports are not admissible.6 In the same manner, newspapers containing
stock quotations are not admissible in evidence when the source of the reports is
available.7 With more reason, mere analyses or projections of such reports cannot
be admitted. In particular, the source of the report in this case can be easily made
available considering that the same is necessary for compliance with certain
governmental requirements.
Nonetheless, by petitioner's own allegations, its actual total net income for 1996
was P5.1 billion.8 An estimate by the All Asia financial analyst stated that
petitioner's net operating income for the same year was about P5.7 billion, a figure
which the Union relies on to support its claim. Assuming without admitting the truth
thereof, the figure is higher than the P4.171 billion allegedly suggested by
petitioner as its projected net operating income. The P5.7 billion which was the
Secretary's basis for granting the P2,200.00 is higher than the actual net income of
P5.1 billion admitted by petitioner. It would be proper then to increase this Court's
award of P1,900.00 to P2,000.00 for the two years of the CBA award. For 1992,
the agreed CBA wage increase for rank-and-file was P1,400.00 and was reduced
to P1,350.00; for 1993; further reduced to P1,150.00 for 1994. For supervisory
employees, the agreed wage increase for the years 1992-1994 are P1,742.50,
P1,682.50 and P1,442.50, respectively. Based on the foregoing figures, the
P2,000.00 increase for the two-year period awarded to the rank-and-file is much
higher than the highest increase granted to supervisory employees. 9 As mentioned
in the January 27, 1999 Decision, the Court does "not seek to enumerate in this
decision the factors that should affect wage determination" because collective
bargaining disputes particularly those affecting the national interest and public
service "requires due consideration and proper balancing of the interests of the
parties to the dispute and of those who might be affected by the dispute." 10 The
Court takes judicial notice that the new amounts granted herein are significantly
higher than the weighted average salary currently enjoyed by other rank-and-file
employees within the community. It should be noted that the relations between
labor and capital is impressed with public interest which must yield to the common
good.11 Neither party should act oppressively against the other or impair the
interest or convenience of the public.12Besides, matters of salary increases are
part of management prerogative.13
On the retroactivity of the CBA arbitral award, it is well to recall that this petition
had its origin in the renegotiation of the parties' 1992-1997 CBA insofar as the last
two-year period thereof is concerned. When the Secretary of Labor assumed
jurisdiction and granted the arbitral awards, there was no question that these
arbitral awards were to be given retroactive effect. However, the parties dispute
the reckoning period when retroaction shall commence. Petitioner claims that the
award should retroact only from such time that the Secretary of Labor rendered the
award, invoking the 1995 decision in Pier 8 case 14 where the Court, citing Union of
Filipino Employees v. NLRC,15 said:
The assailed resolution which incorporated the CBA to be signed by the
parties was promulgated on June 5, 1989, the expiry date of the past CBA.
Based on the provision of Section 253-A, its retroactivity should be agreed
upon by the parties. But since no agreement to that effect was made,
public respondent did not abuse its discretion in giving the said CBA a
prospective effect. The action of the public respondent is within the ambit
of its authority vested by existing law.
On the other hand, the Union argues that the award should retroact to such time
granted by the Secretary, citing the 1993 decision of St. Luke's.16
Finally, the effectivity of the Order of January 28, 1991, must retroact to
the date of the expiration of the previous CBA, contrary to the position of
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 petitioner. Under the circumstances of the case, Article 253-A cannot be
properly applied to herein case. As correctly stated by public respondent in
his assailed Order of April 12, 1991 dismissing petitioner's Motion for
Reconsideration —
Anent the alleged lack of basis for the retroactivity provisions
awarded; we would stress that the provision of law invoked by the
Hospital, Article 253-A of the Labor Code, speaks of agreements
by and between the parties, and not arbitral awards . . .
Therefore, in the absence of a specific provision of law prohibiting
retroactivity of the effectivity of arbitral awards issued by the Secretary of
Labor pursuant to Article 263(g) of the Labor Code, such as herein
involved, public respondent is deemed vested with plenary and
discretionary powers to determine the effectivity thereof.
In the 1997 case of Mindanao Terminal,17 the Court applied the St. Luke's doctrine
and ruled that:
In St. Luke's Medical Center v. Torres, a deadlock also developed during
the CBA negotiations between management and the union. The Secretary
of Labor assumed jurisdiction and ordered the retroaction of the CBA to
the date of expiration of the previous CBA. As in this case, it was alleged
that the Secretary of Labor gravely abused its discretion in making his
award retroactive. In dismissing this contention this Court held:
Therefore, in the absence of a specific provision of law prohibiting
retroactive of the effectivity of arbitral awards issued by the
Secretary of Labor pursuant to Article 263(g) of the Labor Code,
such as herein involved, public respondent is deemed vested with
plenary and discretionary powers to determine the effectivity
thereof.
The Court in the January 27, 1999 Decision, stated that the CBA shall be "effective
for a period of 2 years counted from December 28, 1996 up to December 27,
1999." Parenthetically, this actually covers a three-year period. Labor laws are
silent as to when an arbitral award in a labor dispute where the Secretary had
assumed jurisdiction by virtue of Article 263 (g) of the Labor Code shall retroact. In
general, a CBA negotiated within six months after the expiration of the existing
CBA retroacts to the day immediately following such date and if agreed thereafter,
the effectivity depends on the agreement of the parties.18 On the other hand, the
law is silent as to the retroactivity of a CBA arbitral award or that granted not by
virtue of the mutual agreement of the parties but by intervention of the government.
Despite the silence of the law, the Court rules herein that CBA arbitral awards
granted after six months from the expiration of the last CBA shall retroact to such
time agreed upon by both employer and the employees or their union. Absent such
an agreement as to retroactivity, the award shall retroact to the first day after the
six-month period following the expiration of the last day of the CBA should there be
one. In the absence of a CBA, the Secretary's determination of the date of
retroactivity as part of his discretionary powers over arbitral awards shall control.
It is true that an arbitral award cannot per se be categorized as an agreement
voluntarily entered into by the parties because it requires the interference and
imposing power of the State thru the Secretary of Labor when he assumes
jurisdiction. However, the arbitral award can be considered as an approximation of
a collective bargaining agreement which would otherwise have been entered into
by the parties.19 The terms or periods set forth in Article 253-A pertains explicitly to
a CBA. But there is nothing that would prevent its application by analogy to an
arbitral award by the Secretary considering the absence of an applicable law.
Under Article 253-A: "(I)f any such agreement is entered into beyond six months,
the parties shall agree on the duration of retroactivity thereof." In other words, the
law contemplates retroactivity whether the agreement be entered into before or
after the said six-month period. The agreement of the parties need not be
categorically stated for their acts may be considered in determining the duration of
retroactivity. In this connection, the Court considers the letter of petitioner's
Chairman of the Board and its President addressed to their stockholders, which
states that the CBA "for the rank-and-file employees covering the period
December 1, 1995 to November 30, 1997 is still with the Supreme Court,"20 as
indicative of petitioner's recognition that the CBA award covers the said period.
Earlier, petitioner's negotiating panel transmitted to the Union a copy of its
proposed CBA covering the same period inclusive.21 In addition, petitioner does
not dispute the allegation that in the past CBA arbitral awards, the Secretary
granted retroactivity commencing from the period immediately following the last
day of the expired CBA. Thus, by petitioner's own actions, the Court sees no
reason to retroact the subject CBA awards to a different date. The period is herein
set at two (2) years from December 1, 1995 to November 30, 1997.
On the allegation concerning the grant of loan to a cooperative, there is no merit in
the union's claim that it is no different from housing loans granted by the employer.
The award of loans for housing is justified because it pertains to a basic necessity
of life. It is part of a privilege recognized by the employer and allowed by law. In
contrast, providing seed money for the establishment of the employee's
cooperative is a matter in which the employer has no business interest or legal
obligation. Courts should not be utilized as a tool to compel any person to grant
loans to another nor to force parties to undertake an obligation without justification.
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On the contrary, it is the government that has the obligation to render financial been distributed to them. The assailed Decision is AFFIRMED in all other
assistance to cooperatives and the Cooperative Code does not make it an respects.1âwphi1.nêt
obligation of the employer or any private individual.22
SO ORDERED.
Anent the 40-day union leave, the Court finds that the same is a typographical
error. In order to avoid any confusion, it is herein declared that the union leave is
only thirty (30) days as granted by the Secretary of Labor and affirmed in the
Decision of this Court.
G.R. No. 127598 August 1, 2000
The added requirement of consultation imposed by the Secretary in cases of
contracting out for six (6) months or more has been rejected by the Court. Suffice it MANILA ELECTRIC COMPANY, petitioner,
to say that the employer is allowed to contract out services for six months or more. vs.
However, a line must be drawn between management prerogatives regarding HON. SECRETARY OF LABOR LEONARDO QUISUMBING and MERALCO
business operationsper se and those which affect the rights of employees, and in EMPLOYEES AND WORKERS ASSOCIATION (MEWA), respondents.
treating the latter, the employer should see to it that its employees are at least
properly informed of its decision or modes of action in order to attain a harmonious RESOLUTION
labor-management relationship and enlighten the workers concerning their
rights.23 Hiring of workers is within the employer's inherent freedom to regulate and YNARES-SANTIAGO, J.:
is a valid exercise of its management prerogative subject only to special laws and
agreements on the matter and the fair standards of justice.24 The management On February 22, 2000, this Court promulgated a Resolution with the following
cannot be denied the faculty of promoting efficiency and attaining economy by a decretal portion:
study of what units are essential for its operation. It has the ultimate determination
of whether services should be performed by its personnel or contracted to outside
WHEREFORE, the motion for reconsideration is PARTIALLY GRANTED and the
agencies. While there should be mutual consultation, eventually deference is to be
assailed Decision is MODIFIED as follows: (1) the arbitral award shall retroact from
paid to what management decides.25 Contracting out of services is an exercise of
December 1, 1995 to November 30, 1997; and (2) the award of wage is increased
business judgment or management prerogative.26 Absent proof that management
from the original amount of One Thousand Nine Hundred Pesos (P1,900.00) to
acted in a malicious or arbitrary manner, the Court will not interfere with the
Two Thousand Pesos (P2,000.00) for the years 1995 and 1996. This Resolution is
exercise of judgment by an employer.27 As mentioned in the January 27, 1999
subject to the monetary advances granted by petitioner to its rank-and-file
Decision, the law already sufficiently regulates this matter. 28 Jurisprudence also
employees during the pendency of this case assuming such advances had actually
provides adequate limitations, such that the employer must be motivated by good
been distributed to them. The assailed Decision is AFFIRMED in all other
faith and the contracting out should not be resorted to circumvent the law or must
respects.
not have been the result of malicious or arbitrary actions.29 These are matters that
may be categorically determined only when an actual suit on the matter arises.
SO ORDERED.
WHEREFORE, the motion for reconsideration is PARTIALLY GRANTED and the
assailed Decision is MODIFIED as follows: (1) the arbitral award shall retroact from Petitioner Manila Electric Company filed with this Court, on March 17, 2000, a
December 1, 1995 to November 30, 1997; and (2) the award of wage is increased "Motion for Partial Modification (Re: Resolution Dated 22 February 2000)"
from the original amount of One Thousand Nine Hundred Pesos (P1,900.00) to anchored on the following grounds:
Two Thousand Pesos (P2,000.00) for the years 1995 and 1996. This Resolution is
subject to the monetary advances granted by petitioner to its rank-and-file I
employees during the pendency of this case assuming such advances had actually

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 With due respect, this Honorable Court’s ruling on the retroactivity issue:
(a) fails to account for previous rulings of the Court on the same issue; (b)
fails to indicate the reasons for reversing the original ruling in this case on
the retroactivity issue; and (c) is internally inconsistent.
II
With due respect, the Honorable Court’s ruling on the retroactivity issue
does not take into account the huge cost that this award imposes on
petitioner, estimated at no less than P800 Million.
In the assailed Resolution, it was held:
Labor laws are silent as to when an arbitral award in a labor dispute where the
Secretary (of Labor and Employment) had assumed jurisdiction by virtue of Article
263 (g) of the Labor Code shall retroact. In general, a CBA negotiated within six
months after the expiration of the existing CBA retroacts to the day immediately
following such date and if agreed thereafter, the effectivity depends on the
agreement of the parties. On the other hand, the law is silent as to the retroactivity
of a CBA arbitral award or that granted not by virtue of the mutual agreement of
the parties but by intervention of the government. Despite the silence of the law,
the Court rules herein that CBA arbitral awards granted after six months from the
expiration of the last CBA shall retroact to such time agreed upon by both
employer and the employees or their union. Absent such an agreement as to
retroactivity, the award shall retroact to the first day after the six-month period
following the expiration of the last day of the CBA should there be one. In the
absence of a CBA, the Secretary’s determination of the date of retroactivity as part
of his discretionary powers over arbitral awards shall control.
Petitioner specifically assails the foregoing portion of the Resolution as being
logically flawed, arguing, first, that while it alludes to the Secretary’s discretionary
powers only in the absence of a CBA, Article 253-A of the Labor Code always
presupposes the existence of a prior or subsisting CBA; hence the exercise by the
Secretary of his discretionary powers will never come to pass. Second, petitioner
claims that the Resolution contravenes the jurisprudential rule laid down in the
cases of Union of Filipro Employees v. NLRC,1 Pier 8 Arrastre and Stevedoring
Services v. Roldan-Confesor2 and St. Luke’ s Medical Center v. Torres.3 Third,
petitioner contends that this Court erred in holding that the effectivity of CBA
provisions are automatically retroactive. Petitioner invokes, rather, this Court’s
ruling in the Decision dated January 27, 1999, which was modified in the assailed
Resolution, that in the absence of an agreement between the parties, an arbitrated
CBA takes on the nature of any judicial or quasi-judicial award; it operates and
may be executed only prospectively unless there are legal justifications for its
retroactive application. Fourth, petitioner assigns as error this Court’s interpretation
of certain acts of petitioner as consent to the retroactive application of the arbitral
award. Fifth, petitioner contends that the Resolution is internally flawed because
when it held that the award shall retroact to the first day after the six-month period
following the expiration of the last day of the CBA, the reckoning date should have
been June 1, 1996, not December 1, 1995, which is the last day of the three-year
lifetime of the economic provisions of the CBA.
Anent the second ground, petitioner alleges that the retroactive application of the
arbitral award will cost it no less than P800 Million. Thus, petitioner prays that the
two-year term of the CBA be fixed from December 28, 1996 to December 27,
1998. Petitioner also seeks this Court’s declaration that the award of P2,000.00 be
paid to petitioner’s rank-and-file employees during this two-year period. In the
alternative, petitioner prays that the award of P2,000.00 be made to retroact to
June 1, 1996 as the effectivity date of the CBA.
Private respondent MEWA filed its Comment on May 19, 2000, contending that the
Motion for Partial Modification was unauthorized inasmuch as Mr. Manuel M.
Lopez, President of petitioner corporation, has categorically stated in a
memorandum to the rank-and-file employees that management will comply with
this Court’s ruling and will not file any motion for reconsideration; and that the
assailed Resolution should be modified to conform to the St. Luke’sruling, to the
effect that, in the absence of a specific provision of law prohibiting retroactivity of
the effectivity of arbitral awards issued by the Secretary of Labor pursuant to
Article 263(g) of the Labor Code, he is deemed vested with plenary and
discretionary powers to determine the effectivity thereof.
This Court has re-examined the assailed portion of the Resolution in this case vis-
à-vis the rulings cited by petitioner. Invariably, these cases involve Articles 253-A
in relation to Article 263 (g)4 of the Labor Code. Article 253-A is hereunder
reproduced for ready reference:
ART. 253-A. Terms of a collective bargaining agreement. --- Any Collective
Bargaining Agreement that the parties may enter into shall, insofar as the
representation aspect is concerned, be for a term of five (5) years. No petition
questioning the majority status of the incumbent bargaining agent shall be
entertained and no certification election shall be conducted by the Department of
Labor and Employment outside of the sixty-day period immediately before the date
of expiry of such five year term of the Collective Bargaining Agreement. All other
provisions of the Collective Bargaining Agreement shall be renegotiated not later
than three (3) years after its execution. Any agreement on such other provisions of
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the Collective Bargaining Agreement entered into within six (6) months from the
date of expiry of the term of such other provisions as fixed in such Collective
Bargaining Agreement, shall retroact to the day immediately following such date. If
any such agreement is entered into beyond six months, the parties shall agree on
the duration of retroactivity thereof. In case of a deadlock in the renegotiation of
the collective bargaining agreement, the parties may exercise their rights under
this Code.5
The parties’ respective positions are both well supported by jurisprudence. For its
part, petitioner invokes the ruling in Union of Filipro Employees6 , wherein this
Court upheld the NLRC’s act of giving prospective effect to the CBA, and argues
that the two-year arbitral award in the case at bar should likewise be applied
prospectively, counted from December 28, 1996 to December 27, 1998. Petitioner
maintains that there is nothing in Article 253-A of the Labor Code which states that
arbitral awards or renewals of a collective bargaining agreement shall always have
retroactive effect. The Filipro case was applied more recently in Pier 8 Arrastre &
Stevedoring Services, Inc. v. Roldan-Confesor7 thus:
In Union of Filipro Employees v. NLRC, 192 SCRA 414 (1990), this Court
interpreted the above law as follows:
"In light of the foregoing, this Court upholds the pronouncement of the NLRC
holding the CBA to be signed by the parties effective upon the promulgation of the
assailed resolution. It is clear and explicit from Article 253-A that any agreement on
such other provisions of the CBA shall be given retroactive effect only when it is
entered into within six (6) months from its expiry date. If the agreement was
entered into outside the six (6) month period, then the parties shall agree on the
duration of the retroactivity thereof.
"The assailed resolution which incorporated the CBA to be signed by the parties
was promulgated June 5, 1989, and hence, outside the 6 month period from June
30, 1987, the expiry date of the past CBA. Based on the provision of Section 253-
A, its retroactivity should be agreed upon by the parties. But since no agreement to
that effect was made, public respondent did not abuse its discretion in giving the
said CBA a prospective effect. The action of the public respondent is within the
ambit of its authority vested by existing laws."
In the case of Lopez Sugar Corporation v. Federation of Free Workers, 189 SCRA
179 (1991), this Court reiterated the rule that although a CBA has expired, it
continues to have legal effects as between the parties until a new CBA has been
entered into. It is the duty of both parties to the CBA to keep the status quo, and to
continue in full force and effect the terms and conditions of the existing agreement
during the 60-day freedom period and/or until a new agreement is reached by the
parties (National Congress of Unions in the Sugar Industry of the Philippines v.
Ferrer-Calleja, 205 SCRA 478 [1992]). Applied to the case at bench, the legal
effects of the immediate past CBA between petitioner and private respondent
terminated, and the effectivity of the new CBA began, only on March 4, 1993,
when public respondent resolved their dispute.8
On the other hand, respondent MEWA invokes the ruling in St. Luke’s Medical
Center, Inc. v. Torres,9 which held that the Secretary of Labor has plenary and
discretionary powers to determine the effectivity of arbitral awards. 10 Thus,
respondent maintains that the arbitral award in this case should be made effective
from December 1, 1995 to November 30, 1997. The ruling in the St. Luke’s case
was restated in the 1998 case of Manila Central Line Corporation v. Manila Central
Line Free Workers Union-National Federation of Labor, et al.,11 where it was held
that:
Art. 253-A refers to collective bargaining agreements entered into by the parties as
a result of their mutual agreement. The CBA in this case, on the other hand, is part
of an arbitral award. As such, it may be made retroactive to the date of expiration
of the previous agreement. As held in St. Luke’s Medical Center, Inc. v. Torres:
Finally, the effectivity of the Order of January 28, 1991, must retroact to the date of
the expiration of the previous CBA, contrary to the position of petitioner. Under the
circumstances of the case, Article 253-A cannot be properly applied to herein
case. As correctly stated by public respondent in his assailed Order of April 12,
1991 dismissing petitioner’s Motion for Reconsideration –
Anent the alleged lack of basis for the retroactivity provisions awarded, we would
stress that the provision of law invoked by the Hospital, Article 253-A of the Labor
Code, speaks of agreements by and between the parties, and not arbitral awards .
. . (p. 818 Rollo).
Therefore, in the absence of a specific provision of law prohibiting retroactivity of
the effectivity of arbitral awards issued by the Secretary of Labor pursuant to
Article 263(g) of the Labor Code, such as herein involved, public respondent is
deemed vested with plenary and discretionary powers to determine the effectivity
thereof (223 SCRA 779, 792-793 [1993]; reiterated in Philippine Airlines, Inc. v.
Confessor 231 SCRA 41 [1994]).
Indeed, petitioner has not shown that the question of effectivity was not included in
the general agreement of the parties to submit their dispute for arbitration. To the
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contrary, as the order of the labor arbiter states, this question was among those
submitted for arbitration by the parties:
As regards the "Effectivity and Duration" clause, the company proposes that the
collective bargaining agreement shall take effect only upon its signing and shall
remain in full force and effect for a period of five years. The union proposes that
the agreement shall take effect retroactive to March 15, 1989, the expiration date
of the old CBA.
And after an evaluation of the parties’ respective contention and argument thereof,
it is believed that that of the union is fair and reasonable. It is the observation of
this Arbitrator that in almost subsequent CBAs, the effectivity of the renegotiated
CBA, usually and most often is made effective retroactive to the date when the
immediately preceding CBA expires so as to give a semblance of continuity.
Hence, for this particular case, it is believed that there is nothing wrong adopting
the stand of the union, that is that this CBA be made retroactive effective March
15, 1989.12
Parenthetically, the Decision rendered in the case at bar on January 27,
199913 ordered that the CBA should be effective for a term of two years counted
from December 28, 1996 (the date of the Secretary of Labor’s disputed Order on
the parties’ motion for reconsideration) up to December 27, 1998.14 That is to say,
the arbitral award was given prospective effect.
Upon a reconsideration of the Decision, this Court issued the assailed Resolution
which ruled that where an arbitral award granted beyond six months after the
expiration of the existing CBA, and there is no agreement between the parties as
to the date of effectivity thereof, the arbitral award shall retroact to the first day
after the six-month period following the expiration of the last day of the CBA. In the
dispositive portion, however, the period to which the award shall retroact was
inadvertently stated as beginning on December 1, 1995 up to November 30, 1997.
In resolving the motions for reconsideration in this case, this Court took into
account the fact that petitioner belongs to an industry imbued with public interest.
As such, this Court can not ignore the enormous cost that petitioner will have to
bear as a consequence of the full retroaction of the arbitral award to the date of
expiry of the CBA, and the inevitable effect that it would have on the national
economy. On the other hand, under the policy of social justice, the law bends over
backward to accommodate the interests of the working class on the humane
justification that those with less privilege in life should have more in
law.15 Balancing these two contrasting interests, this Court turned to the dictates of
fairness and equitable justice and thus arrived at a formula that would address the
concerns of both sides. Hence, this Court held that the arbitral award in this case
be made to retroact to the first day after the six-month period following the
expiration of the last day of the CBA, i.e., from June 1, 1996 to May 31, 1998.
This Court, therefore, maintains the foregoing rule in the assailed Resolution pro
hac vice. It must be clarified, however, that consonant with this rule, the two-year
effectivity period must start from June 1, 1996 up to May 31, 1998, not December
1, 1995 to November 30, 1997.1âwphi1
During the interregnum between the expiration of the economic provisions of the
CBA and the date of effectivity of the arbitral award, it is understood that the hold-
over principle shall govern, viz:
"[I]t shall be the duty of both parties to keep the status quo and to continue in full
force and effect the terms and conditions of the existing agreement during the 60-
day freedom period and/or until a new agreement is reached by the parties."
Despite the lapse of the formal effectivity of the CBA the law still considers the
same as continuing in force and effect until a new CBA shall have been validly
executed.16
Finally, this Court finds that petitioner’s prayer, that the award of Two Thousand
Pesos shall be paid to rank-and-file employees during the two-year period, is well-
taken. The award does not extend to supervisory employees of petitioner.
WHEREFORE, the Motion for Partial Modification is GRANTED. The Resolution of
February 22, 2000 is PARTIALLYMODIFIED as follows: (a) the arbitral award shall
retroact to the two-year period from June 1, 1996 to May 31, 1998; (b) the
increased wage award of Two Thousand Pesos (P2,000.00) shall be paid to the
rank-and-file employees during the said two-year period. This Resolution is subject
to the monetary advances granted by petitioner to said employees during the
pendency of this case, assuming such advances had actually been distributed to
them.
SO ORDERED.
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G.R. No. 127422 April 17, 2001 P40 per day on the first year

LMG CHEMICALS CORPORATION, LMG CHEMICALS P40 per day on the second year
CORPORATION, petitioner,
vs. P40 per day on the third year
THE SECRETARY OF THE DEPARTMENT OF LABOR AND EMPLOYMENT,
THE HON. LEONARDO A. QUISUMBING, and CHEMICAL WORKER'S Respondent Union
UNION, respondents.
P350 per day on the first 18 months, and
SANDOVAL-GUTIERREZ, J.:
P150 per day for the next 18 months"
Before us is a petition certiorari with prayer for a temporary restraining order and a
writ of preliminary injunction under Rule 65 of the 1997 Rules of Civil Procedure,
as amended, seeking to nullify the orders dated October 7, 1996 and December In the course of the negotiations, respondent union pruned down the originally
17, 1996, issued by the then Secretary of Labor and Employment, Hon. Leonardo proposed wage increase quoted above to P215 per day, broken down as follows:
A. Quisumbing,1 in OS-AJ-05-10(1)-96, "IN RE: LABOR DISPUTE AT LMB
CHEMICALS CORPORATION" "P142 for the first 18 months

The facts as culled from the records are: P73 for the second 18 months"

LMG Chemicals Corporation, (petitioner) is a domestic corporation engaged in the
manufacture and sale of various kinds of chemical substances, including aluminum
sulfate which is essential in purifying water, and technical grade sulfuric acid used
in thermal power plants. Petitioner has three divisions, namely: the Organic
Division, Inorganic Division and the Pinamucan Bulk Carriers. There are two
unions within petitioner's Inorganic Division. One union represents the daily paid
employees and the other union represents the monthly paid employees. Chemical
Workers Union, respondent, is a duly registered labor organization acting as the
collective bargaining agent of all the daily paid employees of petitioner's Inorganic
Division.
With the CBA negotiations at a deadlock, on March 6, 1996, respondent union filed
a Notice of Strike with the National Conciliation and Mediation Board, National
Capital Region. Despite several conferences and efforts of the designated
conciliator-mediator, the parties failed to reach an amicable settlement.
On April 16, 1996, respondent union staged a strike. IN an attempt to end the
strike early, petitioner, on April 24, 1996, made an improved offer of P135 per day,
spread over the period of three years, as follows:
"P55 per day on the first year;

Sometime in December 1995, the petitioner and the respondent started negotiation P45 per day on the second year;
for a new Collective Bargaining Agreement (CBA) as their old CBA was about to
expire. They were able to agree on the political provisions of the new CBA, but no
P35 per day on the third year."
agreement was reached on the issue of wage increase. The economic issues were
not also settled.
On May 9, 1996, another conciliation meeting was held between the parties. In that
meeting, petitioner reiterated its improved offer of P135 per day which was again
The positions of the parties with respect to wage issue were:
rejected by the respondent union.
"Petitioner Company
On May 20, 1996, the Secretary of Labor and Employment, finding the instant
labor dispute impressed with national interest, assumed jurisdiction over the same.

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In compliance with the directive of the Labor Secretary, the parties submitted their
respective positive papers both dated June 21, 1996.
In its position paper, petitioner made a turn-around, stating that it could no longer
afford to grant its previous offer due to serious financial losses during the early
months of 1996. It then made the following offer:
Zero increase in the first year;
P30 per day increase in the second year; and
P20 per day increase in the third year.
In its reply to petitioner's position paper, respondent union claimed it had a positive
performance in terms of income during the covered period.
On October 7, 1996, the Secretary of Labor and Employment issued the first
assailed order, pertinent portions of which read:
"xxx. In the light of the Company's last offer and the Union's last
position, We decree that the Company's offer of P135 per day wage
increase be further increased to P140 per (day), which shall be
incorporated in the new CBA, as follows:
P90 per day for the first 18 months, and
P50 per day for the next 18 months.
After all, the Company had granted its supervisory employees an
increase of P4,500 per month or P166 per day, more or less, if the
period reckoned is 27 working days.
In regard to the division of the three-year period into two sub-periods
of 18 months each, this office take cognizance of the same practice
under the old CBA.
2. Other economic demands
Considering the financial condition of the Company, all other
economic demands except those provided in No. 3 below are
rejected. The provisions in the old CBA as well as those contained in
the Company's Employee's Primer of Benefits as of Aug. 1, 1994
shall be retained and incorporated in the new CBA.
3. Effectivity of the new CBA
Article 253-A of the Labor Code, as amended, provides that when no
new CBA is signed during a period of six months from the expiry
date of the old CBA, the retroactivity period shall be according to the
parties' agreement, Inasmuch as the parties could not agree on this
issue and since this Office has assumed jurisdiction, then this matter
now lies at the discretion of the Secretary of labor and Employment.
Thus the new Collective Bargaining Agreement which the parties will
sign pursuant to this Order shall retroact to January 1, 1996.
x x x
Forthwith, petitioner filed a motion for reconsideration but was denied by the
Secretary in his order dated December 16, 1996.
Petitioner now contends that in issuing the said orders, respondent Secretary
gravely abused his discretion, thus:
I
"THE HONORABLE SECRETARY OF LABOR COMMITTED GRAVE
ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN
DISREGARDING THE EVIDENCE OF PETITIONER'S FINANCIAL
LOSSES AND IN GRANTING A P140.00 WAGE INCREASE TO THE
RESPONDENT UNION.
II
THE HONORABLE SECRETARY OF LABOR COMMITTED GRAVE
ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN
DECREEING THAT THE NEW COLLECTIVE BARGAINING
AGREEMENT TO BE SIGNED BY THE PARTIES SHALL RETROACT TO
JANUARY 1, 1996."
Anent the first ground, petitioner asserts that the decreed amount of P140 wage
increase has no basis in fact and in law. Petitioner insists that public respondent
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Secretary whimsically presumed that the company can survive despite the losses
being suffered by its Inorganic Division and its additional losses caused by the
strike held by respondent union. Petitioner further contends that respondent
Secretary disregarded its evidence showing that for the first part of 1996, its
Inorganic Division suffered serious losses amounting to P15.651 million. Hence, by
awarding wage increase without any basis, respondent Secretary gravely abused
his discretion and violated petitioner's right to due process.
We are not persuaded.
As aptly stated by the Solicitor General in his comment on the petition dated July
1, 1996, respondent Secretary considered all the evidence and arguments
adduced by both parties. In ordering the wage increase, the Secretary ratiocinated
as follows:
"xxx
In the Company's Supplemental Comment, it says that it has three
divisions, namely: the Organic Division, Inorganic Division and the
Pinamucan Bulk Carriers. The Union in this instant dispute represent
the daily wage earners in the Inorganic Division. The respective
income of the three divisions is shown in Annex B to the Company's
Supplemental Comment. The Organic Division posted an income of
P369,754,000 in 1995. The Inorganic Division realized an income of
P261,288,000 in the same period. The tail ender is the Pinamucan
Bulk Carriers Division with annual income of P11,803,000 for the
same period. Total Company income for the period was
P642,845,000.
It is a sound business practice that a Company's income from all
sources are collated to determine its true financial condition.
Regardless of whether one division or another losses or gains in its
yearly operation is not material in reckoning a Company's financial
status. In fact, the loss in one is usually offset by the gains in the
others. It is not a good business practice to isolate the employees or
workers of one division, which incurred an operating loss for a
particular period. That will create demoralization among its ranks,
which will ultimately affect productivity. The eventual loser will be the
company.
So, even if We believe the position of the company that its Inorganic
Division lost last year and during the early months of this year, it
would not be a good argument to deny them of any salary increase.
When the Company made the offer of P135 per day for the three year
period, it was presumed to have studied its financial condition
properly, taking into consideration its past performance and
projected income. In fact, the Company realized a net income of
P10,806,678 for 1995 in all its operations, which could be one factor
why it offered the wage increase package of P135 per day for the
Union members.1âwphi1.nêt
Besides, as a major player in the country's corporate field, reneging
from a wage increase package it previously offered and later on
withdrawing the same simply because this Office had already
assumed jurisdiction over its labor dispute with the Union cannot be
countenanced. It will be worse if the employer is allowed to withdraw
its offer on the ground that the union staged a strike and
consequently subsequently suffered business setbacks in its income
projections. To sustain the Company's position is like hanging the
proverbial sword of Damocles over the Union's right to concerted
activities, ready to fall when the latter clamors for better terms and
conditions of employment.
But we cannot also sustain the Union's demand for an increase of
P215 per day. If we add the overload factors such as the increase in
SSS premiums, medicare and medicaid, and other multiplier costs,
the Company will be saddled with additional labor cost, and its
projected income for the CBS period may not be able to absorb the
added cost without impairing its viability. xxx"
Verily, petitioner's assertion that respondent Secretary failed to consider the
evidence on record lacks merit. It was only the Inorganic Division of the petitioner
corporation that was sustaining losses. Such incident does not justify the
withholding of any salary increase as petitioner's income from all sources are
collated for the determination of its true financial condition. As correctly stated by
the Secretary, "the loss in one is usually offset by the gains in the others."
Moreover, petitioner company granted its supervisory employees, during the
pendency of the negotiations between the parties, a wage increase of P4,500 per
month or P166 per day, more or less. Petitioner justified this by saying that the
said increase was pursuant to its earlier agreement with the supervisions. Hence,
the company had no choice but to abide by such agreement even if it was already
sustaining losses as a result of the strike of the rank-and-file employees.
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Petitioner's actuation is actually a discrimination against respondent union
members. If it could grant a wage increase to its supervisors, there is no valid
reason why it should deny the same to respondent union members. Significantly,
while petitioner asserts that it sustained losses in the first part of 1996, yet during
the May 9, 1996 conciliation meeting, it made the offer of P135 daily wage to the
said union members.
This Court, therefore, holds that respondent Secretary did not gravely abuse his
discretion in ordering the wage increase. Grave abuse of discretion implies
whimsical and capricious exercise of power which, in the instant case, is not
obtaining.
On the second ground, petitioner contends that public respondent committed grave
abuse of discretion when he ordered that the new CBA which the parties will sign
shall retroact to January 1, 1996, citing the cases of Union of Filipro Employees vs.
NLRC,2 and Pier 8 Arrastre and Stevedoring Services, Inc. vs. Roldan Confesor. 3
Invoking the provisions of Article 253-A of the Labor Code, petitioner insists that
public respondent's discretion on the issue of the date of the effectivity of the new
CBA is limited to either: (1) leaving the matter of the date of effectivity of the new
CBA is limited to either: (1) leaving the matter of the date of effectivity of the new
CBA to the agreement of the parties or (2) ordering that the terms of the new CBA
be prospectively applied.
It must be emphasized that respondent Secretary assumed jurisdiction over the
dispute because it is impressed with national interest. As noted by the Secretary,
"the petitioner corporation was then supplying the sulfate requirements of MWSS
as well as the sulfuric acid of NAPOCOR, and consequently, the continuation of
the strike would seriously affect the water supply of Metro Manila and the power
supply of the Luzon Grid." Such authority of the Secretary to assume jurisdiction
carries with it the power to determine the retroactivity of the parties' CBA.
It is well settled in our jurisprudence that the authority of the Secretary of Labor to
assume jurisdiction over a labor dispute causing or likely to cause a strike or
lockout in an industry indispensable to national interest includes and extends to all
questions and controversies arising therefrom. The power is plenary and
discretionary in nature to enable him to effectively and efficiently dispose of the
primary dispute.4
In St. Luke's Medical Center, Inc. vs. Torres5, a deadlock developed during the
CBA negotiations between the management and the union. The Secretary of Labor
assumed jurisdiction and ordered that their CBA shall retroact to the date of the
expiration of the previous CBA. The management claimed that the Secretary of
Labor gravely abused his discretion. This Court held:
"xxx
Finally, the effectivity of the Order of January 28, 1991, must retroact
to the date of the expiration of the previous CBA, contrary to the
position of the petitioner. Under the circumstances of the case, Art.
253-A cannot be properly applied to herein case. As correctly stated
by public respondent in his assailed Order of April 12, 1991 –
'Anent the alleged lack of basis for retroactivity provisions
awarded, We would stress that the provision of law invoked
by the Hospital, Article 253-A of the Labor Code, speaks of
agreement by and between the parties, and not arbitral
awards.'
Therefore in the absence of the specific provision of law prohibiting
retroactivity of the effectivity of the arbitral awards issued by the
Secretary of Labor pursuant to Article 263(g) of the Labor Code, such
as herein involved, public respondent is deemed vested with plenary
powers to determine the effectivity thereof."
Finally, to deprive respondent Secretary of such power and discretion would run
counter to the well-established rule that all doubts in the interpretation of labor laws
should be resolved in favor of labor. In upholding the assailed orders of respondent
Secretary, this Court is only giving meaning to this rule. Indeed, the Court should
help labor authorities in providing workers immediate benefits, without being
hampered by arbitration or litigation processes that prove to be not only nerve-
wracking but financially burdensome in the long run.
As we said in Maternity Children's Hospital vs. Secretary of Labor 6:
"Social Justice Legislation, to be truly meaningful and rewarding to
our workers, must not be hampered in its application by long winded-
arbitration and litigation. Rights must be asserted and benefits
received with the least inconvenience. Labor laws are meant to
promote, not to defeat, social justice."
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WHEREFORE, the instant petition is DENIED. The assailed orders of the
Secretary of Labor dated October 7, 1996 and December 16, 1996
are AFFIRMED. Costs against petitioner.
SO ORDERED.
G.R. No.174287 August 12, 2013
NATIONAL UNION OF BANK EMPLOYEES (NUBE), PETITIONER,
vs.
PHILNABANK EMPLOYEES ASSOCIATION (PEMA) AND PHILIPPINE
NATIONAL BANK, RESPONDENTS.
DECISION
PERALTA, J.:
Assailed in this petition for review on certiorari under Rule 45 of the 1997 Rules of
Civil Procedure are the May 22, 2006 Decision1 and August 17, 2006
Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 84606, which
reversed the May 27, 2004 Decision3 of the Secretary of Labor and Employment
acting as voluntary arbitrator, the dispositive portion of which states:
WHEREFORE, in light of the foregoing findings, the Bank is hereby ORDERED to
release all union dues withheld and to continue remitting to NUBE-PNB chapter
the members' obligations under the CBA, LESS the amount corresponding to the
number of non-union members including those who participated in the
unsuccessful withdrawal of membership from their mother union.
The parties are enjoined to faithfully comply with the above- mentioned resolution.
With respect to the URGENT MOTION FOR INTERVENTION filed by PEMA, the
same is hereby denied without prejudice to the rights of its members to bring an
action to protect such rights if deemed necessary at the opportune time.
SO ORDERED.4
We state the facts.
Respondent Philippine National Bank (PNB) used to be a government-owned and
controlled banking institution established under Public Act 2612, as amended by
Executive Order No. 80 dated December 3, 1986 (otherwise known as The 1986
Revised Charter of the Philippine National Bank). Its rank-and-file employees,
being government personnel, were represented for collective negotiation by the
Philnabank Employees Association (PEMA), a public sector union.
In 1996, the Securities and Exchange Commission approved PNB’s new Articles of
Incorporation and By-laws and its changed status as a private corporation. PEMA
affiliated with petitioner National Union of Bank Employees (NUBE), which is a
labor federation composed of unions in the banking industry, adopting the name
NUBE-PNB Employees Chapter (NUBE-PEC).
Later, NUBE-PEC was certified as the sole and exclusive bargaining agent of the
PNB rank-and-file employees. A collective bargaining agreement (CBA) was
subsequently signed between NUBE-PEC and PNB covering the period of January
1, 1997 to December 31, 2001.
Pursuant to Article V on Check-off and Agency Fees of the CBA, PNB shall deduct
the monthly membership fee and other assessments imposed by the union from
the salary of each union member, and agency fee (equivalent to the monthly
membership dues) from the salary of the rank- and-file employees within the
bargaining unit who are not union members. Moreover, during the effectivity of the
CBA, NUBE, being the Federation union, agreed that PNB shall remit ₱15.00 of
the ₱65.00 union dues per month collected by PNB from every employee, and that
PNB shall directly credit the amount to NUBE’s current account with PNB. 5
Following the expiration of the CBA, the Philnabank Employees Association-FFW
(PEMA-FFW) filed on January 2, 2002 a petition for certification election among
the rank-and-file employees of PNB. The petition sought the conduct of a
certification election to be participated in by PEMA-FFW and NUBE-PEC.
While the petition for certification election was still pending, two significant events
transpired – the independent union registration of NUBE- PEC and its disaffiliation
with NUBE.
With a legal personality derived only from a charter issued by NUBE, NUBE-PEC,
under the leadership of Mariano Soria, decided to apply for a separate registration
with the Department of Labor and Employment (DOLE). On March 25, 2002, it was
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registered as an independent labor organization under Registration Certificate No.
NCR-UR-3-3790-2002.
Thereafter, on June 20, 2003, the Board of Directors of NUBE-PEC adopted a
Resolution6 disaffiliating itself from NUBE. Cited as reasons were as follows:
xxxx
WHEREAS, in the long period of time that the Union has been affiliated with
NUBE, the latter has miserably failed to extend and provide satisfactory services
and support to the former in the form of legal services, training assistance,
educational seminars, and the like;
WHEREAS, this failure by NUBE to provide adequate essential services and
support to union members have caused the latter to be resentful to NUBE and to
demand for the Union’s disaffiliation from the former[;]
WHEREAS, just recently, NUBE displayed its lack of regard for the interests and
aspirations of the union members by blocking the latter’s desire for the early
commencement of CBA negotiations with the PNB management[;]
WHEREAS, this strained relationship between NUBE and the Union is no longer
conducive to a fruitful partnership between them and could even threaten industrial
peace between the Union and the management of PNB.
WHEREAS, under the circumstances, the current officers of the Union have no
choice but to listen to the clamor of the overwhelming majority of union members
for the Union to disaffiliate from NUBE.7
The duly notarized Resolution was signed by Edgardo B. Serrana (President), Rico
B. Roma (Vice-President), Rachel C. Latorre (Secretary), Valeriana S. Garcia
(Director/Acting Treasurer), Ruben C. Medrano (Director), and Verlo C. Magtibay
(Director). It is claimed that said Resolution was overwhelmingly ratified by about
eighty-one percent (81%) of the total union membership.
On June 25, 2003, NUBE-PEC filed a Manifestation and Motion8 before the Med-
Arbitration Unit of DOLE, praying that, in view of its independent registration as a
labor union and disaffiliation from NUBE, its name as appearing in the official
ballots of the certification election be changed to "Philnabank Employees
Association (PEMA)" or, in the alternative, both parties be allowed to use the name
"PEMA" but with PEMA-FFW and NUBE-PEC be denominated as "PEMA-Bustria
Group" and "PEMA-Serrana Group," respectively.
On the same date, PEMA sent a letter to the PNB management informing its
disaffiliation from NUBE and requesting to stop, effective immediately, the check-
off of the ₱15.00 due for NUBE.9
Acting thereon, on July 4, 2003, PNB informed NUBE of PEMA’s letter and its
decision to continue the deduction of the ₱15.00 fees, but stop its remittance to
NUBE effective July 2003. PNB also notified NUBE that the amounts collected
would be held in a trust account pending the resolution of the issue on PEMA’s
disaffiliation.10
On July 11, 2003, NUBE replied that: it remains as the exclusive bargaining
representative of the PNB rank-and-file employees; by signing the Resolution (on
disaffiliation), the chapter officers have abandoned NUBE-PEC and joined another
union; in abandoning NUBE-PEC, the chapter officers have abdicated their
respective positions and resigned as such; in joining another union, the chapter
officers committed an act of disloyalty to NUBE-PEC and the general membership;
the circumstances clearly show that there is an emergency in NUBE-PEC
necessitating its placement under temporary trusteeship; and that PNB should
cease and desist from dealing with Serrana, Roma, Latorre, Garcia, Medrano, and
Magtibay, who are expelled from NUBE-PEC.11 With regard to the issue of non-
remittance of the union dues, NUBE enjoined PNB to comply with the union check-
off provision of the CBA; otherwise, it would elevate the matter to the grievance
machinery in accordance with the CBA.
Despite NUBE’s response, PNB stood firm on its decision. Alleging unfair labor
practice (ULP) for non-implementation of the grievance machinery and procedure,
NUBE brought the matter to the National Conciliation and Mediation Board
(NCMB) for preventive mediation.12 In time, PNB and NUBE agreed to refer the
case to the Office of the DOLE Secretary for voluntary arbitration. They executed a
Submission Agreement on October 28, 2003.13
Meantime, the DOLE denied PEMA’s motion to change its name in the official
ballots. The certification election was finally held on October 17, 2003. The election
yielded the following results:
3,74
Number of eligible voters
2
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 2,99
Number of valid votes cast
3
Number of spoiled ballots 72
3,06
Total
5 v. National Labor Relations Commission, et al.] However, such disaffiliation must
Philnabank Employees Association-FFW 289
National Union of Bank Employees (NUBE)- 2,68
Philippine National Bank (PNB) Chapter 3 Applying the foregoing jurisprudence to the case at bar, it is difficult to believe that
No Union 21
14
Total 2,993
On April 28, 2004, PEMA filed before the voluntary arbitrator an Urgent Motion for
Intervention,15 alleging that it stands to be substantially affected by whatever
judgment that may be issued, because one of the issues for resolution is the
validity of its disaffiliation from NUBE. It further claimed that its presence is
necessary so that a complete relief may be accorded to the parties. Only NUBE
opposed the motion, arguing that PEMA has no legal personality to intervene, as it
is not a party to the existing CBA; and that NUBE is the exclusive bargaining
representative of the PNB rank-and-file employees and, in dealing with a union
other than NUBE, PNB is violating the duty to bargain collectively, which is another
form of ULP.16
Barely a month after, DOLE Acting Secretary Manuel G. Imson denied PEMA’s
motion for intervention and ordered PNB to release all union dues withheld and to
continue remitting the same to NUBE. The May 27, 2004 Decision opined:
Before we delve into the merits of the present dispute, it behooves [Us] to discuss
in passing the propriety of the MOTION FOR INTERVENTION filed by the
Philnabank Employees Association (PEMA) on April 28, 2004, the alleged [break-
away] group of NUBE- PNB Chapter.
A cursory reading of the motion reveals a denial thereof is not prejudicial to the
individual rights of its members. They are protected by law.
Coming now to the main issues of the case, suffice it to say that after an evaluative
review of the record of the case, taking into consideration the arguments and
evidence adduced by both parties, We find that indeed no effective disaffiliation
took place.
It is well settled that [l]abor unions may disaffiliate from their mother federations to
form a local or independent union only during the 60-day freedom period
immediately preceding the expiration of the CBA. [Tanduay Distillery Labor Union
be effected by a majority of the members in the bargaining unit. (Volkschel Labor
Union v. Bureau of Labor Relations).
a justified disaffiliation took place. While the record apparently shows that attempts
at disaffiliation occurred sometime in June of 2003 x x x the latest result of a
certification election dated 17 October 2003 mooted such disaffiliation.
Further, even if for the sake of argument an attempt at disaffiliation occurred, the
record is bereft of substantial evidence to support a finding of effective
disaffiliation. There might have been a mass withdrawal of the union members
from the NUBE-PNB Chapter. The record shows, however, that only 289 out of
3,742 members shifted their allegiance from the mother union. Hence, they
constituted a small minority for which reason they could not have successfully
severed the local union’s affiliation with NUBE.
Thus, since only a minority of the members wanted disaffiliation as shown by the
certification election, it can be inferred that the majority of the members wanted the
union to remain an affiliate of the NUBE. [Villar, et al. v. Inciong, et al.]. There
being no justified disaffiliation that took place, the bargaining agent’s right under
the provision of the CBA on Check-Off is unaffected and still remained with the old
NUBE-PNB Chapter. x x x
While it is true that the obligation of an employee to pay union dues is co-terminus
with his affiliation [Philippine Federation of Petroleum Workers v. CIR], it is equally
tenable that when it is shown, as in this case, that the withdrawal from the mother
union is not supported by majority of the members, the disaffiliation is unjustified
and the disaffiliated minority group has no authority to represent the employees of
the bargaining unit. This is the import of the principle laid down in [Volkschel Labor
Union v. Bureau of Labor Relations supra] and the inverse application of the
Supreme Court decision in [Philippine Federation of Petroleum Workers v. CIR]
regarding entitlement to the check-off provision of the CBA.
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As a necessary consequence to our finding that no valid disaffiliation took place,
the right of NUBE to represent its local chapter at the PNB, less those employees
who are no longer members of the latter, is beyond reproach.
However, the Bank cannot be faulted for not releasing union dues to NUBE at the
time when representation status issue was still being threshed out by proper
governmental authority. Prudence dictates the discontinuance of remittance of
union dues to NUBE under such circumstances was a legitimate exercise of
management discretion apparently in order to protect the Bank’s business interest.
The suspension of the check-off provision of the CBA, at the instance of the latter
made in good faith, under the present circumstances cannot give rise to a right of
action. For having been exercised without malice much less evil motive and for not
causing actual loss to the National Union of Bank Employees (NUBE), the same
act of management [cannot] be penalized.17
Aggrieved, PEMA filed before the CA a petition under Rule 43 of the Rules on Civil
Procedure with prayer for the issuance of a temporary restraining order (TRO) or
writ of preliminary injunction (WPI). On November 2, 2004, the CA denied the
application for WPI.18 PEMA’s motion for reconsideration was also denied on
February 24, 2005, noting PNB’s manifestation that it would submit to the
judgment of the CA as to which party it should remit the funds collected from the
employees.19
On June 21, 2005, however, petitioner again filed an Urgent Motion for the
Issuance of a TRO against the June 10, 2005 Resolution of DOLE Acting
Secretary Imson, which ordered PNB to properly issue a check directly payable to
the order of NUBE covering the withheld funds from the trust
account.20 Considering the different factual milieu, the CA resolved to grant the
motion.21
Subsequent to the parties’ submission of memoranda, the CA promulgated its May
22, 2006 Decision, declaring the validity of PEMA’s disaffiliation from NUBE and
directing PNB to return to the employees concerned the amounts deducted and
held in trust for NUBE starting July 2003 and to stop further deductions in favor of
NUBE.22
As to the impropriety of denying PEMA’s motion for intervention, the CA noted:
x x x Among the rights of the [PEMA] as an affiliate of a federation is to disaffiliate
from it. Any case in which this is an issue is then one in which the union has a
significant legal interest and as to which it must be heard, irrespective of any
residual rights of the members after a decision that might deny a disaffiliation. It is
a non-sequitur to make the intervention of the union in this case dependent on the
question of whether its members can pursue their own agenda under the same
constraints.23
On the validity of PEMA’s disaffiliation, the CA ratiocinated:
The power and freedom of a local union to disaffiliate from its mother union or
federation is axiomatic. As Volkschel vs. Bureau of Labor Relations [137 SCRA 42]
recognizes, a local union is, after all, a separate and voluntary association that
under the constitutional guarantee of freedom of expression is free to serve the
interests of its members. Such right and freedom invariably include the right to
disaffiliate or declare its autonomy from the federation or mother union to which it
belongs, subject to reasonable restrictions in the law or the federation’s
constitution. [Malayang Samahan ng mga Manggagawa sa M. Greenfield vs.
Ramos, 326 SCRA 428]
Without any restrictive covenant between the parties, [Volkschel Labor Union vs.
Bureau of Labor Relations, supra, at 48,] it is instructive to look into the state of the
law on a union’s right to disaffiliate. The voluntary arbitrator alludes to a provision
in PD 1391 allowing disaffiliation only within a 60-day period preceding the
expiration of the CBA. In Alliance of Nationalist and Genuine Labor Organization
vs. Samahan ng mga Manggagawang Nagkakaisa sa Manila Bay Spinning Mills,
etc. [258 SCRA 371], however, the rule was not held to be iron-clad. Volkschel
was cited to support a more flexible view that the right may be allowed as the
circumstances warrant. In Associated Workers Union-PTGWO vs. National Labor
Relations Commission [188 SCRA 123], the right to disaffiliate was upheld before
the onset of the freedom period when it became apparent that there was a shift of
allegiance on the part of the majority of the union members.
xxxx
As the records show, a majority, indeed a vast majority, of the members of the
local union ratified the action of the board to disaffiliate. Our count of the members
who approved the board action is, 2,638. If we divide this by the number of eligible
voters as per the certification election which is 3,742, the quotient is 70.5%,
representing the proportion of the members in favor of disaffiliation. The [PEMA]
says that the action was ratified by 81%. Either way, the groundswell of support for
the measure was overwhelming.
The respondent NUBE has developed the ingenious theory that if the disaffiliation
was approved by a majority of the members, it was neutered by the subsequent
certification election in which NUBE-PNB Chapter was voted the sole and
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exclusive bargaining agent. It is argued that the effects of this change must be VI.
upheld as the latest expression of the will of the employees in the bargaining unit.
The truth of the matter is that the names of PEMA and NUBE-PNB Chapter are PEMA and NUBE are not one and the same, and the denial by the Secretary of
names of only one entity, the two sides of the same coin. We have seen how Labor of the motion for intervention was proper.
NUBE-PNB Employees Chapter evolved into PEMA and competed with
Philnabank Employees Association-FFW for supremacy in the certification
VII.
election. To realize that it was PEMA which entered into the contest, we need only
to remind ourselves that PEMA was the one which filed a motion in the certification
election case to have its name PEMA put in the official ballot. DOLE insisted, NUBE-PNB Chapter, not PEMA, has been fighting for PNB rank-and-file interests
however, in putting the name NUBE-PNB Chapter in the ballots unaware of the and rights since PNB’s privatization, which is further pro of that NUBE-PNB
implications of this seemingly innocuous act.24 Chapter and PEMA are not one and the same.

NUBE filed a motion for reconsideration, but it was denied;25 hence, this petition VIII.
raising the following issues for resolution:
The alleged disaffiliation was not valid as proper procedure was not followed.
I.
IX.
The Secretary of Labor acted without error and without grave abuse of discretion in
not giving due course to the urgent motion for intervention filed by PEMA. NUBE is entitled to check-off.26

II. Stripped of the non-essential, the issue ultimately boils down on whether PEMA
validly disaffiliated itself from NUBE, the resolution of which, in turn, inevitably
The Secretary of Labor acted without grave abuse of discretion and without affects the latter’s right to collect the union dues held in trust by PNB.
serious error in ruling that PEMA’s alleged disaffiliation was invalid.
We deny the petition.
III.
Whether there was a valid disaffiliation is a factual issue.27 It is elementary that a
The Secretary of Labor did not commit serious error in ordering the release of the question of fact is not appropriate for a petition for review on certiorari under Rule
disputed union fees/dues to NUBE-PNB Chapter. 45 of the Rules of Court. The parties may raise only questions of law because the
Supreme Court is not a trier of facts. As a general rule, We are not duty-bound to
analyze again and weigh the evidence introduced in and considered by the
IV.
tribunals below. When supported by substantial evidence, the findings of fact of the
CA are conclusive and binding on the parties and are not reviewable by this Court,
There is no substantial basis for the issuance of a preli minary injunction or except: (1) When the conclusion is a finding grounded entirely on speculation,
temporary restraining order. surmises and conjectures; (2) When the inference made is manifestly mistaken,
absurd or impossible; (3) Where there is a grave abuse of discretion; (4) When the
V. judgment is based on a misapprehension of facts; (5) When the findings of fact are
conflicting; (6) When the CA, in making its findings, went beyond the issues of the
Under the Rules of Court, the appeal/petition of PEMA should have been case and the same is contrary to the admissions of both parties; (7) When the
dismissed. findings are contrary to those of the trial court; (8) When the findings of fact are
conclusions without citation of specific evidence on which they are based; (9)
When the facts set forth in the petition as well as in the petitioner’s main and reply

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briefs are not disputed by the respondents; and (10) When the findings of fact of
the CA are premised on the supposed absence of evidence and contradicted by
the evidence on record.28The Court finds no cogent reason to apply these
recognized exceptions.
Even a second look at the records reveals that the arguments raised in the petition
are bereft of merit.
The right of the local union to exercise the right to disaffiliate from its mother union
is well settled in this jurisdiction. In MSMG-UWP v. Hon. Ramos,29 We held:
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 which it belongs when circumstances warrant, in
accordance with the constitutional guarantee of freedom of association.
The purpose of affiliation by a local union with a mother union [or] a federation
"x x x 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."
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.30
Likewise, Philippine Skylanders, Inc. v. National Labor Relations
Commission31 restated:
The right of a local union to disaffiliate from its mother federation is not a novel
thesis unillumined by case law.1âwphi1 In the landmark case of Liberty Cotton
Mills Workers Union vs. Liberty Cotton Mills, Inc., we upheld the right of local
unions to separate from their mother federation on the ground that as separate and
voluntary associations, local unions do not owe their creation and existence to the
national federation to which they are affiliated but, instead, to the will of their
members. The sole essence of affiliation is to increase, by collective action, the
common bargaining power of local unions for the effective enhancement and
protection of their interests. Admittedly, there are times when without succor and
support local unions may find it hard, unaided by other support groups, to secure
justice for themselves.
Yet the local unions remain the basic units of association, free to serve their own
interests subject to the restraints imposed by the constitution and by-laws of the
national federation, and free also to renounce the affiliation upon the terms laid
down in the agreement which brought such affiliation into existence.
Such dictum has been punctiliously followed since then.32
And again, in Coastal Subic Bay Terminal, Inc. v. Department of Labor and
Employment – Office of the Secretary,33this Court opined:
Under the rules implementing the Labor Code, a chartered local union acquires
legal personality through the charter certificate issued by a duly registered
federation or national union, and reported to the Regional Office in accordance
with the rules implementing the Labor Code. A local union does not owe its
existence to the federation with which it is affiliated. It is a separate and distinct
voluntary association owing its creation to the will of its members. Mere affiliation
does not divest the local union of its own personality, neither does it give the
mother federation the license to act independently of the local union. It only gives
rise to a contract of agency, where the former acts in representation of the latter.
Hence, local unions are considered principals while the federation is deemed to be
merely their agent. As such principals, the unions are entitled to exercise the rights
and privileges of a legitimate labor organization, including the right to seek
certification as the sole and exclusive bargaining agent in the appropriate employer
unit.34
Finally, the recent case of Cirtek Employees Labor Union-Federation of Free
Workers v. Cirtek Electronics, Inc35ruled:
x x x [A] local union may disaffiliate at any time from its mother federation, absent
any showing that the same is prohibited under its constitution or rule. Such,
however, does not result in it losing its legal personality altogether. Verily, Anglo-
KMU v. Samahan Ng Mga Manggagawang Nagkakaisa Sa Manila Bar Spinning
Mills At J.P. Coats enlightens:
A local labor union is a separate and distinct unit primarily designed to secure and
maintain an equality of bargaining power between the employer and their
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employee-members. A local union does not owe its existence to the federation with
which it is affiliated. It is a separate and distinct voluntary association owing its
creation to the will of its members. The mere act of affiliation does not divest the
local union of its own personality, neither does it give the mother federation the
license to act independently of the local union. It only gives rise to a contract of
agency where the former acts in representation of the latter.36
These and many more have consistently reiterated the earlier view that the right of
the local members to withdraw from the federation and to form a new local union
depends upon the provisions of the union's constitution, by-laws and charter and,
in the absence of enforceable provisions in the federation's constitution preventing
disaffiliation of a local union, a local may sever its relationship with its parent. 37 In
the case at bar, there is nothing shown in the records nor is it claimed by NUBE
that PEMA was expressly forbidden to disaffiliate from the federation nor were
there any conditions imposed for a valid breakaway. This being so, PEMA is not
precluded to disaffiliate from NUBE after acquiring the status of an independent
labor organization duly registered before the DOLE.
Also, there is no merit on NUBE’s contention that PEMA’s disaffiliation is invalid for
non-observance of the procedure that union members should make such
determination through secret ballot and after due deliberation, conformably with
Article 241 (d) of the Labor Code, as amended.38 Conspicuously, other than citing
the opinion of a "recognized labor law authority," NUBE failed to quote a specific
provision of the law or rule mandating that a local union’s disaffiliation from a
federation must comply with Article 241 (d) in order to be valid and effective.
Granting, for argument’s sake, that Article 241 (d) is applicable, still, We uphold
PEMA’s disaffiliation from NUBE. First, non-compliance with the procedure on
disaffiliation, being premised on purely technical grounds cannot rise above the
employees’ fundamental right to self-organization and to form and join labor
organizations of their own choosing for the purpose of collective
bargaining.39 Second, the Article nonetheless provides that when the nature of the
organization renders such secret ballot impractical, the union officers may make
the decision in behalf of the general membership. In this case, NUBE did not even
dare to contest PEMA’s representation that "PNB employees, from where [PEMA]
[derives] its membership, are scattered from Aparri to Jolo, manning more than
300 branches in various towns and cities of the country," hence, "[to] gather the
general membership of the union in a general membership to vote through secret
balloting is virtually impossible."40 It is understandable, therefore, why PEMA’s
board of directors merely opted to submit for ratification of the majority their
resolution to disaffiliate from NUBE. Third, and most importantly, NUBE did not
dispute the existence of the persons or their due execution of the document
showing their unequivocal support for the disaffiliation of PEMA from NUBE. Note
must be taken of the fact that the list of PEMA members (identifying themselves as
"PEMA-Serrana Group"41) who agreed with the board resolution was attached as
Annex "H" of PEMA’s petition before the CA and covered pages 115 to 440 of the
CA rollo. While fully displaying the employees’ printed name, identification number,
branch, position, and signature, the list was left unchallenged by NUBE. No
evidence was presented that the union members’ ratification was obtained by
mistake or through fraud, force or intimidation. Surely, this is not a case where one
or two members of the local union decided to disaffiliate from the mother
federation, but one where more than a majority of the local union members
decided to disaffiliate.
Consequently, by PEMA's valid disaffiliation from NUBE, the vinculum that
previously bound the two entities was completely severed. As NUBE was divested
of any and all power to act in representation of PEMA, any act performed by the
former that affects the interests and affairs of the latter, including the supposed
expulsion of Serrana et al., is rendered without force and effect.
Also, in effect, NUBE loses it right to collect all union dues held in its trust by PNB.
The moment that PEMA separated from and left NUBE and exists as an
independent labor organization with a certificate of registration, the former is no
longer obliged to pay dues and assessments to the latter; naturally, there would be
no longer any reason or occasion for PNB to continue making deductions. 42 As we
said in Volkschel Labor Union v. Bureau of Labor Relations:43
x x x In other words, ALUMETAL [NUBE in this case] is entitled to receive the dues
from respondent companies as long as petitioner union is affiliated with it and
respondent companies are authorized by their employees (members of petitioner
union) to deduct union dues. Without said affiliation, the employer has no link to
the mother union. The obligation of an employee to pay union dues is coterminous
with his affiliation or membership. "The employees' check-off authorization, even if
declared irrevocable, is good only as long as they remain members of the union
concerned." A contract between an employer and the parent organization as
bargaining agent for the employees is terminated bv the disaffiliation ofthe local of
which the employees are members. x x x44
On the other hand, it was entirely reasonable for PNB to enter into a CBA with
PEMA as represented by Serrana et al. Since PEMA had validly separated itself
from NUBE, there would be no restrictions which could validly hinder it from
collectively bargaining with PNB.
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WHEREFORE, the foregoing considered, the instant Petition is DENIED. The May
22, 2006 Decision and August 17, 2006 Resolution of the Court of Appeals in CA-
G.R. SP No. 84606, which reversed the May 27, 2004 Decision ofthe Secretary of
Labor and Employment, are AFFIRMED.
SO ORDERED.
G.R. No. 179146 July 23, 2013
HOLY CHILD CATHOLIC SCHOOL, Petitioner,
vs.
HON. PATRICIA STO. TOMAS, in her official capacity as Secretary of the
Department of Labor and Employment, and PINAG-ISANG TINIG AT LAKAS
NG ANAKPAWIS – HOLY CHILD CATHOLIC SCHOOL TEACHERS AND
EMPLOYEES LABOR UNION (HCCS-TELU-PIGLAS), Respondents.
DECISION
PERALTA, J.:
Assailed in this petition for review on certiorari under Rule 45 of the Rules of Civil
Procedure are the April 18, 2007 Decision1 and July 31, 2007 Resolution2 of the
Court of Appeals in CA-G.R. SP No. 76175, which affirmed the December 27,
2002 Decision3 and February 13, 2003 Resolution4 of the Secretary of the
Department of Labor and Employment (SOLE) that set aside the August 10, 2002
Decision5 of the Med-Arbiter denying private respondent’s petition for certification
election.
The factual antecedents are as follows:
On May 31, 2002, a petition for certification election was filed by private
respondent Pinag-Isang Tinig at Lakas ng Anakpawis – Holy Child Catholic School
Teachers and Employees Labor Union (HCCS-TELUPIGLAS), alleging that:
PIGLAS is a legitimate labor organization duly registered with the Department of
Labor and Employment (DOLE) representing HCCS-TELU-PIGLAS; HCCS is a
private educational institution duly registered and operating under Philippine laws;
there are approximately one hundred twenty (120) teachers and employees
comprising the proposed appropriate bargaining unit; and HCCS is unorganized,
there is no collective bargaining agreement or a duly certified bargaining agent or a
labor organization certified as the sole and exclusive bargaining agent of the
proposed bargaining unit within one year prior to the filing of the petition. 6 Among
the documents attached to the petition were the certificate of affiliation with Pinag-
Isang Tinig at Lakas ng Anakpawis Kristiyanong Alyansa ng Makabayang Obrero
(PIGLAS-KAMAO) issued by the Bureau of Labor Relations (BLR), charter
certificate issued by PIGLASKAMAO, and certificate of registration of HCCS-TELU
as a legitimate labor organization issued by the DOLE.7
In its Comment8 and Position Paper,9 petitioner HCCS consistently noted that it is
a parochial school with a total of 156 employees as of June 28, 2002, broken down
as follows: ninety-eight (98) teaching personnel, twenty-five (25) non-teaching
academic employees, and thirty-three (33) non-teaching non-academic workers. It
averred that of the employees who signed to support the petition, fourteen (14)
already resigned and six (6) signed twice. Petitioner raised that members of private
respondent do not belong to the same class; it is not only a mixture of managerial,
supervisory, and rank-and-file employees – as three (3) are vice-principals, one (1)
is a department head/supervisor, and eleven (11) are coordinators – but also a
combination of teaching and non-teaching personnel – as twenty-seven (27) are
non-teaching personnel. It insisted that, for not being in accord with Article 24510 of
the Labor Code, private respondent is an illegitimate labor organization lacking in
personality to file a petition for certification election, as held in Toyota Motor
Philippines Corporation v. Toyota Motor Philippines Corporation Labor
Union;11 and an inappropriate bargaining unit for want of community or mutuality of
interest, as ruled in Dunlop Slazenger (Phils.), Inc. v. Secretary of Labor and
Employment12 and De La Salle University Medical Center and College of Medicine
v. Laguesma.13
Private respondent, however, countered that petitioner failed to substantiate its
claim that some of the employees included in the petition for certification election
holds managerial and supervisory positions.14 Assuming it to be true, it argued that
Section 11 (II),15 Rule XI of DOLE Department Order (D.O.) No. 9, Series of 1997,
provided for specific instances in which a petition filed by a legitimate organization
shall be dismissed by the Med-Arbiter and that "mixture of employees" is not one
of those enumerated. Private respondent pointed out that questions pertaining to
qualifications of employees may be threshed out in the inclusion-exclusion
proceedings prior to the conduct of the certification election, pursuant to Section
2,16 Rule XII of D.O. No. 9. Lastly, similar to the ruling in In Re: Globe Machine and
Stamping Company,17 it contended that the will of petitioner’s employees should
be respected as they had manifested their desire to be represented by only one
bargaining unit. To back up the formation of a single employer unit, private
respondent asserted that even if the teachers may receive additional pay for an
advisory class and for holding additional loads, petitioner’s academic and non-
academic personnel have similar working conditions. It cited Laguna College v.
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Court of Industrial Relations,18 as well as the case of a union in West Negros
College in Bacolod City, which allegedly represented both academic and non-
academic employees.
On August 10, 2002, Med-Arbiter Agatha Ann L. Daquigan denied the petition for
certification election on the ground that the unit which private respondent sought to
represent is inappropriate. She resolved:
A certification election proceeding directly involves two (2) issues namely: (a) the
proper composition and constituency of the bargaining unit; and (b) the validity of
majority representation claims. It is therefore incumbent upon the Med-Arbiter to
rule on the appropriateness of the bargaining unit once its composition and
constituency is questioned.
Section 1 (q), Rule I, Book V of the Omnibus Rules defines a "bargaining unit" as a
group of employees sharing mutual interests within a given employer unit
comprised of all or less than all of the entire body of employees in the employer
unit or any specific occupational or geographical grouping within such employer
unit. This definition has provided the "community or mutuality of interest" test as
the standard in determining the constituency of a collective bargaining unit. This is
so because the basic test of an asserted bargaining unit’s acceptability is whether
or not it is fundamentally the combination which will best assure to all employees
the exercise of their collective bargaining rights. The application of this test may
either result in the formation of an employer unit or in the fragmentation of an
employer unit.
In the case at bar, the employees of petitioner, may, as already suggested, quite
easily be categorized into (2) general classes: one, the teaching staff; and two, the
non-teaching-staff. Not much reflection is needed to perceive that the community
or mutuality of interest is wanting between the teaching and the non-teaching staff.
It would seem obvious that the teaching staff would find very little in common with
the non-teaching staff as regards responsibilities and function, working conditions,
compensation rates, social life and interests, skills and intellectual pursuits, etc.
These are plain and patent realities which cannot be ignored. These dictate the
separation of these two categories of employees for purposes of collective
bargaining. (University of the Philippines vs. Ferrer-Calleja, 211 SCRA 451)19
Private respondent appealed before the SOLE, who, on December 27, 2002, ruled
against the dismissal of the petition and directed the conduct of two separate
certification elections for the teaching and the non-teaching personnel, thus:
We agree with the Med-Arbiter that there are differences in the nature of work,
hours and conditions of work and salary determination between the teaching and
non-teaching personnel of petitioner. These differences were pointed out by
petitioner in its position paper. We do not, however, agree with the Med-Arbiter
that these differences are substantial enough to warrant the dismissal of the
petition. First, as pointed out by private respondent, "inappropriateness of the
bargaining unit sought to be represented is not a ground for the dismissal of the
petition." In fact, in the cited case of University of the Philippines v. Ferrer-Calleja,
supra, the Supreme Court did not order the dismissal of the petition but ordered
the conduct of a certification election, limiting the same among the non-academic
personnel of the University of the Philippines.
It will be recalled that in the U.P. case, there were two contending unions, the
Organization of Non-Academic Personnel of U.P. (ONAPUP) and All U.P. Workers
Union composed of both academic and nonacademic personnel of U.P. ONAPUP
sought the conduct of certification election among the rank-and-file non-academic
personnel only while the all U.P. Workers Union sought the conduct of certification
election among all of U.P.’s rank-and-file employees covering academic and
nonacademic personnel. While the Supreme Court ordered a separate bargaining
unit for the U.P. academic personnel, the Court, however, did not order them to
organize a separate labor organization among themselves. The All U.P. Workers
Union was not directed to divest itself of its academic personnel members and in
fact, we take administrative notice that the All U.P. Workers Union continue to exist
with a combined membership of U.P. academic and non-academic personnel
although separate bargaining agreements is sought for the two bargaining units.
Corollary, private respondent can continue to exist as a legitimate labor
organization with the combined teaching and non-teaching personnel in its
membership and representing both classes of employees in separate bargaining
negotiations and agreements.
WHEREFORE, the Decision of the Med-Arbiter dated 10 August 2002 is hereby
REVERSED and SET ASIDE. In lieu thereof, a new order is hereby issued
directing the conduct of two certification elections, one among the non-teaching
personnel of Holy Child Catholic School, and the other, among the teaching
personnel of the same school, subject to the usual pre-election conferences and
inclusion-exclusion proceedings, with the following choices:
A. Certification Election Among Petitioner’s Teaching Personnel:
1. Holy Child Catholic School Teachers and Employees Labor
Union; and
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 2. No Union.
B. Certification Election Among Petitioner’s Non-Teaching Personnel:
1. Holy Child Catholic School Teachers and Employees Labor
Union; and
2. No Union.
Petitioner is hereby directed to submit to the Regional Office of origin within ten
(10) days from receipt of this Decision, a certified separate list of its teaching and
non-teaching personnel or when necessary a separate copy of their payroll for the
last three (3) months prior to the issuance of this Decision.20
Petitioner filed a motion for reconsideration21 which, per Resolution dated February
13, 2003, was denied. Consequently, petitioner filed before the CA a Petition for
Certiorari with Prayer for Temporary Restraining Order and Preliminary
Injunction.22 The CA resolved to defer action on the prayer for TRO pending the
filing of private respondent’s Comment.23 Later, private respondent and petitioner
filed their Comment24 and Reply,25 respectively.
On July 23, 2003, petitioner filed a motion for immediate issuance of a TRO,
alleging that Hon. Helen F. Dacanay of the Industrial Relations Division of the
DOLE was set to implement the SOLE Decision when it received a summons and
was directed to submit a certified list of teaching and non-teaching personnel for
the last three months prior to the issuance of the assailed Decision.26 Acting
thereon, on August 5, 2003, the CA issued the TRO and ordered private
respondent to show cause why the writ of preliminary injunction should not be
granted.27 Subsequently, a Manifestation and Motion28 was filed by private
respondent, stating that it repleads by reference the arguments raised in its
Comment and that it prays for the immediate lifting of the TRO and the denial of
the preliminary injunction. The CA, however, denied the manifestation and motion
on November 21, 200329 and, upon motion of petitioner,30 granted the preliminary
injunction on April 21, 2005.31 Thereafter, both parties filed their respective
Memorandum.32
On April 18, 2007, the CA eventually dismissed the petition. As to the purported
commingling of managerial, supervisory, and rank-and-file employees in private
respondent’s membership, it held that the Toyota ruling is inapplicable because the
vice-principals, department head, and coordinators are neither supervisory nor
managerial employees. It reasoned:
x x x While it may be true that they wield power over other subordinate employees
of the petitioner, it must be stressed, however, that their functions are not confined
with policy-determining such as hiring, firing, and disciplining of employees,
salaries, teaching/working hours, other monetary and non-monetary benefits, and
other terms and conditions of employment. Further, while they may formulate
policies or guidelines, nonetheless, such is merely recommendatory in nature, and
still subject to review and evaluation by the higher executives, i.e., the principals or
executive officers of the petitioner. It cannot also be denied that in institutions like
the petitioner, company policies have already been pre-formulated by the higher
executives and all that the mentioned employees have to do is carry out these
company policies and standards. Such being the case, it is crystal clear that there
is no improper commingling of members in the private respondent union as to
preclude its petition for certification of (sic) election.33
Anent the alleged mixture of teaching and non-teaching personnel, the CA agreed
with petitioner that the nature of the former’s work does not coincide with that of
the latter. Nevertheless, it ruled that the SOLE did not commit grave abuse of
discretion in not dismissing the petition for certification election, since it directed
the conduct of two separate certification elections based on Our ruling in University
of the Philippines v. Ferrer-Calleja.34
A motion for reconsideration35 was filed by petitioner, but the CA denied the
same;36 hence, this petition assigning the alleged errors as follows:
I.
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE
RULING IN THE CASE OF TOYOTA MOTOR PHILIPPINES CORPORATION VS.
TOYOTA MOTOR PHILIPPINES CORPORATION LABOR UNION (268 SCRA
573) DOES NOT APPLY IN THE CASE AT BAR DESPITE THE [COMMINGLING]
OF BOTH SUPERVISORY OR MANAGERIAL AND RANK-AND-FILE
EMPLOYEES IN THE RESPONDENT UNION;
II
THE HONORABLE COURT OF APPEALS ERRED IN ITS CONFLICTING
RULING ALLOWING THE CONDUCT OF CERTIFICATION ELECTION BY
UPHOLDING THAT THE RESPONDENT UNION REPRESENTED A
BARGAINING UNIT DESPITE ITS OWN FINDINGS THAT THERE IS NO
MUTUALITY OF INTEREST BETWEEN THE MEMBERS OF RESPONDENT
UNION APPLYING THE TEST LAID DOWN IN THE CASE OF UNIVERSITY OF
THE PHILIPPINES VS. FERRER-CALLEJA (211 SCRA 451).37
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We deny.
Petitioner claims that the CA contradicted the very definition of managerial and
supervisory employees under existing law and jurisprudence when it did not
classify the vice-principals, department head, and coordinators as managerial or
supervisory employees merely because the policies and guidelines they formulate
are still subject to the review and evaluation of the principal or executive officers of
petitioner. It points out that the duties of the vice-principals, department head, and
coordinators include the evaluation and assessment of the effectiveness and
capability of the teachers under them; that such evaluation and assessment is
independently made without the participation of the higher Administration of
petitioner; that the fact that their recommendation undergoes the approval of the
higher Administration does not take away the independent nature of their
judgment; and that it would be difficult for the vice-principals, department head,
and coordinators to objectively assess and evaluate the performances of teachers
under them if they would be allowed to be members of the same labor union.
On the other hand, aside from reiterating its previous submissions, private
respondent cites Sections 9 and 1238 of Republic Act (R.A.) No. 9481 to buttress
its contention that petitioner has no standing to oppose the petition for certification
election. On the basis of the statutory provisions, it reasons that an employer is not
a party-in-interest in a certification election; thus, petitioner does not have the
requisite right to protect even by way of restraining order or injunction.
First off, We cannot agree with private respondent’s invocation of R.A. No. 9481.
Said law took effect only on June 14, 2007; hence, its applicability is limited to
labor representation cases filed on or after said date. 39 Instead, the law and rules
in force at the time private respondent filed its petition for certification election on
May 31, 2002 are R.A. No. 6715, which amended Book V of Presidential Decree
(P.D.) No. 442 (the Labor Code), as amended, and the Rules and Regulations
Implementing R.A. No. 6715, as amended by D.O. No. 9, which was dated May 1,
1997 but took effect on June 21, 1997.40
However, note must be taken that even without the express provision of Section 12
of RA No. 9481, the "Bystander Rule" is already well entrenched in this jurisdiction.
It has been consistently held in a number of cases that a certification election is the
sole concern of the workers, except when the employer itself has to file the petition
pursuant to Article 259 of the Labor Code, as amended, but even after such filing
its role in the certification process ceases and becomes merely a bystander. 41 The
employer clearly lacks the personality to dispute the election and has no right to
interfere at all therein.42 This is so since any uncalled-for concern on the part of the
employer may give rise to the suspicion that it is batting for a company
union.43 Indeed, the demand of the law and policy for an employer to take a strict,
hands-off stance in certification elections is based on the rationale that the
employees’ bargaining representative should be chosen free from any extraneous
influence of the management; that, to be effective, the bargaining representative
must owe its loyalty to the employees alone and to no other.44
Now, going back to petitioner’s contention, the issue of whether a petition for
certification election is dismissible on the ground that the labor organization’s
membership allegedly consists of supervisory and rank-and-file employees is
actually not a novel one. In the 2008 case of Republic v. Kawashima Textile Mfg.,
Philippines, Inc.,45 wherein the employer-company moved to dismiss the petition
for certification election on the ground inter alia that the union membership is a
mixture of rank-and-file and supervisory employees, this Court had conscientiously
discussed the applicability of Toyota and Dunlop in the context of R.A. No. 6715
and D.O. No. 9, viz.:
It was in R.A. No. 875, under Section 3, that such questioned mingling was first
prohibited, to wit:
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 or 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. (Emphasis
supplied)
Nothing in R.A. No. 875, however, tells of how the questioned mingling can affect
the legitimacy of the labor organization. Under Section 15, the only instance when
a labor organization loses its legitimacy is when it violates its duty to bargain
collectively; but there is no word on whether such mingling would also result in loss
of legitimacy. Thus, when the issue of whether the membership of two supervisory
employees impairs the legitimacy of a rank-and-file labor organization came before
the Court En Banc in Lopez v. Chronicle Publication Employees Association, the
majority pronounced:
It may be observed that nothing is said of the effect of such ineligibility upon the
union itself or on the status of the other qualified members thereof should such
prohibition be disregarded. Considering that the law is specific where it intends to
divest a legitimate labor union of any of the rights and privileges granted to it by
law, the absence of any provision on the effect of the disqualification of one of its
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organizers upon the legality of the union, may be construed to confine the effect of
such ineligibility only upon the membership of the supervisor. In other words, the
invalidity of membership of one of the organizers does not make the union illegal,
where the requirements of the law for the organization thereof are, nevertheless,
satisfied and met. (Emphasis supplied)
Then the Labor Code was enacted in 1974 without reproducing Sec. 3 of R.A. No.
875. The provision in the Labor Code closest to Sec. 3 is Article 290, which is
deafeningly silent on the prohibition against supervisory employees mingling with
rank-and-file employees in one labor organization. Even the Omnibus Rules
Implementing Book V of the Labor Code (Omnibus Rules) merely provides in
Section 11, Rule II, thus:
Sec. 11. 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 cancelled. 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 organization.
The determination of who are managerial employees and who are not shall be the
subject of negotiation between representatives of supervisory union and the
employer. If no agreement s reached between the parties, either or both of them
may bring the issue to the nearest Regional Office for determination. (Emphasis
supplied)
The obvious repeal of the last clause of Sec. 3, R.A. No. 875 prompted the Court
to declare in Bulletin v. Sanchez that supervisory employees who do not fall under
the category of managerial employees may join or assist in the formation of a labor
organization for rank-and-file employees, but they may not form their own labor
organization.
While amending certain provisions of Book V of the Labor Code, E.O. No. 111 and
its implementing rules continued to recognize the right of supervisory employees,
who do not fall under the category of managerial employees, to join a rank- and-file
labor organization.
Effective 1989, R.A. No. 6715 restored the prohibition against the questioned
mingling in one labor organization, viz.:
Sec. 18. Article 245 of the same Code, as amended, is hereby further amended to
read as follows:
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 (Emphasis supplied)
Unfortunately, just like R.A. No. 875, R.A. No. 6715 omitted specifying the exact
effect any violation of the prohibition would bring about on the legitimacy of a labor
organization.
It was the Rules and Regulations Implementing R.A. No. 6715 (1989 Amended
Omnibus Rules) which supplied the deficiency by introducing the following
amendment to Rule II (Registration of Unions):
Sec. 1. Who may join unions. - x x x Supervisory employees and security guards
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;
Provided, that those 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 x x x. (Emphasis supplied)
and Rule V (Representation Cases and Internal-Union Conflicts) of the Omnibus
Rules, viz.;
Sec. 1. Where to file. - A petition for certification election may be filed with the
Regional Office which has jurisdiction over the principal office of the employer. The
petition shall be in writing and under oath.
Sec. 2. Who may file. - Any legitimate labor organization or the employer, when
requested to bargain collectively, may file the petition.
The petition, when filed by a legitimate labor organization, shall contain, among
others:
xxxx
(c) description of the bargaining unit which shall be the employer unit unless
circumstances otherwise require; and provided further, that the appropriate
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bargaining unit of the rank-and-file employees shall not include supervisory
employees and/or security guards. (Emphasis supplied)
By that provision, any questioned mingling will prevent an otherwise legitimate and
duly registered labor organization from exercising its right to file a petition for
certification election.
Thus, when the issue of the effect of mingling was brought to the fore in Toyota,
the Court, citing Article 245 of the Labor Code, as amended by R.A. No. 6715,
held:
Clearly, based on this provision, a labor organization composed of both rank-and-
file and supervisory employees is no labor organization at all. It cannot, for any
guise or purpose, be a legitimate labor organization. Not being one, an
organization which carries a mixture of rank-and-file and supervisory employees
cannot possess any of the rights of a legitimate labor organization, including the
right to file a petition for certification election for the purpose of collective
bargaining. It becomes necessary, therefore, anterior to the granting of an order
allowing a certification election, to inquire into the composition of any labor
organization whenever the status of the labor organization is challenged on the
basis of Article 245 of the Labor Code.
xxxx
In the case at bar, as respondent union's membership list contains the names of at
least twenty-seven (27) supervisory employees in Level Five positions, the union
could not, prior to purging itself of its supervisory employee members, attain the
status of a legitimate labor organization. Not being one, it cannot possess the
requisite personality to file a petition for certification election. (Emphasis supplied)
In Dunlop, in which the labor organization that filed a petition for certification
election was one for supervisory employees, but in which the membership included
rank-and-file employees, the Court reiterated that such labor organization had no
legal right to file a certification election to represent a bargaining unit composed of
supervisors for as long as it counted rank-and-file employees among its members.
It should be emphasized that the petitions for certification election involved in
Toyota and Dunlop were filed on November 26, 1992 and September 15, 1995,
respectively; hence, the 1989 Rules was applied in both cases.
But then, on June 21, 1997, the 1989 Amended Omnibus Rules was further
amended by Department Order No. 9, series of 1997 (1997 Amended Omnibus
Rules). Specifically, the requirement under Sec. 2(c) of the 1989 Amended
Omnibus Rules - that the petition for certification election indicate that the
bargaining unit of rank-and-file employees has not been mingled with supervisory
employees - was removed. Instead, what the 1997 Amended Omnibus Rules
requires is a plain description of the bargaining unit, thus:
Rule XI
Certification Elections
xxxx
Sec. 4. Forms and contents of petition. - The petition shall be in writing and under
oath and shall contain, among others, the following: x x x (c) The description of the
bargaining unit."
In Pagpalain Haulers, Inc. v. Trajano, the Court had occasion to uphold the validity
of the 1997 Amended Omnibus Rules, although the specific provision involved
therein was only Sec. 1, Rule VI, to wit:
Sec. 1. Chartering and creation of a local/chapter.- A duly registered federation or
national union may directly create a local/chapter by submitting to the Regional
Office or to the Bureau two (2) copies of the following: a) a charter certificate
issued by the federation or national union indicating the creation or establishment
of the local/chapter; (b) the names of the local/chapter's officers, their addresses,
and the principal office of the local/chapter; and (c) the local/ chapter's constitution
and by-laws; provided that where the local/chapter's constitution and by-laws is the
same as that of the federation or national union, this fact shall be indicated
accordingly.
All the foregoing supporting requirements shall be certified under oath by the
Secretary or the Treasurer of the local/chapter and attested to by its President.
which does not require that, for its creation and registration, a local or chapter
submit a list of its members.
Then came Tagaytay Highlands Int'l. Golf Club, Inc. v. Tagaytay Highlands
Employees Union-PTGWO in which the core issue was whether mingling affects
the legitimacy of a labor organization and its right to file a petition for certification
election. This time, given the altered legal milieu, the Court abandoned the view in
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Toyota and Dunlop and reverted to its pronouncement in Lopez that while there is
a prohibition against the mingling of supervisory and rank-and-file employees in
one labor organization, the Labor Code does not provide for the effects thereof.
Thus, the Court held that after a labor organization has been registered, it may
exercise all the rights and privileges of a legitimate labor organization. Any
mingling between supervisory and rank-and-file employees in its membership
cannot affect its legitimacy for that is not among the grounds for cancellation of its
registration, unless such mingling was brought about by misrepresentation, false
statement or fraud under Article 239 of the Labor Code.
In San Miguel Corp. (Mandaue Packaging Products Plants) v. Mandaue Packing
Products Plants-San Miguel Packaging Products-San Miguel Corp. Monthlies
Rank-and-File Union-FFW, the Court explained that since the 1997 Amended
Omnibus Rules does not require a local or chapter to provide a list of its members,
it would be improper for the DOLE to deny recognition to said local or chapter on
account of any question pertaining to its individual members.
More to the point is Air Philippines Corporation v. Bureau of Labor Relations, which
involved a petition for cancellation of union registration filed by the employer in
1999 against a rank-and-file labor organization on the ground of mixed
membership: the Court therein reiterated its ruling in Tagaytay Highlands that the
inclusion in a union of disqualified employees is not among the grounds for
cancellation, unless such inclusion is due to misrepresentation, false statement or
fraud under the circumstances enumerated in Sections (a) and (c) of Article 239 of
the Labor Code.
All said, while the latest issuance is R.A. No. 9481, the 1997 Amended Omnibus
Rules, as interpreted by the Court in Tagaytay Highlands, San Miguel and Air
Philippines, had already set the tone for it. Toyota and Dunlop no longer hold sway
in the present altered state of the law and the rules.46
When a similar issue confronted this Court close to three years later, the above
ruling was substantially quoted in Samahang Manggagawa sa Charter Chemical
Solidarity of Unions in the Philippines for Empowerment and Reforms (SMCC-
Super) v. Charter Chemical and Coating Corporation. 47 In unequivocal terms, We
reiterated that the alleged inclusionof supervisory employees in a labor
organization seeking to represent the bargaining unit of rank-and-file employees
does not divest it of its status as a legitimate labor organization.48
Indeed, Toyota and Dunlop no longer hold true under the law and rules governing
the instant case. The petitions for certification election involved in Toyota and
Dunlop were filed on November 26, 1992 and September 15, 1995, respectively;
hence, the 1989 Rules and Regulations Implementing R.A. No. 6715 (1989
Amended Omnibus Rules) was applied. In contrast, D.O. No. 9 is applicable in the
petition for certification election of private respondent as it was filed on May 31,
2002.
Following the doctrine laid down in Kawashima and SMCC-Super, it must be
stressed that petitioner cannot collaterally attack the legitimacy of private
respondent by praying for the dismissal of the petition for certification election:
Except when it is requested to bargain collectively, an employer is a mere
bystander to any petition for certification election; such proceeding is non-
adversarial and merely investigative, for the purpose thereof is to determine which
organization will represent the employees in their collective bargaining with the
employer. The choice of their representative is the exclusive concern of the
employees; the employer cannot have any partisan interest therein; it cannot
interfere with, much less oppose, the process by filing a motion to dismiss or an
appeal from it; not even a mere allegation that some employees participating in a
petition for certification election are actually managerial employees will lend an
employer legal personality to block the certification election. The employer's only
right in the proceeding is to be notified or informed thereof.
The amendments to the Labor Code and its implementing rules have buttressed
that policy even more.49
Further, the determination of whether union membership comprises managerial
and/or supervisory employees is a factual issue that is best left for resolution in the
inclusion-exclusion proceedings, which has not yet happened in this case so still
premature to pass upon. We could only emphasize the rule that factual findings of
labor officials, who are deemed to have acquired expertise in matters within their
jurisdiction, are generally accorded not only with respect but even finality by the
courts when supported by substantial evidence.50 Also, the jurisdiction of this Court
in cases brought before it from the CA via Rule 45 is generally limited to reviewing
errors of law or jurisdiction. The findings of fact of the CA are conclusive and
binding. Except in certain recognized instances,51 We do not entertain factual
issues as it is not Our function to analyze or weigh evidence all over again; the
evaluation of facts is best left to the lower courts and administrative
agencies/quasi-judicial bodies which are better equipped for the task.52
Turning now to the second and last issue, petitioner argues that, in view of the
improper mixture of teaching and non-teaching personnel in private respondent
due to the absence of mutuality of interest among its members, the petition for
certification election should have been dismissed on the ground that private
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respondent is not qualified to file such petition for its failure to qualify as a
legitimate labor organization, the basic qualification of which is the representation
of an appropriate bargaining unit.
We disagree.
The concepts of a union and of a legitimate labor organization are different from,
but related to, the concept of a bargaining unit:
Article 212(g) of the Labor Code defines a labor organization as "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." Upon compliance with all the documentary requirements, the
Regional Office or Bureau shall issue in favor of the applicant labor organization a
certificate indicating that it is included in the roster of legitimate labor
organizations. Any applicant labor organization shall acquire legal personality and
shall be entitled to the rights and privileges granted by law to legitimate labor
organizations upon issuance of the certificate of registration.53
In case of alleged inclusion of disqualified employees in a union, the proper
procedure for an employer like petitioner is to directly file a petition for cancellation
of the union’s certificate of registration due to misrepresentation, false statement or
fraud under the circumstances enumerated in Article 239 of the Labor Code, as
amended.54 To reiterate, private respondent, having been validly issued a
certificate of registration, should be considered as having acquired juridical
personality which may not be attacked collaterally.
On the other hand, a bargaining unit has been 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 interests of all the employees, consistent with equity to the
employer, indicated to be best suited to serve reciprocal rights and duties of the
parties under the collective bargaining provisions of the law."55 In determining the
proper collective bargaining unit and what unit would be appropriate to be the
collective bargaining agency, the Court, in the seminal case of Democratic Labor
Association v. Cebu Stevedoring Company, Inc.,56 mentioned several factors that
should be considered, to wit: (1) will of employees (Globe Doctrine); (2) affinity and
unity of employees' interest, such as substantial similarity of work and duties, or
similarity of compensation and working conditions; (3) prior collective bargaining
history; and (4) employment status, such as temporary, seasonal and probationary
employees. We stressed, however, that the test of the grouping is community or
mutuality of interest, because "the basic test of an asserted bargaining unit's
acceptability is whether or not it is fundamentally the combination which will best
assure to all employees the exercise of their collective bargaining rights." 57
As the SOLE correctly observed, petitioner failed to comprehend the full import of
Our ruling in U.P. It suffices to quote with approval the apt disposition of the SOLE
when she denied petitioner’s motion for reconsideration:
Petitioner likewise claimed that we erred in interpreting the decision of the
Supreme Court in U.P. v. Ferrer-Calleja, supra. According to petitioner, the
Supreme Court stated that the non-academic rank-andfile employees of the
University of the Philippines shall constitute a bargaining unit to the exclusion of
the academic employees of the institution. Hence, petitioner argues, it sought the
creation of separate bargaining units, namely: (1) petitioner’s teaching personnel to
the exclusion of non-teaching personnel; and (2) petitioner’s non-teaching
personnel to the exclusion of teaching personnel.
Petitioner appears to have confused the concepts of membership in a bargaining
unit and membership in a union. In emphasizing the phrase "to the exclusion of
academic employees" stated in U.P. v. Ferrer-Calleja, petitioner believed that the
petitioning union could not admit academic employees of the university to its
membership. But such was not the intention of the Supreme Court.
A bargaining unit is a group of employees sought to be represented by a
petitioning union. Such employees need not be members of a union seeking the
conduct of a certification election. A union certified as an exclusive bargaining
agent represents not only its members but also other employees who are not union
members. As pointed out in our assailed Decision, there were two contending
unions in the U.P. case, namely, the Organization of Non-Academic Personnel of
U.P. (ONAPUP) and the All U.P. Worker’s Union composed of both U.P. academic
and non-academic personnel. ONAPUP sought the conduct of a certification
election among the rank-and-file non-academic personnel only, while the All U.P.
Workers Union intended to cover all U.P. rank-and-file employees, involving both
academic and non-academic personnel.
The Supreme Court ordered the "non-academic rank-and-file employees of U.P. to
constitute a bargaining unit to the exclusion of the academic employees of the
institution", but did not order them to organize a separate labor organization. In the
U.P. case, the Supreme Court did not dismiss the petition and affirmed the order
for the conduct of a certification election among the non-academic personnel of
U.P., without prejudice to the right of the academic personnel to constitute a
separate bargaining unit for themselves and for the All U.P. Workers Union to
institute a petition for certification election.
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In the same manner, the teaching and non-teaching personnel of petitioner school
must form separate bargaining units.1âwphi1 Thus, the order for the conduct of
two separate certification elections, one involving teaching personnel and the other
involving non-teaching personnel. It should be stressed that in the subject petition,
private respondent union sought the conduct of a certification election among all
the rank-and-file personnel of petitioner school. Since the decision of the Supreme
Court in the U.P. case prohibits us from commingling teaching and non-teaching
personnel in one bargaining unit, they have to be separated into two separate
bargaining units with two separate certification elections to determine whether the
employees in the respective bargaining units desired to be represented by private
respondent. In the U.P. case, only one certification election among the non-
academic personnel was ordered, because ONAPUP sought to represent that
bargaining unit only. No petition for certification election among the academic
personnel was instituted by All U.P. Workers Union in the said case; thus, no
certification election pertaining to its intended bargaining unit was ordered by the
Court.58
Indeed, the purpose of a certification election is precisely to ascertain the majority
of the employees’ choice of an appropriate bargaining unit – to be or not to be
represented by a labor organization and, if in the affirmative case, by which one. 59
At this point, it is not amiss to stress once more that, as a rule, only questions of
law may be raised in a Rule 45 petition. In Montoya v. Transmed Manila
Corporation,60 the Court discussed the particular parameters of a Rule 45 appeal
from the CA’s Rule 65 decision on a labor case, as follows:
Our review is, therefore, limited to the determination of whether the CA correctly
resolved the presence or absence of grave abuse of discretion in the decision of
the SOLE, not on the basis of whether the latter's decision on the merits of the
case was strictly correct. Whether the CA committed grave abuse of discretion is
not what is ruled upon but whether it correctly determined the existence or want of
grave abuse of discretion on the part of the SOLE.
WHEREFORE, the pet1t1on is DENIED. The April 18, 2007 Decision and July 31,
2007, Resolution of the Court of Appeals in CA-G.R. SP No. 76175, which affirmed
the December 27, 2002 Decision of the Secretary of the Department of Labor and
Employment that set aside the
August 10, 2002 Decision of the Med-Arbiter denying private respondent's petition
for certification election are hereby AFFIRMED.
SO ORDERED.
G.R. No. 170054 January 21, 2013
GOYA, INC., Petitioner,
vs.
GOYA, INC. EMPLOYEES UNION-FFW, Respondent.

x x x In a Rule 45 review, we consider the correctness of the assailed CA decision, DECISION

in contrast with the review for jurisdictional error that we undertake under Rule 65.
Furthermore, Rule 45 limits us to the review of questions of law raised against the PERALTA, J.:
assailed CA decision. In ruling for legal correctness, we have to view the CA
decision in the same context that the petition for certiorari it ruled upon was
This petition for review on certiorari under Rule 45 of the Rules of Civil Procedure
presented to it; we have to examine the CA decision from the prism of whether it
seeks to reverse and set aside the June 16, 2005 Decision1 and October 12, 2005
correctly determined the presence or absence of grave abuse of discretion in the
Resolution2 of the Court of Appeals in CA-G.R. SP No. 87335, which sustained the
NLRC decision before it, not on the basis of whether the NLRC decision on the
October 26, 2004 Decision3 of Voluntary Arbitrator Bienvenido E. Laguesma, the
merits of the case was correct. In other words, we have to be keenly aware that
dispositive portion of which reads:
the CA undertook a Rule 65 review, not a review on appeal, of the NLRC decision
challenged before it. This is the approach that should be basic in a Rule 45 review
of a CA ruling in a labor case. In question form, the question to ask is: Did the CA WHEREFORE, judgment is hereby rendered declaring that the Company is NOT
correctly determine whether the NLRC committed grave abuse of discretion in guilty of unfair labor practice in engaging the services of PESO.
ruling on the case?61

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The company is, however, directed to observe and comply with its commitment as
it pertains to the hiring of casual employees when necessitated by business
circumstances.4
The facts are simple and appear to be undisputed.
Sometime in January 2004, petitioner Goya, Inc. (Company), a domestic
corporation engaged in the manufacture, importation, and wholesale of top quality
food products, hired contractual employees from PESO Resources Development
Corporation (PESO) to perform temporary and occasional services in its factory in
Parang, Marikina City. This prompted respondent Goya, Inc. Employees Union–
FFW (Union) to request for a grievance conference on the ground that the
contractual workers do not belong to the categories of employees stipulated in the
existing Collective Bargaining Agreement (CBA).5 When the matter remained
unresolved, the grievance was referred to the National Conciliation and Mediation
Board (NCMB) for voluntary arbitration.
During the hearing on July 1, 2004, the Company and the Union manifested before
Voluntary Arbitrator (VA) Bienvenido E. Laguesma that amicable settlement was
no longer possible; hence, they agreed to submit for resolution the solitary issue of
"[w]hether or not the Company is guilty of unfair labor acts in engaging the
services of PESO, a third party service provider, under the existing CBA, laws, and
jurisprudence."6 Both parties thereafter filed their respective pleadings.
The Union asserted that the hiring of contractual employees from PESO is not a
management prerogative and in gross violation of the CBA tantamount to unfair
labor practice (ULP). It noted that the contractual workers engaged have been
assigned to work in positions previously handled by regular workers and Union
members, in effect violating Section 4, Article I of the CBA, which provides for
three categories of employees in the Company, to wit:
Section 4. Categories of Employees.– The parties agree on the following
categories of employees:
(a) Probationary Employee. – One hired to occupy a regular rank-and-file position
in the Company and is serving a probationary period. If the probationary employee
is hired or comes from outside the Company (non-Goya, Inc. employee), he shall
be required to undergo a probationary period of six (6) months, which period, in the
sole judgment of management, may be shortened if the employee has already
acquired the knowledge or skills required of the job. If the employee is hired from
the casual pool and has worked in the same position at any time during the past
two (2) years, the probationary period shall be three (3) months.
(b) Regular Employee. – An employee who has satisfactorily completed his
probationary period and automatically granted regular employment status in the
Company.
(c) Casual Employee, – One hired by the Company to perform occasional or
seasonal work directly connected with the regular operations of the Company, or
one hired for specific projects of limited duration not connected directly with the
regular operations of the Company.
It was averred that the categories of employees had been a part of the CBA since
the 1970s and that due to this provision, a pool of casual employees had been
maintained by the Company from which it hired workers who then became regular
workers when urgently necessary to employ them for more than a year. Likewise,
the Company sometimes hired probationary employees who also later became
regular workers after passing the probationary period. With the hiring of contractual
employees, the Union contended that it would no longer have probationary and
casual employees from which it could obtain additional Union members; thus,
rendering inutile Section 1, Article III (Union Security) of the CBA, which states:
Section 1. Condition of Employment. – As a condition of continued employment in
the Company, all regular rank-and-file employees shall remain members of the
Union in good standing and that new employees covered by the appropriate
bargaining unit shall automatically become regular employees of the Company and
shall remain members of the Union in good standing as a condition of continued
employment.
The Union moreover advanced that sustaining the Company’s position would
easily weaken and ultimately destroy the former with the latter’s resort to
retrenchment and/or retirement of employees and not filling up the vacant regular
positions through the hiring of contractual workers from PESO, and that a possible
scenario could also be created by the Company wherein it could "import" workers
from PESO during an actual strike.
In countering the Union’s allegations, the Company argued that: (a) the law
expressly allows contracting and subcontracting arrangements through
Department of Labor and Employment (DOLE) Order No. 18-02; (b) the
engagement of contractual employees did not, in any way, prejudice the Union,
since not a single employee was terminated and neither did it result in a reduction
of working hours nor a reduction or splitting of the bargaining unit; and (c) Section
4, Article I of the CBA merely provides for the definition of the categories of
employees and does not put a limitation on the Company’s right to engage the
Page 77 of 161
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services of job contractors or its management prerogative to address
temporary/occasional needs in its operation.
On October 26, 2004, VA Laguesma dismissed the Union’s charge of ULP for
being purely speculative and for lacking in factual basis, but the Company was
directed to observe and comply with its commitment under the CBA. The VA
opined:
We examined the CBA provision Section 4, Article I of the CBAallegedly violated
by the Company and indeed the agreement prescribes three (3) categories of
employees in the Company and provides for the definition, functions and duties of
each. Material to the case at hand is the definition as regards the functions of a
casual employee described as follows:
Casual Employee – One hired by the COMPANY to perform occasional or
seasonal work directly connected with the regular operations of the COMPANY, or
one hired for specific projects of limited duration not connected directly with the
regular operations of the COMPANY.
While the foregoing agreement between the parties did eliminate management’s
prerogative of outsourcing parts of its operations, it serves as a limitation on such
prerogative particularly if it involves functions or duties specified under the
aforequoted agreement. It is clear that the parties agreed that in the event that the
Company needs to engage the services of additional workers who will perform
"occasional or seasonal work directly connected with the regular operations of the
COMPANY," or "specific projects of limited duration not connected directly with the
regular operations of the COMPANY", the Company can hire casual employees
which is akin to contractual employees. If we note the Company’s own declaration
that PESO was engaged to perform "temporary or occasional services" (See the
Company’s Position Paper, at p. 1), then it should have directly hired the services
of casual employees rather than do it through PESO.
It is evident, therefore, that the engagement of PESO is not in keeping with the
intent and spirit of the CBA provision in question. It must, however, be stressed
that the right of management to outsource parts of its operations is not totally
eliminated but is merely limited by the CBA. Given the foregoing, the Company’s
engagement of PESO for the given purpose is indubitably a violation of the CBA. 7
While the Union moved for partial reconsideration of the VA Decision,8 the
Company immediately filed a petition for review9 before the Court of Appeals (CA)
under Rule 43 of the Revised Rules of Civil Procedure to set aside the directive to
observe and comply with the CBA commitment pertaining to the hiring of casual
employees when necessitated by business circumstances. Professing that such
order was not covered by the sole issue submitted for voluntary arbitration, the
Company assigned the following errors:
THE HONORABLE VOLUNTARY ARBITRATOR EXCEEDED HIS POWER
WHICH WAS EXPRESSLY GRANTED AND LIMITED BY BOTH PARTIES IN
RULING THAT THE ENGAGEMENT OF PESO IS NOT IN KEEPING WITH THE
INTENT AND SPIRIT OF THE CBA.10
THE HONORABLE VOLUNTARY ARBITRATOR COMMITTED A PATENT AND
PALPABLE ERROR IN DECLARING THAT THE ENGAGEMENT OF PESO IS
NOT IN KEEPING WITH THE INTENT AND SPIRIT OF THE CBA.11
On June 16, 2005, the CA dismissed the petition. In dispensing with the merits of
the controversy, it held:
This Court does not find it arbitrary on the part of the Hon. Voluntary Arbitrator in
ruling that "the engagement of PESO is not in keeping with the intent and spirit of
the CBA." The said ruling is interrelated and intertwined with the sole issue to be
resolved that is, "Whether or not the Company is guilty of unfair labor practice in
engaging the services of PESO, a third party service provider, under existing CBA,
laws, and jurisprudence." Both issues concern the engagement of PESO by the
Company which is perceived as a violation of the CBA and which constitutes as
unfair labor practice on the part of the Company. This is easily discernible in the
decision of the Hon. Voluntary Arbitrator when it held:
x x x x While the engagement of PESO is in violation of Section 4, Article I of the
CBA, it does not constitute unfair labor practice as it (sic) not characterized under
the law as a gross violation of the CBA. Violations of a CBA, except those which
are gross in character, shall no longer be treated as unfair labor practice. Gross
violations of a CBA means flagrant and/or malicious refusal to comply with the
economic provisions of such agreement. x x x
Anent the second assigned error, the Company contends that the Hon. Voluntary
Arbitrator erred in declaring that the engagement of PESO is not in keeping with
the intent and spirit of the CBA. The Company justified its engagement of
contractual employees through PESO as a management prerogative, which is not
prohibited by law. Also, it further alleged that no provision under the CBA limits or
prohibits its right to contract out certain services in the exercise of management
prerogatives.
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Germane to the resolution of the above issue is the provision in their CBA with
respect to the categories of the employees:
xxxx
A careful reading of the above-enumerated categories of employees reveals that
the PESO contractual employees do not fall within the enumerated categories of
employees stated in the CBA of the parties. Following the said categories, the
Company should have observed and complied with the provision of their CBA.
Since the Company had admitted that it engaged the services of PESO to perform
temporary or occasional services which is akin to those performed by casual
employees, the Company should have tapped the services of casual employees
instead of engaging PESO.
In justifying its act, the Company posits that its engagement of PESO was a
management prerogative. It bears stressing that a management prerogative refers
to the right of the employer to regulate all aspects of employment, such as the
freedom to prescribe work assignments, working methods, processes to be
followed, regulation regarding transfer of employees, supervision of their work, lay-
off and discipline, and dismissal and recall of work, presupposing the existence of
employer-employee relationship. On the basis of the foregoing definition, the
Company’s engagement of PESO was indeed a management prerogative. This is
in consonance with the pronouncement of the Supreme Court in the case of Manila
Electric Company vs. Quisumbing where it ruled that contracting out of services is
an exercise of business judgment or management prerogative.
This management prerogative of contracting out services, however, is not without
limitation. In contracting out services, the management must be motivated by good
faith and the contracting out should not be resorted to circumvent the law or must
not have been the result of malicious arbitrary actions. In the case at bench, the
CBA of the parties has already provided for the categories of the employees in the
Company’sestablishment. These categories of employees particularly with respect
to casual employees serve as limitation to the Company’s prerogative to outsource
parts of its operations especially when hiring contractual employees. As stated
earlier, the work to be performed by PESO was similar to that of the casual
employees. With the provision on casual employees, the hiring of PESO
contractual employees, therefore, is not in keeping with the spirit and intent of their
CBA. (Citations omitted)12
The Company moved to reconsider the CA Decision,13 but it was denied;14 hence,
this petition.
Incidentally, on July 16, 2009, the Company filed a Manifestation15 informing this
Court that its stockholders and directors unanimously voted to shorten the
Company’s corporate existence only until June 30, 2006, and that the three-year
period allowed by law for liquidation of the Company’s affairs already expired on
June 30, 2009. Referring to Gelano v. Court of Appeals,16 Public Interest Center,
Inc. v. Elma,17 and Atienza v. Villarosa,18 it urged Us, however, to still resolve the
case for future guidance of the bench and the bar as the issue raised herein
allegedly calls for a clarification of a legal principle, specifically, whether the VA is
empowered to rule on a matter not covered by the issue submitted for arbitration.
Even if this Court would brush aside technicality by ignoring the supervening event
that renders this case moot and academic19 due to the permanent cessation of the
Company’s business operation on June 30, 2009, the arguments raised in this
petition still fail to convince Us.
We confirm that the VA ruled on a matter that is covered by the sole issue
submitted for voluntary arbitration. Resultantly, the CA did not commit serious error
when it sustained the ruling that the hiring of contractual employees from PESO
was not in keeping with the intent and spirit of the CBA. Indeed, the opinion of the
VA is germane to, or, in the words of the CA, "interrelated and intertwined with,"
the sole issue submitted for resolution by the parties. This being said, the
Company’s invocation of Sections 4 and 5, Rule IV20 and Section 5, Rule VI21 of
the Revised Procedural Guidelines in the Conduct of Voluntary Arbitration
Proceedings dated October 15, 2004 issued by the NCMB is plainly out of order.
Likewise, the Company cannot find solace in its cited case of Ludo & Luym
Corporation v. Saornido.22 In Ludo, the company was engaged in the manufacture
of coconut oil, corn starch, glucose and related products. In the course of its
business operations, it engaged the arrastre services of CLAS for the loading and
unloading of its finished products at the wharf. The arrastre workers deployed by
CLAS to perform the services needed were subsequently hired, on different dates,
as Ludo’s regular rank-and-file employees. Thereafter, said employees joined
LEU, which acted as the exclusive bargaining agent of the rank-and-file
employees. When LEU entered into a CBA with Ludo, providing for certain benefits
to the employees (the amount of which vary according to the length of service
rendered), it requested to include in its members’ period of service the time during
which they rendered arrastre services so that they could get higher benefits. The
matter was submitted for voluntary arbitration when Ludo failed to act. Per
submission agreement executed by both parties, the sole issue for resolution was
the date of regularization of the workers. The VA Decision ruled that: (1) the
subject employees were engaged in activities necessary and desirable to the
business of Ludo, and (2) CLAS is a labor-only contractor of Ludo. It then disposed
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as follows: (a) the complainants were considered regular employees six months
from the first day of service at CLAS; (b) the complainants, being entitled to the
CBA benefits during the regular employment, were awarded sick leave, vacation
leave, and annual wage and salary increases during such period; (c) respondents
shall pay attorney’s fees of 10% of the total award; and (d) an interest of 12% per
annum or 1% per month shall be imposed on the award from the date of
promulgation until fully paid. The VA added that all separation and/or retirement
benefits shall be construed from the date of regularization subject only to the
appropriate government laws and other social legislation. Ludo filed a motion for
reconsideration, but the VA denied it. On appeal, the CA affirmed in toto the
assailed decision; hence, a petition was brought before this Court raising the issue,
among others, of whether a voluntary arbitrator can award benefits not claimed in
the submission agreement. In denying the petition, We ruled:
Generally, the arbitrator is expected to decide only those questions expressly
delineated by the submission agreement. Nevertheless, the arbitrator can assume
that he has the necessary power to make a final settlement since arbitration is the
final resort for the adjudication of disputes. The succinct reasoning enunciated by
the CA in support of its holding, that the Voluntary Arbitrator in a labor controversy
has jurisdiction to render the questioned arbitral awards, deserves our
concurrence, thus:
In general, the arbitrator is expected to decide those questions expressly stated
and limited in the submission agreement. However, since arbitration is the final
resort for the adjudication of disputes, the arbitrator can assume that he has the
power to make a final settlement. Thus, assuming that the submission empowers
the arbitrator to decide whether an employee was discharged for just cause, the
arbitrator in this instance can reasonably assume that his powers extended beyond
giving a yes-or-no answer and included the power to reinstate him with or without
back pay.
In one case, the Supreme Court stressed that "xxx the Voluntary Arbitrator had
plenary jurisdiction and authority to interpret the agreement to arbitrate and to
determine the scope of his own authority subject only, in a proper case, to the
certiorari jurisdiction of this Court. The Arbitrator, as already indicated, viewed his
authority as embracing not merely the determination of the abstract question of
whether or not a performance bonus was to be granted but also, in the affirmative
case, the amount thereof.
By the same token, the issue of regularization should be viewed as two-tiered
issue. While the submission agreement mentioned only the determination of the
date or regularization, law and jurisprudence give the voluntary arbitrator enough
leeway of authority as well as adequate prerogative to accomplish the reason for
which the law on voluntary arbitration was created – speedy labor justice. It bears
stressing that the underlying reason why this case arose is to settle, once and for
all, the ultimate question of whether respondent employees are entitled to higher
benefits. To require them to file another action for payment of such benefits would
certainly undermine labor proceedings and contravene the constitutional mandate
providing full protection to labor.23
Indubitably, Ludo fortifies, not diminishes, the soundness of the questioned VA
Decision. Said case reaffirms the plenary jurisdiction and authority of the voluntary
arbitrator to interpret the CBA and to determine the scope of his/her own authority.
Subject to judicial review, the leeway of authority as well as adequate prerogative
is aimed at accomplishing the rationale of the law on voluntary arbitration – speedy
labor justice. In this case, a complete and final adjudication of the dispute between
the parties necessarily called for the resolution of the related and incidental issue
of whether the Company still violated the CBA but without being guilty of ULP as,
needless to state, ULP is committed only if there is gross violation of the
agreement.
Lastly, the Company kept on harping that both the VA and the CA conceded that
its engagement of contractual workers from PESO was a valid exercise of
management prerogative. It is confused. To emphasize, declaring that a particular
act falls within the concept of management prerogative is significantly different
from acknowledging that such act is a valid exercise thereof. What the VA and the
CA correctly ruled was that the Company’s act of contracting out/outsourcing is
within the purview of management prerogative. Both did not say, however, that
such act is a valid exercise thereof. Obviously, this is due to the recognition that
the CBA provisions agreed upon by the Company and the Union delimit the free
exercise of management prerogative pertaining to the hiring of contractual
employees. Indeed, the VA opined that "the right of the management to outsource
parts of its operations is not totally eliminated but is merely limited by the CBA,"
while the CA held that "this management prerogative of contracting out services,
however, is not without limitation. x x x These categories of employees particularly
with respect to casual employees serve as limitation to the Company’s prerogative
to outsource parts of its operations especially when hiring contractual employees."
A collective bargaining agreement is the law between the parties:
It is familiar and fundamental doctrine in labor law that the CBA is the law between
the parties and they are obliged to comply with its provisions. We said so in Honda
Phils., Inc. v. Samahan ng Malayang Manggagawa sa Honda:
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A collective bargaining agreement or CBA refers to the negotiated contract
between a legitimate labor organization and the employer concerning wages,
hours of work and all other terms and conditions of employment in a bargaining
unit.1âwphi1 As in all contracts, the parties in a CBA may establish such
stipulations, clauses, terms and conditions as they may deem convenient provided
these are not contrary to law, morals, good customs, public order or public policy.
Thus, where the CBA is clear and unambiguous, it becomes the law between the
parties and compliance therewith is mandated by the express policy of the law.
Moreover, if the terms of a contract, as in a CBA, are clear and leave no doubt
upon the intention of the contracting parties, the literal meaning of their stipulations
shall control. x x x.24
In this case, Section 4, Article I (on categories of employees) of the CBA between
the Company and the Union must be read in conjunction with its Section 1, Article
III (on union security). Both are interconnected and must be given full force and
effect. Also, these provisions are clear and unambiguous. The terms are explicit
and the language of the CBA is not susceptible to any other interpretation. Hence,
the literal meaning should prevail. As repeatedly held, the exercise of management
prerogative is not unlimited; it is subject to the limitations found in law, collective
bargaining agreement or the general principles of fair play and justice 25 Evidently,
this case has one of the restrictions- the presence of specific CBA provisions-
unlike in San Miguel Corporation Employees Union-PTGWO v. Bersamira,26 De
Ocampo v. NLRC,27 Asian Alcohol Corporation v. NLRC,28 and Serrano v.
NLRC29cited by the Company. To reiterate, the CBA is the norm of conduct
between the parties and compliance therewith is mandated by the express policy
of the law.30
WHEREFORE, the petition is DENIED. The assailed June 16, 2005 Decision, as
well as the October 12, 2005 Resolution of the Court of Appeals, which sustained
the October 26, 2004 Decision of the Voluntary Arbitrator, are hereby AFFIRMED.
SO ORDERED.
G.R. No. 179001 August 28, 2013
MZR INDUSTRIES, MARILOU R. QUIROZ AND LEA TIMBAL, PETITIONERS,
vs.
MAJEN COLAMBOT, RESPONDENT.
DECISION
PERALTA, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court
seeking the reversal of the Decision1dated May 17, 2007 and Resolution2 dated
July 25, 2007 of the Court of Appeals in CA-G.R. SP No. 98445, reversing the
Decision dated October 31, 20063 and Resolution4 dated December 21, 2006 of
the National Labor Relations Commission (NLRC) which set aside the
Decision5 dated April 28, 2006 of the Labor Arbiter.
The facts are as follows:
On February 8, 2000, petitioner Marilou Quiroz, Owner and Vice-President for
Finance and Marketing of MZR, hired respondent Majen Colambot (Colambot) as
messenger. Colambot's duties and responsibilities included field, messengerial
and other liaison work.
However, beginning 2002, Colambot's work performance started to deteriorate.
Petitioners issued several memoranda to Colambot for habitual tardiness,
negligence, and violations of office policies.6 He was also given written warnings
for insubordination committed on August 27, 2003 and September 11-12,
2003;7 on September 16, 2003 for negligence caused by careless handling of
confidential office documents;8 on September 22, 2004 for leaving his post without
proper turnover;9 and, on October 4, 2004 for insubordination.10
Petitioners claimed that despite written warnings for repeated tardiness and
insubordination, Colambot failed to mend his ways. Hence, in a
Memorandum11 dated October 25, 2004 issued by petitioner Lea Timbal (Timbal),
MZR's Administrative Manager, Colambot was given a notice of suspension for
insubordination and negligence.
Again, in a Memorandum12 dated November 25, 2004, Colambot was suspended
from November 26, 2004 until December 6, 2004 for insubordination. Allegedly,
Colambot disobeyed and left the office despite clear instructions to stay in the
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office because there was an important meeting in preparation for a very important
activity the following day.
Petitioners claimed they waited for Colambot to report back for work on December
7, 2004, but they never heard from him anymore. Later, petitioners were surprised
to find out that Colambot had filed a complaint for illegal suspension,
underpayment of salaries, overtime pay, holiday pay, rest day, service incentive
leave and 13th month pay. On December 16, 2004, the complaint was amended to
illegal dismissal, illegal suspension, underpayment of salaries, holiday pay, service
incentive pay, 13th month pay and separation pay.13
For his part, Colambot narrated that he worked as a messenger for petitioners
since February 2000. That on November 2004, he was directed to take care of the
processing of a document in Roxas Boulevard, Pasay City. When he arrived at the
office around 6 to 7 o'clock in the evening, he looked for petitioner Quiroz to give
the documents. The latter told him to wait for her for a while. When respondent
finally had the chance to talk to Quiroz, she allegedly told him that she is
dissatisfied already with his work performance. Afterwards, Colambot claimed that
he was made to choose between resigning from the company or the company will
be the one to terminate his services. He said he refused to resign. Colambot
alleged that Quiroz made him sign a memorandum for his suspension, from
November 26 to December 6, 2004. After affixing his signature, Quiroz told him
that effective December 7, 2004, he is already deemed terminated. Later, on
December 2, 2004, respondent went back to the company to look for Timbal to get
his salary. He claimed that Timbal asked him to turn over his company I.D.14
Petitioners, however, insisted that while Colambot was suspended due to
insubordination and negligence, they maintained that they never terminated
Colambot's employment. They added that Colambot's failure to report for work
since December 7, 2004 without any approved vacation or sick leave constituted
abandonment of his work, but they never terminated his employment. Petitioners
further emphasized that even with Colambot's filing of the complaint against them,
his employment with MZR has not been terminated.
Colambot, meanwhile, argued that contrary to petitioners’ claim that he abandoned
his job, he claimed that he did not report back to work after the expiration of his
suspension on December 6, 2004, because Quiroz told him that his employment
was already terminated effective December 7, 2004.
On April 28, 2006, the Labor Arbiter rendered a Decision,15 the dispositive portion
of which reads:
WHEREFORE, premises considered, respondents are hereby declared guilty of
ILLEGAL DISMISSAL and hereby ORDERED to reinstate complainant to his
former position with full backwages from date of dismissal until actual
reinstatement and moral and exemplary damages in the sum of ₱100,000.00 and
₱50,000.00, respectively.
The computation of the judgment award marked as Annex "A" is part and parcel of
this decision.
SO ORDERED.16
The Labor Arbiter held that there was no abandonment as there was no deliberate
intent on the part of Colambot to sever the employer-employee relationship. The
Labor Arbiter likewise noted that Colambot should have been notified to return
back to work, which petitioner failed to do.
Aggrieved, petitioners appealed the decision before the NLRC.
On October 31, 2006, the NLRC rendered a Decision, 17 the dispositive portion of
which reads as follows:
WHEREFORE, premises considered, the appeal filed by respondents is
GRANTED. The judgment of the Labor Arbiter dated April 28, 2006 is hereby SET
ASIDE and the Complaint is DISMISSED for lack of merit.
SO ORDERED.18
The NLRC pointed out that Colambot's complaint was unsupported by any
evidence and was not even made under oath, thus, lacking in credibility and
probative value. The NLRC further believed that Colambot abandoned his work
due to his refusal to report for work after his suspension. The failure of MZR to
notify Colambot to return back to work is not tantamount to actual dismissal.
Colambot filed a motion for reconsideration, but was denied. Thus, via a petition
for certiorari under Rule 65 of the Rules of Court, raising grave abuse of discretion
as a ground, Colambot appealed before the Court of Appeals and sought that the
Decision dated October 31, 2006 and Resolution dated December 21, 2006 of the
NLRC be reversed and set aside.
In the disputed Decision19 dated May 17, 2007, the Court of Appeals granted the
petition and reversed the assailed Decision dated October 31, 2006 and
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Resolution dated December 21, 2006 of the NLRC. The Decision dated April 28,
2006 of the Labor Arbiter was ordered reinstated with modification that in lieu of
reinstatement, petitioners were ordered to pay respondent separation pay
equivalent to one (1) month pay for every year of service in addition to full
backwages.
The appellate court ruled that Colambot was illegally dismissed based on the
grounds that: (1) MZR failed to prove abandonment on the part of Colambot, and
(2) MZR failed to serve Colambot with the required written notices of
dismissal.2007.
Petitioners appealed, but was denied in a Resolution20 dated July 25, 2007.
Thus, via Rule 45 of the Rules of Court, before this Court, petitioners raised the
following issues:
I
THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT
COMPLAINANT WAS ILLEGALLY DISMISSED FROM THE SERVICE.
II
THE HONORABLE COURT SERIOUSLY ERRED IN RULING THAT PETITIONER
IS ENTITLED TO SEPARATION PAY AND BACKWAGES.
Petitioners argue that they did not terminate the employer-employee relationship
with Colambot. Other than Colambot's self-serving and unverified narration of
facts, he failed to present any document showing that he was terminated from
work. Petitioners assert that Colambot abandoned his work when he failed to
report back to work without an approved vacation or sick leave, thus, he is not
entitled to an award of separation pay and backwages.
RULING
While we recognize the rule that in illegal dismissal cases, the employer bears the
burden of proving that the termination was for a valid or authorized cause, in the
present case, however, the facts and the evidence do not establish a prima facie
case that the employee was dismissed from employment. Before the employer
must bear the burden of proving that the dismissal was legal, the employee must
first establish by substantial evidence the fact of his dismissal from service. If there
is no dismissal, then there can be no question as to the legality or illegality
thereof.21
In the present case, other than Colambot's unsubstantiated allegation of having
been verbally terminated from his work, there was no evidence presented to show
that he was indeed dismissed from work or was prevented from returning to his
work. In the absence of any showing of an overt or positive act proving that
petitioners had dismissed respondent, the latter's claim of illegal dismissal cannot
be sustained22 – as the same would be self-serving, conjectural and of no
probative value.
A review of the Notice of Suspension23 dated November 25, 2004 shows that
respondent was merely suspended from work for 6 days, there was, however, no
evidence that Colambot was terminated from work. For clarification, we quote:
TO : MAJEN COLAMBOT
MZR MESSENGER
FROM : HUMAN RESOURCE DEPT
DATE : NOV. 25, 2004
RE : SUSPENSION DUE TO INSUBORDINATION
xxxx
Cases of insubordination and violations have been filed against you many times.
We kept on reminding that you should have changed and improved your working
attitudes because it greatly affects not only your working performance but the
company's productivity as well.
Your attitude only shows HARD HEADEDNESS AND LACK OF RESPECT TO
YOUR SUPERIORS which in any company cannot tolerate.
With these, you are suspended for 6 working days effective November 26, 2004,
you will only report on December 7, 2004.
THIS IS OUR LAST WARNING FOR YOU TO IMPROVE, FAILURE TO DO SO
MAY MEAN TERMINATION OF YOUR EMPLOYMENT CONTRACT.
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 x x x x24
While the same appeared to contain a warning of termination should Colambot fail
to improve his behavior, it is likewise apparent that there was also a specific
instruction for him to report back to work, on December 7, 2004, upon serving his
suspension. The subject of the Letter, i.e., "Suspension due to Insubordination,"
the wordings and content of the letter is a clear-cut notice of suspension, and not a
notice of termination. The notice of suspension may have contained warnings of
termination, but it must be noted that such was conditioned on the ground that –
Colambot would fail to improve his attitude/behavior. There were no wordings
whatsoever implying actual or constructive dismissal. Thus, Colambot's general
allegation of having been orally dismissed from the service as against the clear
wordings and intent of the notice of suspension which he signed, we are then
inclined to believe that there was no dismissal.
In Machica v. Roosevelt Services Center, Inc.,25 this Court sustained the
employer's denial as against the employees' categorical assertion of illegal
dismissal. In so ruling, this Court held that:
The rule is that one who alleges a fact has the burden of proving it; thus,
petitioners were burdened to prove their allegation that respondents dismissed
them from their employment. It must be stressed that the evidence to prove this
fact must be clear, positive and convincing. The rule that the employer bears the
burden of proof in illegal dismissal cases finds no application here because the
respondents deny having dismissed the petitioners.26
Hence, as between respondents’ general allegation of having been orally
dismissed from the service vis-a-vis those of petitioners which were found to be
substantiated by the sworn statement of foreman Wenifredo, we are persuaded by
the latter. Absent any showing of an overt or positive act proving that petitioners
had dismissed respondents, the latter’s claim of illegal dismissal cannot be
sustained. Indeed, a cursory examination of the records reveal no illegal dismissal
to speak of.27
Moreover, in Abad v. Roselle Cinema,28 we ruled that the substantial evidence
proffered by the employer that it had not terminated the employee should not be
ignored on the pretext that the employee would not have filed the complaint for
illegal dismissal if he had not really been dismissed. We held that such non
sequitur reasoning cannot take the place of the evidence of both the employer and
the employee.
Neither could the petitioners be blamed for failing to order respondent to return
back to work.1âwphi1 Records show that Colambot immediately filed the complaint
for illegal dismissal on December 16, 2004,29 or just a few days when he was
supposed to report back to work on December 7, 2004. For petitioners to order
respondent to report back to work, after the latter had already filed a case for
illegal dismissal, would be unsound.
However, while the Court concurs with the conclusion of the NLRC that there was
no illegal dismissal, no dismissal having actually taken place, the Court does not
agree with its findings that Colambot committed abandonment of work.
In a number of cases,30 this Court consistently held that to constitute abandonment
of work, two elements must be present: first, the employee must have failed to
report for work or must have been absent without valid or justifiable reason; and
second, there must have been a clear intention on the part of the employee to
sever the employer-employee relationship manifested by some overt act.
In the instant case, other than Colambot's failure to report back to work after
suspension, petitioners failed to present any evidence which tend to show his
intent to abandon his work. It is a settled rule that mere absence or failure to report
for work is not enough to amount to abandonment of work. There must be a
concurrence of the intention to abandon and some overt acts from which an
employee may be deduced as having no more intention to work.31 On this point,
the CA was correct when it held that:
Mere absence or failure to report for work, even after notice to return, is not
tantamount to abandonment. The burden of proof to show that there was
unjustified refusal to go back to work rests on the employer. Abandonment is a
matter of intention and cannot lightly be presumed from certain equivocal acts. To
constitute abandonment, there must be clear proof of deliberate and unjustified
intent to sever the employer-employee relationship. Clearly, the operative act is
still the employee’s ultimate act of putting an end to his employment. Furthermore,
it is a settled doctrine that the filing of a complaint for illegal dismissal is
inconsistent with abandonment of employment. An employee who takes steps to
protest his dismissal cannot logically be said to have abandoned his work. the filing
of such complaint is proof enough of his desire to return to work, thus negating any
suggestion of abandonment.32
Suffice it to say that, it is the employer who has the burden of proof to show a
deliberate and unjustified refusal of the employee to resume his employment
without any intention of returning. It is therefore incumbent upon petitioners to
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ascertain the respondents’ interest or non-interest in the continuance of their
employment. This, petitioners failed to do so.
These circumstances, taken together, the lack of evidence of dismissal and the
lack of intent on the part of the respondent to abandon his work, the remedy is
reinstatement but without backwages.33 However, considering that reinstatement is
no longer applicable due to the strained relationship between the parties and that
Colambot already found another employment, each party must bear his or her own
loss, thus, placing them on equal footing.
Verily, in a case where the employee's failure to work was occasioned neither by
his abandonment nor by a termination, the burden of economic loss is not rightfully
shifted to the employer; each party must bear his own loss.34
WHEREFORE, premises considered and subject to the above disquisitions, the
Decision dated May 1 7, 2007 of the Court of Appeals is hereby REVERSED and
SET ASIDE. The Resolution dated October 31, 2006 of the National Labor
Relations Commission in NLRC NCR CASE No. 00-11-12189-04/ CA No. 049533-
06 is hereby REINSTATED.
SO ORDERED.
G.R. No. 173489 February 25, 2013
ALILEM CREDIT COOPERATIVE, INC., now known as ALILEM
MULTIPURPOSE COOPERATIVE, INC.,Petitioner,
vs.
SALVADOR M. BANDIOLA, JR., Respondent.
DECISION
PERALTA, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court filed
by petitioner Alilem Credit Cooperative, Inc. against respondent Salvador M.
Bandiola, Jr. assailing the Court of Appeals (CA) Decision1 dated January 16,
2006 and Resolution2 dated July 5, 2006 in CAG. R. SP No. 64554.
The case stemmed from the following facts:
Respondent was employed by petitioner as bookkeeper. Petitioner's Board of
Directors (the Board) received a letter from a certain Napoleon Gao-ay (Napoleon)
reporting the alleged immoral coaduct and unbecoming behavior of respondent by
having an illicit relationship with Napoleon’s sister, Thelma G. Palma (Thelma).
This prompted the Board to conduct a preliminary investigation.3
During the preliminary investigation, the Board received the following evidence of
respondent’s alleged extramarital affair:
1. Melanie Gao-ay’s (Melanie) sworn statement declaring that sometime in
December 1996, respondent slept on the same bed with Thelma in a
boarding house in San Fernando, La Union where she (Melanie) and
Thelma resided. She personally witnessed the intimacy of respondent and
Thelma when they engaged in lovemaking as they slept in one room and
openly displayed their affection for each other.4
2. Rosita Tegon’s (Rosita) sworn statement that on May 23, 1997, she saw
Thelma talk to respondent in petitioner’s office asking him to accompany
her in San Fernando, La Union.5
3. Emma Gao-ay Lubrin’s (Emma, Thelma’s sister) interview wherein she
admitted that she and her family confronted Thelma about the alleged
extramarital affair which Thelma allegedly admitted.6
4. Napoleon’s interview with the Board wherein he claimed that their family
tried to convince Thelma to end her extramarital affair with respondent but
instead of complying, she in fact lived together with respondent.7
The Board decided to form an Ad Hoc Committee to investigate the charges
against respondent yielding the following additional evidence:
1. Agustina Boteras’ (Agustina) sworn statement that she witnessed a
confrontation between Thelma and her sister in the latter’s residence
concerning the alleged extramarital affair. At that time, respondent’s wife
was allegedly present who in fact pleaded Thelma to end her relationship
with respondent but she supposedly said "No way!"8
2. Milagros Villacorte’s sworn statement that while she was at the Bethany
Hospital in San Fernando, La Union where her husband was confined,
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 respondent approached her and asked her to look for Thelma who was
then having her class. When he finally found her, respondent and Thelma
met and talked in the hospital premises.9
3. Julienne Marie L. Dalangey’s certification that on August 9 to 10, 1996,
respondent attended a seminar on Internal Control and Systems Design I
at the Northern Luzon Federation of Cooperatives and Development
Center (NORLU) Pension House in Baguio City, together with a lady
companion whom he introduced as his wife. Apparently, the lady was not
his wife because at that time, his wife reported for work in the Municipal
Hall of Alilem.10
Respondent, on the other hand, denied the accusation against him. He, instead,
claimed that the accusation was a result of the insecurity felt by some members of
the cooperative and of the Board because of his growing popularity owing to his
exemplary record as an employee.11 Thelma executed an affidavit likewise denying
the allegations of extra-marital affair.12
Meanwhile, on June 7, 1997, the Board received a petition from about fifty
members of the cooperative asking the relief of respondent due to his illicit affair
with Thelma.13
In its Summary Investigation Report, the Ad Hoc Committee concluded that
respondent was involved in an extra-marital affair with Thelma. On July 10, 1997,
the Chairman of the Board sent a letter14 to respondent informing him of the
existence of a prima facie case against him for "illicit marital affair, an act that
brings discredit to the cooperative organization and a cause for termination per
AMPC (Alilem Multi-Purpose Cooperative) Personnel Policy. Respondent was
directed to appear and be present at the AMPC office for a hearing. He was
likewise advised of his right to be assisted by counsel.
On the day of the hearing, respondent requested15 for postponement on the
ground that his lawyer was not available. The request was, however, denied and
the hearing proceeded as scheduled.
In a Memorandum16 dated July 16, 1997, respondent was informed of Board
Resolution No. 05, series of 199717embodying the Board’s decision to terminate
his services as bookkeeper of petitioner, effective July 31, 1997, without any
compensation or benefit except the unpaid balance of his regular salary for
services actually rendered.18
Aggrieved, respondent filed a Complaint for Illegal Dismissal against petitioner
before the Regional Arbitration Branch of the National Labor Relations
Commission (NLRC).19
On April 30, 1998, the Labor Arbiter (LA) dismissed20 respondent’s complaint for
lack of merit. The LA concluded that respondent had been or might still be carrying
on an affair with a married woman. The LA found it unforgiving in the case of a
married employee who sleeps with or has illicit relations with another married
person for in such case, the employee sullies not only the reputation of his spouse
and his family but the reputation as well of the spouse of his paramour and the
latter’s family.21 As opposed to respondent’s claim that the accusation is a mere
fabrication of some of the directors or cooperative members who were allegedly
envious of his growing popularity, the LA gave more credence to the testimonies of
petitioner’s witnesses who were relatives of Thelma and who had no motive to
falsely testify because their family reputation was likewise at a risk of being
tarnished.22 The LA, thus, found respondent to have been validly dismissed from
employment for violation of the cooperative’s Personnel Policy, specifically "the
commission of acts that bring discredit to the cooperative organization, especially,
but not limited to conviction of any crime, illicit marital affairs, scandalous acts
inimical to established and accepted social mores." The LA also found no violation
of respondent’s right to due process as he was given ample opportunity to defend
himself from the accusation against him.23
On appeal, the NLRC set aside24 the LA decision and rendered a judgment
disposed in this wise:
WHEREFORE, the appealed Decision of the Executive Labor Arbiter is SET
ASIDE. Judgment is hereby rendered:
1. declaring respondent Alilem Credit Cooperative, Inc. (ACCI) also known
as Alilem Multi-Purpose Cooperative (AMPC) guilty of illegal dismissal for
the reasons above-discussed;
2. directing the said respondent to pay complainant Salvador Bandiola, Jr.
full backwages computed from the time of (sic) his wages were withheld
until finality of this judgment;
3. directing, on account of strained relationship between the parties, the
above-named respondent to pay complainant, in lieu of reinstatement,
separation pay computed at one (1) month pay for every year of service, a
fraction of six (6) months to be computed as one (1) whole year; [and]
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 4. directing respondent to pay complainant ten (10%) percent attorney’s
fees based on the total monetary award.
SO ORDERED.25
The NLRC found petitioner’s Personnel Policy to be of questionable existence and
validity because it was unnumbered.26 It held that even assuming that respondent
had an extra-marital affair with a married woman, the latter is not his fellow worker
in petitioner’s business establishment.27 It, thus, concluded that respondent’s
dismissal was not founded on any of the just causes for termination of employment
under Article 282 of the Labor Code, as amended.28 It, likewise, declared that
respondent was not afforded his right to his counsel of choice as his request for
postponement was not allowed.29 Therefore, the NLRC declared respondent’s
dismissal from employment illegal, entitling him to the payment of backwages,
separation pay, and attorney’s fees.30
Petitioner elevated the matter to the CA, but it failed to obtain a favorable decision.
The CA found respondent’s dismissal being founded on the serious misconduct he
allegedly committed by carrying an illicit relationship with a married
woman.31 While considering said act a serious misconduct, it refused to consider it
sufficient to justify respondent’s dismissal, because it was not done in the
performance of his duties as would make him unfit to continue working for
petitioner.32 Petitioner’s motion for reconsideration was likewise denied in the
assailed July 5, 2006 resolution.
Unsatisfied, petitioner now comes before the Court in this petition for review
on certiorari insisting on the validity of respondent’s dismissal from employment.
We find merit in the petition.
It is undisputed that respondent was dismissed from employment for engaging in
extramarital affairs, a ground for termination of employment stated in petitioner’s
Personnel Policy. This basis of termination was made known to respondent as
early as the first communication made by petitioner. In its June 20, 1997 letter,
petitioner directed respondent to explain in writing or personal confrontation why
he should not be terminated for violation of Section 4.1.4 of the Personnel
Policy.33 Respondent merely denied the accusation against him 34 and did not
question the basis of such termination. When the LA was called upon to decide the
illegal dismissal case, it ruled in favor of petitioner and upheld the basis of such
dismissal which is the cited Personnel Policy.1âwphi1 The NLRC, however,
refused to recognize the existence and validity of petitioner’s Personnel Policy on
which the ground for termination was embodied.35
The existence of the Personnel Policy containing provisions on the grounds for
termination of employees was not questioned by respondent. In his position paper,
respondent only assailed the effectivity of the policy, as for him as it was amended
on the same date as the letter-complaints against him. In other words, he claimed
that the policy was amended in order to include therein the ground for his
termination to make sure that he is removed from his position.36
We do not subscribe to such an argument.
A comparison of petitioner’s old and new Personnel Policies attached by
respondent himself to his Position Paper shows that under the old policy, one of
the grounds for termination of an employee is "commission of acts or
commission (sic) of duties that bring discredit to the organization,37" while
under the new policy, one of the grounds is the "commission of acts that brings
(sic) discredit to the cooperative organization, especially, but not limited to,
conviction of any crime, illicit marital affairs, scandalous acts inimical to
established and accepted social mores."38 Contrary to respondent’s claim, with
the amendment of the Personnel Policy, petitioner did not create a new ground for
the termination of employment to make sure that respondent is removed from his
position. The quoted ground under the old policy is similar to that provided for in
the new policy. The enumeration containing the specific act of "illicit marital affairs"
is not an additional ground, but an example of an act that brings discredit to the
cooperative. It is merely an interpretation of what petitioner considers as such. It is,
thus, clear from the foregoing that engaging in extra-marital affairs is a ground for
termination of employment not only under the new but even under the old
Personnel Policy of petitioner. The effectivity of the policy as to respondent cannot,
therefore, be questioned.
To be sure, an employer is free to regulate all aspects of employment. 39 It may
make reasonable rules and regulations for the government of its employees which
become part of the contract of employment provided they are made known to the
employee.40 In the event of a violation, an employee may be validly terminated
from employment on the ground that an employer cannot rationally be expected to
retain the employment of a person whose lack of morals, respect and loyalty to his
employer, regard for his employer’s rules and application of the dignity and
responsibility, has so plainly and completely been bared.41
Applying now the above-discussed ground for termination, we now determine
whether respondent was properly dismissed from employment. In other words, did
petitioner adequately prove that respondent indeed engaged in extra-marital
affairs, an act which petitioner considers as would bring discredit to the
cooperative?
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We answer in the affirmative.
The employer’s evidence consists of sworn statements of either relatives or friends
of Thelma and respondent. They either had direct personal knowledge of the illicit
relationship or revealed circumstances indicating the existence of such
relationship. As aptly observed by the LA:
x x x Moreover, the credibility of the persons who bore witness against him can
hardly be questioned because some of these persons are relatives or friends of
either [respondent] or his lover. In particular, it is hard to see how Napoleon Gao-
ay, the brother of his lover, Thelma, could have resorted to a lie just to destroy him
when the same scandal could also result in tarnishing the reputation of his own
family. The motive of Napoleon in bringing the matter to the attention of the Board
of Directors, after all, was based on ethical grounds – he wanted a stop to the
affair because it was a disgrace to the community.
conducted a preliminary investigation and even created an Ad Hoc Committee to
investigate the matter. Respondent was directed to explain either in writing or by a
personal confrontation with the Board why he should not be terminated for
engaging in illicit affair.46 Not only did petitioner give him the opportunity but
respondent in fact informed petitioner that he opted to present his side orally47 and
did so as promised when he specifically denied such allegations before the AdHoc
Committee.48 Moreover, respondent was also allowed to peruse the investigation
report prepared by the Ad Hoc Committee and was advised that he was entitled to
assistance of counsel.49 Afterwhich, hearing was conducted. It was only after
thorough investigation and proper notice and hearing to respondent that petitioner
decided whether to dismiss the former or not. The decision to terminate
respondent from employment was embodied in Board Resolution No. 05, series of
1997 a copy of which was furnished respondent.50 With this resolution, respondent
was adequately notified of petitioner’s decision to remove him from his position.
Respondent cannot now claim that his right to due process was infringed upon.

WHEREFORE, premises considered, the petition is hereby GRANTED. The Court

There is also no reason to doubt the statement of Melanie Gao-ay, the wife of
of Appeals Decision dated January 16, 2006 and Resolution dated July 5, 2006 in
Napoleon, who witnessed the embarrassing "encounter", to borrow the term she
CA-G.R. SP No. 64554, are SET ASIDE. The Labor Arbiter's Decision dated April
used, between [respondent] and Thelma in her own boarding house.42
30, 1998 in NLRC Case No. RAB-1-08-1144-97 (IS) dismissing respondent
Salvador M. Bandiola, Jr.'s complaint against petitioner Alilem Credit Cooperative,
While respondent’s act of engaging in extra--marital affairs may be considered Inc., Is REINSTATED.
personal to him and does not directly affect the performance of his assigned task
as bookkeeper, aside from the fact that the act was specifically provided for by
petitioner’s Personnel Policy as one of the grounds for termination of employment, SO ORDERED.
said act raised concerns to petitioner as the Board received numerous complaints
and petitions from the cooperative members themselves asking for the removal of
respondent because of his immoral conduct.43

The next question is whether procedural due process was observed in the
termination of respondent’s services. "Before the services of an employee can be
validly terminated, the employer must furnish him two written notices: (a) a written
notice served on the employee specifying the ground or grounds for termination,
and giving the employee reasonable opportunity to explain his side; and (b) a
written notice of termination served on the employee indicating that upon due
consideration of all the circumstances, grounds have been established to justify his
termination."44 The employer must inform the employee of the charges against him
and to hear his defenses. A full adversarial proceeding is not necessary as the
parties may be heard through pleadings, written explanations, position papers,
memorandum or oral argument.45

In this case, respondent was adequately afforded the opportunity to defend himself
and explain the accusation against him. Upon receipt of the complaint, petitioner

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G.R. No. 160828 August 9, 2010
PICOP RESOURCES, INCORPORATED (PRI), Petitioner,
vs.
ANACLETO L. TAÑECA, GEREMIAS S. TATO, JAIME N. CAMPOS,
MARTINIANO A. MAGAYON, JOSEPH B. BALGOA, MANUEL G. ABUCAY,
MOISES M. ALBARAN, MARGARITO G. ALICANTE, JERRY ROMEO T. AVILA,
LORENZO D. CANON, RAUL P. DUERO, DANILO Y. ILAN, MANUEL M.
MATURAN, JR., LUISITO R. POPERA, CLEMENTINO C. QUIMAN, ROBERTO
Q. SILOT, CHARLITO D. SINDAY, REMBERT B. SUZON ALLAN J. TRIMIDAL,
and NAMAPRI-SPFL, Respondents.
DECISION
PERALTA, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court
seeking the reversal of the Decision1dated July 25, 2003 and Resolution2 dated
October 23, 2003 of the Court of Appeals in CA-G.R. SP No. 71760, setting aside
the Resolutions dated October 8, 20013 and April 29, 20024 of the National Labor
Relations Commission in NLRC CA No. M-006309-2001 and reinstating the
Decision5 dated March 16, 2001 of the Labor Arbiter.
The facts, as culled from the records, are as follows:
On February 13, 2001, respondents Anacleto Tañeca, Loreto Uriarte, Joseph
Balgoa, Jaime Campos, Geremias Tato, Martiniano Magayon, Manuel Abucay and
fourteen (14) others filed a Complaint for unfair labor practice, illegal dismissal and
money claims against petitioner PICOP Resources, Incorporated (PRI), Wilfredo
Fuentes (in his capacity as PRI's Vice President/Resident Manager), Atty. Romero
Boniel (in his capacity as PRI's Manager of Legal/Labor), Southern Philippines
Federation of Labor (SPFL), Atty. Wilbur T. Fuentes (in his capacity as Secretary
General of SPFL), Pascasio Trugillo (in his capacity as Local President of
Nagkahiusang Mamumuo sa PICOP Resources, Inc.- SPFL [NAMAPRI-
SPFL]) and Atty. Proculo Fuentes, Jr.6 (in his capacity as National President of
SPFL).
Respondents were regular rank-and-file employees of PRI and bona fide members
of Nagkahiusang Mamumuo saPRI Southern Philippines Federation of Labor
(NAMAPRI-SPFL), which is the collective bargaining agent for the rank-and-file
employees of petitioner PRI.
PRI has a collective bargaining agreement (CBA) with NAMAPRI-SPFL for a
period of five (5) years from May 22, 1995 until May 22, 2000.
The CBA contained the following union security provisions:
Article II- Union Security and Check-Off
Section 6. Maintenance of membership.
6.1 All employees within the appropriate bargaining unit who are
members of the UNION at the time of the signing of this AGREEMENT
shall, as a condition of continued employment by the COMPANY,
maintain their membership in the UNION in good standing during the
effectivity of this AGREEMENT.
6.2 Any employee who may hereinafter be employed to occupy a position
covered by the bargaining unit shall be advised by the COMPANY that
they are required to file an application for membership with the UNION
within thirty (30) days from the date his appointment shall have been made
regular.
6.3 The COMPANY, upon the written request of the UNION and after
compliance with the requirements of the New Labor Code, shall give
notice of termination of services of any employee who shall fail to
fulfill the condition provided in Section 6.1 and 6.2 of this Article, but
it assumes no obligation to discharge any employee if it has reasonable
grounds to believe either that membership in the UNION was not available
to the employee on the same terms and conditions generally applicable to
other members, or that membership was denied or terminated for reasons
other than voluntary resignation or non-payment of regular union dues.
Separation under the Section is understood to be for cause, consequently,
the dismissed employee is not entitled to separation benefits provided
under the New Labor Code and in this AGREEMENT."7
On May 16, 2000, Atty. Proculo P. Fuentes (Atty. Fuentes) sent a letter to the
management of PRI demanding the termination of employees who allegedly
campaigned for, supported and signed the Petition for Certification Election of the
Federation of Free Workers Union (FFW) during the effectivity of the CBA.
NAMAPRI-SPFL considered said act of campaigning for and signing the petition
for certification election of FFW as an act of disloyalty and a valid basis for
termination for a cause in accordance with its Constitution and By-Laws, and the
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terms and conditions of the CBA, specifically Article II, Sections 6.1 and 6.2 on
Union Security Clause.
In a letter dated May 23, 2000, Mr. Pascasio Trugillo requested the management
of PRI to investigate those union members who signed the Petition for Certification
Election of FFW during the existence of their CBA. NAMAPRI-SPFL, likewise,
furnished PRI with machine copy of the authorization letters dated March 19, 20
and 21, 2000, which contained the names and signatures of employees.
Acting on the May 16 and May 23, 2000 letters of the NAMAPRI-SPFL, Atty.
Romero A. Boniel issued a memorandum addressed to the concerned employees
to explain in writing within 72 hours why their employment should not be
terminated due to acts of disloyalty as alleged by their Union.
Within the period from May 26 to June 2, 2000, a number of employees who were
served "explanation memorandum" submitted their explanation, while some did
not.
In a letter dated June 2, 2000, Atty. Boniel endorsed the explanation letters of the
employees to Atty. Fuentes for evaluation and final disposition in accordance with
the CBA.
After evaluation, in a letter dated July 12, 2000, Atty. Fuentes advised the
management of PRI that the Union found the member's explanations to be
unsatisfactory. He reiterated the demand for termination, but only of 46 member-
employees, including respondents.
On October 16, 2000, PRI served notices of termination for causes to the 31 out of
the 46 employees whom NAMAPRIL-SPFL sought to be terminated on the ground
of "acts of disloyalty" committed against it when respondents allegedly supported
and signed the Petition for Certification Election of FFW before the "freedom
period" during the effectivity of the CBA. A Notice dated October 21, 2000 was
also served on the Department of Labor and Employment Office (DOLE), Caraga
Region.
Respondents then accused PRI of Unfair Labor Practice punishable under Article
248 (a), (b), (c), (d) and (e) of the Labor Code, while Atty. Fuentes and Wilbur T.
Fuentes and Pascasio Trujillo were accused of violating Article 248 (a) and (b) of
the Labor Code.
Respondents alleged that none of them ever withdrew their membership from
NAMAPRI-SPFL or submitted to PRI any union dues and check-off
disauthorizations against NAMAPRI-SPFL. They claimed that they continue to
remain on record as bona fide members of NAMAPRI-SPFL. They pointed out that
a patent manifestation of one’s disloyalty would have been the explicit resignation
or withdrawal of membership from the Union accompanied by an advice to
management to discontinue union dues and check-off deductions. They insisted
that mere affixation of signature on such authorization to file a petition for
certification election was not per se an act of disloyalty. They claimed that while it
may be true that they signed the said authorization before the start of the freedom
period, the petition of FFW was only filed with the DOLE on May 18, 2000, or 58
days after the start of the freedom period.
Respondents maintained that their acts of signing the authorization signifying
support to the filing of a Petition for Certification Election of FFW was merely
prompted by their desire to have a certification election among the rank-and-file
employees of PRI with hopes of a CBA negotiation in due time; and not to cause
the downfall of NAMAPRI-SPFL.
Furthermore, respondents contended that there was lack of procedural due
process. Both the letter dated May 16, 2000 of Atty. Fuentes and the follow-up
letter dated May 23, 2000 of Trujillo addressed to PRI did not mention their names.
Respondents stressed that NAMAPRI-SPFL merely requested PRI to investigate
union members who supported the Petition for Certification Election of FFW.
Respondents claimed that they should have been summoned individually,
confronted with the accusation and investigated accordingly and from where the
Union may base its findings of disloyalty and, thereafter, recommend to
management the termination for causes.1avvphi1
Respondents, likewise, argued that at the time NAMAPRI-SPFL demanded their
termination, it was no longer the bargaining representative of the rank-and-file
workers of PRI, because the CBA had already expired on May 22, 2000. Hence,
there could be no justification in PRI’s act of dismissing respondents due to acts of
disloyalty.
Respondents asserted that the act of PRI, Wilfredo Fuentes and Atty. Boniel in
giving in to the wishes of the Union in discharging them on the ground of disloyalty
to the Union amounted to interference with, restraint or coercion of respondents’
exercise of their right to self-organization. The act indirectly required petitioners to
support and maintain their membership with NAMAPRI-SPFL as a condition for
their continued employment. The acts of NAMAPRI-SPFL, Atty. Fuentes and
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Trujillo amounted to actual restraint and coercion of the petitioners in the exercise
of their rights to self-organization and constituted acts of unfair labor practice.
In a Decision8 dated March 16, 2001, the Labor Arbiter declared the respondents’
dismissal to be illegal and ordered PRI to reinstate respondents to their former or
equivalent positions without loss of seniority rights and to jointly and solidarily pay
their backwages. The dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby entered:
1. Declaring complainants’ dismissal illegal; and
2. Ordering respondents Picop Resources Inc. (PRI) and NAMAPRI-SPFL
to reinstate complainants to their former or equivalent positions without
loss of seniority rights and to jointly and solidarily pay their backwages in
the total amount of ₱420,339.30 as shown in the said Annex "A" plus
damages in the amount of ₱10,000.00 each, or a total of ₱210,000.00 and
attorney’s fees equivalent to 10% of the total monetary award.
SO ORDERED.9
PRI and NAMAPRI-SPFL appealed to the National Labor Relations Commission
(NLRC), which reversed the decision of the Labor Arbiter; thus, declaring the
dismissal of respondents from employment as legal.
Respondents filed a motion for reconsideration, but it was denied on April 29, 2001
for lack of merit.
Unsatisfied, respondents filed a petition for certiorari under Rule 65 before the
Court of Appeals and sought the nullification of the Resolution of the NLRC dated
October 8, 2001 which reversed the Decision dated March 16. 2001 of Labor
Arbiter and the Resolution dated April 29, 2002, which denied respondent’s motion
for reconsideration.
On July 25, 2003, the Court of Appeals reversed and set aside the assailed
Resolutions of the NLRC and reinstated the Decision dated March 16, 2001 of the
Labor Arbiter.
Thus, before this Court, PRI, as petitioner, raised the following issues:
I
WHETHER AN EXISTING COLLECTIVELY (sic) BARGAINING AGREEMENT
(CBA) CAN BE GIVEN ITS FULL FORCE AND EFFECT IN ALL ITS TERMS AND
CONDITION INCLUDING ITS UNION SECURITY CLAUSE, EVEN BEYOND THE
5-YEAR PERIOD WHEN NO NEW CBA HAS YET BEEN ENTERED INTO.
II
WHETHER OR NOT AN HONEST ERROR IN THE INTERPRETATION AND/OR
CONCLUSION OF LAW FALL WITHIN THE AMBIT OF THE EXTRAORDINARY
REMEDY OF CERTIORARI UNDER RULE 65, REVISED RULES OF COURT.10
We will first delve on the technical issue raised.
PRI perceived a patent error in the mode of appeal elected by respondents for the
purpose of assailing the decision of the NLRC. It claimed that assuming that the
NLRC erred in its judgment on the legal issues, its error, if any, is not tantamount
to abuse of discretion falling within the ambit of Rule 65.
Petitioner is mistaken.
The power of the Court of Appeals to review NLRC decisions via Rule 65 or
Petition for Certiorari has been settled as early as in our decision in St. Martin
Funeral Home v. National Labor Relations Commission.11 This Court held that the
proper vehicle for such review was a Special Civil Action for Certiorari under Rule
65 of the Rules of Court, and that this action should be filed in the Court of Appeals
in strict observance of the doctrine of the hierarchy of courts.12 Moreover, it is
already settled that under Section 9 of Batas Pambansa Blg. 129, as amended by
Republic Act No. 7902[10] (An Act Expanding the Jurisdiction of the Court of
Appeals, amending for the purpose of Section Nine of Batas Pambansa Blg. 129
as amended, known as the Judiciary Reorganization Act of 1980), the Court of
Appeals – pursuant to the exercise of its original jurisdiction over Petitions
for Certiorari – is specifically given the power to pass upon the evidence, if and
when necessary, to resolve factual issues. 13
We now come to the main issue of whether there was just cause to terminate the
employment of respondents.
PRI argued that the dismissal of the respondents was valid and legal. It claimed to
have acted in good faith at the instance of the incumbent union pursuant to the
Union Security Clause of the CBA.
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Citing Article 253 of the Labor Code,14 PRI contends that as parties to the CBA,
they are enjoined to keep the status quo and continue in full force and effect the
terms and conditions of the existing CBA during the 60-day period and/or until a
new agreement is reached by the parties.
Petitioner's argument is untenable.
"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 as
a condition 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.15
However, in terminating the employment of an employee by enforcing the union
security clause, the employer needs to determine and prove that: (1) the union
security clause is applicable; (2) the union is requesting for the enforcement of the
union security provision in the CBA; and (3) there is sufficient evidence to support
the decision of the union to expel the employee from the union. These requisites
constitute just cause for terminating an employee based on the union security
provision of the CBA.16
As to the first requisite, there is no question that the CBA between PRI and
respondents included a union security clause, specifically, a maintenance of
membership as stipulated in Sections 6 of Article II, Union Security and Check-Off.
Following the same provision, PRI, upon written request from the Union, can
indeed terminate the employment of the employee who failed to maintain its good
standing as a union member.
Secondly, it is likewise undisputed that NAMAPRI-SPFL, in two (2) occasions
demanded from PRI, in their letters dated May 16 and 23, 2000, to terminate the
employment of respondents due to their acts of disloyalty to the Union.
However, as to the third requisite, we find that there is no sufficient evidence to
support the decision of PRI to terminate the employment of the respondents.
PRI alleged that respondents were terminated from employment based on the
alleged acts of disloyalty they committed when they signed an authorization for the
Federation of Free Workers (FFW) to file a Petition for Certification Election among
all rank-and-file employees of PRI. It contends that the acts of respondents are a
violation of the Union Security Clause, as provided in their Collective Bargaining
Agreement.
We are unconvinced.
We are in consonance with the Court of Appeals when it held that the mere signing
of the authorization in support of the Petition for Certification Election of FFW on
March 19, 20 and 21, or before the "freedom period," is not sufficient ground to
terminate the employment of respondents inasmuch as the petition itself was
actually filed during the freedom period. Nothing in the records would show that
respondents failed to maintain their membership in good standing in the Union.
Respondents did not resign or withdraw their membership from the Union to which
they belong. Respondents continued to pay their union dues and never joined the
FFW.
Significantly, petitioner's act of dismissing respondents stemmed from the latter's
act of signing an authorization letter to file a petition for certification election as
they signed it outside the freedom period. However, we are constrained to believe
that an "authorization letter to file a petition for certification election" is different
from an actual "Petition for Certification Election." Likewise, as per records, it was
clear that the actual Petition for Certification Election of FFW was filed only on May
18, 2000.17 Thus, it was within the ambit of the freedom period which commenced
from March 21, 2000 until May 21, 2000. Strictly speaking, what is prohibited is the
filing of a petition for certification election outside the 60-day freedom period.18 This
is not the situation in this case. If at all, the signing of the authorization to file a
certification election was merely preparatory to the filing of the petition for
certification election, or an exercise of respondents’ right to self-organization.
Moreover, PRI anchored their decision to terminate respondents’ employment on
Article 253 of the Labor Code which states that "it shall be the duty of both
parties to keep the status quo and to continue in full force and effect the
terms and conditions of the existing agreement during the 60-day period
and/or until a new agreement is reached by the parties." It claimed that they
are still bound by the Union Security Clause of the CBA even after the expiration of
the CBA; hence, the need to terminate the employment of respondents.
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Petitioner's reliance on Article 253 is misplaced.
The provision of Article 256 of the Labor Code is particularly enlightening. It reads:
Article 256. Representation issue in organized establishments. - In organized
establishments, when a verified petition questioning the majority status of the
incumbent bargaining agent is filed before the Department of Labor and
Employment within the sixty-day period before the expiration of a collective
bargaining agreement, the Med-Arbiter shall automatically order an election by
secret ballot when the verified petition is supported by the written consent of at
least twenty-five percent (25%) of all the employees in the bargaining unit to
ascertain the will of the employees in the appropriate bargaining unit. To have a
valid election, at least a majority of all eligible voters in the unit must have cast
their votes. The labor union receiving the majority of the valid votes cast shall be
certified as the exclusive bargaining agent of all the workers in the unit. When an
election which provides for three or more choices results in no choice receiving a
majority of the valid votes cast, a run-off election shall be conducted between the
labor unions receiving the two highest number of votes: Provided, That the total
number of votes for all contending unions is at least fifty per cent (50%) of the
number of votes cast.
At the expiration of the freedom period, the employer shall continue to
recognize the majority status of the incumbent bargaining agent where no
petition for certification election is filed.19
Applying the same provision, it can be said that while it is incumbent for the
employer to continue to recognize the majority status of the incumbent bargaining
agent even after the expiration of the freedom period, they could only do so when
no petition for certification election was filed. The reason is, with a pending petition
for certification, any such agreement entered into by management with a labor
organization is fraught with the risk that such a labor union may not be chosen
thereafter as the collective bargaining representative.20 The provision
for status quo is conditioned on the fact that no certification election was filed
during the freedom period. Any other view would render nugatory the clear
statutory policy to favor certification election as the means of ascertaining the true
expression of the will of the workers as to which labor organization would
represent them.21
In the instant case, four (4) petitions were filed as early as May 12, 2000. In fact, a
petition for certification election was already ordered by the Med-Arbiter of DOLE
Caraga Region on August 23, 2000.22 Therefore, following Article 256, at the
expiration of the freedom period, PRI's obligation to recognize NAMAPRI-SPFL as
the incumbent bargaining agent does not hold true when petitions for certification
election were filed, as in this case.
Moreover, the last sentence of Article 253 which provides for automatic renewal
pertains only to the economic provisions of the CBA, and does not include
representational aspect of the CBA. An existing CBA cannot constitute a bar to a
filing of a petition for certification election. When there is a representational issue,
the status quo provision in so far as the need to await the creation of a new
agreement will not apply. Otherwise, it will create an absurd situation where the
union members will be forced to maintain membership by virtue of the union
security clause existing under the CBA and, thereafter, support another union
when filing a petition for certification election. If we apply it, there will always be an
issue of disloyalty whenever the employees exercise their right to self-organization.
The holding of a certification election is a statutory policy that should not be
circumvented,23 or compromised.1avvphi
Time and again, we have ruled that we adhere to the policy of enhancing the
welfare of the workers. Their freedom to choose who should be their bargaining
representative is of paramount importance. The fact that there already exists a
bargaining representative in the unit concerned is of no moment as long as the
petition for certification election was filed within the freedom period. What is
imperative is that by such a petition for certification election the employees are
given the opportunity to make known of who shall have the right to represent them
thereafter. Not only some, but all of them should have the right to do so. What is
equally important is that everyone be given a democratic space in the bargaining
unit concerned.24
We will emphasize anew that the power to dismiss is a normal prerogative of the
employer. This, however, is not without limitations. 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, therefore, respect and protect the
rights of their employees, which include the right to labor. 25
An employee who is illegally dismissed is entitled to the twin reliefs of full
backwages and reinstatement. If reinstatement is not viable, separation pay is
awarded to the employee. In awarding separation pay to an illegally dismissed
employee, in lieu of reinstatement, the amount to be awarded shall be equivalent
to one month salary for every year of service. Under Republic Act No. 6715,
employees who are illegally dismissed are entitled to full backwages, inclusive of
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allowances and other benefits, or their monetary equivalent, computed from the
time their actual compensation was withheld from them up to the time of their
actual reinstatement. But if reinstatement is no longer possible, the backwages
shall be computed from the time of their illegal termination up to the finality of the
decision. Moreover, respondents, having been compelled to litigate in order to
seek redress for their illegal dismissal, are entitled to the award of attorney’s fees
equivalent to 10% of the total monetary award.26
WHEREFORE, the petition is DENIED. The Decision dated July 25, 2003 and the
Resolution dated October 23, 2003 of the Court of Appeals in CA-G.R. SP No.
71760, which set aside the Resolutions dated October 8, 2001 and April 29, 2002
of the National Labor Relations Commission in NLRC CA No. M-006309-2001, are
AFFIRMED accordingly. Respondents are hereby awarded full backwages and
other allowances, without qualifications and diminutions, computed from the time
they were illegally dismissed up to the time they are actually reinstated. Let this
case be remanded to the Labor Arbiter for proper computation of the full
backwages due respondents, in accordance with Article 279 of the Labor Code, as
expeditiously as possible.
SO ORDERED.
G.R. No. 167218 July 2, 2010
ERECTOR ADVERTISING SIGN GROUP, INC. and ARCH. JIMMY C.
AMOROTO, Petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, Respondent.
DECISION
PERALTA, J.:
In this petition for review under Rule 45 of the Rules of Court, petitioner Erector
Advertising Sign Group, Inc. assails the February 16, 2005 Decision1 of the Court
of Appeals in CA-G.R. SP No. 80027. The challenged Decision affirmed the
February 28, 2003 Resolution2 of the National Labor Relations Commission in
NLRC NCR CA No. 028711-01. In turn, the said Decision reversed and set aside
the March 30, 2001 Decision3 of the Labor Arbiter, which dismissed for lack of
merit the complaint for illegal dismissal filed by respondent Expedito Cloma.
The basic facts follow.
Petitioner Erector Advertising Sign Group, Inc. is a domestic corporation engaged
in the business of constructing billboards and advertising signs. Sometime in the
middle of 1996, petitioner engaged the services of Expedito Cloma (Cloma) as
company driver and the latter had served as such until his dismissal from service
in May 2000.4
In his Complaint5 filed with the National Labor Relations Commission (NLRC),
Cloma alleged that he was illegally suspended and then dismissed from his
employment without due process of law. He likewise claimed his unpaid monetary
benefits such as overtime pay, premium pay for worked rest days, service
incentive leave pay and 13th month pay, as well as moral, exemplary and actual
damages and attorneys fees.
It is conceded by petitioner that Cloma has been suspended several times from
work due to frequent tardiness and absenteeism, but the instant case appears to
be likewise the result of documented instances of absenteeism without prior notice
to and approval from his superior, and of misbehavior. The former happened
between May 12 and May 15, 2000 when Cloma supposedly failed to report for
work without prior notice and prior leave approval6 which thus effectively prevented
the other workers from being transported to the job site as there was no other
driver available; whereas the latter incident happened on May 11, 2000 when
allegedly, Cloma, without authority, suddenly barged into the premises of the
Outright Division and, without being provoked, threatened the employees with
bodily harm if they did not stop from doing their work.7 This second incident was
supposedly narrated fully in a letter dated May 13, 2000 addressed to the
personnel manager and signed by one Victor Morales and Ruben Que.81avvphi1
As a result of these incidents, petitioner served on Cloma two (2) Suspension
Orders dated May 15, 2000 and May 17, 2000, both signed by Nelson Clavacio
(Clavacio), personnel and production manager of petitioner company, and
approved by Architect Jimmy C. Amoroto (Amoroto), president and chief executive
officer. For easy reference, the suspension orders are reproduced as follows:
May 15, 2000
Para kay: MR. EXPEDITO CLOMA
Company Driver
Paksa: SUSPENSION ORDER
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Dahil sa iyong pagliban mula pa nuong Mayo 12 hanggang Mayo 15, 2000 na wala
man lang pasabi o paalam, ikaw ay binibigyan ng tatlong araw na suspensyon na
magsisimula ngayon Mayo 15 hanggang Mayo 17, 2000. Ito ay bilang paggawad
ng batas at disiplina sa ating sarili at sa iba upang huwag ng pamarisan pa.
Malinaw na nakasaad sa Company Rules and Regulations SECTION 1,
PARAGRAPH 4: "Ang pagliban ng walang paalam na sunod-sunod ay may kalakip
na kaparusahan. Dalawang araw na absent ay katumbas ng tatlong araw na
suspension.9
May 17, 2000
Para kay: MR. EXPEDITO CLOMA
Company Driver
Paksa: SUSPENSION ORDER
Ikaw ay ginagawaran ng isang linggong Suspensyon mula bukas, Mayo 18, 2000
hanggang Mayo 24, 2000. Ito ay dahil sa [sumusunod] na dahilan:
1. Ang pagpigil sa mga trabahador ni Ms. Anne Dongel na taga-Outright Division
na magtrabaho nuong Mayo 11, 2000 at pananakot sa mga trabahador ni Ms.
Anne Dongel samantalang iba naman ang kanilang Division. (SECTION 2
PARAGRAPH 2/PANANAKOT "ISANG LINGGONG SUSPENSYON)
Ang iyong suspension ay epektibo kaagad bukas at makakabalik ka lamang sa
Mayo 25, 2000. Ang parusang nabanggit ay para sa pagpapairal ng disiplina sa
atin at sa ating mga kapwa manggagawa.10
When Cloma reported back for work on May 25, 2000, he was taken by surprise
when the security guard on duty prevented him from entering the company’s
premises and, instead, handed him a termination letter dated May 20, 2000,
signed and approved by Clavacio and Amoroto.11 The letter states:
May 20, 2000
Para kay: MR. EXPEDITO CLOMA
Company Driver
Paksa: Notice of Termination
Ginoong Expedito Cloma:
Malungkot naming ibinabalita sa iyo na napagpasyahan ng Pamunuang ito na
tanggalin ka na sa iyong serbisyo bilang "Company Driver." Ito ay dahil sa mga
sumusunod na kadahilanan:
1. Ang pagliban ng dalawang araw na wala man lang pasabi o paalam.
2. Ang pananakot sa kapwa manggagawa o trabahador na nagresulta sa
pagkauwi ng mga trabahador ng Outright Division.
3. Ang pagpigil sa operasyon ng ibang Department sa pamamalakad ni
Ms. Anne Dongel.
4. Maraming pagkakataon na "late" na naging dahilan ng pagsabotahe ng
operasyon ng mga Production Crews.
Mula sa mga dahilan na nabanggit, ito ay sapat na dahilan upang tanggalin ka sa
iyong posisyon, nagpapakita lamang na hindi mo nagampanan ng maayos ang
iyong trabaho katulad ng inaasahan sa iyo ng Pamunuang ito.12
Ridden with angst and anxiety, Cloma walked away and filed the instant complaint
for illegal dismissal.
Following the submission of position papers and other documentary exhibits by
both parties, the Labor Arbiter, after evidentiary evaluation, issued its March 30,
2001 Decision dismissing Cloma’s complaint for lack of merit.13 In so ruling, the
Labor Arbiter put much weight on the evidence presented by petitioner company
bearing on Cloma’s frequent tardiness and unauthorized absences, as well as the
several incidents of misbehavior and misconduct in which Cloma figured as the
protagonist. It went on to say that while the onus of proving the existence of the
cause for termination and the observance of due process lie on the employer,
petitioner company was actually able to establish the validity of Cloma’s dismissal
by its evidence.14 It also noted that while the company, by memorandum/notice,
had directed Cloma to submit his explanation on his alleged infractions, the latter
nevertheless did not comply with the directive and instead ignored the same. In
this connection, the Labor Arbiter declared that a plea of denial of procedural due
process would not lie when he who had been given an opportunity to be heard had
chosen not to avail of such opportunity. 15
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Aggrieved, Cloma appealed to the NLRC.16 On February 28, 2003, the NLRC
issued its Resolution17 reversing and setting aside the Labor Arbiter’s decision.
The NLRC pointed out that not only was Cloma dismissed without due process but
also, that he was dismissed without just cause. The NLRC based its finding on the
termination letter served by petitioner on Cloma such that with respect to the first
ground of termination, i.e., Ang pagliban ng dalawang araw na wala man lang
pasabi o paalam, the letter did not state the dates when these two absences had
been incurred; that in relation to the second and third grounds, i.e., Ang pananakot
sa kapwa manggagawa x x x and Ang pagpigil sa operasyon ng ibang Department
x x x, petitioner did not profess having conducted investigation on these matters
that would have afforded Cloma the opportunity to confront his witnesses and that
Cloma had already been sanctioned for this offense under the May 17, 2000
suspension order; and that as to the last ground, i.e., Maraming pagkakataon na
late x x x, the NLRC noted that the best proof on this allegation would have been
Cloma’s corresponding daily time record but which, however, petitioner failed to
make of record at the hearing of the case.18 Hence, finding that Cloma was
dismissed without just cause and without due process, the NLRC ordered
petitioner to pay full backwages, allowances and other benefits, as well as
separation pay in lieu of reinstatement.19 The appeal was disposed of as follows:
WHEREFORE, premises considered, Complainant’s appeal is GRANTED. The
Labor Arbiter’s decision in the above-entitled case is hereby REVERSED and SET
ASIDE. A new one is entered declaring that Complainant’s dismissal from
employment is illegal. Respondents are hereby ordered to jointly as (sic) severally
pay Complainant the amount of ₱271,673.08 as backwages and separation pay,
plus ten percent (10%) of his total monetary award as attorney’s fees.
SO ORDERED.20
Petitioner’s motion for reconsideration was denied,21 and forthwith it elevated the
case to the Court of Appeals on petition for certiorari.22
On February 16, 2005, the Court of Appeals rendered the assailed
Decision23 adopting the findings and conclusions of the NLRC as follows:
WHEREFORE, the instant petition is DENIED. The resolution of the National Labor
Relations Commission dated 28 February 2003 reversing the decision of the Labor
Arbiter dated 30 March 2001 in NLRC CASE No. 00-05-02887-2000 is hereby
AFFIRMED.
SO ORDERED.
Hence, this petition, which raises the sole issue of whether Cloma was dismissed
with just cause and with due process of law.
Petitioner insists that the just cause for Cloma’s termination abounds in the
records, alluding to several infractions and violations of company rules and
regulations for which he has been suspended many times from work. In addition, it
likewise enumerates a number of Cloma’s other acts of misbehavior such as
reporting for work under the influence of alcohol, picking fights with co-workers and
others which the management merely let pass but which, nevertheless, could
constitute valid grounds for dismissal. Yet significantly, petitioner admits that it is
Cloma’s repeated infractions which gave the company the motivation to finally
terminate his services.24
Also, petitioner maintains that it observed due process in deciding to dismiss
Cloma from service. It claims that the decision to let go of Cloma was the result of
a thorough consideration of the totality of the many infractions he has committed,
as well as of his general behavior toward his work. It reasons that ample time, prior
to May 20, 2000, has been afforded Cloma so that he could explain why he should
not be dismissed, but he nevertheless failed to comply despite the fact that he was
residing only a few houses away from the company.25
Commenting on the petition, Cloma maintains that petitioner’s evidence is
insubstantial to support the theory that the dismissal has complied with due
process and is with just cause. He stresses that the evidence presented by
petitioner hardly supports the grounds relied on for his termination and that, more
importantly, petitioner did not comply with the two-notice rule required by law to
validate an employee’s dismissal from service, that is, a written notice stating the
cause for termination and a written notice of the intention to terminate employment
stating clearly the reason therefor.26
We find no merit in the petition.
The validity of an employee’s dismissal from service hinges on the satisfaction of
the two substantive requirements for a lawful termination. These are, first, whether
the employee was accorded due process the basic components of which are the
opportunity to be heard and to defend himself. This is the procedural aspect. And
second, whether the dismissal is for any of the causes provided in the Labor Code
of the Philippines. This constitutes the substantive aspect.27
With respect to due process requirement, the employer is bound to furnish the
employee concerned with two (2) written notices before termination of employment
can be legally effected. One is the notice apprising the employee of the particular
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acts or omissions for which his dismissal is sought and this may loosely be
considered as the proper charge. The other is the notice informing the employee of
the management’s decision to sever his employment. This decision, however,
must come only after the employee is given a reasonable period from receipt of the
first notice within which to answer the charge, thereby giving him ample
opportunity to be heard and defend himself with the assistance of his
representative should he so desire. The requirement of notice, it has been
stressed, is not a mere technicality but a requirement of due process to which
every employee is entitled.28
In this case, we find that Cloma’s dismissal from service did not comply with this
basic precept.
We recall that the notice of termination served by petitioner on Cloma cites three
reasons why the management has arrived at the decision to dismiss him from
service: first, his absence from work for two (2) days without prior notice and
approval; second, his act of barging into the premises of the Outright Division and
threatening the members of the said division with bodily harm if they did not stop
doing their work; and third, his frequent tardiness in reporting for work.
Certainly, nowhere in the records does it appear that Cloma attempted to deny
these allegations, yet it is equally certain that the records do not contain any
suggestion that petitioner, with respect to these three grounds with which Cloma is
charged, has tried to notify the latter of the said charges. Indeed, we find that
petitioner has not complied with the basic requirement of serving a pre-dismissal
notice on Cloma. What is clear from the records is that the only notice that was
given to Cloma prior to his termination is the May 20, 2000 notice of termination
informing him that his employment in the company has been severed for the
causes mentioned.
Be that as it may, petitioner insists that Cloma has been sufficiently informed of the
acts constituting the grounds for his termination and that with respect thereto,
ample opportunity was thereafter given to him to be heard thereon, only that he did
not choose to avail of that opportunity. Petitioner seems to be referring to the May
15 and May 17, 2000 Suspension Orders which it previously served on Cloma.
These orders, however, hardly constitute the first notice required by law prior to
termination. Here is why: a fleeting glance at these two orders readily reveals that
the alleged offenses mentioned therein were not to be used as grounds for
termination, but rather merely for suspension. The wording of the orders conveys
the idea that as a result of his shortcomings, Cloma was going to be meted the
penalty of suspension in accordance with the provisions of the company’s rules
and regulations, but not that he might be dismissed from service upon the same
grounds. There is not an allusion in the said orders that petitioner was giving
Cloma sufficient opportunity to submit his defenses or explanation. Instead, what it
implies is that the management has already decided, for causes stated therein, to
suspend Cloma from work in the company, and nothing more.
Moreover, the May 15, 2000 Order, in particular, could not have constituted the
first notice relative to the charge that Cloma has incurred unauthorized absences
for two days as stated in the notice of termination. This, inasmuch as the order
refers to a four (4)–day absence supposedly incurred between May 12, 2000 and
May 15, 2000 for which Cloma has actually been sanctioned with suspension. In
this regard, it suffices to say that even assuming that the May 15, 2000 order could
validly take the place of the first notice, still, Cloma’s dismissal cannot be validly
effected, because an employee may be dismissed only if the grounds mentioned in
the pre-dismissal notice were the ones cited for the termination of
employment.29 The same is true with the third ground of termination, i.e., that
Cloma has frequently been late in reporting for work. Observably, aside from the
fact that Cloma, with respect to this ground, has not been furnished a pre-dismissal
notice, the notice of termination does not state the inclusive dates on which Cloma
actually reported late for his work.
Moreover, we agree with the Court of Appeals that not only did petitioner fail to
comply with the procedural due process requirements in terminating Cloma’s
employment, but also that petitioner has not overcome the quantum of substantial
evidence needed to establish the existence of just causes for dismissal in this
case.
With respect to the charges of frequent tardiness and incurring an unauthorized
two-day leave of absence, it is plain in the records that the same have not been
sufficiently proved by petitioner. For one, petitioner could not identify the dates
when Cloma incurred the alleged tardiness in reporting for work. Add to that the
fact that Cloma’s daily time records, which would have been the best evidence on
the matter, have not been made of record when they are actually within petitioner’s
power to produce and submit at the trial. The same applies to the charge of
unauthorized absences.
Finally, anent the charge that Cloma had terrorized the staff of the Outright
Division and incited a work stoppage, it is clear, from the May 17, 2000 suspension
order, that he has already been penalized with suspension for this offense and,
hence, this act may no longer be added to support the imposition of the ultimate
penalty of dismissal from service nor may it be used as an independent ground to
that end.30
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All told, we find that no error has been committed by the Court of Appeals in ruling
that Cloma’s dismissal from service was both without just cause and without due
process of law.
WHEREFORE, the petition is DENIED. The February 16, 2005 Decision of the
Court of Appeals in CA-G.R. SP No. 80027, affirming the February 28, 2003
Resolution of the National Labor Relations Commission in NLRC NCR CA No.
028711-01, is hereby AFFIRMED.
SO ORDERED.
G.R. No. 166970 August 17, 2011
MA. ANA M. TAMONTE and EDILBERTO A. TAMONTE, Petitioners,
vs.
HONGKONG and SHANGHAI BANKING CORPORATION LTD., HONGKONG
and SHANGHAI BANKING CORPORATION STAFF RETIREMENT PLAN,
represented by ATTY. MANUEL G. MONTECILLO, STUART P. MILNE and
ALEJANDRO CUSTODIO; ALEJANDRO CUSTODIO; RTC CLERK OF COURT
& EX-OFFICIO SHERIFF and SHERIFF IN CHARGE CLEMENTE BOLOY and
BENEDICTO G. HEBRON, respectively,Respondents.
DECISION
PERALTA, J.:
Assailed in this petition for review on certiorari are the Decision1 dated October 12,
2004 and Resolution2 dated January 25, 2005 of the Court of Appeals (CA) issued
in CA-G.R. CV No. 66920. The CA affirmed the Order dated January 8, 1998 of
the Regional Trial Court (RTC), Branch 274, Parañaque, Metro Manila, dismissing
the complaint filed by petitioners Ma. Ana M. Tamonte and Edilberto A. Tamonte
for annulment of the foreclosure proceedings.
Petitioner Ma. Ana M. Tamonte (Ana) was a regular employee of the Hongkong
and Shanghai Banking Corporation Ltd. (the bank) and a member of the Hongkong
and Shanghai Banking Corporation Staff Retirement Plan (HSBC SRP). The
HSBC SRP was established through its Board of Trustees for the purpose of
providing retirement, disability and loan benefits to all its regular employees.
Petitioner Ana applied for a housing loan with the HSBC SRP. To secure the said
loan, petitioners and respondent HSBC SRP entered into a real estate mortgage
contract3where petitioners mortgaged their property covered by TCT No. 17169 of
the Register of Deeds of Parañaque. The monthly amortizations of the loan were
paid by petitioner Ana through automatic payroll deductions.
In January 1993, a labor dispute arose between the bank and the employees'
union, where petitioner Ana was a member thereof, which culminated in a strike
staged on December 22, 1993. Majority of the bank employees, which included
petitioner Ana, were dismissed from service for abandonment. Petitioner Ana and
the other dismissed bank employees had filed with the Labor Arbiter an illegal
dismissal case against the bank. The Labor Arbiter declared the strike illegal. The
labor case has now reached Us on a petition for review filed by the employees
against the bank.
In a letter4 dated November 28, 1994 addressed to petitioner Ana, respondent
HSBC SRP demanded the payment of her unpaid accounts as of November 25,
1994, which included her housing loan. Petitioners failed to settle their obligation;
thus, respondent HSBC SRP effected the foreclosure of petitioners' property
subject of the real estate mortgage. The foreclosure proceeding was conducted on
May 28, 1996 with Alejandro L. Custodio (Custodio), one of the herein
respondents, emerging as the highest bidder.5
On October 29, 1997, petitioners filed with the RTC of Parañaque, Metro Manila, a
Complaint6 for Annulment of the Entire Proceedings in Foreclosure No. 96-037
with Prayer for Damages, Temporary Restraining Order, Preliminary and Final
Injunction, etc. against the bank, HSBC SRP, represented by Atty. Manuel G.
Montecillo, Stuart P. Milne and Alejandro L. Custodio and the RTC Clerk of Court
and Ex-Officio Sheriff Benedicto G. Hebron.
Respondents HSBC SRP and Custodio filed a Motion to Dismiss 7 with Opposition
to petitioners' prayer for the issuance of a writ of preliminary injunction on the
ground that the complaint stated no cause of action. Respondents contended that
the extrajudicial foreclosure of petitioners' mortgaged property was proper and
regular as the full amount of the loan had accelerated after petitioner Ana had
ceased to be an employee of the bank as she was terminated for cause and
petitioners were unable to settle the same upon demand; and that petitioner Ana's
continued employment with the bank was the sort of the security/guaranty for her
loan. Respondents also stated that petitioners had not made any single payment
since December 1993 which made them in default under their mortgage contract.
Respondents argued that they can proceed with the foreclosure of the mortgaged
property pending the labor dispute, since the foreclosure proceeding was civil in
nature which arose from a purely civil obligation and pursuant to its rights under
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the mortgage contract. Respondents continued that even assuming petitioners had
been making payments, these cannot operate as payment for all intents and
purposes under the law, because they were not for the full and accelerated
obligation.
Respondent bank filed a Motion to Dismiss,8 alleging, among others, that no cause
of action existed against it, since it was not a party to the mortgage contract nor did
it participate in the foreclosure proceedings sought to be annulled.
Respondent HSBC SRP filed a Supplemental Motion to Dismiss 9 stating that their
case was anchored on the same facts obtaining in the case of Cadena v.
HSBC filed in the RTC which had already been dismissed by the RTC after finding
that the employee concerned had defaulted in the payment of her monthly
amortizations which gave rise to the foreclosure of the mortgaged property; that
just like the Cadena case, herein petitioners did not make any single payment of
their housing loan since petitioner Ana's termination in December 1993, thus, their
housing loan became delinquent and the eventual foreclosure of their mortgaged
property.
Petitioners filed their Consolidated Opposition10 to the Motion to Dismiss which
stated, among others, that petitioner Ana's continued employment with the bank
was never meant to secure the housing loan extended to petitioners. Petitioners
did not deny that no amortization payments were made after December 1993, but
claimed that it was not the cause of the foreclosure action but petitioner Ana's
termination.
In an Order11 dated January 8, 1998, the RTC dismissed the complaint. The RTC
found that petitioners did not pay their monthly amortizations after petitioner Ana's
termination in December 1993 which was a violation of the terms and conditions of
their housing loan and the real estate mortgage contract they executed as security
therefor; that when petitioners defaulted in the payment of their monthly
amortizations, respondent HSBC SRP had the right to foreclose the mortgage
property pursuant to their mortgage contract. The RTC also ruled that petitioners'
obligation to regularly pay their housing loan was purely a civil obligation which
arose from a contract which had the force of law between the parties and should
be complied with in good faith.
Petitioners' motion for reconsideration was denied in an Order 12 dated June 1,
1999.
Petitioners filed their appeal with the CA. After the filing of the parties' respective
Briefs, the case was submitted for resolution.
In a Decision dated October 12, 2004, the CA dismissed the appeal and affirmed
the RTC decision. In dismissing the appeal, the CA affirmed the RTC’s findings
that petitioners defaulted in the payment of their monthly amortizations on the
housing loan, and despite demand, petitioners failed and refused to pay their
obligations. The CA also found speculative and without factual basis petitioners'
claim that respondent HSBC SRP would not have accepted their monthly
amortizations after petitioner Ana's dismissal as what respondents did to petitioner
Ana's colleagues. It also ruled that the pendency of the labor case between
petitioner Ana and the bank would not suspend their default in the payment of their
loan and the foreclosure sale, since the demand for the amortizations on the loan
involved a creditor-debtor rather than an employer-employee relationship.
Petitioners filed their motion for reconsideration, which the CA denied in a
Resolution dated January 25, 2005.
Hence, the instant petition for review filed by petitioners on the issue of:
WHETHER OR NOT THE COURT OF APPEALS COMMITTED GRAVE ERROR
IN SUSTAINING THE FINDING THAT PETITIONERS HAD NO CAUSE OF
ACTION.13
Petitioners reiterate their arguments raised in the CA. They insist that respondent
HSBC SRP foreclosed their property because of petitioner Ana's termination from
employment and not because of their default in the payment of their loan
obligation. Petitioners contend that based on the allegations in respondents HSBC
SRP and Custodio's Motion to Dismiss filed in the RTC, the default respondents
spoke of was petitioners' failure to pay the entire balance of their loan in a single
payment upon the cessation of petitioner Ana's employment with the bank. Such
being the case, petitioners claim that the question that arose was whether or not
respondent HSBC SRP had the right to withdraw the loan benefit from petitioner
Ana, considering that the issue of her employment status has not yet been
resolved with finality as the labor case is still pending with Us. Petitioners admitted
that while it had not made any amortization payments since the termination of
petitioner Ana from her employment on December 27, 1993, the RTC and the CA
erred in finding that it was the failure to make the amortization payments that
placed petitioners in default which led to the foreclosure of their property. The
arguments raised by respondents in their Motion to Dismiss refuted the CA
declaration that it was speculative for petitioners to claim that the amortization
payments would not be accepted had they made their efforts to do so.
We are not persuaded.
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It appears that respondent HSBC SRP's Motion to Dismiss on the ground that the
complaint failed to state a cause of action cited the failure of petitioners to make a
single payment of the entire balance of their housing loan obligation which
respondent claimed to have accelerated after she was dismissed from her
employment. Notably, however, it was also stated in the same motion that
petitioners had not paid a single monthly amortization after petitioner Ana's
termination from her employment in December 1993, which petitioners did not
deny but even admitted. Moreover, we note that in their Supplemental Motion to
Dismiss, respondent HSBC SRP reiterated that petitioners did not make any single
payment on their housing loan after December 1993, thus, they resorted to
foreclosure proceedings. Thus, there is no basis to petitioners' claim that the
default which led the respondent to foreclose the mortgaged property was mainly
due to petitioner Ana's discontinued employment.
Petitioners were in default in the payment of their loan obligation when they never
made any payment after December 1993. In fact, the demand letter sent to
petitioners, dated November 28, 1994, showed petitioners' unpaid accounts to
respondents as of November 25, 1994, and despite receipt of the demand letter,
petitioners still failed to settle the same. Under the real estate mortgage contract
executed between respondent HSBC SRP as mortgagee and petitioners as
mortgagors, it was provided, among others, that:
III
THE MORTGAGOR(S) hereby undertake(s) and agree(s) to pay to the
MORTGAGEE, upon demand, any and all sums which may be or become due
from and owing by the MORTGAGOR(S) to said MORTGAGEE, under and in
virtue of the credit or credit facilities hereby granted or hereinafter to be granted by
the latter to the former, together with the interest thereon at the rate computed in
the manner set out in Article II hereof.14
Considering that petitioners failed to pay their obligation with respondent HSBC
SRP, the latter, as mortgagee, resorted to extrajudicial foreclosure of petitioners'
mortgaged property which respondents did pursuant to the provisions of their real
estate mortgage contract, to wit:
VI
H. In the event that the MORTGAGOR(S) should fail to pay the sums of money
secured by this mortgage, or any part thereof in accordance with the terms and
conditions herein set forth, or should the MORTGAGOR(S) fail to perform any of
the conditions stipulated herein, then and in that case, the MORTGAGEE shall
have the right, at his election, to foreclose this mortgage and sell the mortgage
property extrajudicially, in the manner hereinafter in this paragraph set forth; and
for such purpose the MORTGAGEE is hereby appointed the attorney-in-fact of the
MORTGAGOR(S), with full power of substitution and revocation.15
Undeniably, respondent HSBC SRP has a clear right to foreclose the mortgaged
property. In real estate mortgage, when the principal obligation is not paid when
due, the creditor-mortgagee has the right to foreclose the mortgage, sell the
property, and apply the proceeds of the sale to the satisfaction of the unpaid
loan.16 Clearly, foreclosure is but a necessary consequence of non-payment of
mortgage indebtedness.17
Petitioners argue that the resolution of the validity of petitioner Ana's termination is
akin to a prejudicial question, i.e., without a final determination of the legality or
illegality of the termination of her employment, respondent HSBC SRP cannot
validly decide to recall the loan benefits and demand immediate full payment; and
that the auction sale of their property was premature.
We do not agree.
As we said, petitioners were already in default in the payment of their loan
obligations; thus, foreclosure of the mortgage property was resorted to by
respondents. Respondents were only enforcing the civil obligation of petitioners
under their mortgage contract. There is no labor aspect involved in the
enforcement of petitioners' obligation.
In Nestle Philippines, Inc. v. National Labor Relations Commission (NLRC),18 the
employees therein who were sales/medical representatives were allowed to avail
of the company's car loan policy. Under the policy, the company advanced the
purchase price of a car to be paid back by the employee through monthly
deductions from his salary, but the company retained ownership of the motor
vehicle until it shall have been fully paid for. Respondents-employees who availed
of the car loan were later dismissed from the service for participating in an illegal
strike. They filed a complaint for illegal dismissal with the Labor Arbiter which
dismissed their complaint and upheld the legality of the employees' dismissal.
While the appeal was then pending with the NLRC, the employees sought a
temporary restraining order with the NLRC to stop Nestle company from canceling
their loans and collecting their monthly amortizations pending the final resolution of
their illegal dismissal case. The employees claimed that there was a labor dispute
between them and petitioner Nestle, and that their default in paying their
amortizations was brought about by their illegal dismissal from work by Nestle as
punishment for their participation in the strike; that if they had not participated in
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the strike, they would not have been dismissed from work and they would not have
defaulted in the payment of their amortizations. The employees admitted their civil
obligations to the petitioner. We then held that:
Nestlé's demand for payment of the private respondents' amortizations on their car
loans, or, in the alternative, the return of the cars to the company, is not a labor,
but a civil, dispute. It involves debtor-creditor relations, rather than employee-
employer relations.
Petitioner Nestlé Philippines, Inc. correctly pointed out that:
The twin directives contained in petitioner's letters to the private respondents to
either (1) settle the remaining balance on the value of their assigned cars under
the company car plan or return the cars to the company for proper disposition; or
(2) to pay all outstanding accountabilities to the company - are matters related to
the enforcement of a civil obligation founded on contract. It is not dependent on or
related to any labor aspect under which a labor injunction can be issued. Whether
or not the private respondents remain as employees of the petitioner, there is no
escape from their obligation to pay their outstanding accountabilities to petitioner;
and if they cannot afford it, to return the cars assigned to them.
As noted, the options given to the private respondents are civil in nature arising
from contractual obligations. There is no labor aspect involved in the enforcement
of those obligations.
The NLRC gravely abused its discretion and exceeded its jurisdiction by issuing
the writ of injunction to stop the company from enforcing the civil obligation of the
private respondents under the car loan agreements and from protecting its interest
in the cars which, by the terms of those agreements, belong to it (the company)
until their purchase price shall have been fully paid by the employee. The terms of
the car loan agreements are not in issue in the labor case. The rights and
obligations of the parties under those contracts may be enforced by a separate
civil action in the regular courts, not in the NLRC.19 1avvphi1
In Hongkong and Shanghai Banking Corporation, Ltd. Staff Retirement Plan
(HSBC SRP) v. Spouses Broqueza,20which involved the dismissed co-employees
of herein petitioner Ana who were also unable to pay the monthly amortizations of
their respective loans, and despite HSBC SRP's demand for them to pay their
loan, they still failed to pay their loan obligations, We said, among others, that the
enforcement of a loan agreement involves debtor-creditor relations founded on
contracts and does not in any way concern employee relations.
To reiterate, respondent HSBC SRP and petitioners agreed in their mortgage
contract that HSBC SRP as mortgagee was authorized to foreclose the mortgaged
property in the event that the petitioners-mortgagors failed to pay the sum of
money secured by the mortgage. After petitioners failed to pay upon demand, the
civil obligation of the petitioners under the mortgage contract must be enforced to
protect HSBC SRP's interest in the housing loan. The dismissal of petitioners'
complaint for the annulment of the foreclosure proceedings is, therefore, valid and
proper.
WHEREFORE, the petition is DENIED. The Decision dated October 12, 2004 and
the Resolution dated January 25, 2005 of the Court of Appeals are hereby
AFFIRMED.
SO ORDERED.
G.R. No. 161934 October 6, 2010
VARORIENT SHIPPING CO., INC., and.,d ARIA MARITIME CO.,
LTD., Petitioners,
vs.
GIL A. FLORES, Respondent.
DECISION
PERALTA, J.:
Before the Court is a petition for review on certiorari seeking to set aside the
Decision1 dated February 28, 2003, of the Court of Appeals (CA) in CA-G.R. SP.
No. 55512, entitled Varorient Shipping Co., Inc. and Aria Maritime Co., Ltd. v.
National Labor Relations Commission, Third Division and Gil A. Flores, which
affirmed with modification the Decision2 dated May 25, 1999, and
Resolution3 dated August 18, 1999, of the National Labor Relations Commission
(NLRC) in NLRC CN OCW RAB-IV-9-917-97-C, and its Resolution4 dated January
29, 2004, denying petitioners’ motion for reconsideration thereof. The assailed CA
Decision ordered petitioners Varorient Shipping Co., Inc. and Aria Maritime Co.,
Ltd., jointly and severally, to pay respondent Gil A. Flores the balance of sickness
wages in the amount of US$3,790.00, or its peso equivalent at the time of actual
payment, and to reimburse his medical and surgical expenses in the total amount
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of ₱15,373.26, instead of ₱13,579.76. However, it dismissed all the other claims of
respondent for lack of merit.
The antecedent facts are as follows:
On April 7, 1997, petitioners employed respondent, in behalf of its foreign principal,
Aria Maritime Co., Ltd. of Piraeus, Greece, for the position of Chief Officer on
board M/V Aria, per Contract of Employment5 dated April 7, 1997, duly approved
by the Philippine Overseas Employment Administration (POEA), for a period of 12
months, with a basic monthly salary of US$1,200.00 at 48 hours of work weekly,
overtime pay of US$600.00, allowance of US$200.00, and vacation leave with pay
of 30 days a year (or US$100.00 a month) or pro-rata. The total fixed monthly
salary of respondent was US$2,100.00.
On April 16, 1997, he was deployed aboard M/V Aria in Bangkok, Thailand. During
his employment, the master of the vessel sent respondent to the Centre Medical
de Ngodi at Doula, Cameroon, where he was treated for three days due to the
shooting pain in the lower extremities, particularly on his right foot. In the Medical
Certificate6 dated June 19, 1997, the attending physician, Dr. R. Mongouè
Tchouakẻ, stated that he diagnosed respondent's pain on the right foot as "sciatic
neuralgia" and administered "[drips], injection, and acupuncture." Respondent was
declared not fit to work. The doctor recommended respondent’s repatriation to the
Philippines for continuing treatment.
On June 21, 1997, respondent was repatriated to the Philippines. When he
reported back to work, he was referred to the company physician, Dr. John H.E.
Cusi who, in turn, referred him to Dr. Irene B. Roman-Igual, a neurologist at Makati
Medical Center. On June 30, 1997, respondent was subjected to the Computed
Tomography Scan (CT Scan), which yielded the following results:
CT scan examination of the lumbosacral spine demonstrates a large disc
herniation ventral and right lateral at the L5-S1 level encroaching into the right
neural exit foramina. There is compression of the right nerve root at the same L5-
S1 level.
Smaller disc protrusion is also noted ventral and bilateral at the L4-L5 interspace
level obliterating the underlying epidural fatty plane.
The right nerve root appears relatively swollen when compared with the left at the
L5-S1.
The ligamentum flavum, however, is not hypertrophic.
The vertebral bodies, pedicles, laminae, facets and sacro-iliac joints are intact.
There is straightening of the lumbar curvature, but with no compression deformities
nor spondylolisthesis.
IMPRESSION: Large disc herniation, ventral and right lateral at the L5-S1 level
with secondary right nerve root compression and edema. Small disc protrusion
also noted ventral and bilateral at the L4-L5.7
Dr. Igual observed that the "CT scan showed large disc herniation L5-S1 with 2°
nerve root compression and edema" and recommended respondent’s
"confinement for at least two weeks for P.T. [physical therapy] and medications; if
not resolved, may need surgical decompression."8
In a letter9 to petitioner Varorient dated July 29, 1997, respondent, through his
counsel, stated that due to the gross and evident bad faith of petitioners in refusing
to grant him continued medical assistance until he becomes fit to work, as
recommended by their company doctors, he was forced to seek medical treatment
at his own expense.10Respondent demanded that petitioners should provide him
medical treatment and pay him sickness wages and disability compensation, within
five (5) days from receipt of the letter; otherwise, he would be constrained to
institute appropriate legal action against them.
In a Certification11 dated November 7, 1997, Dr. Copernico J. Villaruel, Jr.,
attending orthopedic surgeon at the Philippine General Hospital, stated that
respondent has been admitted under his care from October 9 to 10, 1997 for
hemilaminectomy and foraminotomy of L4-L5 and L5-SI, due to the pain in his right
foot, and that respondent is now fit to go back to work.
Acting on the endorsement letter12 dated November 24, 1997 by Labor Arbiter
Pedro C. Ramos, Dr. Francisco A. Estacio, Chief of the Medical and Rehabilitation
Division of the Employees Compensation Commission (ECC), submitted the
Disability Evaluation Report13 dated December 15, 1997, conducted on the health
condition of respondent, with the following findings:
PHYSICAL EXAMINATION:
- Fairly developed fairly nourished
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 - Head, Eyes, Ears, Nose, and Throat no abnormal findings
- Heart and lungs – no rales and no murmur appreciated
- Abdomen – no abnormal finding
- Extremities – no limitation of movements, no atrophy of muscles.
DIAGNOSIS:
- Large Herniated Disc L5 S1, with Nerve Roat Compression and Edema
- Small Disc Protrusion, L4 L5
RECOMMENDATION:
Based on ECC Schedule of Compensation, the Complainant deserves to
receive daily income benefit for the loss of income he incurred from June
1997 to November 1997, plus reimbursement of hospital and medical
expenses for his injury, Herniated Disc.
On September 19, 1997, respondent filed a Complaint14 against petitioners,
alleging that (1) per his employment contract, he boarded M/V Aria at Bangkok,
Thailand on April 16, 1997; (2) prior to his deployment, he was employed by
petitioner for the past 12 years; (3) during his employment and while in the
performance of his duties, he suffered injuries consisting of "large disc herniation,
ventral and right lateral at the L5-S1 level with secondary right and nerve root
compression and edema, small disc protrusion also noted at ventral and bilateral
at the L4-L5"; (4) due to petitioners’ refusal to provide for his medical treatment
and continued failure to pay his sickness wages amounting to US$4,800.00, he
was constrained to provide for his own medical expenses; (5) his injuries
constituted permanent and total disability which, under POEA Memorandum
Circular No. 5, series of 1994, would make petitioners liable for disability benefits
under his employment contract in the amount of US$60,000.00; and (6) his injury
or disability was directly and proximately due to the direct and vicarious acts of
negligence of petitioners and their agents. Respondent prayed that judgment be
rendered, declaring petitioners liable to reimburse his medical and hospital
expenses in the total amount of ₱103,969.00 and to pay him disability benefits in
the amount of US$60,000.00, sickness wages of US$4,800.00, compensatory
damages of US$604,800.00 (this amount was reduced to US$13,370.00 in his
Position Paper), moral damages of ₱1,100,000.00, and exemplary damages and
attorney’s fees in such an amount as the labor arbiter may deem proper.
In his Position Paper,15 respondent sought reimbursement of his medical expenses
and asserted that petitioners are liable to pay him sickness wages, compensatory
damages, moral damages, and attorney's fees. However, respondent withdrew his
claim for disability benefits with reservation to re-file a complaint should there be a
recurrence of his injury.
In their Position Paper,16 petitioners countered that respondent is not entitled to the
benefits arising from his alleged permanent and total disability as he was later
declared to be fit to work per Certification dated November 7, 1997 by Dr.
Copernico J. Villaruel, Jr., the attending orthopedic surgeon at the Philippine
General Hospital; that respondent can no longer seek continuation of his medical
treatment and claim for sickness wages and reimbursement of medical expenses
because upon his repatriation, he had received the amount of US$1,010.00 (or the
equivalent then of about ₱40,400.00) as settlement for his sickness wages and
other benefits, as evidenced by the Receipt and Quitclaim 17 dated June 25, 1997,
executed by respondent; and that respondent is not entitled to moral and
exemplary damages and attorney's fees. By way of counterclaim, they sought
recovery of litigation expenses, actual damages, and attorney's fees in an amount
not less than ₱20,000.00 and, also, exemplary damages in an amount at the
discretion of the labor arbiter.
In their Supplement to Position Paper,18 petitioners averred that respondent sought
another employment with Tara Trading Shipmanagement, Inc. (for and in behalf of
Amethyst Shipping Co.), on board M/V Luna Azul, for a period of twelve (12)
months, with a basic monthly salary of US$967.00 at 48 hours of work weekly,
overtime pay of US$535.00/month (US$6.24 per hour beyond 105 hours), and
vacation leave with pay of 3 days a year (or US$98.00 a month), as evidenced by
his Contract of Employment,19 Seafarer Info-Sheet20 and POEA Overseas
Employment Certificate.21
On September 7, 1998, Acting Executive Labor Arbiter Pedro C. Ramos dismissed
respondent's complaint for permanent and total disability benefits, sickness wages
and all other claims and, likewise, petitioners' counterclaim for damages, for lack of
merit. The labor arbiter found that petitioners have substantially complied with all
their obligations to
respondent under the POEA-approved employment contract. He debunked
respondent's claim for permanent and total disability benefits because respondent
had been duly proven and declared to be "fit to work" not only by the hospital of his
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choice, i.e., Philippine General Hospital, but also by the Employees Compensation
Commission (ECC); that respondent withdrew his claim during the pendency of the
proceedings, although with reservation to re-file the same; and that respondent is
now on board M/V Luna Azul on an overseas deployment. He upheld the validity of
the Receipt and Quitclaim executed by respondent and stated that respondent had
received reimbursement of his medical expenses in the amount ₱4,896.50. He
declared that respondent is no longer entitled to sickness wages as it would
amount to double recovery of benefits, as provided for under Paragraph 11,
Section 4 of the POEA Standard Employment Contract.
On May 25, 1999, the NLRC rendered a Decision which reversed and set aside
the Decision of the labor arbiter. It ruled that respondent is entitled to sickness
wages and to free medical and hospital treatment for the injury he sustained during
the term of his contract, pursuant to Section C 4(b) and (c), Part II of the Standard
Employment Contract Governing All Filipino Seamen On Board Ocean-Going
Vessels, which obligates the employer to: (1) provide continuous medical
treatment to the repatriated injured seaman until such time he is declared fit or the
degree of his disability has been established by the company-designated
physician; and (2) pay the injured seaman one hundred percent (100%) of his
basic wages from the time he leaves the vessel for treatment until he is declared fit
to work, but in no case shall this period exceed 120 days. The NLRC observed that
petitioners cannot be considered to have adequately discharged their obligation in
providing continuous treatment for respondent, as they failed to follow through their
company-designated physician’s recommendation, which required respondent to
undergo a two-week confinement and physical therapy and, if the injury remains
unresolved, for respondent to have surgical decompression. As a consequence,
respondent was constrained to seek treatment and surgery from a doctor other
than the company-designated physician. The NLRC also declared that respondent
is entitled to sickness wages equivalent to 120 days in the amount of
US$4,800.00, less the amount of US$1,010.00 which he had received, as full
settlement of the claim from the petitioners, per Receipt and Quitclaim dated June
25, 1997, or a net total of US$3,790.00. However, the NLRC denied respondent's
claim for compensatory damages, as the contractual benefit of sickness wages
provided for under the Standard Contract is already a compensatory measure
intended to assist the injured seaman during the term of his contract. The
dispositive portion of the Decision reads:
WHEREFORE, the decision appealed from is hereby SET ASIDE. Respondents
Varorient Shipping Co., Inc. and Aria Maritime Co., Ltd., are, jointly and severally,
ordered to pay complainant Gil A. Flores the Philippine Peso equivalent at the time
of actual payment of THREE THOUSAND SEVEN HUNDRED NINETY US
DOLLARS (US$3,790.00), plus THIRTEEN THOUSAND FIVE HUNDRED
SEVENTY-NINE and 76/00 PESOS (₱13,579.76), representing the balance of the
sickness wages and reimbursement of medical and surgical expenses.
All other claims are DISMISSED for lack of merit.
SO ORDERED.22
Both parties filed their respective motions for reconsideration. Petitioners sought
exoneration from liability, while respondent averred that the NLRC erred in
excluding certain items or receipts from the reimbursable medical expenses,
deducting US$1,010.00 from the award of sickness wages, not holding petitioners
liable for his entire wages up to the time he would be employed with another
company, and not awarding him compensatory and moral damages and attorney’s
fees.
The NLRC denied respondent's motion for reconsideration in a Resolution dated
June 30, 1999 and, likewise, petitioners' motion for reconsideration in its
Resolution dated August 18, 1999.
On petition for review by petitioners, the CA affirmed the Decision dated May 25,
1999 and the Resolution dated August 18, 1999 of the NLRC with the following
disposition:
WHEREFORE, the Decision of the National Labor Relations Commission dated
May 25, 1999 is AFFIRMED with MODIFICATION. Petitioners Varorient Shipping
Co., Inc. and Aria Maritime Co., Ltd., are, jointly and severally, ordered to pay
private respondent Gil A. Flores:
1) the balance of sickness wages in the amount of US$3,790.00, or its
peso equivalent at the time of actual payment; and
2) reimbursement of medical and surgical expenses in the total amount of
₱15,373.26, instead of ₱13,579.76.
All other claims are DISMISSED for lack of merit.23
As the CA denied their motion for reconsideration in the Resolution dated January
29, 2004, petitioners filed this present petition.
Petitioners contend that respondent is not entitled to sickness wages, as this would
be tantamount to unjust enrichment and double recovery on the part of
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respondent. They maintain that they had paid him US$1,010.00 as full payment of
his salaries and benefits, including his medical treatment and, by reason thereof,
respondent executed the Receipt and Quitclaim. They also claim that prior to his
departure from the country and actual deployment overseas, respondent and his
wife received financial accommodations in the form of cash advances, i.e.,
US$1,000.00, per cash voucher dated April 16, 1997, signed by respondent; and
US$2,790.00, per cash voucher dated April 21, 1997, signed by Crisanta Flores
(wife of respondent), or the total amount of US$3,790.00. According to petitioners,
since the amount of US$3,790.00 remained unpaid by respondent and his wife,
therefore, they can properly offset the said amount with the sickness wages they
would be paying to respondent.
Respondent denies that he and his wife were given cash advances while he was
on board; that he had received the amount of US$1,010.00 from the petitioners as
settlement of all his claims; and that the Receipt and Quitclaim dated June 25,
1997, allegedly executed by him, was a falsified document as the signature
appearing therein was a forgery.
Contrary to petitioners' contention, respondent is entitled to sickness wages. The
shooting pain on his right foot is an injury which he suffered during the course of
his employment and, therefore, obligates petitioners to compensate him and
provide him the appropriate medical treatment.
This is in consonance with the mandated provisions under Section 20 B (1), (2),
(3), (4), and (5) of the Standard Terms and Conditions Governing the Employment
of Filipino Seafarers On Board Ocean-Going Vessels,24 pursuant to Department
Order No. 4, series of 2000, of the Department of Labor and Employment (by then
Secretary Bienvenido E. Laguesma), adopted on May 31, 2000, which provides
that:
SECTION 20. COMPENSATION AND BENEFITS
B. COMPENSATION AND BENEFITS FOR INJURY OR ILLNESS
The liabilities of the employer when the seafarer suffers work-related injury or
illness during the term of his contract are as follows:
1. The employer shall continue to pay the seafarer his wages during the
time he is on board the vessel;
2. If the injury or illness requires medical and/or dental treatment in a
foreign port, the employer shall be liable for the full cost of such medical,
serious dental, surgical and hospital treatment, as well as board and
lodging, until the seafarer is declared fit to work or to be repatriated.
However, if after repatriation, the seafarer still requires medical attention
arising from said injury or illness, he shall be so provided at cost to the
employer until such time he is declared fit or the degree of his disability
has been established by the company-designated physician.
3. Upon sign-off from the vessel for medical treatment, the seafarer is
entitled to sickness allowance equivalent to his basic wage until he is
declared fit to work, or the degree of permanent disability has been
assessed by the company-designated physician, but in no case shall this
period exceed one hundred twenty (120) days.
For this purpose, the seafarer shall submit himself to a post-employment
medical examination by a company-designated physician within three
working days upon his return, except when he is physically incapacitated
to do so, in which case a written notice to the agency within the same
period is deemed as compliance. Failure of the seafarer to comply with the
mandatory reporting requirement shall result in his forfeiture of the right to
claim the above benefits.
If a doctor appointed by the seafarer disagrees with the assessment,
a third doctor may be agreed jointly between the employer and the
seafarer. The third doctor's decision shall be final and binding on both
parties.
4. Those illnesses not listed in Section 32 of this Contract are disputably
presumed as work related.
5. Upon sign-off of the seafarer from the vessel for medical treatment, the
employer shall bear the full cost of repatriation in the event the seafarer is
declared (1) fit for repatriation; or (2) fit to work, but the employer is unable
to find employment for the seafarer on board his former vessel or another
vessel of the employer despite earnest efforts.
6. In case of permanent total or partial disability of the seafarer caused by
either injury or illness, the seafarer shall be compensated in accordance
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 with the schedule of benefits enumerated in Section 32 of his Contract. should accordingly be reimbursed for the purchase of these medicines. The
Computation of his benefits arising from an illness or disease shall be records disclose the following purchases:
governed by the rates and the rules of compensation applicable at the time
the illness or disease was contracted.
1. Mercury Drug Receipt No. 535112 (Annex "F")
On June 21, 1997, respondent was repatriated to the Philippines and declared fit Myonal - ₱97.50
to work on November 7, 1997, or a total period of 141 days. Applying the said
provisions of the Standard Contract, respondent is entitled to receive sickness Neo-pyrozon - 71.50 < - s>P169.00
wages, covering the maximum period of 120 days, or the amount of US$4,800.00.
The NLRC, as affirmed by the CA, found that petitioners are liable to pay 2. Mercury Drug Receipt No. 532746 (Annex "F-1")
respondent the total amount of US$3,790.00 (US$4,800.00 less the amount of
US$1,010.00 which he already received by virtue of the Receipt and Quitclaim Ne[u]robin - ₱76.00
dated June 25, 1997). Myonal - 97.50 - ₱173.50

As pointed out by the CA, petitioners, in their motion for reconsideration of the 3. Mercury Drug Receipt No. 533708 (Annex "F-2")
NLRC Decision dated May 25, 1999, raised for the first time that they had given
the amount of US$3,790.00 to respondent and belatedly submitted two (2) cash Neo-pyrazon - ₱71.50
vouchers, i.e., US$1,000.00, dated April 16, 1997, which was signed by
Neurobin - 76.00
respondent; and US$2,290.00, dated April 21, 1997, which was signed by
respondent's wife Cristina Flores, or a total of US$3,790.00. The CA observed that Myonal - 97.50 - ₱244.00
the said cash vouchers do not bear the name and logo of petitioners, unlike the
check voucher they issued for the reimbursement of the medical expenses of 4. Mercury Drug Receipt No. 251929 (Annex "F-3")
respondent amounting to ₱4,896.50, and that these vouchers were supposedly
already in existence or in the possession of the petitioners since April 1997, but Pyrazon - ₱71.50 - ₱71.50
they never interposed such fact in their pleadings, e.g., Position Paper,
Supplement to Respondent's Position Paper, or Opposition to Complainant's 5. Mercury Drug Receipt No. 251931 (Annex "F-4")
Appeal. The Court sees no reason to disturb this factual finding. Myonal - ₱97.50 - ₱97.50

Moreover, petitioners were remiss in providing continuous treatment for 6. Mercury Drug Receipt No. 534528 (Annex "F-5")
respondent in accordance with the recommendation of their company physician
that respondent should undergo a two-week confinement and physical therapy Neo Pyrozon - ₱71.50
and, if his condition does not improve, then he would have to be subjected to
Myonal - 97.50 - ₱169.00
surgical decompression to alleviate the pain on his right foot. Respondent's ailment
required urgent medical response, thereby necessitating him to seek immediate 7. Mercury Drug Receipt No. 253117 (Annex "F-6")
medical attention, even at his own expense. The CA enumerated the medical
expenses of respondent for which petitioner would be liable. Thus, Myobal - ₱97.50

[w]hile we agree substantially with the NLRC’s decision in allowing the Neo-Pyrozon - 71.50 - ₱169.00
reimbursement of ₱13,579.76, we disagree with its findings that the receipts for
TOTAL - ₱1,093.50
medicines were not covered by prescriptions. Dr. Irene Igual recommended the
continued use of neo-pyrozon, ne[u]robin, and myonal [and], thus, respondent
xxxx

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In the same vein, receipt numbers 630 and 0091, issued by the offices of Dr. Betty
Dy Mancao (Annex "F-40") and Dr. Copernico J. Villaruel (Annex "F-39") for
₱300.00 and ₱400.00, respectively, should be reimbursed to Flores. The PGH
hospital bills do not include the doctors’ fee, thus, it is safe to conclude that the
doctors who attended to Flores billed him personally. x x x
xxxx
In fine, private respondent is entitled to reimbursement of his medical expenses
totalling ₱15,373.26.25
In view of the foregoing, respondent should be reimbursed the amount of
₱13,579.76, representing the balance of the sickness wages due him, the cost of
the prescribed medicines he purchased, and the surgical expenses he incurred, as
evaluated by the CA.
Petitioners argue that the Receipt and Quitclaim sufficed to cover the balance of
the sickness wages, after deducting the cash advances, which respondent would
be entitled to; while respondent questions the veracity of the said
document.1avvphi1
The Receipt and Quitclaim executed by respondent lacks the elements of
voluntariness and free will and, therefore, does not absolve petitioners from liability
in paying him the sickness wages and other monetary claims.
Although respondent avers that his signature on the said quitclaim was a forgery,
the CA relied on the factual findings of the labor arbiter and the NLRC that gave
credence to it. Thus, the matter to be resolved would be whether the Receipt and
Quitclaim can be considered substantial compliance to the contractual obligation
by petitioners under the standard employment contract.
In More Maritime Agencies, Inc. v. NLRC,26 the Court ruled that the law does not
consider as valid any agreement to receive less compensation than what a worker
is entitled to recover nor prevent him from demanding benefits to which he is
entitled. Quitclaims executed by the employees are thus commonly frowned upon
as contrary to public policy and ineffective to bar claims for the full measure of the
worker’s legal rights, considering the economic disadvantage of the employee and
the inevitable pressure upon him by financial necessity. Thus, it is never enough to
assert that the parties have voluntarily entered into such a quitclaim. There are
other requisites, to wit: (a) that there was no fraud or deceit on the part of any of
the parties; (b) that the consideration of the quitclaim is credible and reasonable;
and (c) that the contract is not contrary to law, public order, public policy, morals or
good customs, or prejudicial to a third person with a right recognized by law.
A perusal of the provisions of the Receipt and Quitclaim shows that respondent
would be releasing and discharging petitioners from all claims, demands, causes
of action, and the like in an all-encompassing manner, including the fact that he
had not contracted or suffered any illness or injury in the course of his employment
and that he was discharged in good and perfect health. These stipulations clearly
placed respondent in a disadvantageous position vis-á-vis the petitioners.
WHEREFORE, the petition is DENIED. The Decision dated February 28, 2003 and
the Resolution dated January 29, 2004 of the Court of Appeals in CA-G.R. SP No.
55512, which affirmed with modification the Decision dated May 25, 1999 and
Resolution dated August 18, 1999 of the National Labor Relations Commission,
are AFFIRMED.
SO ORDERED.
G.R. No. 165935 February 8, 2012
BRIGHT MARITIME CORPORATION (BMC)/DESIREE P. TENORIO, Petitioners,
vs.
RICARDO B. FANTONIAL, Respondent.
DECISION
PERALTA, J.:
This is a petition for review on certiorari1 of the Decision of the Court of Appeals in
CA-G.R. SP No. 67571, dated October 25, 2004, reversing and setting aside the
Decision of the National Labor Relations Commission (NLRC), and reinstating the
Decision of the Labor Arbiter finding that respondent Ricardo B. Fantonial was
illegally dismissed, but the Court of Appeals modified the award of damages.
The facts are as follows:
On January 15, 2000, a Contract of Employment2 was executed by petitioner
Bright Maritime Corporation (BMC), a manning agent, and its president, petitioner
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Desiree P. Tenorio, for and in behalf of their principal, Ranger Marine S.A., and
respondent Ricardo B. Fantonial, which contract was verified and approved by the
Philippine Overseas Employment Administration (POEA) on January 17, 2000.
The employment contract provided that respondent shall be employed as
boatswain of the foreign vessel M/V AUK for one year, with a basic monthly salary
of US$450, plus an allowance of US$220. The contract also provided for a 90
hours per month of overtime with pay and a vacation leave with pay of US$45 per
month.
Respondent was made to undergo a medical examination at the Christian Medical
Clinic, which was petitioner’s accredited medical clinic. Respondent was issued a
Medical Certificate3 dated January 17, 2000, which certificate had the phrase "FIT
TO WORK" stamped on its lower and upper portion.
At about 3:30 p.m. of January 17, 2000, respondent, after having undergone the
pre-departure orientation seminar and being equipped with the necessary
requirements and documents for travel, went to the Ninoy Aquino International
Airport upon instruction of petitioners. Petitioners told respondent that he would be
departing on that day, and that a liaison officer would be delivering his plane ticket
to him. At about 4:00 p.m., petitioners’ liaison officer met respondent at the airport
and told him that he could not leave on that day due to some defects in his medical
certificate. The liaison officer instructed respondent to return to the Christian
Medical Clinic.
Respondent went back to the Christian Medical Clinic the next day, and he was
told by the examining physician, Dr. Lyn dela Cruz-De Leon, that there was
nothing wrong or irregular with his medical certificate.
Respondent went to petitioners’ office for an explanation, but he was merely told to
wait for their call, as he was being lined-up for a flight to the ship's next port of call.
However, respondent never got a call from petitioners.
On May 16, 2000, respondent filed a complaint against petitioners for illegal
dismissal, payment of salaries for the unexpired portion of the employment
contract and for the award of moral, exemplary, and actual damages as well as
attorney’s fees before the Regional Arbitration Branch No. 7 of the NLRC in Cebu
City.4
In their Position Paper,5 petitioners stated that to comply with the standard
requirements that only those who meet the standards of medical fitness have to be
sent on board the vessel, respondent was referred to their accredited medical
clinic, the Christian Medical Clinic, for pre-employment medical examination on
January 17, 2000, the same day when respondent was supposed to fly to
Germany to join the vessel. Unfortunately, respondent was not declared fit to work
on January 17, 2000 due to some medical problems.
Petitioners submitted the Affidavit6 of Dr. Lyn dela Cruz-De Leon, stating that the
said doctor examined respondent on January 17, 2000; that physical and
laboratory results were all within normal limits except for the finding, after chest x-
ray, of Borderline Heart Size, and that respondent was positive to Hepatitis B on
screening; that respondent underwent ECG to check if he had any heart problem,
and the result showed left axis deviation. Dr. De Leon stated that she requested for
a Hepatitis profile, which was done on January 18, 2000; that on January 20, 2000,
the result of the Hepatitis profile showed non-infectious Hepatitis B. Further, Dr. De
Leon stated that respondent was declared fit to work only on January 21, 2000;
however, the date of the Medical Certificate was January 17, 2000, which was the
date when she started to examine the patient per standard operating procedure.
Petitioners argued that since respondent was declared fit to work only on January
21, 2000, he could not join the vessel anymore as it had left the port in Germany.
Respondent was advised to wait for the next vacancy for boatswain, but he failed
to report to petitioners’ office, and he gave them an incorrect telephone number.
During the mandatory conference/conciliation stage of this case, petitioners offered
respondent to join one of their vessels, but he refused.
Petitioners further argued that they cannot be held liable for illegal dismissal as the
contract of employment had not yet commenced based on Section 2 of the
Standard Terms and Conditions Governing the Employment of Filipino Seafarers
on Board Ocean-Going Vessels (POEA Memorandum Circular No. 055-96), which
states:
SEC 2. COMMENCEMENT/DURATION OF CONTRACT
A. The employment contract between the employer and the seafarer shall
commence upon actual departure of the seafarer from the airport or seaport in the
point of hire and with a POEA approved contract. It shall be effective until the
seafarer’s date of arrival at the point of hire upon termination of his employment
pursuant to Section 18 of this Contract.
Petitioners asserted that since respondent was not yet declared fit to work on
January 17, 2000, he was not able to leave on the scheduled date of his flight to
Germany to join the vessel. With his non-departure, the employment contract was
not commenced; hence, there is no illegal dismissal to speak of. Petitioners prayed
for the dismissal of the complaint.
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On September 25, 2000, Labor Arbiter Ernesto F. Carreon rendered a Decision7 in
favor of respondent. The pertinent portion of the decision reads:
Unarguably, the complainant and respondents have already executed a contract of
employment which was duly approved by the POEA. There is nothing left for the
validity and enforceability of the contract except compliance with what are agreed
upon therein and to all their consequences. Under the contract of employment, the
respondents are under obligation to employ the complainant on board M/V AUK for
twelve months with a monthly salary of 450 US$ and 220 US$ allowance. The
respondents failed to present plausible reason why they have to desist from
complying with their obligation under the contract. The allegation of the
respondents that the complainant was unfit to work is ludicrous. Firstly, the
respondents' accredited medical clinic had issued a medical certificate showing
that the complainant was fit to work. Secondly, if the complainant was not fit to
work, a contract of employment would not have been executed and approved by
the POEA.
We are not also swayed by the argument of the respondents that since the
complainant did not actually depart from Manila his contract of employment can be
withdrawn because he has not yet commenced his employment. The
commencement of the employment is not one of those requirements in order to
make the contract of employment consummated and enforceable between the
parties, but only as a gauge for the payment of salary. In this case, while it is true
that the complainant is not yet entitled to the payment of wages because then his
employment has not yet commenced, nevertheless, the same did not relieve the
respondents from fulfilling their obligation by unilaterally revoking the contract as
the same amounted to pre-termination of the contract without just or authorized
cause perforce, we rule to be constitutive of illegal dismissal.
Anent our finding of illegal dismissal, we condemn the respondent corporation to
pay the complainant three (3) months salary and the refund of his placement fee,
including documentation and other actual expenses, which we fixed at one month
pay.
The granted claims are computed as follows:
US$670 x 4 months US$ 2,680.00
WHEREFORE, premises considered, judgment is hereby rendered ordering the
respondent Bright Maritime Corporation to pay the complainant Ricardo Fantonial
the peso equivalent at the time of actual payment of US$ 2,680.00.
The other claims and the case against respondent Desiree P. Tenorio are
dismissed for lack of merit.8
Petitioners appealed the decision of the Labor Arbiter to the NLRC.
On May 31, 2001, the NLRC, Fourth Division, rendered a Decision9 reversing the
decision of the Labor Arbiter. The dispositive portion of the NLRC decision reads:
WHEREFORE, premises considered, the decision of Labor Arbiter Ernesto F.
Carreon, dated 25 September 2000, is SET ASIDE and a new one is entered
DISMISSING the complaint of the complainant for lack of merit.
SO ORDERED.10
The NLRC held that the affidavit of Dr. Lyn dela Cruz-De Leon proved that
respondent was declared fit to work only on January 21, 2000, when the vessel
was no longer at the port of Germany. Hence, respondent’s failure to depart on
January 17, 2000 to join the vessel M/V AUK in Germany was due to respondent’s
health. The NLRC stated that as a recruitment agency, petitioner BMC has to
protect its name and goodwill, so that it must ensure that an applicant for
employment abroad is both technically equipped and physically fit because a labor
contract affects public interest.
Moreover, the NLRC stated that the Labor Arbiter’s decision ordering petitioners to
refund respondent’s placement fee and other actual expenses, which was fixed at
one month pay in the amount of US$670.00, does not have any bases in law,
because in the deployment of seafarers, the manning agency does not ask the
applicant for a placement fee. Hence, respondent is not entitled to the said
amount.
Respondent filed a motion for reconsideration of the NLRC decision, which motion
was denied in a Resolution11dated July 23, 2001.
Respondent filed a petition for certiorari before the Court of Appeals, alleging that
the NLRC committed grave abuse of discretion in rendering the Decision dated
May 31, 2001and the Resolution dated July 23, 2001.
On March 12, 2002, respondent’s counsel filed a Manifestation with Motion for
Substitution of Parties due to the death of respondent on November 15, 2001,
which motion was granted by the Court of Appeals.
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On October 25, 2004, the Court of Appeals rendered a Decision, the dispositive The Court of Appeals held that petitioners’ act of preventing respondent from
portion of which reads: leaving for Germany was tainted with bad faith, and that petitioners were also
liable to respondent for moral and exemplary damages.
WHEREFORE, in view of the foregoing premises, judgment is hereby rendered by
us REVERSING and SETTING ASIDE the May 31, 2001 Decision and the July 23, Thereafter, petitioners filed this petition raising the following issues:
2001 Resolution of the NLRC, Fourth Division, and REINSTATING the September
25, 2000 Decision of the Labor Arbiter with the modification that the placement fee I
and other expenses equivalent to one (1) month salary is deleted and that the
private respondent Bright Maritime Corporation must also pay the amounts of
WHETHER OR NOT THE HONORABLE APPELLATE COURT
₱30,000.00 and ₱10,000.00 as moral and exemplary damages, respectively, to the
COMMITTED A SERIOUS ERROR AND GRAVE ABUSE OF
petitioner.12
DISCRETION WHEN IT HELD THE PETITIONERS LIABLE FOR
ILLEGALLY TERMINATING THE PRIVATE RESPONDENT FROM HIS
The Court of Appeals held that the NLRC, Fourth Division, acted with grave abuse EMPLOYMENT.
of discretion in reversing the decision of the Labor Arbiter who found that
respondent was illegally dismissed. It agreed with the Labor Arbiter that the
II
unilateral revocation of the employment contract by petitioners amounted to pre-
termination of the said contract without just or authorized cause.
WHETHER OR NOT THE HONORABLE APPELLATE COURT
COMMITTED SERIOUS ERROR AND GRAVE ABUSE OF DISCRETION
The Court of Appeals held that the contract of employment between petitioners
IN SETTING ASIDE THE OVERWHELMING EVIDENCE SHOWING
and respondent had already been perfected and even approved by the POEA.
THAT THE PRIVATE RESPONDENT FAILED TO COMPLY WITH THE
There was no valid and justifiable reason for petitioners to withhold the departure
REQUIREMENTS SET BY THE POEA RULES REGARDING FITNESS
of respondent on January 17, 2000. It found petitioners’ argument that respondent
FOR WORK.
was not fit to work on the said date as preposterous, since the medical certificate
issued by petitioners’ accredited medical clinic showed that respondent was
already fit to work on the said date. The Court of Appeals stated, thus: III

Private respondent's contention, which was contained in the affidavit of Dr. Lyn WHETHER OR NOT THE HONORABLE APPELLATE COURT
dela Cruz-De Leon, that the Hepatitis profile was done only on January 18, 2000 SERIOUSLY ERRED AND COMMITTED GRAVE ABUSE OF
and was concluded on January 20, 2000, is of dubious merit. For how could the DISCRETION WHEN IT AWARDED MONETARY BENEFITS TO THE
said examining doctor place in the medical certificate dated January 17, 2000 the PRIVATE RESPONDENT DESPITE THE PROVISION OF THE POEA
words "CLASS-B NON-Infectious Hepatitis" (Rollo, p. 17) if she had not conducted [STANDARD EMPLOYMENT CONTRACT] TO THE CONTRARY.
the hepatitis profile? Would the private respondent have us believe that its
accredited physician would fabricate medical findings? IV

It is obvious, therefore, that the petitioner had been fit to work on January 17, 2000 WHETHER OR NOT THE HONORABLE APPELLATE COURT
and he should have been able to leave for Germany to meet with the vessel M/V COMMITTED SERIOUS ERROR WITH REGARD TO ITS FINDINGS OF
AUK, had it not been for the unilateral act by private respondent of preventing him FACTS, WHICH, IF NOT CORRECTED, WOULD CERTAINLY CAUSE
from leaving. The private respondent was merely grasping at straws in attacking GRAVE OR IRREPARABLE DAMAGE OR INJURY TO THE
the medical condition of the petitioner just so it can justify its act in preventing PETITIONERS.14
petitioner from leaving for abroad.13
The general rule that petitions for review only allow the review of errors of law by
this Court is not ironclad.15 Where the issue is shrouded by a conflict of factual

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perceptions by the lower court or the lower administrative body, such as the NLRC
in this case, this Court is constrained to review the factual findings of the Court of
Appeals.16
Petitioners contend that the Court of Appeals erred in doubting the Affidavit of Dr.
Lyn dela Cruz-De Leon, which affidavit stated that the Hepatitis profile of
respondent was done only on January 18, 2000 and was concluded on January
20, 2000. Petitioners stated that they had no intention to fabricate or mislead the
appellate court and the Labor Arbiter, but they had to explain the circumstances
that transpired in the conduct of the medical examination. Petitioners reiterated
that the medical examination was conducted on January 17, 2000 and the result
was released on January 20, 2000. As explained by Dr. Lyn dela Cruz-De Leon,
the date "January 17, 2000" was written on the medical examination certificate
because it was the day when respondent was referred and initially examined by
her. The medical examination certificate was dated January 17, 2000 not for any
reason, but in accordance with a generally accepted medical practice, which was
not controverted by respondent.
Petitioners assert that respondent’s failure to join the vessel on January 17, 2000
should not be attributed to it for it was a direct consequence of the delay in the
release of the medical report. Respondent was not yet declared fit to work at the
time when he was supposed to be deployed on January 17, 2000, as instructed by
petitioners’ principal. Respondent’s fitness to work is a condition sine qua non for
purposes of deploying an overseas contract worker. Since respondent failed to
qualify on the date designated by the principal for his deployment, petitioners had
to find a qualified replacement considering the nature of the shipping business
where delay in the departure of the vessel is synonymous to demurrage/damages
on the part of the principal and on the vessel’s charterer. Without a clean bill of
health, the contract of employment cannot be considered to have been perfected
as it is wanting of an important requisite.
Based on the foregoing argument of petitioners, the first issue to be resolved is
whether petitioners’ reason for preventing respondent from leaving Manila and
joining the vessel M/V AUK in Germany on January 17, 2000 is valid.
The Court rules in the negative.
The Court has carefully reviewed the records of the case, and agrees with the
Court of Appeals that respondent’s Medical Certificate17 dated January 17, 2000,
stamped with the words "FIT TO WORK," proves that respondent was medically fit
to leave Manila on January 17, 2000 to join the vessel M/V AUK in Germany. The
Affidavit of Dr. Lyn dela Cruz-De Leon that respondent was declared fit to work
only on January 21, 2000 cannot overcome the evidence in the Medical Certificate
dated January 17, 2000, which already stated that respondent had "Class-B Non-
Infectious Hepatitis-B," and that he was fit to work. The explanation given by Dr.
Lyn dela Cruz-De Leon in her affidavit that the Medical Certificate was dated
January 17, 2000, since it carries the date when they started to examine the
patient per standard operating procedure, does not persuade as it goes against
logic and the chronological recording of medical procedures. The Medical
Certificate submitted as documentary evidence18 is proof of its contents, including
the date thereof which states that respondent was already declared fit to work on
January 17, 2000, the date of his scheduled deployment.
Next, petitioners contend that respondent’s employment contract was not
perfected pursuant to the POEA Standard Employment Contract, which provides:
SEC 2. COMMENCEMENT/DURATION OF CONTRACT
A. The employment contract between the employer and the seafarer shall
commence upon actual departure of the seafarer from the airport or seaport in the
point of hire and with a POEA approved contract. It shall be effective until the
seafarer’s date of arrival at the point of hire upon termination of his employment
pursuant to Section 18 of this Contract.19
Petitioners argue that, as ruled by the NLRC, since respondent did not actually
depart from the Ninoy Aquino International Airport in Manila, no employer-
employee relationship existed between respondent and petitioners’ principal,
Ranger Marine S.A., hence, there is no illegal dismissal to speak of, so that the
award of damages must be set aside.
Petitioners assert that they did not conceal any information from respondent
related to his contract of employment, from his initial application until the release of
the result of his medical examination. They even tried to communicate with
respondent for another shipboard assignment even after his failed deployment,
which ruled out bad faith. They pray that respondent’s complaint be dismissed for
lack of merit.
Petitioners’ argument is partly meritorious.
An employment contract, like any other contract, is perfected at the moment (1) the
parties come to agree upon its terms; and (2) concur in the essential elements
thereof: (a) consent of the contracting parties, (b) object certain which is the
subject matter of the contract, and (c) cause of the obligation.20 The object of the
Page 111 of 161
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contract was the rendition of service by respondent on board the vessel for which
service he would be paid the salary agreed upon.
Hence, in this case, the employment contract was perfected on January 15, 2000
when it was signed by the parties, respondent and petitioners, who entered into
the contract in behalf of their principal, Ranger Marine S.A., thereby signifying their
consent to the terms and conditions of employment embodied in the contract, and
the contract was approved by the POEA on January 17, 2000. However, the
employment contract did not commence, since petitioners did not allow respondent
to leave on January 17, 2000 to embark the vessel M/V AUK in Germany on the
ground that he was not yet declared fit to work on the day of departure, although
his Medical Certificate dated January 17, 2000 proved that respondent was fit to
work.
In Santiago v. CF Sharp Crew Management, Inc.,21 the Court held that the
employment contract did not commence when the petitioner therein, a hired
seaman, was not able to depart from the airport or seaport in the point of hire;
thus, no employer-employee relationship was created between the parties.
Nevertheless, even before the start of any employer-employee relationship,
contemporaneous with the perfection of the employment contract was the birth of
certain rights and obligations, the breach of which may give rise to a cause of
action against the erring party.22 If the reverse happened, that is, the seafarer
failed or refused to be deployed as agreed upon, he would be liable for damages. 23
The Court agrees with the NLRC that a recruitment agency, like petitioner BMC,
must ensure that an applicant for employment abroad is technically equipped and
physically fit because a labor contract affects public interest. Nevertheless, in this
case, petitioners failed to prove with substantial evidence that they had a valid
ground to prevent respondent from leaving on the scheduled date of his
deployment. While the POEA Standard Contract must be recognized and
respected, neither the manning agent nor the employer can simply prevent a
seafarer from being deployed without a valid reason.24
Petitioners’ act of preventing respondent from leaving and complying with his
contract of employment constitutes breach of contract for which petitioner BMC is
liable for actual damages to respondent for the loss of one-year salary as provided
in the contract.25 The monthly salary stipulated in the contract is US$670, inclusive
of allowance.
The Court upholds the award of moral damages in the amount of ₱30,000.00, as
the Court of Appeals correctly found petitioners’ act was tainted with bad
faith,26 considering that respondent’s Medical Certificate stated that he was fit to
work on the day of his scheduled departure, yet he was not allowed to leave
allegedly for medical reasons.1âwphi1
Further, the Court agrees with the Court of Appeals that petitioner BMC is liable to
respondent for exemplary damages,27 which are imposed by way of example or
correction for the public good in view of petitioner’s act of preventing respondent
from being deployed on the ground that he was not yet declared fit to work on the
date of his departure, despite evidence to the contrary. Such act, if tolerated,
would prejudice the employment opportunities of our seafarers who are qualified to
be deployed, but prevented to do so by a manning agency for unjustified reasons.
Exemplary damages are imposed not to enrich one party or impoverish another,
but to serve as a deterrent against or as a negative incentive to curb socially
deleterious actions.28 In this case, petitioner should be held liable to respondent for
exemplary damages in the amount of ₱50,000.00,29 following the recent case of
Claudio S. Yap v. Thenamaris Ship’s Management, et al.,30 instead of ₱10,000.00
The Court also holds that respondent is entitled to attorney’s fees in the concept of
damages and expenses of litigation.31 Attorney's fees are recoverable when the
defendant's act or omission has compelled the plaintiff to incur expenses to protect
his interest.32 Petitioners’ failure to deploy respondent based on an unjustified
ground forced respondent to file this case, warranting the award of attorney’s fees
equivalent to ten percent (10%) of the recoverable amount.33
WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in
CA-G.R. SP No. 67571, dated October 25, 2004, is AFFIRMED with modification.
Petitioner Bright Maritime Corporation is hereby ORDERED to pay respondent
Ricardo B. Fantonial actual damages in the amount of the peso equivalent of
US$8,040.00, representing his salary for one year under the contract; moral
damages in the amount Thirty Thousand Pesos (₱30,000.00); exemplary damages
that is increased from Ten Thousand Pesos (₱10,000.00) to Fifty Thousand Pesos
(₱50,000.00), and attorney’s fees equivalent to ten percent (10%) of the
recoverable amount.
Costs against petitioners.
SO ORDERED.
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Labor Law Review – Part 1
G.R. No. 169757 November 23, 2011
CESAR C. LIRIO, doing business under the name and style of CELKOR AD
SONICMIX, Petitioner,
vs.
WILMER D. GENOVIA, Respondent.
DECISION
PERALTA, J.:
This is a petition for review on certiorari of the decision of the Court of Appeals in
CA-G.R. SP No. 88899 dated August 4, 2005 and its Resolution dated September
21, 2005, denying petitioner’s motion for reconsideration.
The Court of Appeals reversed and set aside the resolution of the NLRC, and
reinstated the decision of the Labor Arbiter with modification, finding that
respondent is an employee of petitioner, and that respondent was illegally
dismissed and entitled to the payment of backwages and separation pay in lieu of
reinstatement.
The facts are as follows:
On July 9, 2002, respondent Wilmer D. Genovia filed a complaint against petitioner
Cesar Lirio and/or Celkor Ad Sonicmix Recording Studio for illegal dismissal, non-
payment of commission and award of moral and exemplary damages.
In his Position Paper,1 respondent Genovia alleged, among others, that on August
15, 2001, he was hired as studio manager by petitioner Lirio, owner of Celkor Ad
Sonicmix Recording Studio (Celkor). He was employed to manage and operate
Celkor and to promote and sell the recording studio's services to music enthusiasts
and other prospective clients. He received a monthly salary of ₱7,000.00. They
also agreed that he was entitled to an additional commission of ₱100.00 per hour
as recording technician whenever a client uses the studio for recording, editing or
any related work. He was made to report for work from Monday to Friday from 9:00
a.m. to 6 p.m. On Saturdays, he was required to work half-day only, but most of
the time, he still rendered eight hours of work or more. All the employees of
petitioner, including respondent, rendered overtime work almost everyday, but
petitioner never kept a daily time record to avoid paying the employees overtime
pay.
Respondent stated that a few days after he started working as a studio manager,
petitioner approached him and told him about his project to produce an album for
his 15-year-old daughter, Celine Mei Lirio, a former talent of ABS-CBN Star
Records. Petitioner asked respondent to compose and arrange songs for Celine
and promised that he (Lirio) would draft a contract to assure respondent of his
compensation for such services. As agreed upon, the additional services that
respondent would render included composing and arranging musical scores only,
while the technical aspect in producing the album, such as digital editing, mixing
and sound engineering would be performed by respondent in his capacity as
studio manager for which he was paid on a monthly basis. Petitioner instructed
respondent that his work on the album as composer and arranger would only be
done during his spare time, since his other work as studio manager was the
priority. Respondent then started working on the album.
Respondent alleged that before the end of September 2001, he reminded
petitioner about his compensation as composer and arranger of the album.
Petitioner verbally assured him that he would be duly compensated. By mid-
November 2001, respondent finally finished the compositions and musical
arrangements of the songs to be included in the album. Before the month ended,
the lead and back-up vocals in the ten (10) songs were finally recorded and
completed. From December 2001 to January 2002, respondent, in his capacity as
studio manager, worked on digital editing, mixing and sound engineering of the
vocal and instrumental audio files.
Thereafter, respondent was tasked by petitioner to prepare official
correspondence, establish contacts and negotiate with various radio stations,
malls, publishers, record companies and manufacturers, record bars and other
outlets in preparation for the promotion of the said album. By early February 2002,
the album was in its manufacturing stage. ELECTROMAT, manufacturer of CDs
and cassette tapes, was tapped to do the job. The carrier single of the album,
which respondent composed and arranged, was finally aired over the radio on
February 22, 2002.
On February 26, 2002, respondent again reminded petitioner about the contract on
his compensation as composer and arranger of the album. Petitioner told
respondent that since he was practically a nobody and had proven nothing yet in
the music industry, respondent did not deserve a high compensation, and he
should be thankful that he was given a job to feed his family. Petitioner informed
respondent that he was entitled only to 20% of the net profit, and not of the gross
sales of the album, and that the salaries he received and would continue to receive
as studio manager of Celkor would be deducted from the said 20% net profit
share. Respondent objected and insisted that he be properly compensated. On
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March 14, 2002, petitioner verbally terminated respondent’s services, and he was
instructed not to report for work.
Respondent asserts that he was illegally dismissed as he was terminated without
any valid grounds, and no hearing was conducted before he was terminated, in
violation of his constitutional right to due process. Having worked for more than six
months, he was already a regular employee. Although he was a so called "studio
manager," he had no managerial powers, but was merely an ordinary employee.
Respondent prayed for his reinstatement without loss of seniority rights, or, in the
alternative, that he be paid separation pay, backwages and overtime pay; and that
he be awarded unpaid commission in the amount of ₱2,000.00 for services
rendered as a studio technician as well as moral and exemplary damages.
Respondent’s evidence consisted of the Payroll dated July 31, 2001 to March 15,
2002, which was certified correct by petitioner,2 and Petty Cash
Vouchers3 evidencing receipt of payroll payments by respondent from Celkor.
In defense, petitioner stated in his Position Paper4 that respondent was not hired
as studio manager, composer, technician or as an employee in any other capacity
of Celkor. Respondent could not have been hired as a studio manager, since the
recording studio has no personnel except petitioner. Petitioner further claimed that
his daughter Celine Mei Lirio, a former contract artist of ABS-CBN Star Records,
failed to come up with an album as the latter aborted its project to produce one.
Thus, he decided to produce an album for his daughter and established a
recording studio, which he named Celkor Ad Sonicmix Recording Studio. He
looked for a composer/arranger who would compose the songs for the said album.
In July 2001, Bob Santiago, his son-in-law, introduced him to respondent, who
claimed to be an amateur composer, an arranger with limited experience and
musician without any formal musical training. According to petitioner, respondent
had no track record as a composer, and he was not known in the field of music.
Nevertheless, after some discussion, respondent verbally agreed with petitioner to
co-produce the album based on the following terms and conditions: (1) petitioner
shall provide all the financing, equipment and recording studio; (2) Celine Mei Lirio
shall sing all the songs; (3) respondent shall act as composer and arranger of all
the lyrics and the music of the five songs he already composed and the revival
songs; (4) petitioner shall have exclusive right to market the album; (5) petitioner
was entitled to 60% of the net profit, while respondent and Celine Mei Lirio were
each entitled to 20% of the net profit; and (6) respondent shall be entitled to draw
advances of ₱7,000.00 a month, which shall be deductible from his share of the
net profits and only until such time that the album has been produced.
According to petitioner, they arrived at the foregoing sharing of profits based on the
mutual understanding that respondent was just an amateur composer with no track
record whatsoever in the music industry, had no definite source of income, had
limited experience as an arranger, had no knowledge of the use of sound mixers or
digital arranger and that petitioner would help and teach him how to use the studio
equipment; that petitioner would shoulder all the expenses of production and
provide the studio and equipment as well as his knowledge in the use thereof; and
Celine Mei Lirio would sing the songs. They embarked on the production of the
album on or about the third week of August 2002.
Petitioner asserted that from the aforesaid terms and conditions, his relationship
with respondent is one of an informal partnership under Article 1767 5 of the New
Civil Code, since they agreed to contribute money, property or industry to a
common fund with the intention of dividing the profits among themselves.
Petitioner had no control over the time and manner by which respondent
composed or arranged the songs, except on the result thereof. Respondent
reported to the recording studio between 10:00 a.m. and 12:00 noon. Hence,
petitioner contended that no employer-employee relationship existed between him
and the respondent, and there was no illegal dismissal to speak of.
On October 31, 2003, Labor Arbiter Renaldo O. Hernandez rendered a
decision,6 finding that an employer-employee relationship existed between
petitioner and respondent, and that respondent was illegally dismissed. The
dispositive portion of the decision reads:
WHEREFORE, premises considered, we find that respondents CELKOR AD
SONICMIX RECORDING STUDIO and/ or CESAR C. LIRIO (Owner), have
illegally dismissed complainant in his status as regular employee and,
consequently, ORDERING said respondents:
1) To pay him full backwages from date of illegal dismissal on March 14,
2002 until finality of this decision and, in lieu of reinstatement, to [pay] his
separation pay of one (1) month pay per year of service reckoned from
[the] date of hire on August 15, 2001 until finality of this decision, which as
of date amounts to full backwages total of 145,778.6 (basic ₱7,000.00 x
19.6 mos.=₱133,000.00 + 1/12 thereof as 13th month pay of ₱11,083.33 +
SILP ₱7,000/32.62 days=₱214.59/day x 5=₱1,072.96 x 1.58
yrs.=₱1,695.27); separation pay of ₱22,750.00 (₱7,000.00 x 3.25 yrs.);
2) To pay complainant's unpaid commission of ₱2,000.00;
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 3) To pay him moral and exemplary damages in the combined amount of
₱75,000.00.
Other monetary claims of complainant are dismissed for lack of merit.7
The Labor Arbiter stated that petitioner’s denial of the employment relationship
cannot overcome respondent’s positive assertion and documentary evidence
proving that petitioner hired respondent as his employee.8
Petitioner appealed the decision of the Labor Arbiter to the National Labor
Relations Commission (NLRC).
In aResolution7 dated October 14, 2004, the NLRC reversed and set aside the
decision of the Labor Arbiter. The dispositive portion of the Resolution reads:
WHEREFORE, premises considered, the Appeal is GRANTED. Accordingly, the
Decision appealed from is REVERSED and, hence, SET ASIDE and a new one
ENTERED dismissing the instant case for lack of merit.9
The NLRC stated that respondent failed to prove his employment tale with
substantial evidence. Although the NLRC agreed that respondent was able to
prove that he received gross pay less deduction and net pay, with the
corresponding Certification of Correctness by petitioner, covering the period from
July 31, 2001 to March 15, 2002, the NLRC held that respondent failed to proved
with substantial evidence that he was selected and engaged by petitioner, that
petitioner had the power to dismiss him, and that they had the power to control him
not only as to the result of his work, but also as to the means and methods of
accomplishing his work.
Respondent’s motion for reconsideration was denied by the NLRC in a
Resolution9 dated December 14, 2004.
Respondent filed a petition for certiorari before the Court of Appeals.
On August 4, 2005, the Court of Appeals rendered a decision 10 reversing and
setting aside the resolution of the NLRC, and reinstating the decision of the Labor
Arbiter, with modification in regard to the award of commission and damages. The
Court of Appeals deleted the award of commission, and moral and exemplary
damages as the same were not substantiated. The dispositive portion of the Court
of Appeals’ decision reads:
WHEREFORE, the petition is GRANTED and the assailed resolutions dated
October 14, 2004 and December 14, 2004 are hereby REVERSED and SET
ASIDE. Accordingly, the decision dated October 31, 2003 of the Labor Arbiter
is REINSTATED, with the modification that the awards of commission and
damages are deleted.11(Emphasis supplied.)
Petitioner’s motion for reconsideration was denied for lack of merit by the Court of
Appeals in its Resolution12 dated September 21, 2005.
Hence, petitioner Lirio filed this petition.
Petitioner states that respondent appealed to the Court of Appeals via a petition for
certiorari under Rule 65, which will prosper only if there is a showing of grave
abuse of discretion or an act without or in excess of jurisdiction on the part of the
NLRC.13 However, petitioner contends that the Court of Appeals decided the case
not in accordance with law and applicable rulings of this Court as petitioner could
not find any portion in the Decision of the Court of Appeals ruling that the NLRC
acted without or in excess of jurisdiction or with grave abuse of discretion
amounting to lack or excess of jurisdiction. Petitioner submits that the Court of
Appeals could not review an error of judgment by the NLRC raised before it on a
petition for certiorari under Rule 65 of the 1997 Rules of Civil Procedure.
Moreover, petitioner contends that it was error on the part of the Court of Appeals
to review the finding of facts of the NLRC on whether there exists an employer-
employee relationship between the parties.
Petitioner’s argument lacks merit.
It is noted that respondent correctly sought judicial review of the decision of the
NLRC via a petition for certiorari under Rule 65 of the Rules of Court filed before
the Court of Appeals in accordance with the decision of the Court in St. Martin
Funeral Home v. NLRC,14 which held:
Therefore, all references in the amended Section 9 of B.P. No. 129 to
supposed appeals from the NLRC to the Supreme Court are interpreted and
hereby declared to mean and refer to petitions for certiorari under Rule 65.
Consequently, all such petitions should henceforth be initially filed in the Court of
Appeals in strict observance of the doctrine on the hierarchy of courts as the
appropriate forum for the relief desired.15
The Court of Appeals stated in its decision that the issue it had to resolve was
"whether or not the public respondent [NLRC] committed grave abuse of discretion
when it declared that no employer-employee relationship exists between the
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petitioner and the private respondents, since the petitioner failed to prove such fact
by substantial evidence."16
Errors of judgment, as distinguished from errors of jurisdiction, are not within the
province of a special civil action for certiorari, which is merely confined to issues of
jurisdiction or grave abuse of discretion.17 By grave abuse of discretion is meant
such capricious and whimsical exercise of judgment as is equivalent to lack of
jurisdiction, and it must be shown that the discretion was exercised arbitrarily or
despotically.18
The Court of Appeals, therefore, could grant the petition for certiorari if it finds that
the NLRC, in its assailed decision or resolution, committed grave abuse of
discretion by capriciously, whimsically, or arbitrarily disregarding evidence that is
material to or decisive of the controversy; and it cannot make this determination
without looking into the evidence of the parties.19 Necessarily, the appellate court
can only evaluate the materiality or significance of the evidence, which is alleged
to have been capriciously, whimsically, or arbitrarily disregarded by the NLRC, in
relation to all other evidence on record.20 Thus, contrary to the contention of
petitioner, the Court of Appeals can review the finding of facts of the NLRC and the
evidence of the parties to determine whether the NLRC gravely abused its
discretion in finding that no employer-employee relationship existed between
petitioner and respondent.21
Respondent raised before the Court of Appeals the following issues:
I. RESPONDENT NATIONAL LABOR RELATIONS COMMISSION COMMITTED
GRAVE ABUSE OF DISCRETION IN SHIFTING THE BURDEN OF PROVING
THAT EMPLOYMENT RELATIONS EXISTED BETWEEN THE PETITIONER AND
THE PRIVATE RESPONDENTS TO THE FORMER, IN VIOLATION OF
ESTABLISHED PROVISION OF LAWS AND JURISPRUDENCE.
II. RESPONDENT NATIONAL LABOR RELATIONS COMMISSION COMMITTED
GRAVE ABUSE OF DISCRETION IN HOLDING THAT NO EMPLOYER-
EMPLOYEE RELATIONSHIP EXISTED BETWEEN THE PETITIONER AND THE
PRIVATE RESPONDENTS.
III. RESPONDENT NATIONAL LABOR RELATIONS COMMISSION COMMITTED
GRAVE ABUSE OF DISCRETION IN DISREGARDING THE PETITIONER'S
PAYROLL AND THE PETTY CASH VOUCHERS AS AN INDICIA OF
EMPLOYMENT RELATIONS BETWEEN PETITIONER AND THE PRIVATE
RESPONDENTS.22
Between the documentary evidence presented by respondent and the mere
allegation of petitioner without any proof by way of any document evincing their
alleged partnership agreement, the Court of Appeals agreed with the Labor Arbiter
that petitioner failed to substantiate his claim that he had a partnership with
respondent, citing the Labor Arbiter’s finding, thus:
In this case, complainant's evidence is substantial enough to prove the
employment relationship that on August 14, 2001, he was hired as 'Studio
manager' by respondent Lirio to manage and operate the recording studio and to
promote and sell its services to music enthusiasts and clients, proven by his
receipt for this purpose from said respondent a fixed monthly compensation of
₱7,000.00, with commission of ₱100.00 per hour when serving as recording
technician, shown by the payroll from July 31, 2001-March 15, 2002. The said
evidence points to complainant's hiring as employee so that the case comes within
the purview of our jurisdiction on labor disputes between an employer and an
employee. x x x.
Respondent Lirio's so-called existence of a partnership agreement was not
substantiated and his assertion thereto, in the face of complainant's
evidence, constitute but a self-serving assertion, without probative value, a
mere invention to justify the illegal dismissal.
xxxx
Indeed, we find credible that what caused complainant's dismissal on March 14,
2002 was due to his refusal to respondent's Lirio's insistences on merely giving
him 20% based on net profit on sale of the album which he composed and
arranged during his free time and, moreover, that salaries which he received would
be deducted therefrom, which obviously, soured the relations from the point of
view of respondent Lirio.23
Hence, based on the finding above and the doctrine that "if doubt exists between
the evidence presented by the employer and the employee, the scales of justice
must be tilted in favor of the latter,"24 the Court of Appeals reversed the resolution
of the NLRC and reinstated the decision of the Labor Arbiter with modification.
Even if the Court of Appeals was remiss in not stating it in definite terms, it is
implied that the Court of Appeals found that the NLRC gravely abused its
discretion in finding that no employer-employee relationship existed between
petitioner and respondent based on the evidence on record.
We now proceed to the main issue raised before this Court: Whether or not the
decision of the Court of Appeals is in accordance with law, or whether or not the
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Court of Appeals erred in reversing and setting aside the decision of the NLRC,
and reinstating the decision of the Labor Arbiter with modification.
In petitions for review, only errors of law are generally reviewed by this Court. This
rule, however, is not ironclad.25Where the issue is shrouded by a conflict of factual
perceptions by the lower court or the lower administrative body, in this case, the
NLRC, this Court is constrained to review the factual findings of the Court of
Appeals.26
Before a case for illegal dismissal can prosper, it must first be established that an
employer-employee relationship existed between petitioner and respondent.27
The elements to determine the existence of an employment relationship are: (a)
the selection and engagement of the employee; (b) the payment of wages; (c) the
power of dismissal; and (d) the employer’s power to control the employee’s
conduct. The most important element is the employer’s control of the employee’s
conduct, not only as to the result of the work to be done, but also as to the means
and methods to accomplish it.28
It is settled that no particular form of evidence is required to prove the existence of
an employer-employee relationship.29 Any competent and relevant evidence to
prove the relationship may be admitted.30
In this case, the documentary evidence presented by respondent to prove that he
was an employee of petitioner are as follows: (a) a document denominated as
"payroll" (dated July 31, 2001 to March 15, 2002) certified correct by
petitioner,31 which showed that respondent received a monthly salary of ₱7,000.00
(₱3,500.00 every 15th of the month and another ₱3,500.00 every 30th of the
month) with the corresponding deductions due to absences incurred by
respondent; and (2) copies of petty cash vouchers,32 showing the amounts he
received and signed for in the payrolls.
The said documents showed that petitioner hired respondent as an employee and
he was paid monthly wages of ₱7,000.00. Petitioner wielded the power to dismiss
as respondent stated that he was verbally dismissed by petitioner, and respondent,
thereafter, filed an action for illegal dismissal against petitioner. The power of
control refers merely to the existence of the power.33 It is not essential for the
employer to actually supervise the performance of duties of the employee, as it is
sufficient that the former has a right to wield the power.34Nevertheless, petitioner
stated in his Position Paper that it was agreed that he would help and teach
respondent how to use the studio equipment. In such case, petitioner certainly had
the power to check on the progress and work of respondent.
On the other hand, petitioner failed to prove that his relationship with respondent
was one of partnership.1âwphi1 Such claim was not supported by any written
agreement. The Court notes that in the payroll dated July 31, 2001 to March 15,
2002,35 there were deductions from the wages of respondent for his absence from
work, which negates petitioner’s claim that the wages paid were advances for
respondent’s work in the partnership. In Nicario v. National Labor Relations
Commission,36 the Court held:
It is a well-settled doctrine, that if doubts exist between the evidence presented by
the employer and the employee, the scales of justice must be tilted in favor of the
latter. It is a time-honored rule that in controversies between a laborer and his
master, doubts reasonably arising from the evidence, or in the interpretation of
agreements and writing should be resolved in the former’s favor. The policy is to
extend the doctrine to a greater number of employees who can avail of the benefits
under the law, which is in consonance with the avowed policy of the State to give
maximum aid and protection of labor. This rule should be applied in the case at
bar, especially since the evidence presented by the private respondent company is
not convincing. x x x37
Based on the foregoing, the Court agrees with the Court of Appeals that the
evidence presented by the parties showed that an employer-employee relationship
existed between petitioner and respondent.
In termination cases, the burden is upon the employer to show by substantial
evidence that the termination was for lawful cause and validly made.38 Article 277
(b) of the Labor Code39 puts the burden of proving that the dismissal of an
employee was for a valid or authorized cause on the employer, without distinction
whether the employer admits or does not admit the dismissal.40 For an employee’s
dismissal to be valid, (a) the dismissal must be for a valid cause, and (b) the
employee must be afforded due process.41 Procedural due process requires the
employer to furnish an employee with two written notices before the latter is
dismissed: (1) the notice to apprise the employee of the particular acts or
omissions for which his dismissal is sought, which is the equivalent of a charge;
and (2) the notice informing the employee of his dismissal, to be issued after the
employee has been given reasonable opportunity to answer and to be heard on his
defense.42 Petitioner failed to comply with these legal requirements; hence, the
Court of Appeals correctly affirmed the Labor Arbiter’s finding that respondent was
illegally dismissed, and entitled to the payment of backwages, and separation pay
in lieu of reinstatement.
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WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in
CA-G.R. SP No. 88899, dated August 4, 2005, and its Resolution dated
September 21, 2005, are AFFIRMED.
No costs.
SO ORDERED.
G.R. No. 164181 September 14, 2011
NISSAN MOTORS PHILS., INC., Petitioner,
vs.
VICTORINO ANGELO, Respondent.
DECISION
PERALTA, J.:
This is to resolve the Petition for Review1 dated July 10, 2004 of petitioner Nissan
Motors Phils., Inc. (Nissan) assailing the Decision2 dated March 24, 2004 of the
Court of Appeals (CA) and the latter's Resolution3 dated June 9, 2004.
The records contain the following antecedent facts:
Respondent Victorino Angelo was employed by Nissan on March 11, 1989 as one
of its payroll staff. On April 7 to 17, 2000, respondent was on sick leave, thus, he
was not able to prepare the payroll for the said period. Again, on April 27 and 28,
2000, respondent was on an approved vacation leave which again resulted in the
non-preparation of the payroll for that particular period.
On May 8, 2000, respondent received a Memorandum 4 from the petitioner
containing the following:
This is to inform you that the Company is considering your dismissal from
employment on the grounds of serious misconduct, willful disobedience and
gross neglect of duties.
It appears that on April 10, 2000, Monday, which was the supposed cut-off date for
payroll purposes for the April 15 payroll, you went home early without finishing
your work and requested for a referral letter from the company clinic to E. Delos
Santos Hospital claiming that you are not feeling well.
On April 11, Tuesday, you did not report for work, without any notice to the
company or to any of your immediate superior section head, department head and
division head. A phone call was made to your home, but the company could not
make any contact.
On April 12, Wednesday, you reported for work but went home early claiming that
you were again not feeling well. You were reminded of the coming payday on
Friday, April 14, and you said you will be able to finish it on time and that you will
just continue/finish your work the following day.
On April 13, Thursday, you again did not report for work without any notice to the
company just like what you did last Tuesday. Your immediate superior, sensing
that you did not finish your task, tried to contact you but to no avail, as you were
residing in Novaliches and your home phone was not in order. So we decided to
open your computer thru the help of our IT people to access the payroll program.
On April 14, Friday (payday), we were still doing the payroll thru IT because we
could not contact you. Later in the day, the Company decided to release the
payroll of employees the following day as we already ran out of time and the
Company just based the net pay of the employees on their March 15 payroll.
Naturally, the amount released to the employees were not accurate as some got
more than (sic), while some got less than what they were supposed to receive.
Consequently, many employees got angry, as the Company paid on a Saturday,
(in practice we do not release salary on a Saturday as it is always done in
advance, i.e., Friday) and majority got lesser amount than what they were
supposed to receive. In addition, the employees were not given their payslip where
they can base the net pay they received.
When you reported for work on Tuesday, April 18, we had a meeting and you were
advised to transfer your payroll task to your immediate superior, which you agreed.
The time table agreement was 2 payroll period, meaning April 30 and May 15
payroll.
Still on April 18, Tuesday, you filed an application for vacation leave due to your
son's graduation on April 27 and 28. Because it is again payroll time, we advised
that your leave will be approved on the condition that you will ensure that the
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payroll is finished on time and [you] will make a proper turn over to your immediate
superior before your leave. You agreed and your leave was approved.
On April 24, Monday, you were reminded you should start on your payroll task
because you will be on leave starting April 27, Thursday, you said yes.
On April 25, Tuesday, you were again reminded on finishing the payroll and the
turn over again and you said yes.
On April 26, Wednesday, you were again reminded on the same matter and, in
fact, Mr. AA del Rosario reminded you also on the matter about 5:30 p.m. And you
promised him that the task will be finished by tomorrow (sic) and will just leave the
diskette in your open drawer. You were left in the office until 6:00 p.m.
On April 27, Thursday, you were already on leave and your superior, Mr. M.
Panela, found out that the diskette only contained the amount and name of
employees, but not the account number. Likewise, the deductions from salaries
was not finished, the salaries of contractuals, apprentices were also not finished.
Since the bank only reads account numbers of employees, we experienced delay
in the payroll processing. You even promised to call the office i.e., M Panela to
give additional instructions not later than 12:00 noon on the same day, but you did
not do so. In fact, the direct phone line of Mr. AA del Rosario was given to you by
your officemate so you can call the office directly and not thru long distance.
On April 28, Friday, after exhaustive joint efforts done by Welfare Management
Section and IT Division, we were able to finally release the payroll thru the bank,
but many employees got lower amount than what they have expected, as in fact at
least 43 employees out of 360 got salaries below ₱1,000.00, among them about
10 people got no salary primarily due to wrong deduction and computation done by
you. Again, many people got angry to the management's inefficient handling of
their payroll.
On May 2, Tuesday, you did not report for work, again you said you are not feeling
well, but the information to us came very late at about noon time.
On May 3, Wednesday, you reported for work, and was instructed to finish the
payslips for the payroll periods April 15 and April 30. You said yes, and you
promised not to go home on that day without finishing the payslips. Later, you
decided on your own to just compute the payslip on a monthly basis instead of the
usual semi-monthly basis as is the customary thing to do. As a result thereof, an
error in the tax withholding happened and again resulted in another confusion and
anger among employees, as in fact for two (2) consecutive days, May 3 and May
4, the plant workers refused to render overtime.
As a consequence of all these, the manufacturing employees, numbering about
350 people or about 65% of [Nissan's total population], since April 16, have started
to decline rendering overtime work, saying after their 15 days of work they
received only less than ₱200 while some even received only ₱80.
The manufacturing operation was hampered completely in the month of April and
the first week of May because of these several incidents. In sum, the company has
suffered massive loss of opportunity to sell because of failure to produce in the
production area due to non-availability of workers rendering overtime, high
absenteeism rate among plant direct workers primarily due to the payroll problem.
It came at a time when NMPI sales [are] just starting to pick up due to the
introduction of the new model Sentra Exalta. The loss is simply too overwhelming.
Accordingly, you are hereby given a period of three (3) days from receipt hereof to
submit your written answer.
In the meantime, you are hereby placed on preventive suspension effective
immediately.
A hearing will be conducted by Mr. AA del Rosario, on May 13, 2000 at 9:00 a.m.
at the Company's conference room (Fairlady).
Respondent filed a Complaint5 for illegal suspension with the Department of Labor
and Employment (DOLE) on May 12, 2000.
Petitioner conducted an investigation on May 13, 2000, and concluded that
respondent's explanation was untrue and insufficient. Thus, on June 13, 2000,
petitioner issued a Notice of Termination. 6
Respondent amended his previous complaint against petitioner on June 22, 2000,
to include the charge of illegal dismissal.7 On September 29, 2000, the Labor
Arbiter rendered a Decision8 dismissing respondent's complaint for lack of merit.
Undaunted, respondent brought the case to the National Labor Relations
Commission (NLRC), which eventually rendered a Resolution9 dated February 14,
2002 dismissing the appeal and affirming the Labor Arbiter's Decision.
Respondent's motion for reconsideration of the NLRC resolution was subsequently
denied on May 13, 2002.10
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Aggrieved, respondent filed a petition for certiorari11 under Rule 65 of the Rules of
Court with the CA and the latter granted the same petition in its Decision dated
March 24, 2004, the dispositive portion of which reads:
WHEREFORE, the petition is GRANTED. The assailed resolutions dated February
14, 2002 and May 13, 2002 are REVERSED and SET ASIDE. The petitioner is
hereby reinstated and the private respondents are ordered to pay him backwages
from the time of his illegal dismissal.
SO ORDERED.
Unsatisfied with the decision of the CA, Nissan filed a motion for reconsideration,
which was denied by the same court in a Resolution dated June 9, 2004.
Thus, the present petition, to which the petitioner cites the following grounds:
A misconduct, however serious, must nevertheless be in connection with the
THE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW
WHEN IT OVERTURNED THE FACTUAL FINDINGS OF BOTH THE
LABOR ARBITER AND THE NLRC WHICH ARE BASED ON
SUBSTANTIAL EVIDENCE.
B serious misconduct or insubordination. Petitioner claims that the language used by
THE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW
WHEN IT DISREGARDED PRIVATE RESPONDENT'S SERIOUS
MISCONDUCT AND INSUBORDINATION, AND DECIDED THE CASE
ONLY ON THE CHARGE OF GROSS AND HABITUAL NEGLIGENCE.
C Again, it's not negligence on my part and I'm not alone to be blamed. It's
THE COURT OF APPEALS COMMITTED SERIOUS ERROR OF LAW IN
IGNORING PRIVATE RESPONDENT'S MISCONDUCT WHICH, IF EVER
IT DOES NOT JUSTIFY DISMISSAL BECAUSE OF HIS 11-YEAR
SERVICE NONETHELESS LIMITS THE AWARD OF BACKWAGES.12
The petition is meritorious.
Petitioner argues that the factual findings of the Labor Arbiter and the NLRC
should have been accorded respect by the CA as they are based on substantial
evidence. However, factual findings of administrative agencies are not infallible
and will be set aside if they fail the test of arbitrariness. 13 In the present case, the
findings of the CA differ from those of the Labor Arbiter and the NLRC. The Court,
in the exercise of its equity jurisdiction, may look into the records of the case and
re-examine the questioned findings.14
The Labor Code provides that an employer may terminate the services of an
employee for a just cause.15 Petitioner, the employer in the present case,
dismissed respondent based on allegations of serious miscounduct, willful
disobedience and gross neglect.
One of the just causes enumerated in the Labor Code is serious misconduct.
Misconduct is improper or wrong conduct.16 It is the transgression of some
established and definite rule of action, a forbidden act, a dereliction of duty, willful
in character, and implies wrongful intent and not mere error in judgment.17 Such
employee's work to constitute just cause for his separation.18Thus, for misconduct
or improper behavior to be a just cause for dismissal, (a) it must be serious; (b) it
must relate to the performance of the employee’s duties; and (c) it must show that
the employee has become unfit to continue working for the employer.19
Going through the records, this Court found evidence to support the allegation of
respondent in his Letter-Explanation is akin to a manifest refusal to cooperate with
company officers, and resorted to conduct which smacks of outright disrespect and
willful defiance of authority or insubordination. The misconduct to be serious within
the meaning of the Labor Code must be of such a grave and aggravated character
and not merely trivial or unimportant.20 The Letter-Explanation21 partly reads:
negligence on your part [Perla Go] and A.A. Del Rosario kasi, noong pang April
1999 ay alam ninyo na hindi ako ang dapat may responsibilidad ng payroll kundi
ang Section Head eh bakit hindi ninyo pinahawak sa Section Head noon pa. Pati
kaming dalawa sa payroll, kasama ko si Thelma. Tinanggal nyo si Thelma. Hindi
nyo ba naisip na kailangan dalawa ang tao sa payroll para pag absent ang isa ay
may gagawa. Dapat noon nyo pa naisip iyan. Ang tagal kong gumawa ng
trabahong hindi ko naman dapat ginagawa.
This Court finds the above to be grossly discourteous in content and tenor. The
most appropriate thing he could have done was simply to state his facts without
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resorting to such strong language. Past decisions of this Court have been one in
ruling that accusatory and inflammatory language used by an employee to the
employer or superior can be a ground for dismissal or termination. 22
Another just cause cited by the petitioner is willful disobedience. One of the
fundamental duties of an employee is to obey all reasonable rules, orders and
instructions of the employer. Disobedience, to be a just cause for termination, must
be willful or intentional, willfulness being characterized by a wrongful and perverse
mental attitude rendering the employee’s act inconsistent with proper
subordination. A willful or intentional disobedience of such rule, order or instruction
justifies dismissal only where such rule, order or instruction is (1) reasonable and
lawful, (2) sufficiently known to the employee, and (3) connected with the duties
which the employee has been engaged to discharge.23This allegation of willful
disobedience can still be adduced and proven from the same Letter-Explanation
cited earlier.
Petitioner also dismissed respondent because of gross or habitual negligence.
Neglect of duty, to be a ground for dismissal, must be both gross and habitual.24 In
finding that petitioner was able to adduce evidence that would justify its dismissal
of respondent, the NLRC correctly ruled that the latter's failure to turn over his
functions to someone capable of performing the vital tasks which he could not
effectively perform or undertake because of his heart ailment or condition
constitutes gross neglect. It stated that:
x x x Be it mentioned and emphasized that complainant cannot be faulted for his
absences incurred on 10, 11, 13, 14, 17, 27 and 28 of April 2000 as he went on
official leave on said dates. Except for the last two dates mentioned (27 and 28
April 2000), health problem compelled complainant to be on sick leave of absence
on the foregoing dates. It is not the complainant's liking, in other words, to be
afflicted with any form of heart ailment which actually caused him to incur such
leave of absences. Complainant's pellucid fault, however, lies on his failure to
effect the "much-needed" turn over of functions to someone capable of performing
the vital task(s) which he could not effectively perform or undertake because of his
heart ailment or condition. Indeed, the trouble(s) "felt" by management and the
employees concerned on the payday of 15 April 2000 may seem justified under the
circumstances as complainant indeed has gotten ill and in fact went on sick leave
of absence prior to said payday. The same, however, certainly does not hold true
as to the trouble(s) and chaos felt and which occurred on the payday of 30 April
2000 as diligence and prudence logically and equitably required complainant to
have effected the necessary turn over of his functions to someone capable of
taking over his assigned task(s) even perhaps on a merely temporary basis. The
preparation of payroll, especially that of a big business entity such as herein
respondent company, certainly involves serious, diligent, and meticulous attention
of the employee tasked of performing such function and a company definitely could
not let either negligence or absence of the employee concerned get in the way of
the performance of the undertaking of such, otherwise, serious repercussion(s)
would be the logical and unavoidable consequences; such is what befell the
respondents. Be it mentioned at this juncture that under the circumstances herein
then prevailing, it would seem just logical and in keeping with the natural
"reflexes," so to speak, of a business entity, to require an incapable employee
tasked to perform a vital function, to effect the necessary turn over of functions of
such employee to someone capable. Be it further emphasized, however, that even
assuming that no formal directive was given by the company to the employee
concerned for the turn over of the latter's functions, said employee should have
taken the initiative of so doing considering the importance of the task(s) he is
performing. Hence, failure to do so would clearly be tantamount to serious neglect
of duty, a valid ground in terminating employment relations.25
Gross negligence connotes want of care in the performance of one's
duties.1ªvvph!1 Habitual neglect implies repeated failure to perform one's duties
for a period of time, depending upon the circumstances. On the other hand, fraud
and willful neglect of duties imply bad faith on the part of the employee in failing to
perform his job to the detriment of the employer and the latter's business. 26
It must be emphasized at this point that the onus probandi to prove the lawfulness
of the dismissal rests with the employer. In termination cases, the burden of proof
rests upon the employer to show that the dismissal is for just and valid cause.
Failure to do so would necessarily mean that the dismissal was not justified and,
therefore, was illegal.27 In this case, both the Labor Arbiter and the NLRC were not
amiss in finding that the dismissal of respondent was legal or for a just cause
based on substantial evidence presented by petitioner. Substantial evidence,
which is the quantum of proof required in labor cases, is that amount of relevant
evidence which a reasonable mind might accept as adequate to justify a
conclusion.28
However, although the dismissal was legal, respondent is still entitled to a
separation pay as a measure of financial assistance, considering his length of
service and his poor physical condition which was one of the reasons he filed a
leave of absence. As a general rule, an employee who has been dismissed for any
of the just causes enumerated under Article 28229 of the Labor Code is not entitled
to separation pay.30 Although by way of exception, the grant of separation pay or
some other financial assistance may be allowed to an employee dismissed for just
causes on the basis of equity.31 This concept has been thoroughly discussed
in Solidbank Corporation v. NLRC,32 thus:
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The reason that the law does not statutorily grant separation pay or financial
assistance in instances of termination due to a just cause is precisely because the
cause for termination is due to the acts of the employee. In such instances,
however, this Court, inspired by compassionate and social justice, has in the
past awarded financial assistance to dismissed employees when
circumstances warranted such an award.
In Central Philippines Bandag Retreaders, Inc. v. Diasnes,33 this Court discussed
the parameters of awarding separation pay to dismissed employees as a measure
of financial assistance, viz:
To reiterate our ruling in Toyota, labor adjudicatory officials and the CA must
demur the award of separation pay based on social justice when an employee's
dismissal is based on serious misconduct or willful disobedience; gross and
habitual neglect of duty; fraud or willful breach of trust; or commission of a crime
against the person of the employer or his immediate family - grounds under Art.
282 of the Labor Code that sanction dismissals of employees. They must be most
judicious and circumspect in awarding separation pay or financial assistance as
the constitutional policy to provide full protection to labor is not meant to be an
instrument to oppress the employers. The commitment of the Court to the cause of
labor should not embarrass us from sustaining the employers when they are right,
as here. In fine, we should be more cautious in awarding financial assistance to
the undeserving and those who are unworthy of the liberality of the law. 34
Thus, in Philippine Commercial International Bank v. Abad,35 this Court, having
considered the circumstances present therein and as a measure of social justice,
awarded separation pay to a dismissed employee for a just cause under Article
282. The same concession was given by this Court in Aparente, Sr. v. National
Labor Relations Commission36 and Tanala v. National Labor Relations
Commission.37
WHEREFORE, the Petition for Review dated July 10, 2004 of petitioner Nissan
Motors Phils., Inc. is hereby GRANTED. Consequently, the Decision dated March
24, 2004 of the Court of Appeals and the latter's Resolution dated June 9, 2004
are hereby REVERSED AND SET ASIDE and the Decision dated September 29,
2000 of the Labor Arbiter and its Resolution dated February 14, 2002 are
hereby REINSTATED with the MODIFICATION that petitioner shall award
respondent his separation pay, the computation of which shall be based on the
prevailing pertinent laws on the matter.
SO ORDERED.
G.R. No. 169905 September 7, 2011
St. PAUL COLLEGE QUEZON CITY, SR. LILIA THERESE TOLENTINO, SPC,
SR. BERNADETTE RACADIO, SPC, AND SR. SARAH MANAPOL, Petitioners,
vs.
REMIGIO MICHAEL A. ANCHETA II AND CYNTHIA A. ANCHETA, Respondent.
DECISION
PERALTA, J.:
This resolves the Petition for Review1 dated November 18, 2005 of petitioners St.
Paul College, Quezon City, et al. which seeks to reverse and set aside the
Decision2 dated July 8, 2005 of the Court of Appeals (CA) and its
Resolution3 dated September 29, 2005, reversing the Decision4 dated February
28, 2003 of the National Labor Relations Commission (NLRC) and the
Decision5 dated November 20, 2000 of the Labor Arbiter.
As culled from the records, the antecedent facts are the following:
Petitioner St. Paul College, Quezon City (SPCQC) is a private Catholic educational
institution. It is represented by its President, petitioner Sr. Lilia Therese Tolentino,
SPC, the College Dean, Sr. Bernadette Racadio, SPC, and the Mass
Communication Program Director, Sr. Sarah Manapol, SPC. The respondents,
Spouses Remigio Michael A. Ancheta II and Cynthia A. Ancheta are former
teachers of the same school.
Respondent Remigio Michael was hired by the SPCQC as a teacher in the
General Education Department with a probationary rank in the School Year (SY)
1996-1997 which was renewed in the following SY 1997-1998. His wife,
respondent Cynthia was hired by the same school as a part time teacher of the
Mass Communication Department in the second semester of SY 1996-1997 and
her appointment was renewed for SY 1997-1998.
On February 13, 1998, respondent Remigio Michael wrote a letter6 to petitioner Sr.
Lilia, signifying his intention to renew his contract with SPCQC for SY 1998-1999.
A letter7 of the same tenor was also written by respondent Cynthia addressed to
petitioner Sr. Lilia.
Petitioner Sr. Bernadette, on March 9, 1998, sent two letters 8 with the same
contents to the respondent spouses informing them that upon the recommendation
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of the College Council, the school is extending to them new contracts for SY 1998-
1999.
A letter9 dated April 22, 1998 was sent to petitioner Sr. Bernadette and signed by
some of the teachers of SPCQC, including the respondent spouses. The said letter
contained the teachers' sentiments regarding two school policies, namely: first, the
policy of penalizing the delay in encoding final grades and, second, the policy of
withholding salaries of the teachers. Meanwhile, a letter 10 dated April 21, 1998 (the
date, later on contested by respondent Remigio Michael to be ante-dated) was
written by petitioner Sr. Bernadette to respondent Remigio Michael, reiterating the
conversation that took place between them the day before the date of the said
letter (April 20, 1998). The letter enumerated the departmental and instructional
policies that respondent Remigio Michael failed to comply with, such as the late
submission of final grades, failure to submit final test questions to the Program
Coordinator, the giving of tests in the essay form instead of the multiple choice
format as mandated by the school and the high number of students with failing
grades in the classes that he handled.
Thereafter, petitioner Sr. Bernadette wrote a letter11 dated April 30, 1998 to
petitioner Sr. Lilia, endorsing the immediate termination of the teaching services of
the respondent spouses on the following grounds:
1. Non-compliance with the departmental policy to submit their final test
questions to their respective program coordinators for checking/comments
(violating par. 7.1, p. 65 of the Faculty Manual).
This policy was formulated to ensure the validity and reliability of test
questions of teachers for the good of the students. This in effect can
minimize if not prevent unnecessary failure of students.
2. Non-compliance with the standard format (multiple choice) of final test
questions as agreed upon in the department. Mr. Ancheta prepared purely
essay questions for the students.
Well-prepared multiple choice questions are more objective, and develop
critical thinking among students.
3. Failure to encode their modular grade reports as required (violating par.
H. 8, p. 66 of our Faculty manual).
4. Failure to submit and update required modules (syllabi) of their subject
despite reminders (violating D, 1.5, p. 40 of our Faculty Manual).
5. Both spouses have a gross number of failure in their class.
Mr. Ancheta failed 27 in a class of 44 students, and had a total number of
56 failures in his sections of Philippine History. Mrs. Ancheta failed 11
students in a class of 37, and had a total number of 16 failures in her 2
classes of Communication Theories.
When I talked to each of them to re-examine their bases of failure, they
refused saying that they had done this; otherwise, the number of failures
would have been more. I gathered data as to the mental ability of the
students who failed, and the number of students who incurred more than
one failure. In Mr. Ancheta's class of 44 students with 27 failures, majority
had average IQ's, 8 were on probation status, and 2 had above-average
IQ. Only 7 of his 27 failures were also failing in other subjects.
6. Failure to report to work on time <re: Mr. Ancheta> (violating par. 1, 21,
p. 63 of our Faculty Manual).
7. Both spouses are not open to suggestions to improve themselves as
teachers. They just see their points and their principles.
When I talked to Mr. Ancheta the second time telling him of the data I gathered,
including the information that statistics permits only 1 to 2% failures, he still
refused to budge in to review his grades and his quality of teaching. He stood firm
in his conviction and ground that the students were to blame for their failures, and
reiterated his disagreement with several school policies (which he violated)
contained in his letter which he had asked his wife to give to the dean's office. Not
content on writing down his personal disagreement on some policies, he also
asked some faculty members to read his letter and put their signatures on it if they
were in favor of one or all of his points.
In other words, said spouses had refused and continue to refuse to evaluate the
students' performance on the bases of an established grading system to ensure
just and fair appraisal (violating par. 1.4, p. 40 of our Faculty Manual). 12
Respondent spouses were given an opportunity to comment on the above letter-
recommendation of petitioner Sr. Bernadette.13 On May 4, 1998, respondent
spouses sent their respective comments14 to petitioner Sr. Lilia. Subsequently, the
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respondent spouses received their respective letters of termination 15 on May 14,
1998. Respondent spouses sent a letter16 for reconsideration to petitioner Sr. Lilia,
but was eventually denied.17
Thus, respondent spouses filed a Complaint18 for illegal dismissal with the NLRC.
On November 20, 2000, the Labor Arbiter dismissed the complaint,19 the
dispositive portion of the decision reads:
WHEREFORE, premises considered, judgment is hereby rendered DISMISSING
the complaint of illegal dismissal for lack of merit. All other claims are denied for
lack of basis.
SO ORDERED.
The decision of the Labor Arbiter was appealed to the NLRC, but was affirmed by
the latter on February 28, 2003,20disposing the case as follows:
WHEREFORE, premises considered, the appeal is DISMISSED for lack of merit
and the Decision appealed from is AFFIRMED en toto.
SO ORDERED.
After the denial of their motion for reconsideration with the NLRC,21 the respondent
spouses filed a petition for certiorari with the CA. In its Decision22 dated July 8,
2005, the CA granted the petition and reversed the decisions of the Labor Arbiter
and the NLRC, thus, it ruled:
WHEREFORE, finding grave abuse of discretion amounting to lack or excess of
jurisdiction, the court resolved to SET ASIDE the decision dated February 28, 2003
of public respondent National Labor Relations Commission. Private respondents
are hereby ordered to pay, jointly and severally, petitioners the following:
a) Separation pay equivalent to one (1) month's pay for every year of
continuous service;
b) Deficiency wages to be computed from the unexpired portion of
petitioners’ employment contract.
c) Moral damages in the amount of ₱250,000.00 to each [of the]
petitioners;
d) Exemplary damages also in the amount of ₱250,000.00 to each [of the]
petitioners; and
e) Attorney's fees.
SO ORDERED.
In its Resolution23 dated September 29, 2005, the CA denied the motion for
reconsideration of the petitioners herein; hence, the present petition.
The petitioners cited the following arguments:
I.
THE HONORABLE COURT OF APPEALS, WITH ALL DUE RESPECT,
COMMITTED GRAVE AND REVERSIBLE ERROR IN SETTING ASIDE
THE FINDING IN THE D E C I S I O N DATED 20 NOVEMBER 2000 OF
THE HONORABLE LABOR ARBITER IN NLRC NCR CASE NO. 00-07-
06018-98 THAT INDIVIDUAL CONTRACTS OF EMPLOYMENT OF
ATTY. REMIGIO MICHAEL A. ANCHETA II AND MS. CYNTHIA A.
ANCHETA HAD EXPIRED AT THE END OF SY 1997-1998, I.E., 1 JUNE
1997- 31 MARCH 1998, AND WAS NOT RENEWED FOR SY 1998-1999
AND, ACCORDINGLY, THEY WERE NOT ILLEGALLY TERMINATED BY
ST. PAUL COLLEGE QUEZON CITY.
II.
THE HONORABLE COURT OF APPEALS, WITH ALL DUE RESPECT,
COMMITTED GRAVE AND REVERSIBLE ERROR IN SETTING ASIDE
THE D E C I S I O N DATED 28 FEBRUARY 2003 OF THE NATIONAL
LABOR RELATIONS COMMISSION IN NLRC NCR CA NO. 02775-01
FINDING THAT ATTY. REMIGIO MICHAEL A. ANCHETA II AND MS.
CYNTHIA A. ANCHETA WERE DISMISSED FOR JUST CAUSE AND
AFTER DUE PROCESS.
III.
THE HONORABLE COURT OF APPEALS, WITH ALL DUE RESPECT,
COMMITTED GRAVE AND REVERSIBLE ERROR IN RULING THAT
ATTY. REMIGIO MICHAEL A. ANCHETA II AND MS. CYNTHIA A.
ANCHETA WERE (A) EXTENDED A THIRD APPOINTMENT TO TEACH
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 AS PROBATIONARY TEACHERS FOR SY 1998-1999, (B) ILLEGALLY
DISMISSED BY ST. PAUL COLLEGE QUEZON CITY AS AN ACT OF
RETALIATION ON THE PART OF SR. BERNADETTE RACADIO, SPC
AND (C) ENTITLED TO SEPARATION PAY, DEFICIENCY WAGES,
MORAL AND EXEMPLARY DAMAGES AND ATTORNEY'S FEES.24
The petition is impressed with merit.
Before this Court delves into the merits of the petition, it deems it necessary to
discuss the nature of the employment of the respondents. It is not disputed that
respondent Remigio Michael was a full-time probationary employee and his wife, a
part-time teacher of the petitioner school.
A reality we have to face in the consideration of employment on probationary
status of teaching personnel is that they are not governed purely by the Labor
Code.25 The Labor Code is supplemented with respect to the period of probation
by special rules found in the Manual of Regulations for Private Schools.26 On the
matter of probationary period, Section 92 of these regulations provides:
Section 92. Probationary Period. - Subject in all instances to compliance with the
Department and school requirements, the probationary period for academic
personnel shall not be more than three (3) consecutive years of satisfactory
service for those in the elementary and secondary levels, six (6) consecutive
regular semesters of satisfactory service for those in the tertiary level, and nine (9)
consecutive trimesters of satisfactory service for those in the tertiary level where
collegiate courses are offered on a trimester basis.
A probationary employee or probationer is one who is on trial for an employer,
during which the latter determines whether or not he is qualified for permanent
employment.27 The probationary employment is intended to afford the employer an
opportunity to observe the fitness of a probationary employee while at work, and to
ascertain whether he will become an efficient and productive employee.28 While
the employer observes the fitness, propriety and efficiency of a probationer to
ascertain whether he is qualified for permanent employment, the probationer, on
the other hand, seeks to prove to the employer that he has the qualifications to
meet the reasonable standards for permanent employment.29 Thus, the word
probationary, as used to describe the period of employment, implies the purpose of
the term or period, not its length.30
The common practice is for the employer and the teacher to enter into a contract,
effective for one school year.31 At the end of the school year, the employer has the
option not to renew the contract, particularly considering the teacher's
performance.32 If the contract is not renewed, the employment relationship
terminates.33 If the contract is renewed, usually for another school year, the
probationary employment continues.34 Again, at the end of that period, the parties
may opt to renew or not to renew the contract.35 If renewed, this second renewal of
the contract for another school year would then be the last year – since it would be
the third school year – of probationary employment.36 At the end of this third year,
the employer may now decide whether to extend a permanent appointment to the
employee, primarily on the basis of the employee having met the reasonable
standards of competence and efficiency set by the employer.37 For the entire
duration of this three-year period, the teacher remains under probation.38 Upon the
expiration of his contract of employment, being simply on probation, he cannot
automatically claim security of tenure and compel the employer to renew his
employment contract.39
Petitioner school contends that it did not extend the contracts of respondent
spouses. It claims that, although, it has sent letters to the spouses informing them
that the school is extending to them new contracts for the coming school year, the
letters do not constitute as actual employment contracts but merely offers to teach
on the said school year. The respondent spouses wrote to the president, petitioner
Sr. Lilia:
Respondent Remigio Michael:
Dear Sister,
Peace!
This signifies my intention of renewing my contract of employment with [SPCQC]
for SY 1998-1999.
Thank you.40
Respondent Cynthia:
Dear Sister,
I wish to continue teaching in St. Paul College Quezon City for school year 1998-
99.
Thank you very much.41
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In response to the above, the college dean, petitioner Sr. Bernadette wrote the
respondent spouses letters with the same contents, thus:
This is to acknowledge receipt of your letter of application to teach during the
School year of 1998-1999.
Upon the recommendation of the College Council, I am happy to inform you that
the school is extending to you a new contract for School year 1998-1999.
I wish to take this opportunity to thank you for the service which you have rendered
to our students and to the school during the past School year 1997-1998. I hope
you will again go out of your way and cooperate in this apostolate that we are
doing.
Congratulations and I look forward to a fruitful and harmonious time with you. 42
Section 91 of the Manual of Regulations for Private Schools, states that:
Section 91. Employment Contract. Every contract of employment shall specify the
designation, qualification, salary rate, the period and nature of service and its date
of effectivity, and such other terms and condition of employment as may be
consistent with laws and rules, regulations and standards of the school. A copy of
the contract shall be furnished the personnel concerned.43
It is important that the contract of probationary employment specify the period or
term of its effectivity.44 The failure to stipulate its precise duration could lead to the
inference that the contract is binding for the full three-year probationary
period.45 Therefore, the letters sent by petitioner Sr. Racadio, which were void of
any specifics cannot be considered as contracts. The closest they can resemble to
are that of informal correspondence among the said individuals. As such, petitioner
school has the right not to renew the contracts of the respondents, the old ones
having been expired at the end of their terms.
Assuming, arguendo, that the employment contracts between the petitioner school
and the respondent spouses were renewed, this Court finds that there was a valid
and just cause for their dismissal. The Labor Code commands that before an
employer may legally dismiss an employee from the service, the requirement of
substantial and procedural due process must be complied with.46 Under the
requirement of substantial due process, the grounds for termination of employment
must be based on just47 or authorized causes.48
Petitioner school charged respondent Remigio Michael of non-compliance with a
school policy regarding the submission of final test questions to his program
coordinator for checking or comment. Following due process, the same respondent
admitted the charge in his letter,49 stating that:
It is true that I failed to submit a copy of my final exam to my program
coordinator for checking or comment. But to single me out (and Mrs. Cynthia
Ancheta for that matter) and hold me accountable for it would not only defy the
basic tenets of fair play and equality. It is a common knowledge that there are
many teachers who do not comply with this policy. To impose solely upon me the
whole weight of this particular policy, leaving the others who similarly violate the
same policy, would put me under the mercy of selective justice and the exercise of
gross abuse of discretion by the Dean. If the root cause of this matter – which I will
discuss later – had not happened, I know that my attention would never be called
to this policy, as what was the case in the past. I plead to you, Sister, to find out
how many of us have not complied with this policy and how many were actually
called their attention for non-compliance. I do not disagree with the objective of this
policy; I am only shocked to find out that while many are non-compliant, only few
are punished. So be it, I apologize for my violation.50
Respondent Remigio Michael was further charged with non-compliance with the
standard format (multiple choice) of final test questions as agreed upon by the
different departments of petitioner school, to which the former replied:
I am not the only one who does not comply with this policy. Many teachers do
not give multiple choice exams at all; others do not give a pure multiple choice
exam. I urge you, Sister, to kindly do the rounds. x x x
xxxx
Again, I apologize if I did not comply with this policy.51
He was also charged with failure to encode modular grade reports as required by
the school. On that charge, respondent Remigio Michael cited a letter dated April
22, 1998 that criticizes the school policy of penalizing the delays in encoding final
grades.
On the charge that he had a high failure rate in his classes, respondent Remigio
Michael claimed that he did not flunk students, but the latter failed. He further
commented that petitioner school did not consciously promote academic
excellence.1avvphi1
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Finally, as to the charge that he constantly failed to report for work on time, the
same respondent admitted such tardiness but only with respect to his 7:30 a.m.
classes.
Respondent Remigio Michael's spouse shared the same defenses and admissions
as to the charges against her.
The plain admissions of the charges against them were the considerations taken
into account by the petitioner school in their decision not to renew the respondent
spouses' employment contracts. This is a right of the school that is mandated by
law and jurisprudence. It is the prerogative of the school to set high standards of
efficiency for its teachers since quality education is a mandate of the
Constitution.52 As long as the standards fixed are reasonable and not arbitrary,
courts are not at liberty to set them aside.53 Schools cannot be required to adopt
standards which barely satisfy criteria set for government recognition.54 The same
academic freedom grants the school the autonomy to decide for itself the terms
and conditions for hiring its teacher, subject of course to the overarching limitations
under the Labor Code.55 The authority to hire is likewise covered and protected by
its management prerogative – the right of an employer to regulate all aspects of
employment, such as hiring, the freedom to prescribe work assignments, working
methods, process to be followed, regulation regarding transfer of employees,
supervision of their work, lay-off and discipline, and dismissal and recall of
workers.56
WHEREFORE, the Petition for Review dated November 18, 2005 of petitioners St.
Paul College, Quezon City, et al. is hereby GRANTED and the Decision dated July
8, 2005 of the Court of Appeals and its Resolution dated September 29, 2005 are
hereby REVERSED and SET ASIDE. Consequently, the Decision dated February
28, 2003 of the National Labor Relations Commission and the Decision dated
November 20, 2000 of the Labor Arbiter are hereby REINSTATED.
SO ORDERED.
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
Order5 directing Election Officer Cynthia Tolentino to proceed with the conduct of
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certification election in accordance with Section 2, Rule XII of Department Order Laguna or San Fernando, Pampanga; and (3) it submitted individual and separate
No. 9. declarations of the employees whose votes were challenged in the election.9

On September 30, 1998, a certification election was conducted and it yielded the Adding the results to the number of votes canvassed during the September 30,
following results,6 thus: 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
Cabuyao San Fernando Total
Plant Plant
The Med-Arbiter issued the Resolution11 dated February 17, 1999 directing the
Yes 23 23 46 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,
No 0 0 0 on April 12, 1999, the segregated ballots were opened, showing that out of the 76
segregated
Spoiled 2 0 2

Segregated 41 35 76 votes, 72 were cast for "Yes" and 3 for "No," with one "spoiled" ballot.12

Total Votes Cast 66 58 124
On the date of the election, September 30, 1998, petitioner filed the Omnibus
Objections and Challenge to Voters,7questioning 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,
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.
Petitioner’s 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.

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Petitioner’s 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. 11039920 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 petitioner’s
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 petitioner’s 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.
Petitioner’s 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 unit’s 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.
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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 employer’s 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.29However, 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 one’s 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
petitioner’s 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.
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SO ORDERED.
G.R. Nos. 174040-41 September 22, 2010
INSULAR HOTEL EMPLOYEES UNION-NFL, Petitioner,
vs.
WATERFRONT INSULAR HOTEL DAVAO, Respondent.
DECISION
PERALTA, J.:
Before this Court is a petition for review on certiorari,1 under Rule 45 of the Rules
of Court, seeking to set aside the Decision2 dated October 11, 2005, and the
Resolution3 dated July 13, 2006 of the Court of Appeals (CA) in consolidated labor
cases docketed as CA-G.R. SP No. 83831 and CA-G.R. SP No. 83657. Said
Decision reversed the Decision4 dated the April 5, 2004 of the Accredited
Voluntary Arbitrator Rosalina L. Montejo (AVA Montejo).
The facts of the case, as culled from the records, are as follows:
On November 6, 2000, respondent Waterfront Insular Hotel Davao (respondent)
sent the Department of Labor and Employment (DOLE), Region XI, Davao City, a
Notice of Suspension of Operations5 notifying the same that it will suspend its
operations for a period of six months due to severe and serious business losses. In
said notice, respondent assured the DOLE that if the company could not resume
its operations within the six-month period, the company would pay the affected
employees all the benefits legally due to them.
During the period of the suspension, Domy R. Rojas (Rojas), the President of
Davao Insular Hotel Free Employees Union (DIHFEU-NFL), the recognized labor
organization in Waterfront Davao, sent respondent a number of letters asking
management to reconsider its decision.
In a letter6 dated November 8, 2000, Rojas intimated that the members of the
Union were determined to keep their jobs and that they believed they too had to
help respondent, thus:
xxxx
Sir, we are determined to keep our jobs and push the Hotel up from sinking. We
believe that we have to help in this (sic) critical times. Initially, we intend to
suspend the re-negotiations of our CBA. We could talk further on possible
adjustments on economic benefits, the details of which we are hoping to discuss
with you or any of your emissaries. x x x7
In another letter8 dated November 10, 2000, Rojas reiterated the Union's desire to
help respondent, to wit:
We would like to thank you for giving us the opportunity to meet [with] your
representatives in order for us to air our sentiments and extend our helping hands
for a possible reconsideration of the company's decision.
The talks have enabled us to initially come up with a suggestion of solving the high
cost on payroll.
We propose that 25 years and above be paid their due retirement benefits and put
their length of service to zero without loss of status of employment with a minimum
hiring rate.
Thru this scheme, the company would be able to save a substantial amount and
reduce greatly the payroll costs without affecting the finance of the families of the
employees because they will still have a job from where they could get their
income.
Moreover, we are also open to a possible reduction of some economic benefits as
our gesture of sincere desire to help.
We are looking forward to a more fruitful round of talks in order to save the hotel. 9
In another letter10 dated November 20, 2000, Rojas sent respondent more
proposals as a form of the Union's gesture of their intention to help the company,
thus:
1) Suspension of [the] CBA for ten years, No strike no lock-out shall be
enforced.
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 2) Pay all the employees their benefits due, and put the length of service
to zero with a minimum hiring rate. Payment of benefits may be on a
staggered basis or as available.
3) Night premium and holiday pays shall be according to law. Overtime
hours rendered shall be offsetted as practiced.
4) Reduce the sick leaves and vacation leaves to 15 days/15days.
5) Emergency leave and birthday off are hereby waived.
6) Duty meal allowance is fixed at ₱30.00 only. No more midnight snacks
and double meal allowance. The cook drinks be stopped as practiced.
7) We will shoulder 50% of the group health insurance and family medical
allowance be reduced to 1,500.00 instead of 3,000.00.
8) The practice of bringing home our uniforms for laundry be continued.
9) Fixed manning shall be implemented, the rest of manpower
requirements maybe sourced thru WAP and casual hiring. Manpower for
fixed manning shall be 145 rank-and-file union members.
10) Union will cooperate fully on strict implementation of house rules in
order to attain desired productivity and discipline. The union will not
tolerate problem members.
11) The union in its desire to be of utmost service would adopt multi-
tasking for the hotel to be more competitive.
It is understood that with the suspension of the CBA renegotiations, the same
existing CBA shall be adopted and that all provisions therein shall remain enforced
except for those mentioned in this proposal.
These proposals shall automatically supersede the affected provisions of the
CBA.11
In a handwritten letter12 dated November 25, 2000, Rojas once again appealed to
respondent for it to consider their proposals and to re-open the hotel. In said letter,
Rojas stated that manpower for fixed manning shall be one hundred (100) rank-
and-file Union members instead of the one hundred forty-five (145) originally
proposed.
Finally, sometime in January 2001, DIHFEU-NFL, through Rojas, submitted to
respondent a Manifesto13concretizing their earlier proposals.
After series of negotiations, respondent and DIHFEU-NFL, represented by its
President, Rojas, and Vice-Presidents, Exequiel J. Varela Jr. and Avelino C.
Bation, Jr., signed a Memorandum of Agreement14 (MOA) wherein respondent
agreed to re-open the hotel subject to certain concessions offered by DIHFEU-NFL
in its Manifesto.
Accordingly, respondent downsized its manpower structure to 100 rank-and-file
employees as set forth in the terms of the MOA. Moreover, as agreed upon in the
MOA, a new pay scale was also prepared by respondent.
The retained employees individually signed a "Reconfirmation of
Employment"15 which embodied the new terms and conditions of their continued
employment. Each employee was assisted by Rojas who also signed the
document.
On June 15, 2001, respondent resumed its business operations.
On August 22, 2002, Darius Joves (Joves) and Debbie Planas, claiming to be local
officers of the National Federation of Labor (NFL), filed a Notice of
Mediation16 before the National Conciliation and Mediation Board (NCMB), Region
XI, Davao City. In said Notice, it was stated that the Union involved was "DARIUS
JOVES/DEBBIE PLANAS ET. AL, National Federation of Labor." The issue raised
in said Notice was the "Diminution of wages and other benefits through unlawful
Memorandum of Agreement."
On August 29, 2002, the NCMB called Joves and respondent to a conference to
explore the possibility of settling the conflict. In the said conference, respondent
and petitioner Insular Hotel Employees Union-NFL (IHEU-NFL), represented by
Joves, signed a Submission Agreement17 wherein they chose AVA Alfredo C.
Olvida (AVA Olvida) to act as voluntary arbitrator. Submitted for the resolution of
AVA Olvida was the determination of whether or not there was a diminution of
wages and other benefits through an unlawful MOA. In support of his authority to
file the complaint, Joves, assisted by Atty. Danilo Cullo (Cullo), presented several
Special Powers of Attorney (SPA) which were, however, undated and unnotarized.
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On September 2, 2002, respondent filed with the NCMB a Manifestation with
Motion for a Second Preliminary Conference,18 raising the following grounds:
1) The persons who filed the instant complaint in the name of the Insular
Hotel Employees Union-NFL have no authority to represent the Union;
2) The individuals who executed the special powers of attorney in favor of
the person who filed the instant complaint have no standing to cause the
filing of the instant complaint; and
3) The existence of an intra-union dispute renders the filing of the instant
case premature.19
On September 16, 2002, a second preliminary conference was conducted in the
NCMB, where Cullo denied any existence of an intra-union dispute among the
members of the union. Cullo, however, confirmed that the case was filed not by the
IHEU-NFL but by the NFL. When asked to present his authority from NFL, Cullo
admitted that the case was, in fact, filed by individual employees named in the
SPAs. The hearing officer directed both parties to elevate the aforementioned
issues to AVA Olvida.20
The case was docketed as Case No. AC-220-RB-11-09-022-02 and referred to
AVA Olvida. Respondent again raised its objections, specifically arguing that the
persons who signed the complaint were not the authorized representatives of the
Union indicated in the Submission Agreement nor were they parties to the MOA.
AVA Olvida directed respondent to file a formal motion to withdraw its submission
to voluntary arbitration.
On October 16, 2002, respondent filed its Motion to Withdraw.21 Cullo then filed an
Opposition22 where the same was captioned:
NATIONAL FEDERATION OF LABOR
And 79 Individual Employees, Union Members,
Complainants,
-versus-
Waterfront Insular Hotel Davao,
Respondent.
In said Opposition, Cullo reiterated that the complainants were not representing
IHEU-NFL, to wit:
xxxx
2. Respondent must have been lost when it said that the individuals who
executed the SPA have no standing to represent the union nor to assail
the validity of Memorandum of Agreement (MOA). What is correct is that
the individual complainants are not representing the union but filing
the complaint through their appointed attorneys-in-fact to assert their
individual rights as workers who are entitled to the benefits granted by law
and stipulated in the collective bargaining agreement.23
On November 11, 2002, AVA Olvida issued a Resolution24 denying respondent's
Motion to Withdraw. On December 16, 2002, respondent filed a Motion for
Reconsideration25 where it stressed that the Submission Agreement was void
because the Union did not consent thereto. Respondent pointed out that the Union
had not issued any resolution duly authorizing the individual employees or NFL to
file the notice of mediation with the NCMB.
Cullo filed a Comment/Opposition26 to respondent's Motion for Reconsideration.
Again, Cullo admitted that the case was not initiated by the IHEU-NFL, to wit:
The case was initiated by complainants by filling up Revised Form No. 1 of the
NCMB duly furnishing respondent, copy of which is hereto attached as Annex "A"
for reference and consideration of the Honorable Voluntary Arbitrator. There is no
mention there of Insular Hotel Employees Union, but only National Federation of
Labor (NFL). The one appearing at the Submission Agreement was only a matter
of filling up the blanks particularly on the question there of Union; which was filled
up with Insular Hotel Employees Union-NFL. There is nothing there that indicates
that it is a complainant as the case is initiated by the individual workers and
National Federation of Labor, not by the local union. The local union was not
included as party-complainant considering that it was a party to the assailed
MOA.27
On March 18, 2003, AVA Olvida issued a Resolution28 denying respondent's
Motion for Reconsideration. He, however, ruled that respondent was correct when
it raised its objection to NFL as proper party-complainant, thus:
Anent to the real complainant in this instant voluntary arbitration case, the
respondent is correct when it raised objection to the National Federation of Labor
(NFL) and as proper party-complainants.
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The proper party-complainant is INSULAR HOTEL EMPLOYEES UNION-NFL, the
recognized and incumbent bargaining agent of the rank-and-file employees of the
respondent hotel. In the submission agreement of the parties dated August 29,
2002, the party complainant written is INSULAR HOTEL EMPLOYEES UNION-
NFL and not the NATIONAL FEDERATION OF LABOR and 79 other members.
However, since the NFL is the mother federation of the local union, and signatory
to the existing CBA, it can represent the union, the officers, the members or union
and officers or members, as the case may be, in all stages of proceedings in
courts or administrative bodies provided that the issue of the case will involve
labor-management relationship like in the case at bar.
The dispositive portion of the March 18, 2003 Resolution of AVA Olvida reads:
WHEREFORE, premises considered, the motion for reconsideration filed by
respondent is DENIED. The resolution dated November 11, 2002 is modified in so
far as the party-complainant is concerned; thus, instead of "National Federation of
Labor and 79 individual employees, union members," shall be "Insular Hotel
Employees Union-NFL et. al., as stated in the joint submission agreement dated
August 29, 2002. Respondent is directed to comply with the decision of this
Arbitrator dated November 11, 2002,
No further motion of the same nature shall be entertained.29
On May 9, 2003, respondent filed its Position Paper Ad Cautelam,30 where it
declared, among others, that the same was without prejudice to its earlier
objections against the jurisdiction of the NCMB and AVA Olvida and the standing
of the persons who filed the notice of mediation.
Cullo, now using the caption "Insular Hotel Employees Union-
NFL, Complainant," filed a Comment31 dated June 5, 2003. On June 23, 2003,
respondent filed its Reply.32
Later, respondent filed a Motion for Inhibition33 alleging AVA Olvida's bias and
prejudice towards the cause of the employees. In an Order34 dated July 25, 2003,
AVA Olvida voluntarily inhibited himself out of "delicadeza" and ordered the
remand of the case to the NCMB.
On August 12, 2003, the NCMB issued a Notice requiring the parties to appear
before the conciliator for the selection of a new voluntary arbitrator.
In a letter35 dated August 19, 2003 addressed to the NCMB, respondent reiterated
its position that the individual union members have no standing to file the notice of
mediation before the NCMB. Respondent stressed that the complaint should have
been filed by the Union.
On September 12, 2003, the NCMB sent both parties a Notice36 asking them to
appear before it for the selection of the new voluntary arbitrator. Respondent,
however, maintained its stand that the NCMB had no jurisdiction over the case.
Consequently, at the instance of Cullo, the NCMB approved ex parte the selection
of AVA Montejo as the new voluntary arbitrator.
On April 5, 2004, AVA Montejo rendered a Decision37 ruling in favor of Cullo, the
dispositive portion of which reads:
WHEREOF, in view of the all the foregoing, judgment is hereby rendered:
1. Declaring the Memorandum of Agreement in question as invalid as it is
contrary to law and public policy;
2. Declaring that there is a diminution of the wages and other benefits of
the Union members and officers under the said invalid MOA.
3. Ordering respondent management to immediately reinstate the workers
wage rates and other benefits that they were receiving and enjoying before
the signing of the invalid MOA;
4. Ordering the management respondent to pay attorney’s fees in an
amount equivalent to ten percent (10%) of whatever total amount that the
workers union may receive representing individual wage differentials.
As to the other claims of the Union regarding diminution of other benefits, this
accredited voluntary arbitrator is of the opinion that she has no authority to
entertain, particularly as to the computation thereof.
SO ORDERED.38
Both parties appealed the Decision of AVA Montejo to the CA. Cullo only assailed
the Decision in so far as it did not categorically order respondent to pay the
covered workers their differentials in wages reckoned from the effectivity of the
MOA up to the actual reinstatement of the reduced wages and benefits. Cullos'
petition was docketed as CA-G.R. SP No. 83831. Respondent, for its part,
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questioned among others the jurisdiction of the NCMB. Respondent maintained
that the MOA it had entered into with the officers of the Union was valid.
Respondent's petition was docketed as CA-G.R. SP No. 83657. Both cases were
consolidated by the CA.
On October 11, 2005, the CA rendered a Decision39 ruling in favor of respondent,
the dispositive portion of which reads:
WHEREFORE, premises considered, the petition for review in CA-G.R. SP No.
83657 is hereby GRANTED, while the petition in CA-G.R. SP No. 83831 is
DENIED. Consequently, the assailed Decision dated April 5, 2004 rendered by
AVA Rosalina L. Montejo is hereby REVERSED and a new one entered declaring
the Memorandum of Agreement dated May 8, 2001 VALID and ENFORCEABLE.
Parties are DIRECTED to comply with the terms and conditions thereof.
SO ORDERED.40
Aggrieved, Cullo filed a Motion for Reconsideration, which was, however, denied
by the CA in a Resolution41 dated July 13, 2006.
Hence, herein petition, with Cullo raising the following issues for this Court's
resolution, to wit:
I.
WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS COMMITTED
SERIOUS ERRORS IN FINDING THAT THE ACCREDITED VOLUNTARY
ARBITRATOR HAS NO JURISDICTION OVER THE CASE SIMPLY BECAUSE
THE NOTICE OF MEDIATION DOES NOT MENTION THE NAME OF THE
LOCAL UNION BUT ONLY THE AFFILIATE FEDERATION THEREBY
DISREGARDING THE SUBMISSION AGREEMENT DULY SIGNED BY THE
PARTIES AND THEIR LEGAL COUNSELS THAT MENTIONS THE NAME OF
THE LOCAL UNION.
II.
WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS COMMITTED
SERIOUS ERROR BY DISREGARDING THE PROVISIONS OF THE CBA
SIMPLY BECAUSE IT BELIEVED THE UNPROVEN ALLEGATIONS OF
RESPONDENT HOTEL THAT IT WAS SUFFERING FROM FINANCIAL CRISIS.
III.
THE HONORABLE COURT OF APPEALS MUST HAVE SERIOUSLY ERRED IN
CONCLUDING THAT ARTICLE 100 OF THE LABOR CODE APPLIES ONLY TO
BENEFITS ENJOYED PRIOR TO THE ADOPTION OF THE LABOR CODE
WHICH, IN EFFECT, ALLOWS THE DIMINUTION OF THE BENEFITS ENJOYED
BY EMPLOYEES FROM ITS ADOPTION HENCEFORTH.42
The petition is not meritorious.
Anent the first error raised, Cullo argues that the CA erred when it overlooked the
fact that before the case was submitted to voluntary arbitration, the parties signed
a Submission Agreement which mentioned the name of the local union and not
only NFL. Cullo, thus, contends that the CA committed error when it ruled that the
voluntary arbitrator had no jurisdiction over the case simply because the Notice of
Mediation did not state the name of the local union thereby disregarding the
Submission Agreement which states the names of local union as Insular Hotel
Employees Union-NFL.43
In its Memorandum,44 respondent maintains its position that the NCMB and
Voluntary Arbitrators had no jurisdiction over the complaint. Respondent, however,
now also contends that IHEU-NFL is a non-entity since it is DIHFEU-NFL which is
considered by the DOLE as the only registered union in Waterfront
Davao.45 Respondent argues that the Submission Agreement does not name the
local union DIHFEU-NFL and that it had timely withdrawn its consent to arbitrate
by filing a motion to withdraw.
A review of the development of the case shows that there has been much
confusion as to the identity of the party which filed the case against respondent. In
the Notice of Mediation46 filed before the NCMB, it stated that the union involved
was "DARIUS JOVES/DEBBIE PLANAS ET. AL., National Federation of Labor." In
the Submission Agreement,47 however, it stated that the union involved was
"INSULAR HOTEL EMPLOYEES UNION-NFL."
Furthermore, a perusal of the records would reveal that after signing the
Submission Agreement, respondent persistently questioned the authority and
standing of the individual employees to file the complaint. Cullo then clarified in
subsequent documents captioned as "National Federation of Labor and 79
Individual Employees, Union Members, Complainants" that the individual
complainants are not representing the union, but filing the complaint through their
appointed attorneys-in-fact.48 AVA Olvida, however, in a Resolution dated March
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18, 2003, agreed with respondent that the proper party-complainant should be
INSULAR HOTEL EMPLOYEES UNION-NFL, to wit:
x x x In the submission agreement of the parties dated August 29, 2002, the party
complainant written is INSULAR HOTEL EMPLOYEES UNION-NFL and not the
NATIONAL FEDERATION OF LABOR and 79 other members.49
The dispositive portion of the Resolution dated March 18, 2003 of AVA Olvida
reads:
WHEREFORE, premises considered, the motion for reconsideration filed by
respondent is DENIED. The resolution dated November 11, 2002, is modified in so
far as the party complainant is concerned, thus, instead of "National Federation of
Labor and 79 individual employees, union members," shall be "Insular Hotel
Employees Union-NFL et. al., as stated in the joint submission agreement dated
August 29, 2002. Respondent is directed to comply with the decision of this
Arbitrator dated November 11, 2002.50
After the March 18, 2003 Resolution of AVA Olvida, Cullo adopted "Insular Hotel
Employees Union-NFL et. al., Complainant" as the caption in all his subsequent
pleadings. Respondent, however, was still adamant that neither Cullo nor the
individual employees had authority to file the case in behalf of the Union.
While it is undisputed that a submission agreement was signed by respondent and
"IHEU-NFL," then represented by Joves and Cullo, this Court finds that there are
two circumstances which affect its validity: first, the Notice of Mediation was filed
by a party who had no authority to do so; second, that respondent had persistently
voiced out its objection questioning the authority of Joves, Cullo and the individual
members of the Union to file the complaint before the NCMB.
Procedurally, the first step to submit a case for mediation is to file a notice of
preventive mediation with the NCMB. It is only after this step that a submission
agreement may be entered into by the parties concerned.
Section 3, Rule IV of the NCMB Manual of Procedure provides who may file a
notice of preventive mediation, to wit:
Who may file a notice or declare a strike or lockout or request preventive
mediation. -
Any certified or duly recognized bargaining representative may file a notice
or declare a strike or request for preventive mediation in cases of bargaining
deadlocks and unfair labor practices. The employer may file a notice or declare
a lockout or request for preventive mediation in the same cases. In the absence of
a certified or duly recognized bargaining representative, any legitimate labor
organization in the establishment may file a notice, request preventive mediation or
declare a strike, but only on grounds of unfair labor practice.
From the foregoing, it is clear that only a certified or duly recognized bargaining
agent may file a notice or request for preventive mediation. It is curious that even
Cullo himself admitted, in a number of pleadings, that the case was filed not by the
Union but by individual members thereof. Clearly, therefore, the NCMB had no
jurisdiction to entertain the notice filed before it.
Even though respondent signed a Submission Agreement, it had, however,
immediately manifested its desire to withdraw from the proceedings after it became
apparent that the Union had no part in the complaint. As a matter of fact, only four
days had lapsed after the signing of the Submission Agreement when respondent
called the attention of AVA Olvida in a "Manifestation with Motion for a Second
Preliminary Conference"51 that the persons who filed the instant complaint in the
name of Insular Hotel Employees Union-NFL had no authority to represent the
Union. Respondent cannot be estopped in raising the jurisdictional issue, because
it is basic that the issue of jurisdiction may be raised at any stage of the
proceedings, even on appeal, and is not lost by waiver or by estoppel.
In Figueroa v. People,52 this Court explained that estoppel is the exception rather
than the rule, to wit:
Applying the said doctrine to the instant case, the petitioner is in no way estopped
by laches in assailing the jurisdiction of the RTC, considering that he raised the
lack thereof in his appeal before the appellate court. At that time, no considerable
period had yet elapsed for laches to attach. True, delay alone, though
unreasonable, will not sustain the defense of "estoppel by laches" unless it further
appears that the party, knowing his rights, has not sought to enforce them until the
condition of the party pleading laches has in good faith become so changed that
he cannot be restored to his former state, if the rights be then enforced, due to loss
of evidence, change of title, intervention of equities, and other causes. In applying
the principle of estoppel by laches in the exceptional case of Sibonghanoy, the
Court therein considered the patent and revolting inequity and unfairness of having
the judgment creditors go up their Calvary once more after more or less 15
years.The same, however, does not obtain in the instant case.
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We note at this point that estoppel, being in the nature of a forfeiture, is not favored
by law. It is to be applied rarely—only from necessity, and only in extraordinary
circumstances. The doctrine must be applied with great care and the equity must
be strong in its favor.When misapplied, the doctrine of estoppel may be a most
effective weapon for the accomplishment of injustice. x x x (Italics supplied.)53
The question to be resolved then is, do the individual members of the Union have
the requisite standing to question the MOA before the NCMB? On this
note, Tabigue v. International Copra Export Corporation (INTERCO) 54 is
instructive:
Respecting petitioners’ thesis that unsettled grievances should be referred to
voluntary arbitration as called for in the CBA, the same does not lie.The pertinent
portion of the CBA reads:
In case of any dispute arising from the interpretation or implementation of this
Agreement or any matter affecting the relations of Labor and Management,
the UNION and the COMPANY agree to exhaust all possibilities of conciliation
through the grievance machinery. The committee shall resolve all problems
submitted to it within fifteen (15) days after the problems ha[ve] been discussed by
the members. If the dispute or grievance cannot be settled by the Committee, or if
the committee failed to act on the matter within the period of fifteen (15) days
herein stipulated, the UNION and the COMPANY agree to submit the issue to
Voluntary Arbitration. Selection of the arbitrator shall be made within seven (7)
days from the date of notification by the aggrieved party. The Arbitrator shall be
selected by lottery from four (4) qualified individuals nominated by in equal
numbers by both parties taken from the list of Arbitrators prepared by the National
Conciliation and Mediation Board (NCMB). If the Company and the Union
representatives within ten (10) days fail to agree on the Arbitrator, the NCMB shall
name the Arbitrator. The decision of the Arbitrator shall be final and binding upon
the parties. However, the Arbitrator shall not have the authority to change any
provisions of the Agreement.The cost of arbitration shall be borne equally by the
parties.
Petitioners have not, however, been duly authorized to represent the union.
Apropos is this Court’s pronouncement in Atlas Farms, Inc. v. National Labor
Relations Commission, viz:
x x x Pursuant to Article 260 of the Labor Code, the parties to a CBA shall name or
designate their respective representatives to the grievance machinery and if the
grievance is unsettled in that level, it shall automatically be referred to the
voluntary arbitrators designated in advance by parties to a CBA.
Consequently, only disputes involving the union and the company shall be
referred to the grievance machinery or voluntary arbitrators. (Emphasis and
underscoring supplied.)55
If the individual members of the Union have no authority to file the case, does the
federation to which the local union is affiliated have the standing to do so? On this
note, Coastal Subic Bay Terminal, Inc. v. Department of Labor and
Employment56 is enlightening, thus:
x x x A local union does not owe its existence to the federation with which it is
affiliated. It is a separate and distinct voluntary association owing its creation to the
will of its members. Mere affiliation does not divest the local union of its own
personality, neither does it give the mother federation the license to act
independently of the local union. It only gives rise to a contract of agency,
where the former acts in representation of the latter. Hence, local unions are
considered principals while the federation is deemed to be merely their agent. x x
x57
Based on the foregoing, this Court agrees with approval with the disquisition of the
CA when it ruled that NFL had no authority to file the complaint in behalf of the
individual employees, to wit:
Anent the first issue, We hold that the voluntary arbitrator had no jurisdiction over
the case. Waterfront contents that the Notice of Mediation does not mention the
name of the Union but merely referred to the National Federation of Labor (NFL)
with which the Union is affiliated. In the subsequent pleadings, NFL's legal counsel
even confirmed that the case was not filed by the union but by NFL and the
individual employees named in the SPAs which were not even dated nor notarized.
Even granting that petitioner Union was affiliated with NFL, still the relationship
between that of the local union and the labor federation or national union with
which the former was affiliated is generally understood to be that of agency, where
the local is the principal and the federation the agency. Being merely an agent of
the local union, NFL should have presented its authority to file the Notice of
Mediation. While We commend NFL's zealousness in protecting the rights of lowly
workers, We cannot, however, allow it to go beyond what it is empowered to do.
As provided under the NCMB Manual of Procedures, only a certified or duly
recognized bargaining representative and an employer may file a notice of
mediation, declare a strike or lockout or request preventive mediation. The
Collective Bargaining Agreement (CBA), on the other, recognizes that DIHFEU-
NFL is the exclusive bargaining representative of all permanent employees. The
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inclusion of the word "NFL" after the name of the local union merely stresses that
the local union is NFL's affiliate. It does not, however, mean that the local union
cannot stand on its own. The local union owes its creation and continued existence
to the will of its members and not to the federation to which it belongs. The spring
cannot rise higher than its source, so to speak.58
In its Memorandum, respondent contends that IHEU-NFL is a non-entity and that
DIHFEU-NFL is the only recognized bargaining unit in their establishment. While
the resolution of the said argument is already moot and academic given the
discussion above, this Court shall address the same nevertheless.
While the November 16, 2006 Certification59 of the DOLE clearly states that
"IHEU-NFL" is not a registered labor organization, this Court finds that respondent
is estopped from questioning the same as it did not raise the said issue in the
proceedings before the NCMB and the Voluntary Arbitrators. A perusal of the
records reveals that the main theory posed by respondent was whether or not the
individual employees had the authority to file the complaint notwithstanding the
apparent non-participation of the union. Respondent never put in issue the fact that
DIHFEU-NFL was not the same as IHEU-NFL. Consequently, it is already too late
in the day to assert the same.
Anent the second issue raised by Cullo, the same is again without merit.
Cullo contends that respondent was not really suffering from serious losses as
found by the CA. Cullo anchors his position on the denial by the Wage Board of
respondent's petition for exemption from Wage Order No. RTWPB-X1-08 on the
ground that it is a distressed establishment.60 In said denial, the Board ruled:
A careful analysis of applicant's audited financial statements showed that during
the period ending December 31, 1999, it registered retained earnings amounting to
₱8,661,260.00. Applicant's interim financial statements for the quarter ending
June 30, 2000 cannot be considered, as the same was not audited.
Accordingly, this Board finds that applicant is not qualified for exemption as a
distressed establishment pursuant to the aforecited criteria.61
In its Decision, the CA held that upholding the validity of the MOA would mean the
continuance of the hotel's operation and financial viability, to wit:
x x x We cannot close Our eyes to the impending financial distress that an
employer may suffer should the terms of employment under the said CBA
continue.
If indeed We are to tilt the balance of justice to labor, then We would be inclined to
favor for the nonce petitioner Waterfront. To uphold the validity of the MOA would
mean the continuance of the hotel's operation and financial viability. Otherwise, the
eventual permanent closure of the hotel would only result to prejudice of the
employees, as a consequence thereof, will necessarily lose their jobs. 62
In its petition before the CA, respondent submitted its audited financial
statements63 which show that for the years 1998, 1999, until September 30, 2000,
its total operating losses amounted to ₱48,409,385.00. Based on the foregoing,
the CA was not without basis when it declared that respondent was suffering from
impending financial distress. While the Wage Board denied respondent's petition
for exemption, this Court notes that the denial was partly due to the fact that the
June 2000 financial statements then submitted by respondent were not audited.
Cullo did not question nor discredit the accuracy and authenticity of respondent's
audited financial statements. This Court, therefore, has no reason to question the
veracity of the contents thereof. Moreover, it bears to point out that respondent's
audited financial statements covering the years 2001 to 2005 show that it still
continues to suffer losses.64
Finally, anent the last issue raised by Cullo, the same is without merit.
Cullo argues that the CA must have erred in concluding that Article 100 of the
Labor Code applies only to benefits already enjoyed at the time of the
promulgation of the Labor Code.
Article 100 of the Labor Code provides:
PROHIBITION AGAINST ELIMINATION OR DIMINUTION OF BENEFITS-
Nothing in this Book shall be construed to eliminate or in any way diminish
supplements, or other employee benefits being enjoyed at the time of the
promulgation of this Code.
On this note, Apex Mining Company, Inc. v. NLRC65 is instructive, to wit:
Clearly, the prohibition against elimination or diminution of benefits set out in
Article 100 of the Labor Code is specifically concerned with benefits already
enjoyed at the time of the promulgation of the Labor Code. Article 100 does not, in
other words, purport to apply to situations arising after the promulgation date of the
Labor Code x x x.66
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Even assuming arguendo that Article 100 applies to the case at bar, this Court
agrees with respondent that the same does not prohibit a union from offering and
agreeing to reduce wages and benefits of the employees. In Rivera v.
Espiritu,67 this Court ruled that the right to free collective bargaining, after all,
includes the right to suspend it, thus:
A CBA is "a contract executed upon request of either the employer or the exclusive
bargaining representative incorporating the agreement reached after negotiations
with respect to wages, hours of work and all other terms and conditions of
employment, including proposals for adjusting any grievances or questions arising
under such agreement." The primary purpose of a CBA is the stabilization of labor-
management relations in order to create a climate of a sound and stable industrial
peace. In construing a CBA, the courts must be practical and realistic and give due
consideration to the context in which it is negotiated and the purpose which it is
intended to serve.
The assailed PAL-PALEA agreement was the result of voluntary collective
bargaining negotiations undertaken in the light of the severe financial
situation faced by the employer, with the peculiar and unique intention of not
merely promoting industrial peace at PAL, but preventing the latter’s
closure. We find no conflict between said agreement and Article 253-A of the
Labor Code. Article 253-A has a two-fold purpose. One is to promote industrial
stability and predictability. Inasmuch as the agreement sought to promote industrial
peace at PAL during its rehabilitation, said agreement satisfies the first purpose of
Article 253-A.1awphi1 The other is to assign specific timetables wherein
negotiations become a matter of right and requirement. Nothing in Article 253-A,
prohibits the parties from waiving or suspending the mandatory timetables and
agreeing on the remedies to enforce the same.
In the instant case, it was PALEA, as the exclusive bargaining agent of PAL’s
ground employees, that voluntarily entered into the CBA with PAL. It was also
PALEA that voluntarily opted for the 10-year suspension of the CBA. Either case
was the union’s exercise of its right to collective bargaining. The right to free
collective bargaining, after all, includes the right to suspend it.68
Lastly, this Court is not unmindful of the fact that DIHFEU-NFL's Constitution and
By-Laws specifically provides that "the results of the collective bargaining
negotiations shall be subject to ratification and approval by majority vote of the
Union members at a meeting convened, or by plebiscite held for such special
purpose."69 Accordingly, it is undisputed that the MOA was not subject to
ratification by the general membership of the Union. The question to be resolved
then is, does the non-ratification of the MOA in accordance with the Union's
constitution prove fatal to the validity thereof?
It must be remembered that after the MOA was signed, the members of the Union
individually signed contracts denominated as "Reconfirmation of
Employment."70 Cullo did not dispute the fact that of the 87 members of the Union,
who signed and accepted the "Reconfirmation of Employment," 71 are the
respondent employees in the case at bar. Moreover, it bears to stress that all the
employees were assisted by Rojas, DIHFEU-NFL's president, who even co-signed
each contract.
Stipulated in each Reconfirmation of Employment were the new salary and
benefits scheme. In addition, it bears to stress that specific provisions of the new
contract also made reference to the MOA. Thus, the individual members of the
union cannot feign knowledge of the execution of the MOA. Each contract was
freely entered into and there is no indication that the same was attended by fraud,
misrepresentation or duress. To this Court's mind, the signing of the individual
"Reconfirmation of Employment" should, therefore, be deemed an implied
ratification by the Union members of the MOA.
In Planters Products, Inc. v. NLRC,71 this Court refrained from declaring a CBA
invalid notwithstanding that the same was not ratified in view of the fact that the
employees had enjoyed benefits under it, thus:
Under Article 231 of the Labor Code and Sec. 1, Rule IX, Book V of the
Implementing Rules, the parties to a collective [bargaining] agreement are required
to furnish copies of the appropriate Regional Office with accompanying proof of
ratification by the majority of all the workers in a bargaining unit. This was not done
in the case at bar. But we do not declare the 1984-1987 CBA invalid or void
considering that the employees have enjoyed benefits from it. They cannot receive
benefits under provisions favorable to them and later insist that the CBA is void
simply because other provisions turn out not to the liking of certain employees. x x
x. Moreover, the two CBAs prior to the 1984-1987 CBA were not also formally
ratified, yet the employees are basing their present claims on these CBAs. It is
iniquitous to receive benefits from a CBA and later on disclaim its validity.72
Applied to the case at bar, while the terms of the MOA undoubtedly reduced the
salaries and certain benefits previously enjoyed by the members of the Union, it
cannot escape this Court's attention that it was the execution of the MOA which
paved the way for the re-opening of the hotel, notwithstanding its financial distress.
More importantly, the execution of the MOA allowed respondents to keep their
jobs. It would certainly be iniquitous for the members of the Union to sign new
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contracts prompting the re-opening of the hotel only to later on renege on their
agreement on the fact of the non-ratification of the MOA.
In addition, it bears to point out that Rojas did not act unilaterally when he
negotiated with respondent's management. The Constitution and By-Laws of
DIHFEU-NFL clearly provide that the president is authorized to represent the union
on all occasions and in all matters in which representation of the union may be
agreed or required.73 Furthermore, Rojas was properly authorized under a Board
of Directors Resolution74 to negotiate with respondent, the pertinent portions of
which read:
SECRETARY's CERTIFICATE
I, MA. SOCORRO LISETTE B. IBARRA, x x x, do hereby certify that, at a meeting
of the Board of Directors of the DIHFEU-NFL, on 28 Feb. 2001 with a quorum duly
constituted, the following resolutions were unanimously approved:
RESOLVED, as it is hereby resolved that the Manifesto dated 25 Feb. 2001 be
approved ratified and adopted;
RESOLVED, FURTHER, that Mr. Domy R. Rojas, the president of the DIHFEU-
NFL, be hereby authorized to negotiate with Waterfront Insular Hotel Davao
and to work for the latter's acceptance of the proposals contained in
DIHFEU-NFL Manifesto; and
RESOLVED, FINALLY, that Mr. Domy R. Rojas is hereby authorized to sign
any and all documents to implement, and carry into effect, his foregoing
authority.75
Withal, while the scales of justice usually tilt in favor of labor, the peculiar
circumstances herein prevent this Court from applying the same in the instant
petition. Even if our laws endeavor to give life to the constitutional policy on social
justice and on the protection of labor, it does not mean that every labor dispute will
be decided in favor of the workers. The law also recognizes that management has
rights which are also entitled to respect and enforcement in the interest of fair
play.76
WHEREFORE, premises considered, the petition is DENIED. The Decision dated
October 11, 2005, and the Resolution dated July 13, 2006 of the Court of Appeals
in consolidated labor cases docketed as CA-G.R. SP No. 83831 and CA-G.R. SP
No. 83657, are AFFIRMED.
SO ORDERED.
G.R. No. 172724 August 23, 2010
PHARMACIA and UPJOHN, INC. (now PFIZER PHILIPPINES, INC.), ASHLEY
MORRIS, ALEDA CHU, JANE MONTILLA & FELICITO GARCIA, Petitioners,
vs.
RICARDO P. ALBAYDA, JR., Respondent.
DECISION
PERALTA, J.:
Before this Court is a petition for review on certiorari,1 under Rule 45 of the Rules
of Court, seeking to set aside the November 30, 2005 Decision2 and May 5, 2006
Resolution3 of the Court of Appeals (CA), in CA-G.R. SP No. 00386.
The facts of the case are as follows:
Respondent Ricardo P. Albayda, Jr. (respondent) was an employee of Upjohn, Inc.
(Upjohn) in 1978 and continued working there until 1996 when a merger between
Pharmacia and Upjohn was created. After the merger, respondent was designated
by petitioner Pharmacia and Upjohn (Pharmacia) as District Sales Manager
assigned to District XI in the Western Visayas area. During the period of his
assignment, respondent settled in Bacolod City.
Sometime on August 9, 1999, a district meeting was held in Makati City wherein
one of the topics discussed was the district territorial configuration for the new
marketing and sales direction for the year 2000.
In December 1999, respondent received a Memorandum 4 announcing the sales
force structure for the year 2000. In the said memorandum, respondent was
reassigned as District Sales Manager to District XII in the Northern Mindanao area.
One of the key areas covered in District XII is Cagayan de Oro City.
In response to the memorandum, respondent wrote a letter5 dated December
27,1999 to Felicito M. Garcia (Garcia), Pharmacia’s Vice-President for Sales and
Marketing, questioning his transfer from District XI to District XII. Respondent said
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that he has always been assigned to the Western Visayas area and that he felt
that he could not improve the sales of products if he was assigned to an unfamiliar
territory. Respondent concluded that his transfer might be a way for his managers
to dismiss him from employment. Respondent added that he could not possibly
accept his new assignment in Cagayan de Oro City because he will be dislocated
from his family; his wife runs an established business in Bacolod City; his eleven-
year-old daughter is studying in Bacolod City; and his two-year-old son is under his
and his wife’s direct care.
On January 10, 2000, Garcia wrote a letter6 to respondent denying his request to
be reassigned to the Western Visayas area. Garcia explained that the factors used
in determining assignments of managers are to maximize business opportunities
and growth and development of personnel. Garcia stressed that other people
both reprensentatives and district sales managers have been re-located in the
past and in the year 2000 re-alignment.
On February 16, 2000, respondent wrote a letter7 to Aleda Chu (Chu), Pharmacia’s
National Sales and External Business Manager, reiterating his request to be
reassigned to the Western Visayas area. Respondent alleged that during one
conversation, Chu assured him that as long as he hits his sales target by 100%, he
would not be transferred. Respondent again speculated that the real reason
behind his transfer was that it was petitioners’ way of terminating his employment.
Respondent harped that his transfer would compel him to lose his free housing
and his wife’s compensation of ₱50,000.00 from her business in Bacolod City.
In a letter8 dated March 3, 2000, Chu said that she did not give any assurance or
commitment to respondent that he would not be transferred as long as he
achieved his 100% target for 1999. Chu explained to respondent that they are
moving him to Cagayan de Oro City, because of their need of respondent’s
expertise to build the business there. Chu added that the district performed
dismally in 1999 and, therefore, they were confident that under respondent’s
leadership, he can implement new ways and develop the sales force to become
better and more productive. Moreover, since respondent has been already in
Bacolod and Iloilo for 22 years, Chu said that exposure to a different market
environment and new challenges will contribute to respondent’s development as a
manager. Finally, Chu stressed that the decision to transfer respondent was purely
a business decision.
Respondent replied through a letter9 dated March 16, 2000. Respondent likened
his transfer to Mindanao as a form of punishment as he alleged that even Police
Chief General Panfilo Lacson transferred erring and non-performing police officers
to Mindanao. Respondent argued that Chu failed to face and address the issues
he raised regarding the loss of his family income, the additional cost of housing
and other additional expenses he will incur in Mindanao.
In a memorandum10 dated May 11, 2000, Jane B. Montilla (Montilla), Pharmacia’s
Human Resource Manager, notified respondent that since he has been on sick
leave since January 5, 2000 up to the present, he had already consumed all his
sick leave credits for the year 2000. Montilla stated that per company policy,
respondent would then be considered on indefinite sick leave without pay. In
another memorandum 11 dated May 15, 2000, Montilla informed respondent of the
clinic schedule of the company appointed doctor.
In a letter12 dated May 17, 2000, respondent acknowledged his receipt of the
letters from Montilla. Respondent informed Montilla that his doctors had already
declared him fit for work as of May 16, 2000. Respondent stated that he was
already ready to take on his regular assignment as District Sales Manager in
Negros Occidental or in any district in the Western Visayas area.
In a letter13 dated May 17, 2000, Chu expressed her disappointment on the way
respondent viewed their reason for moving his place of assignment. Chu was
likewise disappointed with respondent’s opinion that with the movement, he be
given additional remuneration, when in fact, such was never done in the past and
never the practice in the industry and in the Philippines. Chu concluded that it
appeared to her that respondent would not accept any reason for the movement
and that nothing is acceptable to him except a Western Visayas assignment.
Consequently, Chu referred the case to the Human Resource Department for
appropriate action.
Montilla met with respondent to discuss his situation. After the meeting, Montilla
sent respondent a memorandum 14wherein his request to continue his work
responsibilities in Negros Occidental or in any district in the Western Visayas area
was denied as there was no vacant position in those areas. Montilla stressed that
the company needed respondent in Cagayan de Oro City, because of his wealth of
experience, talent and skills. Respondent, however, was also given an option to be
assigned in Metro Manila as a position in the said territory had recently opened
when Joven Rodriguez was transferred as Government Accounts and Special
Projects Manager. Montilla gave respondent until June 2, 2000 to talk to his family
and weigh the pros and cons of his decision on whether to accept a post in
Cagayan de Oro City or in Manila.
In a letter15 dated May 31, 2000, respondent reiterated the concerns he raised in
his previous letters.
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Montilla sent respondent another memorandum 16 dated June 6, 2000, stating that
it is in the best interest of the company for respondent to report to the Makati office
to assume his new area of assignment.
In a letter17 dated June 8, 2000, respondent told Montilla that he will be airing his
grievance before the National Labor Relations Commission (NLRC).
In a memorandum18 dated June 15, 2000, Montilla stated that contrary to the
opinion of respondent, respondent is entitled to Relocation Benefits and Allowance
pursuant to the company’s Benefits Manual. Montilla directed respondent to report
for work in Manila within 5 working days from receipt of the memorandum.
In another memorandum 19 dated June 26, 2000, Montilla stated that she had not
heard from respondent since his June 8, 2000 letter and that he has not replied to
their last memorandum dated June 15, 2000. Respondent was warned that the
same would be a final notice for him to report for work in Manila within 5 working
days from receipt of the memo; otherwise, his services will be terminated on the
basis of being absent without official leave (AWOL).
On July 13, 2000, Montilla sent respondent a memorandum 20 notifying him of their
decision to terminate his services after he repeatedly refused to report for work
despite due notice, the pertinent portions of which read:
As I mentioned many times in our talks, you are in a Sales position for which you
had signed up. Your employment contract actually states that you are willing to be
assigned anywhere else in the Philippines, wherever the company needs you sees
you fit.
Metro Manila is the biggest and most advanced market we have in the Philippines.
It is where the success or failure of our business lies. It is, therefore, the most
competitive and significant area for sales. It is the most challenging and most
rewarding of all areas. Only the best field managers are given the opportunity to
manage a territory in Metro Manila. This is why I chose Manila over Cagayan de
Oro for you in my letter dated June 6, 2000. And because you had assured us that
you were fit to work, after being on sick leave for about five and a half months, I
asked you to assume your new assignment in Metro Manila before June 16, 2000.
Before June 16, 2000, you wrote us a letter advising us that you can not accept the
new assignment in Manila. In response, we advised you that the assignment in
Manila is a business need and for said reason you were requested to report for
work within five working days from receipt of notice. However, you failed to comply.
So we issued another memo dated June 26, 2000, instructing you to report for
work and advising you that should you continue to fail to report for work, the
company shall be constrained to terminate your employment.
In view of the foregoing, we have no alternative but to terminate your services on
the basis of absence without official leave (AWOL) and insubordination pursuant to
Article 282 of the Labor Code of the Philippines, which shall be effective on July
19, 2000.21
On August 14, 2000, respondent filed a Complaint 22 with the NLRC, Regional
Arbitration Branch No. VI, Bacolod City against Pharmacia, Chu, Montilla and
Garcia for constructive dismissal. Also included in the complaint was Ashley
Morris, Pharmacia’s President. Since mandatory conciliation failed between the
parties, both sides were directed to submit their position papers.
On July 12, 2002, the Labor Arbiter (LA) rendered a Decision 23 dismissing the
case, the dispositive portion of which reads:
WHEREFORE, premises considered, the complaint against respondents in the
above-entitled case is DISMISSED for lack of merit.
SO ORDERED.24
Respondent appealed to the NLRC. In a Decision25 dated July 26, 2004, the NLRC
dismissed the appeal, the dispositive portion of which reads:
WHEREFORE, premises considered, the appeal of complainant is hereby
DISMISSED for lack of merit. The decision of the Labor Arbiter is AFFIRMED en
toto.
SO ORDERED.26
Respondent filed a Motion for Reconsideration,27 which was denied by the NLRC
in a Resolution28 dated November 10, 2004.
Aggrieved, respondent filed a Petition for Certiorari29 before the CA.
On November 30, 2005, the CA rendered a Decision ruling in favor of respondent,
the dispositive portion of which reads:
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WHEREFORE, premises considered, this petition is hereby given due course and
the Resolution dated November 10, 2004 and the Decision dated July 26, 2004 of
the NLRC Fourth Division in NLRC Case No. V-000521-2000 (RAB Case No. 06-
08-10650-2000), are hereby REVERSED and SET ASIDE. Accordingly, the case
is REMANDED to the National Labor Relations Commission, Regional Arbitration
Branch No. VI, Bacolod City, for the proper determination of the petitioner’s claims.
SO ORDERED.30
Petitioners filed a Motion for Reconsideration, which was, however, denied by the
CA in a Resolution dated May 5, 2006.
Hence, herein petition, with petitioner raising a lone assignment of error to wit:
WHETHER OR NOT THE COURT OF APPEALS (CEBU CITY) CAN REVERSE
OR SET ASIDE THE FACTUAL AND LEGAL FINDINGS OF THE NLRC WHICH
WAS BASED ON SUBSTANTIAL EVIDENCE WHEN THERE IS NO SHOWING
OF PALPABLE ERROR OR THAT THE FINDINGS OF FACTS OF THE LABOR
ARBITER IS CONTRARY TO THAT OF THE NLRC.31
The petition is meritorious.
As a general rule, this Court does not entertain factual issues. The scope of our
review in petitions filed under Rule 45 is limited to errors of law or
jurisdiction.32 This Court leaves the evaluation of facts to the trial and appellate
courts which are better equipped for this task.
However, there are instances in which factual issues may be resolved by this
Court, to wit: (1) the conclusion is a finding grounded entirely on speculation,
surmise and conjecture; (2) the inference made is manifestly mistaken; (3) there is
grave abuse of discretion; (4) the judgment is based on a misapprehension of
facts; (5) the findings of fact are conflicting; (6) the CA goes beyond the issues of
the case, and its findings are contrary to the admissions of both appellant and
appellees; (7) the findings of fact of the CA are contrary to those of the trial
court; (8) said findings of fact are conclusions without citation of specific evidence
on which they are based; (9) the facts set forth in the petition, as well as in the
petitioner’s main and reply briefs, are not disputed by the respondent; and (10) the
findings of fact of the CA are premised on the supposed absence of evidence and
contradicted by the evidence on record.33
In the present case, this Court is prompted to evaluate the findings of the LA, the
NLRC, and the CA which are diametrically opposed.
Petitioners argue that the CA erred when it reversed the factual and legal findings
of the NLRC which affirmed the decision of the LA. Petitioners contend that it is
well established that factual findings of administrative agencies and quasi-judicial
bodies are accorded great respect and finality and are not to be disturbed on
appeal unless patently erroneous.
After a judicious examination of the records herein, this Court sustains the findings
of the LA and the NLRC which are more in accord with the facts and law of the
case.
On petitioners’ exercise of management prerogative
Jurisprudence recognizes the exercise of management prerogative to transfer or
assign employees from one office or area of operation to another, provided there is
no demotion in rank or diminution of salary, benefits, and other privileges, and the
action is not motivated by discrimination, made in bad faith, or effected as a form
of punishment or demotion without sufficient cause.34
To determine the validity of the transfer of employees, the employer must show
that the transfer is not unreasonable, inconvenient, or prejudicial to the employee;
nor does it involve a demotion in rank or a diminution of his salaries, privileges and
other benefits. Should the employer fail to overcome this burden of proof, the
employee's transfer shall be tantamount to constructive dismissal.35
Both the LA and the NLRC ruled that the reassignment of respondent was a valid
exercise of petitioners’ management prerogative.
The LA shared petitioners’ posture that the transfer of respondent was a valid
exercise of a legitimate management prerogative to maximize business
opportunities, growth and development of personnel and that the expertise of
respondent was needed to build the company’s business in Cagayan de Oro City
which dismally performed in 1999.36
In addition, the LA explained that the reassignment of respondent was not a
demotion as he will also be assigned as a District Sales Manager in Mindanao or
in Metro Manila and that the notice of his transfer did not indicate that his
emoluments will be reduced. Moreover, the LA mentioned that respondent was
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entitled to Relocation Benefits and Allowance in accordance with petitioners’
Benefits Manual.
On respondent’s allegation that his family stands to lose income from his wife’s
business, the LA ruled:
The allegation of complainant that his income will be affected because his wife
who is doing business in Bacolod City and earns ₱50,000.00, if true, should not be
taken in consideration of his transfer. What is contemplated here is the diminution
of the salary of the complainant but not his wife. Besides, even if complainant may
accept his new assignment in Cagayan de Oro or in Metro Manila, his wife may
still continue to do her business in Bacolod City. Anyway, Bacolod City and Manila
is just one (1) hour travel by plane.37
Lastly, the LA pointed out that in respondent’s contract of employment, he agreed
to be assigned to any work or workplace as may be determined by the company
whenever the operations require such assignment.
The NLRC affirmed in toto the findings of the LA. The NLRC ruled that petitioners’
restructuring move was a valid exercise of its management prerogative and
authorized under the employment contract of respondent, to wit:
We do not see in the records any evidence to prove that the restructuring move of
respondent company was done with ill motives or with malice and bad faith
purposely to constructively terminate complainant’s employment. Such
misinterpretation or misguided supposition by complainant is belied by the fact that
respondent’s officers had in several communications officially sent to complainant,
expressly recognized complainant’s expertise and capabilities as a top sales man
and manager for which reason the respondent company needs his services and
skills to energize the low-performing areas in order to maximize business
opportunities and to afford complainant an opportunity for further growth and
development. Complainant persistently refused instead of taking this opportunity
as a challenge after all, the nature of employment of a sales man or sales manager
is that it is mobile or ambulant being always seeking for possible areas to market
goods and services. He totally forgot the terms and conditions in his employment
contract, stated in part, thus:
xxxx
You agree, during the period of employment, to be assigned to any work or
workplace for such period as may be determined by the company and whenever
the operations thereof require such assignment.38
The rule in our jurisdiction is that findings of fact of the NLRC, affirming those of
the LA, are entitled to great weight and will not be disturbed if they are supported
by substantial evidence.39 Substantial evidence is an amount of relevant evidence
which a reasonable mind might accept as adequate to justify a conclusion.40 As
explained in Ignacio v. Coca-Cola Bottlers Phils., Inc:41
x x x Factual findings of the NLRC affirming those of the Labor Arbiter, both bodies
being deemed to have acquired expertise in matters within their jurisdictions, when
sufficiently supported by evidence on record, are accorded respect if not finality,
and are considered binding on this Court. As long as their decisions are devoid of
any unfairness or arbitrariness in the process of their deduction from the evidence
proffered by the parties, all that is left is for the Court to stamp its affirmation and
declare its finality.42
Based on the foregoing, this Court rules that the CA had overstepped its legal
mandate by reversing the findings of fact of the LA and the NLRC as it appears
that both decisions were based on substantial evidence. There is no proof of
arbitrariness or abuse of discretion in the process by which each body arrived at its
own conclusions. Thus, the CA should have deferred to such specialized agencies
which are considered experts in matters within their jurisdictions.
Moreover, what is objectionable with the CA decision is that in finding that the
reassignment of respondent was arbitrary and unreasonable it had, in effect,
imposed on petitioners its own opinion or judgment on what should have been a
purely business decision, to wit:
Discussing the issues jointly, a perusal of the records shows that there was no
overwhelming evidence to prove that petitioner was terminated for a just and valid
cause. Public respondent had overlooked the fact that the reassignment of
petitioner was arbitrary and unreasonable as the same was in contrast to the
purposes espoused by private respondents. Undoubtedly, petitioner is a complete
alien to the territory and as no established contacts therein, thus, he cannot be
effective nor can he maximize profits. It cannot also contribute to his professional
growth and development considering that he had already made a mark on his
territory by virtue of his twenty-two (22) long years of valuable service. Considering
the quality of his performance in his territory, the private respondents cannot
therefore reason out that they are merely exercising their management prerogative
for it would be unreasonable since petitioner has not been amiss in his
responsibilities. Furthermore, it would undeniably cause undue inconvenience to
herein petitioner who would have to relocate, disrupting his family’s peaceful living,
and with no additional monthly remuneration.43
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In the absence of arbitrariness, the CA should not have looked into the wisdom of
a management prerogative. It is the employer’s prerogative, based on its
assessment and perception of its employee’s qualifications, aptitudes, and
competence, to move them around in the various areas of its business operations
in order to ascertain where they will function with maximum benefit to the
company.44
As a matter of fact, while the CA’s observations may be acceptable to some
quarters, it is nevertheless not universal so as to foreclose another view on what
may be a better business decision. While it would be profitable to keep respondent
in an area where he has established contacts and therefore the probability of him
reaching and even surpassing his sales quota is high, on the one hand, one can
also make a case that since respondent is one of petitioners’ best district
managers, he is the right person to turn around and improve the sales numbers in
Cagayan de Oro City, an area which in the past had been dismally performing.
After all, improving and developing a new market may even be more profitable
than having respondent stay and serve his old market. In addition, one can even
make a case and say that the transfer of respondent is also for his professional
growth. Since respondent
has been already assigned in the Western Visayas area for 22 years, it may mean
that his market knowledge is very limited. In another territory, there will be new and
more challenges for respondent to face. In addition, one can even argue that for
purposes of future promotions, it would be better to promote a district manager
who has experience in different markets.
The foregoing illustrates why it is dangerous for this Court and even the CA to look
into the wisdom of a management prerogative. Certainly, one can argue for or
against the pros and cons of transferring respondent to another territory. Absent a
definite finding that such exercise of prerogative was tainted with arbitrariness and
unreasonableness, the CA should have left the same to petitioners’ better
judgment. The rule is well settled that labor laws discourage interference with an
employer's judgment in the conduct of his business. Even as the law is solicitous
of the welfare of employees, it must also protect the right of an employer to
exercise what are clearly management prerogatives. As long as the company's
exercise of the same is in good faith to advance its interest and not for the purpose
of defeating or circumventing the rights of employees under the laws or valid
agreements, such exercise will be upheld.45
In addition, this Court cannot agree with the findings of the CA that the transfer of
respondent was unreasonable, considering he had not been remiss in his
responsibilities. What the CA failed to recognize is that the very nature of a sales
man is that it is mobile and ambulant. On this point, it bears to stress that
respondent signed two documents signifying his assent to be assigned anywhere
in the Philippines. In respondent’s Employment Application,46 he checked the box
which asks, "Are you willing to be relocated anywhere in the Philippines?"47 In
addition, in respondent’s Contract of Employment,48 item (8) reads:
You agree, during the period of your employment, to be assigned to any work or
workplace for such period as may be determined by the company and whenever
the operations thereof require such assignment.49
Even if respondent has been performing his duties well it does not mean that
petitioners’ hands are tied up that they can no longer reassign respondent to
another territory. And it is precisely because of respondent’s good performance
that petitioners want him to be reassigned to Cagayan de Oro City so that he could
improve their business there.
In Abbott Laboratories (Phils.), Inc. v. National Labor Relations
Commission,50 which involved a complaint filed by a medical representative
against his employer drug company for illegal dismissal for allegedly terminating
his employment when he refused to accept his reassignment to a new area, the
Court upheld the right of the drug company to transfer or reassign its employee in
accordance with its operational demands and requirements. The ruling of the Court
therein, quoted hereunder, also finds application in the instant case:
Therefore, Bobadilla had no valid reason to disobey the order of transfer. He had
tacitly given his consent thereto when he acceded to the petitioners’ policy of hiring
sales staff who are willing to be assigned anywhere in the Philippines which is
demanded by petitioners’ business.
By the very nature of his employment, a drug salesman or medical representative
is expected to travel. He should anticipate reassignment according to the demands
of their business. It would be a poor drug corporation which cannot even assign its
representatives or detail men to new markets calling for opening or expansion or to
areas where the need for pushing its products is great. More so if such
reassignments are part of the employment contract.51
On the existence of grounds to dismiss respondent from the service
Because of respondent’s adamant refusal to be reassigned, the LA ruled that
petitioners had valid grounds to terminate his employment, to wit:
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As early as in December 27, 1999, complainant already signified his refusal to
accept his new assignment in Cagayan de Oro. Complainant was on sick leave
since January 5, 2000 up to May 11, 2000, for about four (4) months and he
already consumed his leave credits up to March 2000. Hence, starting April 2000
he was already on indefinite leave without pay.
xxxx
In his letter dated May 17, 2000, addressed to respondent Jane B. Montilla,
complainant informed her that his doctors have already declared him fit for work as
of May 16, 2000, and he was ready to assume to his regular assignment as District
Sales Manager of Negros Occidental. This is a strong indication that complainant
really does not want to accept his new assignment either in Cagayan de Oro or in
Metro Manila, which is clearly a defiance of the lawful order of his employer, and a
ground to terminate his services pursuant to Article 282 of the Labor Code.
Notwithstanding his adamant refusal to resume working to his new assignment in
Metro Manila, complainant was still given by respondent Montilla another chance
to think it over up to June 2, 2000. By way of reply, complainant, in his letter dated
May 31, 2000 to Ms. Montilla, he clearly expressed his disagreement to his
transfer and would rather seek justice elsewhere in another forum.
But still the respondent company, notwithstanding the position taken by
complainant in his letter dated May 31, 2000 that he is refusing his transfer gave
complainant until June 16, 2000 to reconsider his position. In a letter dated June 5,
2000, respondent Montilla gave complainant a period of five (5) days from receipt
thereof to report to Manila, but still complainant did not comply. Ms. Montilla sent
complainant a final notice dated June 26, 2000 for him to report to Manila within
five (5) working days from receipt of the same, with a warning that his failure to do
so, the company would be constraint to terminate his services for being absent
without official leave.
Finally, is was only on July 19, 2000, when the services of complainant was
terminated by respondent company through its Human Resource Manager on the
ground of absence without leave and insubordination pursuant to Article 282 of the
Labor Code.
Clearly, the complainant had abandoned his work by reason of his being on AWOL
as a consequence of vigorous objection to his transfer to either Cagayan de Oro or
Metro Manila. The long period of absence of complainant without official leave
from April to July 19, 2000 is more than sufficient ground to dismiss him. The
refusal of complainant to accept his transfer of assignment is a clear willful
disobedience of the lawful order of his employer and a ground to terminate his
services under Article 282, par. (a) of the Labor Code, as amended. The series of
chances given complainant to report for work, coupled by his adamant refusal to
report to his new assignment, is a conclusive indication of willful disobedience of
the lawful orders of his employer.52
In addition, the NLRC also ruled that respondent was guilty of insubordination,
thus:
Apparently, complainant, by his unjustified acts of refusing to be transferred either
to Mindanao or Manila for personal reasons, absent any bad faith or malice on the
part of respondents, has deliberately ignored and defied lawful orders of his
employer. An employee who refuses to be transferred, when such transfer is valid,
is guilty of insubordination. x x x53
Based on the foregoing, this Court rules that the findings of the LA and the NLRC
are supported by substantial evidence. The LA clearly outlined the steps taken by
petitioners and the manner by which respondent was eventually dismissed. The
NLRC, for its part, explained why respondent was guilty of insubordination. No
abuse of discretion can, therefore, be attributed to both agencies, and the CA was
certainly outside its mandate in reversing such findings.
This Court has long stated that the objection to the transfer being grounded solely
upon the personal inconvenience or hardship that will be caused to the employee
by reason of the transfer is not a valid reason to disobey an order of
transfer.54 Such being the case, respondent cannot adamantly refuse to abide by
the order of transfer without exposing himself to the risk of being dismissed.
Hence, his dismissal was for just cause in accordance with Article 282(a) 55 of the
Labor Code.
The CA, however, ruled that respondent was not guilty of insubordination, to wit:
As to the findings of insubordination, the records show that petitioner was not guilty
of such offense. For insubordination to exist, the order must be reasonable and
lawful, sufficiently known to the employee and in connection to his duties. Where
an order or rule is not reasonable, in view of the terms of the contract of
employment and the general right of the parties, a refusal to obey does not
constitute a just cause for the employee’s discharge. It is undeniable that the order
given by the company to petitioner to transfer to a place where he has no
connections, leaving his family behind, and with no clear additional remuneration,
can be considered unreasonable and petitioner’s actuation cannot be considered
insubordination.56
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This Court cannot agree with the findings of the CA, in view of the fact that it was
an error for it to substitute its own judgment and interfere with management
prerogatives. No iota of evidence was presented that the reassignment of
respondent was a demotion as he would still be a District Sales Manager in
Cagayan de Oro City or in Metro Manila. Furthermore, he would be given
relocation benefits in accordance with the Benefits Manual. If respondent feels that
what he was given is less than what is given to all other district managers who
were likewise reassigned, the onus is on him to prove such fact. Furthermore,
records reveal that respondent has been harping on the fact that no additional
remuneration would be given to him with the transfer. However, again, respondent
did not present any evidence that additional remuneration were being given to
other district managers who were reassigned to different locations, or that such
was the practice in the company. This Court, therefore, is inclined to believe the
statement of Chu in her May 17, 2000 letter to respondent that additional
remuneration is never given to people who are reassigned, to wit:
x x x Likewise, I am disappointed that with the movement, you expect to be paid
additional remuneration when in fact, this has never been done in the past and
never a practice within the industry and the Philippines.57
Lastly, while it is understandable that respondent does not want to relocate his
family, this Court agrees with the NLRC when it observed that such inconvenience
is considered an "employment" or "professional" hazard which forms part of the
concessions an employee is deemed to have offered or sacrificed in the view of his
acceptance of a position in sales.
On the observance of due process
The CA ruled that respondent was denied due process in the manner he was
dismissed by petitioners, to wit:
Furthermore, the finding that petitioner was afforded due process is bereft of any
legal basis. An employee must be given notice and an ample opportunity, prior to
dismissal to adequately prepare for his defense. This is an elementary rule in labor
law that due process in dismissal cases contemplates the twin requisites of notice
and hearing. These procedural requirements have been mandatorily imposed to
the employer to accord its employees the right to be heard. Failure of the employer
to comply with such requirements renders its judgment of dismissal void and
inexistent. A written notice from the employer containing the causes for the
dismissal must be given. The employee is then given ample opportunity to be
heard and to defend himself, appraising him of his right to counsel if he desires.
Lastly, a written notice informing the employee of the decision of the employer,
citing there reasons therefore, is given. The above procedure was not followed in
the instant case and the series of communications and meetings cannot take the
place and is therefore not sufficient to take the place of notice and hearing. 58
In termination proceedings of employees, procedural due process consists of the
twin requirements of notice and hearing. The employer must furnish the employee
with two written notices before the termination of employment can be effected: (1)
the first apprises the employee of the particular acts or omissions for which his
dismissal is sought; and (2) the second informs the employee of the employer’s
decision to dismiss him. The requirement of a hearing is complied with as long as
there was an opportunity to be heard, and not necessarily that an actual hearing
was conducted.59
While no actual hearing was conducted before petitioners dismissed respondent,
the same is not fatal as only an "ample opportunity to be heard" is what is required
in order to satisfy the requirements of due process.60Accordingly, this Court is
guided by Solid Development Corporation Workers Association v. Solid
Development Corporation61 (Solid), where the validity of the dismissal of two
employees was upheld notwithstanding that no hearing was conducted, to wit:
[W]ell-settled is the dictum that the twin requirements of notice and hearing
constitute the essential elements of due process in the dismissal of employees. It
is a cardinal rule in our jurisdiction that the employer must furnish the employee
with two written notices before the termination of employment can be effected: (1)
the first apprises the employee of the particular acts or omissions for which his
dismissal is sought; and (2) the second informs the employee of the employer’s
decision to dismiss him. The requirement of a hearing, on the other hand, is
complied with as long as there was an opportunity to be heard, and not necessarily
that an actual hearing was conducted.
In separate infraction reports, petitioners were both apprised of the particular acts
or omissions constituting the charges against them. They were also required to
submit their written explanation within 12 hours from receipt of the reports. Yet,
neither of them complied. Had they found the 12-hour period too short, they should
have requested for an extension of time. Further, notices of termination were also
sent to them informing them of the basis of their dismissal. In fine, petitioners were
given due process before they were dismissed. Even if no hearing was conducted,
the requirement of due process had been met since they were accorded a chance
to explain their side of the controversy62
In the case at bar, this Court finds that petitioners had complied with the
requirements of law in effecting the dismissal of respondent. Petitioners sent
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respondent a first notice in the form of a memorandum 63 dated June 26, 2000,
warning him that the same would serve as a final notice for him to report to work in
Manila within 5 working days from receipt thereof, otherwise, his services would be
terminated on the basis of AWOL. After receiving the memorandum, respondent
could have requested for a conference with the assistance of counsel, if he so
desired. Like in Solid, had respondent found the time too short, he should have
responded to the memorandum asking for more time. It, however, appears to this
Court that respondent made no such requests. On July 13, 2000, petitioners sent
another memorandum 64 notifying respondent that they are terminating his services
effective July 19, 2000, after he repeatedly refused to report to work despite due
notice. Even if no actual hearing was conducted, this Court is of the opinion that
petitioners had complied with the requirements of due process as all that the law
requires is an ample opportunity to be heard.
separation pay, or financial assistance, or whatever other name it is called, on the
ground of social justice.69
In the instant case, this Court rules that an award to respondent of separation pay
by way of financial assistance, equivalent to one-half (1/2) month’s pay for every
year of service, is equitable. Although respondent's actions constituted a valid
ground to terminate his services, the same is to this Court's mind not so
reprehensible as to warrant complete disregard of his long years of service. It also
appears that the same is respondent's first offense. While it may be expected that
petitioners will argue that respondent has only been in their service for four years
since the merger of Pharmacia and Upjohn took place in 1996, equity
considerations dictate that respondent's tenure be computed from 1978, the year
when respondent started working for Upjohn.

In conclusion, it bears to stress that the CA should not have disturbed the factual
findings of the LA and the NLRC in the absence of arbitrariness or palpable error.
The reassignment of respondent to another territory was a valid exercise of
petitioners’ management prerogative and, consequently, his dismissal was for
cause and in accordance with the due process requirement of law.
This Court, however, is not unmindful of previous rulings,65 wherein separation pay
has been granted to a validly dismissed employee after giving considerable weight
to long years of employment.661âwphi1
WHEREFORE, premises considered, the petition is PARTIALLY GRANTED. The
November 30, 2005 Decision and May 5, 2006 Resolution of the Court of Appeals
in CA-G.R. SP No. 00386 are REVERSED and SET ASIDE.
In view of the above disquisitions, petitioners are ordered to pay respondent
separation pay by way of financial assistance equivalent to one-half (1/2) month
pay for every year of service.
SO ORDERED.

An employee who is dismissed for cause is generally not entitled to any financial
assistance. Equity considerations, however, provide an exception. Equity has been
defined as justice outside law, being ethical rather than jural and belonging to the
sphere of morals than of law. It is grounded on the precepts of conscience and not
on any sanction of positive law, for equity finds no room for application where there
is law.67

In Philippine Long Distance Telephone Co. v. National Labor Relations

Commission,68 the Court laid down the guidelines in the grant of separation pay to
a lawfully dismissed employee, thus:

We hold that henceforth separation pay shall be allowed as a measure of social

justice only in those instances where the employee is validly dismissed for causes
other than serious misconduct or those reflecting on his moral character. Where
the reason for the valid dismissal is, for example, habitual intoxication or an
offense involving moral turpitude, like theft or illicit sexual relations with a fellow
worker, the employer may not be required to give the dismissed employee

Page 148 of 161

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G.R. No. 174809 June 27, 2012
DUTY FREE PHILIPPINES SERVICES, INC., Petitioner,
vs.
MANOLITO Q. TRIA, Respondent.
DECISION
PERALTA, J.:
Assailed in this petition for review on certiorari under Rule 45 of the Rules of Court
are the Court of Appeals (CA) Decision1 dated May 31, 2006 and Resolution2 dated
September 21, 2006 in CA-G.R. SP No. 70839. The assailed decision affirmed the
National Labor Relations Commission (NLRC) Resolution3 dated March 15, 2002
in NLRC NCR Case No. 00-12-009965-98, while the assailed resolution denied
petitioner Duty Free Philippines Services, Inc.’s (DFPSI’s) motion for
reconsideration.
The facts, as found by the CA, are as follows:
Petitioner Duty Free Philippines Services, Inc. is a manpower agency that provides
personnel to Duty Free Philippines (DFP).
On March 16, 1989, [respondent] Manolo Tria was employed by Petitioner and
was seconded to DFP as a Warehouse Supervisor.
In an Audit Report, dated January 16, 1998, it was revealed that 1,020 packs of
Marlboro bearing Merchandise Code No. 020101 under WRR No. 36-04032 were
not included in the condemnation proceedings held on December 27, 1996 and
that there were "glaring discrepancies" in the related documents which "indicate a
malicious attempt to conceal an anomalous irregularity." The relevant Request for
Condemnation was found to have been fabricated and all signatories therein,
namely, Ed Garcia, Stockkeeper; Catherino A. Bero, DIU Supervisor; and
Constantino L. Cruz, were held "accountable for the irregular loss of the
unaccounted Marlboro KS Pack of 5…"
After further investigation, it was discovered that the subject merchandise was
illegally brought out of the warehouse and it was made to appear that in all the
documents prepared said goods were legally condemned on December 27, 1996.
Ed Garcia, one of the respondents in the Audit Review, implicated [respondent]
and [two] others. Garcia claimed that he was unaware of the illegality of the
transaction as he was only obeying the orders of his superiors who included
[respondent]. Garcia disclosed that it was [respondent] who ordered him to look for
a van for the supposed "direct condemnation" of the subject merchandise.
Consequently, the Discipline Committee requested [respondent] to submit a written
reply/explanation regarding the findings in the Audit Report and the allegations of
Garcia.
[Respondent] denied his participation in the illegal transaction. Although he
admitted that he instructed Garcia to look for a van, it was for the purpose of
transferring the damaged merchandise from the main warehouse to the proper
warehouse for damaged goods.
On August 27, 1998, the DFP Discipline Committee [DFPDC] issued a Joint
Resolution holding [respondent] "GUILTY OF DISHONESTY for (his) direct
participation in the fake condemnation" and pilferage of the missing 1,020
Marlboro Pack of 5’s cigarettes … and orders (his) DISMISSAL from the service
for cause and for loss of trust and confidence, with forfeiture of all rights and
privileges due them from the company, except earned salaries and leave credits."
On September 18, 1998, Petitioner sent [respondent] a memorandum terminating
his employment with Petitioner and his secondment to DFP "on the basis of the
findings and recommendation of the (DFP’s) Discipline Committee."
Aggrieved, [respondent] filed a Complaint against Petitioner for Illegal Dismissal
and for payment of backwages, attorney’s fees and damages.4
On May 31, 1999, the Labor Arbiter (LA) rendered a Decision 5 finding respondent
to have been illegally dismissed from employment. The dispositive portion of the
decision reads:
WHEREFORE, all the foregoing premises being considered, judgment is hereby
rendered ordering the respondent company to reinstate complainant to his former
position with all the rights, privileges, and benefits appertaining thereto, including
seniority, plus full backwages which as of May 31, 1999 already amount to
₱172,672.50. Further, the respondent is ordered to pay complainant the equivalent
of ten percent (10%) of the total backwages as and for attorney’s fees.
The claim for damages is denied for lack of merit.
SO ORDERED.6
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On appeal, the NLRC affirmed7 the LA decision, but deleted the award of
attorney’s fees. Petitioner’s motion for reconsideration was also denied 8 on March
15, 2002.
When petitioner elevated the case to the CA, it denied for the first time the
existence of employer-employee relationship and pointed to DFP as respondent’s
real employer. The appellate court, however, considered said defense barred by
estoppel for its failure to raise the defense before the LA and the NLRC.9 It
nonetheless ruled that although DFPDC conducted the investigation, petitioner’s
dismissal letter effected respondent’s termination from employment.10 On the
validity of respondent’s dismissal from employment, the CA respected the LA and
NLRC findings and reached the same conclusion that respondent was indeed
illegally dismissed from employment.11Petitioner’s motion for reconsideration was
likewise denied in a Resolution12 dated September 21, 2006.
Undaunted, petitioner elevates the case before the Court in this petition for review
on certiorari based on the following grounds:
THE COURT OF APPEALS GRAVELY ERRED WHEN IT RULED THAT
PETITIONER DFPSI IS LIABLE FOR ILLEGAL DISMISSAL AND DECLARE
THAT:
A. DFPSI IS THE DIRECT EMPLOYER OF RESPONDENT
INSTEAD OF DUTY FREE PHILIPPINES ("DFP"); AND
B. THE ISSUE AS TO WHO TERMINATED RESPONDENT WAS
RAISED ONLY FOR THE FIRST TIME ON APPEAL.
THE COURT OF APPEALS GRAVELY ERRED AND RULED CONTRARY TO
LAW AND JURISPRUDENCE WHEN IT FAILED TO RULE ON THE LIABILITY
OF DFP, AS AN INDISPENSABLE PARTY TO THE COMPLAINT FOR ILLEGAL
DISMISSAL.
THE COURT OF APPEALS GRAVELY ERRED AND RULED CONTRARY TO
LAW AND JURISPRUDENCE WHEN IT HELD THAT RESPONDENT’S
EMPLOYMENT WAS ILLEGALLY TERMINATED.13
Petitioner insists that the CA erred in not considering its argument that it is not the
employer of respondent. It likewise faults the CA in not ruling on the liability of DFP
as an indispensable party.
We cannot sustain petitioner’s contention. In its Position Paper, 14 petitioner
highlighted respondent’s complicity and involvement in the alleged "fake
condemnation" of damaged cigarettes as found by the DFPDC. This, according to
petitioner, was a just cause for terminating an employee.
In its Motion for Reconsideration and/or Appeal,15 petitioner insisted that there was
basis for the termination of respondent’s employment. Even in its Supplemental
Appeal16 with the NLRC, petitioner reiterated its stand that respondent was
terminated for a just and valid cause and due process was strictly observed in his
dismissal. It further questioned the reinstatement aspect of the LA decision
allegedly because of strained relations between them.
With the aforesaid pleadings submitted by petitioner, together with the
corresponding pleadings filed by respondent, the LA and the NLRC declared the
dismissal of respondent illegal. These decisions were premised on the finding that
there was an employer-employee relationship. 17 Nowhere in said pleadings did
petitioner deny the existence of said relationship. Rather, the line of its defense
impliedly admitted said relationship. The issue of illegal dismissal would have been
irrelevant had there been no employer-employee relationship in the first place.
It was only in petitioner’s Petition for Certiorari before the CA did it impute liability
on DFP as respondent’s direct employer and as the entity who conducted the
investigation and initiated respondent’s termination proceedings. Obviously,
petitioner changed its theory when it elevated the NLRC decision to the CA. The
appellate court, therefore, aptly refused to consider the new theory offered by
petitioner in its petition. As the object of the pleadings is to draw the lines of battle,
so to speak, between the litigants, and to indicate fairly the nature of the claims or
defenses of both parties, a party cannot subsequently take a position contrary to,
or inconsistent, with its pleadings.18 It is a matter of law that when a party adopts a
particular theory and the case is tried and decided upon that theory in the court
below, he will not be permitted to change his theory on appeal. The case will be
reviewed and decided on that theory and not approached and resolved from a
different point of view.19
The review of labor cases is confined to questions of jurisdiction or grave abuse of
discretion.20 The alleged absence of employer-employee relationship cannot be
raised for the first time on appeal.21 The resolution of this issue requires the
admission and calibration of evidence and the LA and the NLRC did not pass upon
it in their decisions.22 We cannot permit petitioner to change its theory on appeal. It
would be unfair to the adverse party who would have no more opportunity to
present further evidence, material to the new theory, which it could have done had
it been aware earlier of the new theory before the LA and the NLRC. 23 More so in
Page 150 of 161
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this case as the supposed employer of respondent which is DFP was not and is
not a party to the present case.
In Pamplona Plantation Company v. Acosta,24 petitioner therein raised for the first
time in its appeal to the NLRC that respondents therein were not its employees but
of another company. In brushing aside this defense, the Court held:
x x x Petitioner is estopped from denying that respondents worked for it. In the first
place, it never raised this defense in the proceedings before the Labor Arbiter.
Notably, the defense it raised pertained to the nature of respondents’ employment,
i.e., whether they are seasonal employees, contractors, or worked under the
pakyaw system. Thus, in its Position Paper, petitioner alleged that some of the
respondents are coconut filers and copra hookers or sakadors; some are seasonal
employees who worked as scoopers or lugiteros; some are contractors; and some
worked under the pakyaw system. In support of these allegations, petitioner even
presented the company’s payroll which will allegedly prove its allegations.
By setting forth these defenses, petitioner, in effect, admitted that respondents
worked for it, albeit in different capacities. Such allegations are negative pregnant
– denials pregnant with the admission of the substantial facts in the pleading
responded to which are not squarely denied, and amounts to an acknowledgment
that respondents were indeed employed by petitioner. 25 (Emphasis supplied.)
Also in Telephone Engineering & Service Co., Inc. v. WCC, et al.,26 the Court held
that the lack of employer-employee relationship is a matter of defense that the
employer should properly raise in the proceedings below. The determination of this
relationship involves a finding of fact, which is conclusive and binding and not
subject to review by this Court.27
In this case, petitioner insisted that respondent was dismissed from employment
for cause and after the observance of the proper procedure for termination.
Consequently, petitioner cannot now deny that respondent is its employee. While
indeed, jurisdiction cannot be conferred by acts or omission of the parties,
petitioner’s belated denial that it is the employer of respondent is obviously an
afterthought, a devise to defeat the law and evade its obligations. 28
It is a fundamental rule of procedure that higher courts are precluded from
entertaining matters neither alleged in the pleadings nor raised during the
proceedings below, but ventilated for the first time only in a motion for
reconsideration or on appeal.29 Petitioner is bound by its submissions that
respondent is its employee and it should not be permitted to change its theory.
Such change of theory cannot be tolerated on appeal, not due to the strict
application of procedural rules, but as a matter of fairness.30
As to the legality of respondent’s dismissal, it is well settled that under Rule 45 of
the Rules of Court, only questions of law may be raised, the reason being that this
Court is not a trier of facts, and it is not for this Court to reexamine and reevaluate
the evidence on record.31 Findings of fact and conclusions of the Labor Arbiter as
well as those of the NLRC or, for that matter, any other adjudicative body which
can be considered as a trier of facts on specific matters within its field of expertise,
should be considered as binding and conclusive upon the appellate courts. 32
Petitioner dismissed respondent from employment based on the recommendation
of the DFPDC holding respondent guilty of dishonesty for his direct participation in
the "fake condemnation" and "pilferage" of the missing 1,020 Marlboro Pack of 5
cigarettes.33 Respondent was implicated in the anomalous transaction by his co-
employees who pointed to the former as the one who ordered the other suspects
to look for a vehicle that would be used to transport the subject cigarettes. This,
according to the DFPDC, was odd and strange. With this act alone and by reason
of his position, the DFPDC concluded, and affirmed by petitioner, that respondent
definitely had knowledge of the "fake condemnation." From these circumstances,
petitioner sustained the findings of dishonesty and dismissed respondent from
employment.
Again, we agree with the appellate court that DFPDC’s conclusions are not
supported by clear and convincing evidence to warrant the dismissal of
respondent. In illegal dismissal cases, the employer is burdened to prove just
cause for terminating the employment of its employee with clear and convincing
evidence. This principle is designed to give flesh and blood to the guaranty of
security of tenure granted by the Constitution to employees under the Labor
Code.34 In this case, petitioner failed to submit clear and convincing evidence of
respondent’s direct participation in the alleged fake condemnation proceedings. To
be sure, unsubstantiated suspicions, accusations, and conclusions of employers
do not provide for legal justification for dismissing employees. In case of doubt,
such cases should be resolved in favor of labor, pursuant to the social justice
policy of labor laws and the Constitution. 35
WHEREFORE, premises considered, the petition is DENIED for lack of merit. The
Court of Appeals Decision dated May 31, 2006 and Resolution dated September
21, 2006, in CA-G.R. SP No. 70839, are AFFIRMED.
SO ORDERED.
Page 151 of 161
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G.R. No. 172642 June 13, 2012
ESTATE OF NELSON R. DULAY, represented by his wife MERRIDY JANE P.
DULAY, Petitioner,
vs.
ABOITIZ JEBSEN MARITIME, INC. and GENERAL CHARTERERS,
INC., Respondents.
DECISION
PERALTA, J.:
Before the Court is a petition for review on certiorari under Rule 45 of the Rules of
Court seeking to reverse and set aside the Decision1 and Resolution2 dated July
11, 2005 and April 18, 2006 of the Court of Appeals (CA) in CA-G.R. SP No.
76489.
The factual and procedural antecedents of the case, as summarized by the CA,
are as follows:
Nelson R. Dulay (Nelson, for brevity) was employed by [herein respondent]
General Charterers Inc. (GCI), a subsidiary of co-petitioner [herein co-respondent]
Aboitiz Jebsen Maritime Inc. since 1986. He initially worked as an ordinary seaman
and later as bosun on a contractual basis. From September 3, 1999 up to July 19,
2000, Nelson was detailed in petitioners’ vessel, the MV Kickapoo Belle.
On August 13, 2000, or 25 days after the completion of his employment contract,
Nelson died due to acute renal failure secondary to septicemia. At the time of his
death, Nelson was a bona fide member of the Associated Marine Officers and
Seaman’s Union of the Philippines (AMOSUP), GCI’s collective bargaining agent.
Nelson’s widow, Merridy Jane, thereafter claimed for death benefits through the
grievance procedure of the Collective Bargaining Agreement (CBA) between
AMOSUP and GCI. However, on January 29, 2001, the grievance procedure was
"declared deadlocked" as petitioners refused to grant the benefits sought by the
widow.
On March 5, 2001, Merridy Jane filed a complaint with the NLRC Sub-Regional
Arbitration Board in General Santos City against GCI for death and medical
benefits and damages.
On March 8, 2001, Joven Mar, Nelson’s brother, received ₱20,000.00 from
[respondents] pursuant to article 20(A)2 of the CBA and signed a "Certification"
acknowledging receipt of the amount and releasing AMOSUP from further liability.
Merridy Jane contended that she is entitled to the aggregate sum of Ninety
Thousand Dollars ($90,000.00) pursuant to [A]rticle 20 (A)1 of the CBA x x x
xxxx
Merridy Jane averred that the P20,000.00 already received by Joven Mar should
be considered advance payment of the total claim of US$90,000.[00].
[Herein respondents], on the other hand, asserted that the NLRC had no
jurisdiction over the action on account of the absence of employer-employee
relationship between GCI and Nelson at the time of the latter’s death. Nelson also
had no claims against petitioners for sick leave allowance/medical benefit by
reason of the completion of his contract with GCI. They further alleged that private
respondent is not entitled to death benefits because petitioners are only liable for
such "in case of death of the seafarer during the term of his contract pursuant to
the POEA contract" and the cause of his death is not work-related. Petitioners
admitted liability only with respect to article 20(A)2 [of the CBA]. x x x
xxxx
However, as petitioners stressed, the same was already discharged.
The Labor Arbiter ruled in favor of private respondent. It took cognizance of the
case by virtue of Article 217 (a), paragraph 6 of the Labor Code and the existence
of a reasonable causal connection between the employer-employee relationship
and the claim asserted. It ordered the petitioner to pay ₱4,621,300.00, the
equivalent of US$90,000.00 less ₱20,000.00, at the time of judgment x x x
xxxx
The Labor Arbiter also ruled that the proximate cause of Nelson’s death was not
work-related.
On appeal, [the NLRC] affirmed the Labor Arbiter’s decision as to the grant of
death benefits under the CBA but reversed the latter’s ruling as to the proximate
cause of Nelson’s death.3
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Herein respondents then filed a special civil action for certiorari with the CA
contending that the NLRC committed grave abuse of discretion in affirming the
jurisdiction of the NLRC over the case; in ruling that a different provision of the
CBA covers the death claim; in reversing the findings of the Labor Arbiter that the
cause of death is not work-related; and, in setting aside the release and quitclaim
executed by the attorney-in-fact and not considering the P20,000.00 already
received by Merridy Jane through her attorney-in-fact.
On July 11, 2005, the CA promulgated its assailed Decision, the dispositive portion
of which reads as follows:
WHEREFORE, in view of the foregoing, the petition is hereby GRANTED and the
case is REFERRED to the National Conciliation and Mediation Board for the
designation of the Voluntary Arbitrator or the constitution of a panel of Voluntary
Arbitrators for the appropriate resolution of the issue on the matter of the
applicable CBA provision.
SO ORDERED.4
The CA ruled that while the suit filed by Merridy Jane is a money claim, the same
basically involves the interpretation and application of the provisions in the subject
CBA. As such, jurisdiction belongs to the voluntary arbitrator and not the labor
arbiter.
Petitioner filed a Motion for Reconsideration but the CA denied it in its Resolution
of April 18, 2006.
Hence, the instant petition raising the sole issue of whether or not the CA
committed error in ruling that the Labor Arbiter has no jurisdiction over the case.
Petitioner contends that Section 10 of Republic Act (R.A.) 8042, otherwise known
as the Migrant Workers and Overseas Filipinos Act of 1995, vests jurisdiction on
the appropriate branches of the NLRC to entertain disputes regarding the
interpretation of a collective bargaining agreement involving migrant or overseas
Filipino workers. Petitioner argues that the abovementioned Section amended
Article 217 (c) of the Labor Code which, in turn, confers jurisdiction upon voluntary
arbitrators over interpretation or implementation of collective bargaining
agreements and interpretation or enforcement of company personnel policies.
The pertinent provisions of Section 10 of R.A. 8042 provide as follows:
SEC. 10. Money Claims. - Notwithstanding any provision of law to the contrary, the
Labor Arbiters of the National Labor Relations Commission (NLRC) shall have the
original and exclusive jurisdiction to hear and decide, within ninety (90) calendar
days after filing of the complaint, the claims arising out of an employer-employee
relationship or by virtue of any law or contract involving Filipino workers for
overseas deployment including claims for actual, moral, exemplary and other
forms of damages.
Article 217(c) of the Labor Code, on the other hand, states that:
xxxx
(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 by the
Labor Arbiter by referring the same to the grievance machinery and
voluntary arbitration as may be provided in said agreements.
On their part, respondents insist that in the present case, Article 217, paragraph (c)
as well as Article 261 of the Labor Code remain to be the governing provisions of
law with respect to unresolved grievances arising from the interpretation and
implementation of collective bargaining agreements. Under these provisions of
law, jurisdiction remains with voluntary arbitrators.
Article 261 of the Labor Code reads, thus:
ARTICLE 261. Jurisdiction of Voluntary Arbitrators or panel of Voluntary
Arbitrators. – The Voluntary Arbitrator or panel of Voluntary Arbitrators shall have
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 referred to in the immediately preceding article. Accordingly,
violations of a Collective Bargaining Agreement, except those which are gross in
character, shall no longer be treated as unfair labor practice and shall be resolved
as grievances under the Collective Bargaining Agreement. For purposes of this
article, gross violations of Collective Bargaining Agreement shall mean flagrant
and/or malicious refusal to comply with the economic provisions of such
agreement.
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
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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.
The petition is without merit.
It is true that R.A. 8042 is a special law governing overseas Filipino workers.
However, a careful reading of this special law would readily show that there is no
specific provision thereunder which provides for jurisdiction over disputes or
unresolved grievances regarding the interpretation or implementation of a CBA.
Section 10 of R.A. 8042, which is cited by petitioner, simply speaks, in general, of
"claims arising out of an employer-employee relationship or by virtue of any law or
contract involving Filipino workers for overseas deployment including claims for
actual, moral, exemplary and other forms of damages." On the other hand, Articles
217(c) and 261 of the Labor Code are very specific in stating that voluntary
arbitrators have jurisdiction over cases arising from the interpretation or
implementation of collective bargaining agreements. Stated differently, the instant
case involves a situation where the special statute (R.A. 8042) refers to a subject
in general, which the general statute (Labor Code) treats in particular.5 In the
present case, the basic issue raised by Merridy Jane in her complaint filed with the
NLRC is: which provision of the subject CBA applies insofar as death benefits due
to the heirs of Nelson are concerned. The Court agrees with the CA in holding that
this issue clearly involves the interpretation or implementation of the said CBA.
Thus, the specific or special provisions of the Labor Code govern.
In any case, the Court agrees with petitioner's contention that the CBA is the law
or contract between the parties. Article 13.1 of the CBA entered into by and
between respondent GCI and AMOSUP, the union to which petitioner belongs,
provides as follows:
The Company and the Union agree that in case of dispute or conflict in the
interpretation or application of any of the provisions of this Agreement, or
enforcement of Company policies, the same shall be settled through
negotiation, conciliation or voluntary arbitration. The Company and the Union
further agree that they will use their best endeavor to ensure that any dispute will
be discussed, resolved and settled amicably by the parties hereof within ninety
(90) days from the date of filing of the dispute or conflict and in case of failure to
settle thereof any of the parties retain their freedom to take appropriate
action.6 (Emphasis supplied)
From the foregoing, it is clear that the parties, in the first place, really intended to
bring to conciliation or voluntary arbitration any dispute or conflict in the
interpretation or application of the provisions of their CBA. It is settled that when
the parties have validly agreed on a procedure for resolving grievances and to
submit a dispute to voluntary arbitration then that procedure should be strictly
observed.7
It may not be amiss to point out that the abovequoted provisions of the CBA are in
consonance with Rule VII, Section 7 of the present Omnibus Rules and
Regulations Implementing the Migrant Workers and Overseas Filipinos Act of
1995, as amended by Republic Act No. 10022, which states that "[f]or OFWs with
collective bargaining agreements, the case shall be submitted for voluntary
arbitration in accordance with Articles 261 and 262 of the Labor Code." The Court
notes that the said Omnibus Rules and Regulations were promulgated by the
Department of Labor and Employment (DOLE) and the Department of Foreign
Affairs (DFA) and that these departments were mandated to consult with the
Senate Committee on Labor and Employment and the House of Representatives
Committee on Overseas Workers Affairs.
In the same manner, Section 29 of the prevailing Standard Terms and Conditions
Governing the Employment of Filipino Seafarers on Board Ocean Going Vessels,
promulgated by the Philippine Overseas Employment Administration (POEA),
provides as follows:
Section 29. Dispute Settlement Procedures. − In cases of claims and disputes
arising from this employment, the parties covered by a collective bargaining
agreement shall submit the claim or dispute to the original and exclusive
jurisdiction of the voluntary arbitrator or panel of arbitrators. If the parties are
not covered by a collective bargaining agreement, the parties may at their option
submit the claim or dispute to either the original and exclusive jurisdiction of the
National Labor Relations Commission (NLRC), pursuant to Republic Act (RA)
8042, otherwise known as the Migrant Workers and Overseas Filipinos Act of 1995
or to the original and exclusive jurisdiction of the voluntary arbitrator or panel of
arbitrators. If there is no provision as to the voluntary arbitrators to be appointed by
the parties, the same shall be appointed from the accredited voluntary arbitrators
of the National Conciliation and Mediation Board of the Department of Labor and
Employment.
The Philippine Overseas Employment Administration (POEA) shall exercise
original and exclusive jurisdiction to hear and decide disciplinary action on cases,
which are administrative in character, involving or arising out of violations of
recruitment laws, rules and regulations involving employers, principals, contracting
partners and Filipino seafarers. (Emphasis supplied)
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It is clear from the above that the interpretation of the DOLE, in consultation with
their counterparts in the respective committees of the Senate and the House of
Representatives, as well as the DFA and the POEA is that with respect to disputes
involving claims of Filipino seafarers wherein the parties are covered by a
collective bargaining agreement, the dispute or claim should be submitted to the
jurisdiction of a voluntary arbitrator or panel of arbitrators. It is only in the absence
of a collective bargaining agreement that parties may opt to submit the dispute to
either the NLRC or to voluntary arbitration. It is elementary that rules and
regulations issued by administrative bodies to interpret the law which they are
entrusted to enforce, have the force of law, and are entitled to great respect. 8 Such
rules and regulations partake of the nature of a statute and are just as binding as if
they have been written in the statute itself.9 In the instant case, the Court finds no
cogent reason to depart from this rule.1âwphi1
The above interpretation of the DOLE, DFA and POEA is also in consonance with
the policy of the state to promote voluntary arbitration as a mode of settling labor
disputes.10
No less than the Philippine Constitution provides, under the third paragraph,
Section 3, Article XIII, thereof that "[t]he State shall promote the principle of shared
responsibility between workers and employers and the preferential use of voluntary
modes in settling disputes, including conciliation, and shall enforce their mutual
compliance therewith to foster industrial peace."
Consistent with this constitutional provision, Article 211 of the Labor Code provides
the declared policy of the State "[t]o promote and emphasize the primacy of free
collective bargaining and negotiations, including voluntary arbitration, mediation
and conciliation, as modes of settling labor or industrial disputes."
On the basis of the foregoing, the Court finds no error in the ruling of the CA that
the voluntary arbitrator has jurisdiction over the instant case.
WHEREFORE, the petition is DENIED. The Decision and Resolution of the Court
of Appeals in CA-G.R. SP No. 76489 dated July 11, 2005 and April 18, 2006,
respectively, are AFFIRMED.
SO ORDERED.
G.R. No. 176287 January 31, 2011
HOSPITAL MANAGEMENT SERVICES, INC. - MEDICAL CENTER
MANILA, Petitioner,
vs.
HOSPITAL MANAGEMENT SERVICES, INC. - MEDICAL CENTER MANILA
EMPLOYEES ASSOCIATION-AFW and EDNA R. DE CASTRO, Respondents.
DECISION
PERALTA, J.:
Before this Court is a petition for review on certiorari seeking to set aside the
Decision1 dated May 24, 2006 and Resolution2 dated January 10, 2007 of the
Court of Appeals (CA), Special First Division, in CA-G.R. SP No. 73189,
entitled Hospital Management Services, Inc.-Medical Center Manila Employees
Association-AFW and Edna R. De Castro v. National Labor Relations Commission,
Hospital Management Services, Inc.-Medical Center Manila and Asuncion Abaya-
Morido, which reversed and set aside the Decision3 dated February 28, 2002 of
the National Labor Relations Commission (NLRC), Second Division, in NLRC NCR
No. 00-07-07716-99 (CA No. 027766-01), and its Resolution4 dated May 31, 2002.
The assailed CA decision ordered petitioner Hospital Management Services, Inc.-
Medical Center Manila to reinstate respondent Edna R. De Castro to her former
position without loss of seniority rights or by payroll reinstatement, pursuant to the
Labor Arbiter's Decision dated January 18, 2001, but with payment of full
backwages and other benefits or their monetary equivalent, computed from the
expiration of the 14-day suspension period up to actual reinstatement.
The antecedent facts are as follows:
Respondent De Castro started working as a staff nurse at petitioner hospital since
September 28, 1990, until she was dismissed on July 20, 1999.
Between 2:00 a.m. to 3:00 a.m. of March 24, 1999, while respondent De Castro
and ward-clerk orientee Gina Guillergan were at the nurse station on night duty
(from 10:00 p.m. of March 23, 1999 to 6:00 a.m. of March 24, 1999), one Rufina
Causaren, an 81-year-old patient confined at Room 724-1 of petitioner hospital for
"gangrenous wound on her right anterior leg and right forefoot" and scheduled for
operation on March 26, 1999, fell from the right side of the bed as she was trying
to reach for the bedpan. Because of what happened, the niece of patient Causaren
staying in the room was awakened and she sought assistance from the nurse
station. Instead of personally seeing the patient, respondent De Castro directed
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ward-clerk orientee Guillergan to check the patient. The vital signs of the patient
were normal. Later, the physician on duty and the nursing staff on duty for the next
shift again attended to patient Causaren.
Chief Nurse Josefina M. Villanueva informed Dr. Asuncion Abaya-Morido,
president and hospital director, about the incident and requested for a formal
investigation. On May 11, 1999, the legal counsel of petitioner hospital directed
respondent De Castro and three other nurses on duty, Staff Nurse Janith V.
Paderes and Nursing Assistants Marilou Respicio and Bertilla T. Tatad, to appear
before the Investigation Committee on May 13, 1999, 2:00 p.m., at the conference
room of petitioner hospital. During the committee investigation, respondent De
Castro explained that at around 2:30 a.m. to 3:00 a.m., she was attending to a
newly-admitted patient at Room 710 and, because of this, she instructed Nursing
Assistant Tatad to check the vital signs of patient Causaren, with ward-clerk
orientee Guillergan accompanying the latter. When the two arrived at the room, the
patient was in a squatting position, with the right arm on the bed and the left hand
holding on to a chair.
In the Investigation Report5 dated May 20, 1999, the Investigation Committee
found that the subject incident happened between 11:00 a.m. to 11:30 a.m. of
March 23, 1999. The three other nurses for the shift were not at the nurse station.
Staff Nurse Paderes was then in another nurse station encoding the medicines for
the current admissions of patients, while Nursing Assistant Respicio was making
the door name tags of admitted patients and Nursing Assistant Tatad delivered
some specimens to the laboratory. The committee recommended that despite her
more than seven years of service, respondent De Castro should be terminated
from employment for her lapse in responding to the incident and for trying to
manipulate and influence her staff to cover-up the incident. As for Staff Nurse
Paderes and Nursing Assistants Respicio and Tatad, the committee recommended
that they be issued warning notices for failure to note the incident and endorse it to
the next duty shift and, although they did not have any knowledge of the incident,
they should be reminded not to succumb to pressure from their superiors in
distorting the facts.
On July 5, 1999, Janette A. Calixijan, HRD Officer of petitioner hospital, issued a
notice of termination, duly noted by Dr. Abaya-Morido, upon respondent De
Castro, effective at the close of office hours of July 20, 1999, for alleged violation
of company rules and regulations, particularly paragraph 16 (a), Item 3, Chapter XI
of the Employee's Handbook and Policy Manual of 1996 (Employee's
Handbook):6 (1) negligence to follow company policy on what to do with patient
Rufina Causaren who fell from a hospital bed; (2) failure to record and refer the
incident to the physician-[on- duty and] allow[ing] a significant lapse of time before
reporting the incident; (3) deliberately instructing the staff to follow her version of
the incident in order to cover up the lapse; and (4) negligence and carelessness in
carrying out her duty as staff nurse-on-duty when the incident happened.
On July 21, 1999, respondent De Castro, with the assistance of respondent
Hospital Management Services Inc.-Medical Center Manila Employees
Association-AFW, filed a Complaint7 for illegal dismissal against petitioners with
prayer for reinstatement and payment of full backwages without loss of seniority
rights, ₱20,000.00 moral damages, ₱10,000.00 exemplary damages, and 10% of
the total monetary award as attorney's fees.
On January 18, 2001, the Labor Arbiter rendered a Decision,8 ordering petitioner
hospital to reinstate respondent De Castro to her former position or by payroll
reinstatement, at the option of the former, without loss of seniority rights, but
without backwages and, also, directing petitioners to notify her to report to work.
Her prayer for damages and attorney's fees was denied. The Labor Arbiter
concluded that although respondent De Castro committed the act complained of,
being her first offense, the penalty to be meted should not be dismissal from the
service, but merely 7 to 14 days suspension as the same was classified as a less
serious offense under the Employee’s Handbook.
On appeal by respondent De Castro, the NLRC rendered a Decision dated
February 28, 2002, reversing the findings of the Labor Arbiter and dismissing the
complaint against the petitioners. It observed that respondent De Castro lacked
diligence and prudence in carrying out her duty when, instead of personally
checking on the condition of patient Causaren after she fell from the bed, she
merely sent ward-clerk orientee Guillergan to do the same in her behalf and for
influencing her staff to conceal the incident.
On May 31, 2002, the NLRC denied respondent De Castro's Motion for
Reconsideration dated April 16, 2002.
On May 24, 2006, the CA reversed and set aside the Decision of the NLRC and
reinstated the Decision of the Labor Arbiter, with modification that respondent De
Castro should be entitled to payment of full backwages and other benefits, or their
monetary equivalent, computed from the expiration of the 14-day-suspension
period up to actual reinstatement. The CA ruled that while respondent De Castro's
failure to personally attend to patient Causeran amounted to misconduct, however,
being her first offense, such misconduct could not be categorized as serious or
grave that would warrant the extreme penalty of termination from the service after
having been employed for almost 9 years. It added that the subject infraction was
a less serious offense classified under "commission of negligent or careless acts
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during working time or on company property that resulted in the personal injury or
property damage causing expenses to be incurred by the company" stated in
subparagraph 11, paragraph 3 (B), Chapter XI [on the Rules on Discipline] of the
Employee's Handbook9 of petitioner hospital. The CA did not sustain the NLRC's
ruling that respondent De Castro's dismissal was proper on the ground that her
offense was aggravated to serious misconduct on account of her alleged act of
asking her co-employees to lie for her as this fact was not proven.
Petitioners' motion for reconsideration was denied by the CA in the Resolution
dated January 10, 2007.
Hence, this present petition.
Petitioners allege that the deliberate refusal to attend to patient Causaren after the
latter fell from the bed justifies respondent De Castro's termination from
employment due to serious misconduct. They claim that respondent De Castro
failed to: (a) personally assist the patient; (b) check her vital signs and examine if
she sustained any injury; (c) refer the matter to the patient's attending physician or
any physician-on-duty; and (d) note the incident in the report sheet for
endorsement to the next shift for proper monitoring. They also aver that
respondent De Castro persuaded her co-nurses to follow her version of what
transpired so as to cover up her nonfeasance.
In her Comment, respondent De Castro counters that there was no serious
misconduct or gross negligence committed, but simple misconduct or minor
negligence which would warrant the penalty of 7 to 14 days of suspension under
the Employee's Handbook of petitioner hospital. She denies exerting influence
over the four nursing personnel, but points out that it was Chief Nurse Villanueva,
a close friend of patient Causaren's niece, who persuaded the four nursing staff to
retract their statements appearing in the incident reports as to the approximate
time of occurrence, from 2:00 a.m. to 3:00 a.m. of March 24, 1999 to 11:00 p.m. to
11:30 p.m. of March 23, 1999, so as to pin her for negligence. She appeals for
leniency, considering that the subject infraction was her first offense in a span of
almost nine years of employment with petitioner hospital.
We affirm with modification the CA ruling which declared petitioners guilty of illegal
dismissal.
Article 282 (b) of the Labor Code provides that an employer may terminate an
employment for gross and habitual neglect by the employee of his duties. The CA
ruled that per the Employee’s Handbook of petitioner hospital, respondent De
Castro’s infraction is classified as a less serious offense for "commission of
negligent acts during working time" as set forth in subparagraph 11, paragraph 3
(B) of Chapter XI10 thereof. Petitioners anchor respondent De Castro’s termination
of employment on the ground of serious misconduct for failure to personally attend
to patient Causaren who fell from the bed as she was trying to reach for the
bedpan. Based on her evaluation of the situation, respondent De Castro saw no
necessity to record in the chart of patient Causaren the fact that she fell from the
bed as the patient did not suffer any injury and her vital signs were normal. She
surmised that the incident was not of a magnitude that would require medical
intervention as even the patient and her niece did not press charges against her by
reason of the subject incident.
It is incumbent upon respondent De Castro to ensure that patients, covered by the
nurse station to which she was assigned, be accorded utmost health care at all
times without any qualification or distinction. Respondent De Castro’s failure to
personally assist patient Causaren, check her vital signs and examine if she
sustained any injury, refer the matter to the patient's attending physician or any
physician-on-duty, and note the incident in the report sheet for endorsement to the
next shift for proper monitoring constitute serious misconduct that warrants her
termination of employment. After attending to the toxic patients under her area of
responsibility, respondent De Castro should have immediately proceeded to check
the health condition of patient Causaren and, if necessary, request the physician-
on-duty to diagnose her further. More importantly, respondent De Castro should
make everything of record in the patient’s chart as there might be a possibility that
while the patient may appear to be normal at the time she was initially examined,
an injury as a consequence of her fall may become manifest only in the
succeeding days of her confinement. The patient’s chart is a repository of one’s
medical history and, in this regard, respondent De Castro should have recorded
the subject incident in the chart of patient Causaren so that any subsequent
discomfort or injury of the patient arising from the incident may be accorded proper
medical treatment.
Neglect of duty, to be a ground for dismissal, must be both gross and
habitual.1âwphi1 Gross negligence connotes want of care in the performance of
one's duties. Habitual neglect implies repeated failure to perform one's duties for a
period of time, depending upon the circumstances. A single or isolated act of
negligence does not constitute a just cause for the dismissal of the
employee.11 Despite our finding of culpability against respondent De Castro;
however, we do not see any wrongful intent, deliberate refusal, or bad faith on her
part when, instead of personally attending to patient Causaren, she requested
Nursing Assistant Tatad and ward-clerk orientee Guillergan to see the patient, as
she was then attending to a newly-admitted patient at Room 710. It was her
judgment call, albeit an error of judgment, being the staff nurse with presumably
more work experience and better learning curve, to send Nursing Assistant Tatad
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and ward-clerk orientee Guillergan to check on the health condition of the patient,
as she deemed it best, under the given situation, to attend to a newly-admitted
patient who had more concerns that needed to be addressed accordingly. Being
her first offense, respondent De Castro cannot be said to be grossly negligent so
as to justify her termination of employment. Moreover, petitioners’ allegation, that
respondent De Castro exerted undue pressure upon her co-nurses to alter the
actual time of the incident so as to exculpate her from any liability, was not clearly
substantiated.
Negligence is defined as the failure to exercise the standard of care that a
reasonably prudent person would have exercised in a similar situation. 12 The Court
emphasizes that the nature of the business of a hospital requires a higher degree
of caution and exacting standard of diligence in patient management and health
care as what is involved are lives of patients who seek urgent medical assistance.
An act or omission that falls short of the required degree of care and diligence
amounts to serious misconduct which constitutes a sufficient ground for dismissal.
However, in some cases, the Court had ruled that sanctioning an erring employee
with suspension would suffice as the extreme penalty of dismissal would be too
harsh.13 Considering that this was the first offense of respondent De Castro in her
nine (9) years of employment with petitioner hospital as a staff nurse without any
previous derogatory record and, further, as her lapse was not characterized by any
wrongful motive or deceitful conduct, the Court deems it appropriate that, instead
of the harsh penalty of dismissal, she would be suspended for a period of six (6)
months without pay, inclusive of the suspension for a period of 14 days which she
had earlier served. Thereafter, petitioner hospital should reinstate respondent
Edna R. De Castro to her former position without loss of seniority rights, full
backwages, inclusive of allowances and other benefits, or their monetary
equivalent, computed from the expiration of her suspension of six (6) months up to
the time of actual reinstatement.
WHEREFORE, the petition is DENIED. The Decision dated May 24, 2006 and
Resolution dated January 10, 2007 of the Court of Appeals, Special First Division,
in CA-G.R. SP No. 73189, which reversed and set aside the Decision dated
February 28, 2002 and Resolution dated May 31, 2002 of the National Labor
Relations Commission, Second Division, are AFFIRMED WITH MODIFICATION
insofar as respondent Edna R. De Castro is found guilty of gross negligence and is
SUSPENDED for a period of SIX (6) MONTHS without pay, inclusive of the
suspension for a period of 14 days which she had earlier served. Petitioner
Hospital Management Services, Inc.-Medical Center Manila is ORDERED to
reinstate respondent Edna R. De Castro to her former position without loss of
seniority rights, full backwages, inclusive of allowances and other benefits, or their
monetary equivalent, computed from the expiration of her suspension of six (6)
months up to the time of actual reinstatement.
SO ORDERED.
G.R. No. 164118 February 9, 2010
SARGASSO CONSTRUCTION and DEVELOPMENT
CORPORATION, Petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION (4th Division) and GORGONIO
MONGCAL, Respondent.
DECISION
PERALTA, J.:
This resolves the Petition for Review on Certiorari under Rule 45 of the 1997 Rules
of Court, praying that the Decision1 of the Court of Appeals (CA) dated January 27,
2004 dismissing petitioner's petition for certiorari, and the CA Resolution2 dated
May 28, 2004, denying petitioner's motion for reconsideration, be reversed and set
aside.
The undisputed facts, as accurately narrated by the Labor Arbiter, are as follows.
x x x complainant [herein respondent Mongcal] alleged that on May 7, 1993, he
was employed as a payloader operator by the respondent company; that his latest
assignment was in La Castellana, Negros Occidental for the period from March to
June 1995 in connection with the respondent's [herein petitioner] road construction
project at La Castellana; that as payloader operator, he was required to be ready
at any time to load dump trucks as so requested by truck drivers even at early
hours of the morning; that he was paid a monthly salary of not less than P3,900.00
for working seven (7) days a week including Saturdays, Sundays and holidays.
That on June 29, 1995 at around 2:30 o'clock in the morning, a dump truck driver
of the respondent company for truck No. 25, requested complainant to load his
dump truck with construction materials at the crusher site; that fully aware of the
policy of the company allowing dump truck drivers to start hauling materials even
at early hours of the morning and considering that truck drivers were required by
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the company to haul a quota of the number of truck loads of aggregates to be
delivered to the construction site everyday as per instruction given to them,
complainant willingly obliged to do his job; that it was later on discovered that said
Aldrin Rasote had diverted the delivery of said materials loaded to another person;
that as a result of this incident, complainant was dismissed from his job effective
30 June 1995. Complainant denies having a hand nor was he involved in the act
committed by truck driver Aldrin Rasote.
Complainant alleged that the respondent corporation filed a criminal complaint for
theft against him six (6) months after 29 June 1995, the date of the alleged
commission of the crime charged and only after coming to know that he had filed a
labor case against the company with this office.
Complainant further alleged that his dismissal from work was effected without any
valid ground and violative of the rules on due process; that he was not informed of
the reasons for his termination from the service nor was he given an opportunity to
explain his side, and hence, he was deprived of his means of livelihood without
due process of law. Hence, he prays for reinstatement, backwages, and separation
pay if reinstatement is no longer feasible.
Complainant also claims for moral and exemplary damages for having been
dismissed by respondent without cause and in order to harass and to discourage
him from pursuing his case against the respondent, he was falsely charged of the
crime of theft; that these are all indications of bad faith and this, having been done
in a wanton, oppressive or malevolent manner, complainant claims that he should
be awarded moral and exemplary damages in the amount of ₱100,000.00 an
₱50,000.00, respectively.
On the other hand, in their memorandum, the respondents aver that complainant
was validly dismissed from his job based on loss of confidence due to commission
of offense constituting act of dishonesty and flagrant violation of respondent's
policy.
Respondents aver that complainant was employed as a contract/project employee
on 18 April 1995 and later as payloader operator at its crusher site at Sitio Lapak,
La Castellana, Negros Occidental; that on 29 June 1995, or two (2) months and
eleven (11) days after complainant was hired, he was caught together with another
respondent's employee, Aldrin Rasote, a dump truck driver, stealing crushed
aggregate belonging to respondent company; that complainant operated his
payloader on the unholy hour of 2:00 o'clock in the early morning and loaded the
crushed aggregate unto the dump truck; that this act of loading crushed
aggregates during this particular date and time was unauthorized, as there was no
memorandum nor instruction from the management for complainant to perform his
job on that particular day.3
The Labor Arbiter ruled in favor of petitioner by dismissing the complaint but
ordered petitioner to pay herein private respondent ₱1,000.00 for failure to observe
due process requirements of law. On appeal, the National Labor Relations
Commission (NLRC) overturned the Labor Arbiter's ruling and issued a Decision
the dispositive portion of which reads as follows:
WHEREFORE, premises considered, judgment is hereby rendered setting aside
the appealed decision and another one entered ordering respondent Sargasso
Construction and Development Corporation to pay the complainant Gorgonio
Mongcal as follows:
1. SEPARATION PAY ₱ 40,560.00
2. BACKWAGES 164,450.00
TOTAL ₱205,010.00
The other claims and the case against respondent Mel J. Go and Felipe S.
Penecilla are dismissed for lack of merit.
SO ORDERED.4
The case was then elevated to the CA via a petition for certiorari and on January
27, 2004, the CA promulgated the assailed Decision which disposed thus:
WHEREFORE, premises considered, the instant petition is DISMISSED. The
assailed Decision and Resolution of the National Labor Relations Commission,
Fourth Division, Cebu City, dated November 29, 1999 and November 22, 2001,
respectively, are hereby AFFIRMED with MODIFICATION: the separation pay
should be computed from the date of private respondent's employment until the
finality of this decision while his backwages should be computed from the time of
his alleged dismissal up to the finality of this decision, and in both cases, using his
monthly salary of ₱3,380.00 as basis of computation.
SO ORDERED.5
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Petitioner moved for reconsideration but the same was denied per CA Resolution
dated May 28, 2004. Hence, this petition where it is alleged that:
I.
THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ERROR IN
DISREGARDING THE FINDINGS OF THE LABOR ARBITER WHICH ARE
SUPPORTED BY SUBSTANTIAL EVIDENCE.
II.
THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ERROR IN
HOLDING THAT PRIVATE RESPONDENT WAS ILLEGALLY DISMISSED.
III.
THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ERROR IN
SUSTAINING THE AWARD OF SEPARATION PAY AND BACKWAGES TO
PRIVATE RESPONDENT.6
The Court finds the petition unmeritorious.
Petitioner's assignment of errors boils down to the sole issue of whether the CA
correctly upheld the NLRC ruling that private respondent Mongcal was illegally
dismissed by petitioner because there was insufficient proof that the latter
conspired with one Aldrin Rasote to steal construction materials from petitioner.
The Labor Arbiter found that on June 29, 1995, at around 2:30 o'clock in the
morning, private respondent loaded the dump truck driven by one Aldrin Rasote
with aggregates despite the lack of a trip ticket or authorization, and said
aggregates were eventually delivered by Rasote to other persons. Such factual
findings of the Labor Arbiter were not overturned by the NLRC or the CA, but the
two higher courts interpreted the very same evidence differently. The NLRC,
affirmed by the CA, arrived at the conclusion that such fact did not point to a
conspiracy between the dump truck driver and private respondent Mongcal, a
payload operator, which would justify the latter's dismissal.
The long-standing rule is that the existence of a conspiracy must be proved by
clear, direct and convincing evidence.7 A perusal of the record shows that the
NLRC and the CA correctly ruled that petitioner's theory of conspiracy had not
been sufficiently established.1avvphi1
In Fernandez v. National Labor Relations Commission,8 The Court expounded on
the degree of evidence required to establish the existence of a conspiracy in this
wise:
While it is true that in conspiracy, direct proof is not essential, it must however, be
shown that it exists as clearly as the commission of the offense itself. There must
at least be adequate proof that the malefactors had come to an agreement
concerning the commission of a felony and decided to commit it.
xxx
x x x For conspiracy to exist, it is essential that there must be conscious design
to commit an offense. Conspiracy is not the product of negligence but of
intentionality on the part of the cohorts.9 (Emphasis supplied)
From the foregoing, it is quite clear that the evidence presented in this case did not
reach the level required to find respondent Mongcal guilty of conspiring to commit
theft of company property. Indeed, respondent Mongcal loaded the dump truck
with aggregates at 2:30 o'clock in the morning despite the lack of a trip ticket, but
petitioner utterly failed to rebut Mongcal's explanation that it was not unusual for
them to perform such tasks even at an early hour, because truck drivers tried to
reach the delivery quotas that petitioner had set. This was never denied or
rebutted by petitioner in any of its pleadings. Petitioner merely harped on the fact
that no trip ticket was issued for that particular delivery. However, even if petitioner
established that it was company policy to have trip tickets for every delivery of
aggregates, it failed to prove that it was the payload operators like respondent
Mongcal who had the duty of requiring dump truck drivers to show their trip tickets
before the trucks could be loaded with aggregates. Petitioner failed to prove that
respondent Mongcal was involved at all or agreed with the scheme to steal
aggregates from petitioner. There was no showing whatsoever, that respondent
Mongcal had any knowledge that Aldrin Rasote had the intention of stealing
company property.
Verily, there was a dearth of evidence directly linking respondent Mongcal to the
commission of the crime of theft, as his mere act of loading the dump truck with
aggregates did not show that he knew of Rasote's plan to deliver the load to a
place other than petitioner's construction site. The only conclusion, therefore, is
that petitioner illegally dismissed respondent Mongcal.
Under Article 279 of the Labor Code, an illegally dismissed employee "shall be
entitled to reinstatement without loss of seniority rights and other privileges and to
his full backwages, inclusive of allowances, and to his other benefits or their
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monetary equivalent computed from the time his compensation was withheld from
him up to the time of his actual reinstatement." In addition to full backwages, the
Court has also repeatedly ruled that in cases where reinstatement is no longer
feasible due to strained relations, then separation pay may be awarded instead of
reinstatement.10 In Mt. Carmel College v. Resuena,11 the Court reiterated that the
separation pay, as an alternative to reinstatement, should be equivalent to one (1)
month salary for every year of service.12

IN VIEW OF THE FOREGOING, the instant petition is dismissed. The Decision

and Resolution of the Court of Appeals dated January 27, 2004 and May 28, 2004,
respectively, in CA G.R. SP No. 70991 are AFFIRMED. Petitioner is ORDERED to
pay respondent Gorgonio Mongcal (a) separation pay in the amount equivalent to
one (1) month pay for every year of service; and (b) backwages, computed from
the time compensation of respondent Mongcal was withheld from him when he
was unjustly terminated, up to the time of payment thereof. For this purpose, the
records of this case are hereby REMANDED to the Labor Arbiter for proper
computation of said awards. Costs against petitioner.

SO ORDERED.

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