COLLECTIVE BARGAINING AGREEMENT

Department Order No. 9. [21 June 1997], and Department Order No. 40, [17
February 2003]

1. Definition - B5 R1 S1 (jj), IRR

(jj) "Collective Bargaining Agreement" 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, including
mandatory provisions for grievances and arbitration machineries.

Davao Integrated Port Stevedoring vs. Abarquez, 220 SCRA 197

G.R. No. 102132. March 19, 1993.

DAVAO INTEGRATED PORT STEVEDORING SERVICES, petitioner, vs.

RUBEN V. ABARQUEZ, in his capacity as an accredited Voluntary Arbitrator
and THE ASSOCIATION OF TRADE UNIONS (ATU-TUCP), respondents.

SYLLABUS

1. LABOR LAWS AND SOCIAL LEGISLATION; LABOR RELATIONS;

COLLECTIVE BARGAINING AGREEMENT; DEFINED; NATURE THEREOF;
CONSTRUCTION TO BE PLACED THEREON. — A collective bargaining
agreement (CBA), as used in Article 252 of the Labor Code, refers to 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. While the terms and conditions of a CBA
constitute the law between the parties, it is not, however, an ordinary contract to
which is applied the principles of law governing ordinary contracts. A CBA, as a
labor contract within the contemplation of Article 1700 of the Civil Code of the
Philippines which governs the relations between labor and capital, is not merely
contractual in nature but impressed with public interest, thus, it must yield to the
common good. As such, it must be construed liberally rather than narrowly and
technically, and the courts must place a practical and realistic construction upon
it, giving due consideration to the context in which it is negotiated and purpose
which it is intended to serve.

2. ID.; ID.; ID.; ID.; ID.; ID.; CASE AT BAR. — It is thus erroneous for petitioner to
isolate Section 1, Article VIII of the 1989 CBA from the other related section on
sick leave with pay benefits, specifically Section 3 thereof, in its attempt to justify
the discontinuance or withdrawal of the privilege of commutation or conversion to
cash of the unenjoyed portion of the sick leave benefit to regular intermittent
workers. The manner they were deprived of the privilege previously recognized
and extended to them by petitioner-company during the lifetime of the CBA of
October 16, 1985 until three (3) months from its renewal on April 15, 1989, or a
period of three (3) years and nine (9) months, is not only tainted with
arbitrariness but likewise discriminatory in nature. It must be noted that the 1989
CBA has two (2) sections on sick leave with pay benefits which apply to two (2)
distinct classes of workers in petitioner's company, namely: (1) the regular non-
intermittent workers or those workers who render a daily eight-hour service to the
company and are governed by Section 1, Article VIII of the 1989 CBA; and (2)
intermittent field workers who are members of the regular labor pool and the
present regular extra labor pool as of the signing of the agreement on April 15,
1989 or those workers who have irregular working days and are governed by
Section 3, Article VIII of the 1989 CBA. It is not disputed that both classes of
workers are entitled to sick leave with pay benefits provided they comply with the
conditions set forth under Section 1 in relation to the last paragraph of Section 3,
to wit: (1) the employee-applicant must be regular or must have rendered at least
one year of service with the company; and (2) the application must be
accompanied by a certification from a company-designated physician. the phrase
"herein sick leave privilege," as used in the last sentence of Section 1, refers to
the privilege of having a fixed 15-day sick leave with pay which, as mandated by
Section 1, only the non-intermittent workers are entitled to. This fixed 15-day sick
leave with pay benefit should be distinguished from the variable number of days
of sick leave, not to exceed 15 days, extended to intermittent workers under
Section 3 depending on the number of hours of service rendered to the company,
including overtime pursuant to the schedule provided therein. It is only fair and
reasonable for petitioner-company not to stipulate a fixed 15-day sick leave with
pay for its regular intermittent workers since, as the term "intermittent" implies,
there is irregularity in their work-days. Reasonable and practical interpretation
must be placed on contractual provisions. Interpetatio fienda est ut res magis
valeat quam pereat. Such interpretation is to be adopted, that the thing may
continue to have efficacy rather than fail.

3. ID.; ID.; ID.; SICK LEAVE BENEFITS; NATURE AND PURPOSE. — Sick
leave benefits, like other economic benefits stipulated in the CBA such as
maternity leave and vacation leave benefits, among others, are by their nature,
intended to be replacements for regular income which otherwise would not be
earned because an employee is not working during the period of said leaves.
They are non-contributory in nature, in the sense that the employees contribute
nothing to the operation of the benefits. By their nature, upon agreement of the
parties, they are intended to alleviate the economic condition of the workers.

4. ID.; ID.; JURISDICTION OF VOLUNTARY ARBITRATOR; CASE AT BAR. —

Petitioner-company's objection to the authority of the Voluntary Arbitrator to direct
the commutation of the unenjoyed portion of the sick leave with pay benefits of
intermittent workers in his decision is misplaced. Article 261 of the Labor Code is
clear. The questioned directive of the herein public respondent is the necessary
consequence of the exercise of his arbitral power as Voluntary Arbitrator under
Article 261 of the Labor Code "to hear and decide all unresolved grievances
arising from the interpretation or implementation of the Collective Bargaining
Agreement." We, therefore, find that no grave abuse of discretion was committed
by public respondent in issuing the award (decision). Moreover, his interpretation
of Sections 1 and 3, Article VIII of the 1989 CBA cannot be faulted with and is
absolutely correct.

5. ID.; CONDITIONS OF EMPLOYMENT; PROHIBITION AGAINST

ELIMINATION OR DIMINUTION OF BENEFITS; BENEFITS GRANTED
PURSUANT TO COMPANY PRACTICE OR POLICY CANNOT BE
PEREMPTORILY WITHDRAWN. — Whatever doubt there may have been early
on was clearly obliterated when petitioner-company recognized the said privilege
and paid its intermittent workers the cash equivalent of the unenjoyed portion of
their sick leave with pay benefits during the lifetime of the CBA of October 16,
1985 until three (3) months from its renewal on April 15, 1989. Well-settled is it
that the said privilege of commutation or conversion to cash, being an existing
benefit, the petitioner-company may not unilaterally withdraw, or diminish such
benefits. It is a fact that petitioner-company had, on several instances in the past,
granted and paid the cash equivalent of the unenjoyed portion of the sick leave
benefits of some intermittent workers. Under the circumstances, these may be
deemed to have ripened into company practice or policy which cannot be
peremptorily withdrawn.

DECISION

ROMERO, J p:

In this petition for certiorari, petitioner Davao Integrated Port Services

Corporation seeks to reverse the Award 1 issued on September 10, 1991 by
respondent Ruben V. Abarquez, in his capacity as Voluntary Arbitrator of the
National Conciliation and Mediation Board, Regional Arbitration Branch XI in
Davao City in Case No. AC-211-BX1-10-003-91 which directed petitioner to grant
and extend the privilege of commutation of the unenjoyed portion of the sick
leave with pay benefits to its intermittent field workers who are members of the
regular labor pool and the present regular extra pool in accordance with the
Collective Bargaining Agreement (CBA) executed between petitioner and private
respondent Association of Trade Unions (ATU-TUCP), from the time it was
discontinued and henceforth.

The facts are as follows:

Petitioner Davao Integrated Port Stevedoring Services (petitioner-company) and

private respondent ATU-TUCP (Union), the exclusive collective bargaining agent
of the rank and file workers of petitioner-company, entered into a collective
bargaining agreement (CBA) on October 16, 1985 which, under Sections 1 and
3, Article VIII thereof, provide for sick leave with pay benefits each year to its
employees who have rendered at least one (1) year of service with the company,
thus:

"ARTICLE VIII

Section 1. Sick Leaves — The Company agrees to grant 15 days sick leave with
pay each year to every regular non-intermittent worker who already rendered at
least one year of service with the company. However, such sick leave can only
be enjoyed upon certification by a company designated physician, and if the
same is not enjoyed within one year period of the current year, any unenjoyed
portion thereof, shall be converted to cash and shall be paid at the end of the
said one year period. And provided however, that only those regular workers of
the company whose work are not intermittent, are entitled to the herein sick leave
privilege.

xxx xxx xxx

Section 3. — All intermittent field workers of the company who are members of
the Regular Labor Pool shall be entitled to vacation and sick leaves per year of
service with pay under the following schedule based on the number of hours
rendered including overtime, to wit:

Hours of Service Per Vacation Sick Leave

Calendar Year Leave
Less than 750 NII NII
751 — 825 6 days 6 days
826 — 900 7 7
901 — 925 8 8
926 — 1,050 9 9
1,051 — 1,125 10 10
1,126 — 1,200 11 11
1,201 — 1,275 12 12
1,276 — 1,350 13 13
1,351 — 1,425 14 14
1,426 — 1,500 15 15

The conditions for the availment of the herein vacation and sick leaves shall be in
accordance with the above provided Sections 1 and 2 hereof, respectively."

Upon its renewal on April 15, 1989, the provisions for sick leave with pay benefits
were reproduced under Sections 1 and 3, Article VIII of the new CBA, but the
coverage of the said benefits was expanded to include the "present Regular
Extra Labor Pool as of the signing of this Agreement." Section 3, Article VIII, as
revised, provides, thus:
"Section 3. — All intermittent field workers of the company who are members of
the Regular Labor Pool and present Regular Extra Labor Pool as of the signing
of this agreement shall be entitled to vacation and sick leaves per year of service
with pay under the following schedule based on the number of hours rendered
including overtime, to wit:

Hours of Service Per Vacation Sick Leave

Calendar Year Leave
Less than 750 NII NII
751 — 825 6 days 6 days
826 — 900 7 7
901 — 925 8 8
926 — 1,050 9 9
1,051 — 1,125 10 10
1,126 — 1,200 11 11
1,201 — 1,275 12 12
1,276 — 1,350 13 13
1,351 — 1,425 14 14
1,426 — 1,500 15 15

The conditions for the availment of the herein vacation and sick leaves shall be in
accordance with the above provided Sections 1 and 2 hereof, respectively."

During the effectivity of the CBA of October 16, 1985 until three (3) months after
its renewal on April 15, 1989, or until July 1989 (a total of three (3) years and
nine (9) months), all the field workers of petitioner who are members of the
regular labor pool and the present regular extra labor pool who had rendered at
least 750 hours up to 1,500 hours were extended sick leave with pay benefits.
Any unenjoyed portion thereof at the end of the current year was converted to
cash and paid at the end of the said one-year period pursuant to Sections 1 and
3, Article VIII of the CBA. The number of days of their sick leave per year
depends on the number of hours of service per calendar year in accordance with
the schedule provided in Section 3, Article VIII of the CBA.

The commutation of the unenjoyed portion of the sick leave with pay benefits of
the intermittent workers or its conversion to cash was, however, discontinued or
withdrawn when petitioner-company under a new assistant manager, Mr.
Benjamin Marzo (who replaced Mr. Cecilio Beltran, Jr. upon the latter's
resignation in June 1989), stopped the payment of its cash equivalent on the
ground that they are not entitled to the said benefits under Sections 1 and 3 of
the 1989 CBA.

The Union objected to the said discontinuance of commutation or conversion to

cash of the unenjoyed sick leave with pay benefits of petitioner's intermittent
workers contending that it is a deviation from the true intent of the parties that
negotiated the CBA; that it would violate the principle in labor laws that benefits
already extended shall not be taken away and that it would result in
discrimination between the non-intermittent and the intermittent workers of the
petitioner-company.

Upon failure of the parties to amicably settle the issue on the interpretation of
Sections 1 and 3, Article VIII of the 1989 CBA, the Union brought the matter for
voluntary arbitration before the National Conciliation and Mediation Board,
Regional Arbitration Branch XI at Davao City by way of complaint for
enforcement of the CBA. The parties mutually designated public respondent
Ruben Abarquez, Jr. to act as voluntary arbitrator.

After the parties had filed their respective position papers, 2 public respondent
Ruben Abarquez, Jr. issued on September 10, 1991 an Award in favor of the
Union ruling that the regular intermittent workers are entitled to commutation of
their unenjoyed sick leave with pay benefits under Sections 1 and 3 of the 1989
CBA, the dispositive portion of which reads:

"WHEREFORE, premises considered, the management of the respondent Davao

Integrated Port Stevedoring Services Corporation is hereby directed to grant and
extend the sick leave privilege of the commutation of the unenjoyed portion of the
sick leave of all the intermittent field workers who are members of the regular
labor pool and the present extra pool in accordance with the CBA from the time it
was discontinued and henceforth.

SO ORDERED."

Petitioner-company disagreed with the aforementioned ruling of public

respondent, hence, the instant petition.

Petitioner-company argued that it is clear from the language and intent of the last
sentence of Section 1, Article VIII of the 1989 CBA that only the regular workers
whose work are not intermittent are entitled to the benefit of conversion to cash
of the unenjoyed portion of sick leave, thus: ". . . And provided, however, that only
those regular workers of the Company whose work are not intermittent are
entitled to the herein sick leave privilege."

Petitioner-company further argued that while the intermittent workers were paid
the cash equivalent of their unenjoyed sick leave with pay benefits during the
previous management of Mr. Beltran who misinterpreted Sections 1 and 3 of
Article VIII of the 1985 CBA, it was well within petitioner-company's rights to
rectify the error it had committed and stop the payment of the said sick leave with
pay benefits. An error in payment, according to petitioner-company, can never
ripen into a practice.

We find the arguments unmeritorious.

A collective bargaining agreement (CBA), as used in Article 252 of the
Labor Code, refers to 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.

While the terms and conditions of a CBA constitute the law between the
parties, 3 it is not, however, an ordinary contract to which is applied the
principles of law governing ordinary contracts. 4 A CBA, as a labor contract
within the contemplation of Article 1700 of the Civil Code of the Philippines which
governs the relations between labor and capital, is not merely contractual in
nature but impressed with public interest, thus, it must yield to the common
good. As such, it must be construed liberally rather than narrowly and
technically, and the courts must place a practical and realistic construction
upon it, giving due consideration to the context in which it is negotiated
and purpose which it is intended to serve. 5

It is thus erroneous for petitioner to isolate Section 1, Article VIII of the 1989
CBA from the other related section on sick leave with pay benefits,
specifically Section 3 thereof, in its attempt to justify the discontinuance or
withdrawal of the privilege of commutation or conversion to cash of the
unenjoyed portion of the sick leave benefit to regular intermittent workers.
The manner they were deprived of the privilege previously recognized and
extended to them by petitioner-company during the lifetime of the CBA of
October 16, 1985 until three (3) months from its renewal on April 15, 1989, or a
period of three (3) years and nine (9) months, is not only tainted with
arbitrariness but likewise discriminatory in nature. Petitioner-company is of the
mistaken notion that since the privilege of commutation or conversion to
cash of the unenjoyed portion of the sick leave with pay benefits is found
in Section 1, Article VIII, only the regular non-intermittent workers and no
other can avail of the said privilege because of the proviso found in the last
sentence thereof.

It must be noted that the 1989 CBA has two (2) sections on sick leave with pay
benefits which apply to two (2) distinct classes of workers in petitioner's
company, namely: (1) the regular non-intermittent workers or those workers who
render a daily eight-hour service to the company and are governed by Section 1,
Article VIII of the 1989 CBA; and (2) intermittent field workers who are members
of the regular labor pool and the present regular extra labor pool as of the signing
of the agreement on April 15, 1989 or those workers who have irregular working
days and are governed by Section 3, Article VIII of the 1989 CBA.

It is not disputed that both classes of workers are entitled to sick leave with pay
benefits provided they comply with the conditions set forth under Section 1 in
relation to the last paragraph of Section 3, to wit: (1) the employee-applicant
must be regular or must have rendered at least one year of service with the
company; and (2) the application must be accompanied by a certification from a
company-designated physician.

Sick leave benefits, like other economic benefits stipulated in the CBA such as
maternity leave and vacation leave benefits, among others, are by their nature,
intended to be replacements for regular income which otherwise would not be
earned because an employee is not working during the period of said leaves. 6
They are non-contributory in nature, in the sense that the employees contribute
nothing to the operation of the benefits. 7 By their nature, upon agreement of the
parties, they are intended to alleviate the economic condition of the workers.

After a careful examination of Section 1 in relation to Section 3, Article VIII of the

1989 CBA in light of the facts and circumstances attendant in the instant case,
we find and so hold that the last sentence of Section 1, Article VIII of the
1989 CBA, invoked by petitioner-company does not bar the regular
intermittent workers from the privilege of commutation or conversion to
cash of the unenjoyed portion of their sick leave with pay benefits, if
qualified. For the phrase "herein sick leave privilege," as used in the last
sentence of Section 1, refers to the privilege of having a fixed 15-day sick
leave with pay which, as mandated by Section 1, only the non-intermittent
workers are entitled to. This fixed 15-day sick leave with pay benefit should
be distinguished from the variable number of days of sick leave, not to
exceed 15 days, extended to intermittent workers under Section 3
depending on the number of hours of service rendered to the company,
including overtime pursuant to the schedule provided therein. It is only fair
and reasonable for petitioner-company not to stipulate a fixed 15-day sick
leave with pay for its regular intermittent workers since, as the term
"intermittent" implies, there is irregularity in their work-days. Reasonable
and practical interpretation must be placed on contractual provisions.
Interpetatio fienda est ut res magis valeat quam pereat. Such interpretation
is to be adopted, that the thing may continue to have efficacy rather than fail. 8

We find the same to be a reasonable and practical distinction readily discernible

in Section 1, in relation to Section 3, Article VIII of the 1989 CBA between the two
classes of workers in the company insofar as sick leave with pay benefits are
concerned. Any other distinction would cause discrimination on the part of
intermittent workers contrary to the intention of the parties that mutually agreed in
incorporating the questioned provisions in the 1989 CBA.

Public respondent correctly observed that the parties to the CBA clearly
intended the same sick leave privilege to be accorded the intermittent
workers in the same way that they are both given the same treatment with
respect to vacation leaves - non-commutable and non-cumulative. If they
are treated equally with respect to vacation leave privilege, with more
reason should they be on par with each other with respect to sick leave
privileges. 9 Besides, if the intention were otherwise, during its
renegotiation, why did not the parties expressly stipulate in the 1989 CBA
that regular intermittent workers are not entitled to commutation of the
unenjoyed portion of their sick leave with pay benefits?

Whatever doubt there may have been early on was clearly obliterated when
petitioner-company recognized the said privilege and paid its intermittent
workers the cash equivalent of the unenjoyed portion of their sick leave
with pay benefits during the lifetime of the CBA of October 16, 1985 until
three (3) months from its renewal on April 15, 1989. Well-settled is it that
the said privilege of commutation or conversion to cash, being an existing
benefit, the petitioner-company may not unilaterally withdraw, or diminish
such benefits. 10 It is a fact that petitioner-company had, on several
instances in the past, granted and paid the cash equivalent of the
unenjoyed portion of the sick leave benefits of some intermittent workers.
11 Under the circumstances, these may be deemed to have ripened into
company practice or policy which cannot be peremptorily withdrawn. 12

Moreover, petitioner-company's objection to the authority of the Voluntary

Arbitrator to direct the commutation of the unenjoyed portion of the sick leave
with pay benefits of intermittent workers in his decision is misplaced. Article 261
of the Labor Code is clear. The questioned directive of the herein public
respondent is the necessary consequence of the exercise of his arbitral power as
Voluntary Arbitrator under Article 261 of the Labor Code "to hear and decide all
unresolved grievances arising from the interpretation or implementation of the
Collective Bargaining Agreement." We, therefore, find that no grave abuse of
discretion was committed by public respondent in issuing the award (decision).
Moreover, his interpretation of Sections 1 and 3, Article VIII of the 1989 CBA
cannot be faulted with and is absolutely correct.

WHEREFORE, in view of the foregoing, the petition is DISMISSED. The award

(decision) of public respondent dated September 10, 1991 is hereby AFFIRMED.
No costs.

SO ORDERED.

PT&T vs. NLRC, 245 SCRA 193 [1995]

G.R. No. 99858 June 19, 1995

PHILIPPINE TELEGRAPH AND TELEPHONE CORPORATION, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and PT&T EMPLOYEE'S
UNION-ALU, respondents.
VITUG, J.:

Herein private respondent PT&T Union-ALU initiated this case via a complaint,
filed on 25 November 1986, charging petitioner Philippine Telegraph and
Telephone Corporation ("PT&T") with unfair labor practice acts and
underpayment of statutory and contractual benefits claimed to be due pursuant to
Wage Orders No. 3, 4, 5 and 6, and also under Sections 2 and 3, Article IX, of
the 1984 Collective Bargaining Agreement ("CBA") and Section 2, Article XII, of
the 1986 CBA. Petitioner denied the charges.

On 27 April 1989, the Labor Arbiter, following the respective submissions made
by the parties, rendered judgment thusly:

WHEREFORE, premises considered, respondent Philippine

Telegraph and Telephone Corporation (PT&T) with main office and
postal address at SSC Bldg., 106 Alvarez St., Legaspi Village,
Makati, Metro Manila, is hereby ORDERED, to pay the individual
complainants-members of PT&T Employees Union-ALU their
corresponding salary differentials in accordance with Wage Order
Nos. 3 to 6; and/or Sections 2 and 3, Article IX of the 1984 CBA and
Section 2, of Article XII of the 1986 CBA.

As regards the charge of unfair labor practice acts, the same is

hereby dismissed for lack of merit.

Petitioner interposed an appeal to the National Labor Relations Commission

("NLRC") and assailed the arbiter's decision on the following grounds: That —

1. The Honorable Labor Arbiter committed serious errors in finding

that the failure of respondent-appellant to present payrolls for the
period of at least two (2) months prior to and after November 1,
1983 leads to the conclusion that there was indeed a violation of
the Wage Orders, which would cause grave or irreparable damage
or injury to the appellants.

2. The Honorable Labor Arbiter committed serious errors in the

interpretation of the Wage Orders that respondent-appellant
committed a violation thereto.

In a resolution, dated 31 October 1989, the NLRC dismissed the appeal for lack
of merit. Petitioner moved for reconsideration stressing that only the higher
remuneration from either the statutorily mandated increase or the CBA should be
given and paid to the employees. This motion, as well as the supplement thereto,
was denied by public respondent.
Hence, this petition for certiorari.

We grant, in part, the petition.

We need not belabor the first of the two grounds raised by petitioner corporation.
We see no merit at all in the contention that the NLRC has committed grave
abuse of discretion, amounting to lack of jurisdiction, in finding petitioner to have
failed in its compliance with the increases mandated by Wage Orders No. 3, 4, 5
and 6, as well as the 1984 and 1986 CBAs. That this factual finding is not without
basis should be fairly evident from the statement of the Labor Arbiter, adopted by
the respondent Commission, thusly:

As regards the issue of underpayment, respondent PT&T miserably

failed to substantiate their stand of compliance with Wage Order
Nos. 3 to 6 and the provisions of the 1984 and 1986 CBAs. All that
was submitted by the respondent PT&T were sample payrolls for
the period January and February 1985, purportedly to show that
complainants were allegedly paid in accordance with Wage Order
No. 6, without presenting however, the payrolls for the period of at
least two (2) months prior to and after November 1, 1983, when
Wage Order No. 3, took effect, in order to determine whether there
was compliance or not starting with Wage
No. 3. . . .1

Petitioner's position, however, on the second issue is well taken. The Solicitor
General likewise agrees that petitioner cannot, given the circumstances here
obtaining, be obligated to pay both the CBA and statutory, wage increases. The
common provisions of Wage Orders No. 3, 5, and 6, state that:

All increases in wages and/or allowances granted or paid by

employers . . . shall be credited as compliance with the minimum
wage and allowance adjustments prescribed herein, provided that
where the increases are less than the applicable amount provided
in this Order, the employer shall pay the difference. Such increases
shall not include anniversary wage increases provided in collective
bargaining agreements unless the agreements expressly provide
otherwise . . . . 2

Petitioner company and private respondent union, in the 1984 and 1986 CBAs, in
turn, have stipulated that:

The parties agree that in the event of additional wage increases,

bonuses or allowances which may during the life of this agreement
being made mandatory as a matter of law, such that the minimum
wage including bonuses and allowances shall be greater than the
wage provided therein, then such wages shall ipso facto become
 the total remunerations under such agreement in lieu of all other
remunerations and increases herein provided.3

The foregoing CBA provisions reveal quite sufficiently the parties' intention
to consider salary increases provided in the CBA to be creditable to wage
increases that are or may be mandated within the applicable period by law.
There is nothing sinister in this stipulation. In Filipinas Golf and Country
Club, Inc., vs. National Labor Relations Commission , 176 SCRA 625, we
have said that such agreements merely create an equivalence between
legal and contractual imperatives, rendering both obligations susceptible
performance by compliance with either, subject only to the condition that
where the increases given under agreement fall short in amount of those
fixed by law, the difference must be made up by the employer.

WHEREFORE, the decision of the National Labor Relations Commission under

review is MODIFIED insofar as it affirmed in toto the Labor Arbiter's decision
ordering the payment to private respondent union's members their corresponding
salary differentials in accordance with Wage Orders No. 3 to 6; and Sections 2
and 3, Article IX of the 1984 CBA and Section 2, of Article XII of the 1986 CBA;
instead, the case is REMANDED to the Commission for a computation of the
salary differentials payable to the members of respondent union conformably
with, and in the manner expressed in, this opinion. No special pronouncement on
costs.

SO ORDERED.

2. Contents - supra., IRR

2.1 Mandatory subjects

a) Compliance with minimum labor standards; what is effect of sub- standard

contract

RFM Corp Flour Division vs. KAMPI-NAFLU-KMU, GR No.162324, 04 February

2009.

CARPIO MORALES, J.:

Petitioner RFM Corporation (RFM) is a domestic corporation engaged in
flour-milling and animal feeds manufacturing. Sometime in 2000, its Flour
Division and SFI Feeds Division entered into collective bargaining agreements
(CBAs) with their respective labor unions, the Kasapian ng Manggagawang
Pinagkaisa-RFM (KAMPI-NAFLU-KMU) for the Flour Division, and Sandigan at
Ugnayan ng Manggagawang Pinagkaisa-SFI (SUMAPI-NAFLU-KMU) for the
Feeds Division (respondents). The CBAs, which contained similar provisions,
were effective for five years, from July 1, 2000 up to June 30, 2005.
 Sec. 3, Art. XVI of each of the CBAs reads:

Section. 3. Special Holidays with Pay The

COMPANY agrees to make payment to all daily paid
employees, in respect of any of the days enumerated
hereunto if declared as special holidays by the
national government:

a) Black Saturday
b) November 1
c) December 31

The compensation rate shall be the regular

rate. Any work beyond eight (8) hours shall be paid
the standard ordinary premium. (Emphasis and
underscoring supplied)

During the first year of the effectivity of the CBAs in 2000, December
31 which fell on a Sunday was declared by the national government as a
special holiday. Respondents thus claimed payment of their members
salaries, invoking the above-stated CBA provision. Petitioner refused the
claims for payment, averring that December 31, 2000 was not compensable
as it was a rest day. The controversy resulted in a deadlock, drawing the
parties to submit the same for voluntary arbitration.
Following the submission by the parties of their respective position papers,
Voluntary Arbitrator (VA) Bernardino M. Volante, by Decision [1] of October 11,
2001, declared that the above-quoted provision of the CBA is clear. It accordingly
ruled in favor of respondents and ordered petitioner to pay the salaries of
respondents members for December 31, 2000, and to pay attorneys fees to
respondents equivalent to 10% of the monetary award.
Its motion for reconsideration of the VA ruling having been denied,
[2]
petitioner appealed to the Court of Appeals which affirmed the same by
Decision[3] dated October 30, 2003.
The appellate court held that if it was indeed petitioners intent to pay the
salaries of daily-paid employees during a special holiday, even if unworked, only
if such special holiday fell on weekdays, then it should have been clearly and
expressly stipulated in the CBAs. And it held inapplicable Kimberly Clark
Philippines v. Lorredo[4] cited by petitioner which case held that whenever there is
a conflict between the words in the CBA and the evident intention of the parties,
the latter prevails. For, so the appellate court explained, there were no words or
provisions in the CBAs which would result in an absurd interpretation vis a vis the
parties true intention.
In sustaining the award of attorneys fees, the appellate court ruled that
respondents were entitled thereto as they were compelled to engage a lawyer to
pursue their claims.
 Petitioners motion for reconsideration having been denied, the present
petition was filed.
Petitioner insists that the CBA provision in question was intended
to protect the employees from reduction of their take-home pay, hence, it was not
meant to remunerate them on Sundays, which are rest days, nor to increase their
salaries.
On the award of attorneys fees, petitioner argues that it is not warranted
as it did not arbitrarily refuse to pay respondents demands.
The petition is bereft of merit.
If the terms of a CBA are clear and have no doubt upon the intention
of the contracting parties, as in the herein questioned provision, the literal
meaning thereof shall prevail. That is settled.[5] As such, the daily-paid
employees must be paid their regular salaries on the holidays which are so
declared by the national government, regardless of whether they fall on
rest days.

Holiday pay is a legislated benefit enacted as part of the

Constitutional imperative that the State shall afford protection to
labor. Its purpose is not merely to prevent diminution of the
monthly income of the workers on account of work
interruptions. In other words, although the worker is forced to
take a rest, he earns what he should earn, that is, his holiday
pay.[6] (Emphasis and underscoring supplied)

The CBA is the law between the parties, hence, they are obliged to
comply with its provisions. Indeed, if petitioner and respondents intended
the provision in question to cover payment only during holidays falling on
work or weekdays, it should have been so incorporated therein.
Petitioner maintains, however, that the parties failed to foresee a
situation where the special holiday would fall on a rest day. The Court is
not persuaded. The Labor Code specifically enjoins that in case of doubt in
the interpretation of any law or provision affecting labor, it should be
interpreted in favor of labor.
Respondents having been compelled to litigate as a result of petitioners
failure to satisfy their valid claim, the Court deems it just and equitable to sustain
the award of attorneys fees.
WHEREFORE, the petition is DENIED.

SO ORDERED.

b) Grievance procedure and voluntary arbitration

San Miguel Corp. vs. NLRC, 204 SCRA 1 (1999)

[G.R. No. 99266. March 2, 1999]

SAN MIGUEL CORPORATION, petitioner, vs. NATIONAL LABOR
RELATIONS COMMISSION, SECOND DIVISION, AND SAN MIGUEL
CORPORATION EMPLOYEES UNION (SMCEU) -
PTGWO, respondents.

SYNOPSIS
San Miguel Corporation (SMC), which allegedly needed to streamline its operations due to
financial losses shut down some of its plants and declared 55 positions as redundant.
Consequently, the private respondent union (SMCEU) filed several grievance cases for the said
retrenched employees, praying for the redeployment of the said employees to the other divisions
of the company. During the grievance proceedings, however, most of the employees were
redeployed, while others accepted early retirement. As a result, only 17 employees remained
when the parties proceeded to the third level of the grievance procedure. The private respondent
filed with the National Conciliation and Mediation Board (NCMB) of the Department of Labor and
Employment (DOLE) a notice of strike. Petitioner, on the other hand, moved to dismiss the notice
of strike, but the NCMB failed to act on the motion. Petitioner SMC filed a complaint with the
respondent NLRC praying for the dismissal of the notice of strike, and an order compelling the
respondent union to submit to grievance and arbitration the issue listed in the notice of strike, and
the recovery of the expenses of litigation. Respondent NLRC came out with a minute resolution
dismissing the complaint. Aggrieved by the resolution, petitioner found its way to this Court via
the present petition.
In the case under consideration, the grounds relied upon by the private respondent union are
non-strikeable. Their grounds appear more illusory than real. The Court held that the violation of
the CBA is chargeable against the private respondent union. The Supreme Court granted the
instant petition. SMCEU-PTGWO was directed to complete the third level of the Grievance
Procedure and proceed with the Arbitration proceedings if necessary.

SYLLABUS
1. LABOR AND SOCIAL LEGISLATION; LABOR RELATIONS; COLLECTIVE BARGAINING
AGREEMENT; COLLECTIVE BARGAINING DEADLOCK; DEFINED; NOT PRESENT IN
CASE AT BAR. Collective Bargaining Deadlock is defined as the situation between the labor
and the management of the company where there is failure in the collective bargaining
negotiations resulting in a stalemate. This situation, is non-existent in the present case since
there is a Board assigned on the third level (Step 3) of the grievance machinery to resolve
the conflicting views of the parties. Instead of asking the Conciliation Board composed of
five representatives each from the company and the union, to decide the conflict, petitioner
declared a deadlock, and thereafter, filed a notice of strike. For failing to exhaust all the
steps in the grievance machinery and arbitration proceedings provided in the Collective
Bargaining Agreement, the notice of strike should have been dismissed by the NLRC and
private respondent union ordered to proceed with the grievance and arbitration proceedings.
In the case of Liberal Labor Union vs. Phil. Can Co., the court declared as illegal the strike
staged by the union for not complying with the grievance procedure provided in the collective
bargaining agreement, ruling that: xxx the main purpose of the parties in adopting a
procedure in the settlement of their disputes is to prevent a strike. This procedure must be
followed in its entirely if it is to achieve its objective. xxx strikes held in violation of the terms
contained in the collective bargaining agreement are illegal, specially when they provide for
conclusive arbitration clauses. These agreements must be strictly adhered to and respected
if their ends have to be achieved. xxx
2. ID.; ID.; ID.; ABOLITION OF DEPARTMENT OR POSITION IS ONE OF THE RECOGNIZED
MANAGEMENT PREROGATIVE; IN THE ABSENCE OF PROOF THE ACT IS ILL
MOTIVATED, IT IS PRESUMED THAT HE ACTED IN GOOD FAITH. In abandoning the
grievance proceedings and stubbornly refusing to avail of the remedies under the CBA,
private respondent violated the mandatory provisions of the collective bargaining
agreement. Abolition of departments or positions in the company is one of the recognized
 management prerogatives. Noteworthy is the fact that the private respondent does not
question the validity of the business move of petitioner. In the absence of proof that the act
of petitioner was ill-motivated, it is presumed that petitioner San Miguel Corporation acted in
good faith. In fact, petitioner acceded to the demands of the private respondent union by
redeploying most of the employees involved: such that from an original 17 excess
employees in BLD, 15 were successfully redeployed. In AOC, out of the 17 original excess,
15 were redeployed. In the Magnolia Manila Buying Station, out of 18 employees, 6 were
deployed and only 12 were terminated.
DECISION
PURISIMA, J.:
At bar is a Petition for Certiorari under Rule 65 of the Revised Rules of Court,
assailing the Resolution[1] of the National Labor Relations Commission in NLRC
NCR CASE NO. 00094-90, which dismissed the complaint of San Miguel
Corporation (SMC), seeking to dismiss the notice of strike given by the private
respondent union and to compel the latter to comply with the provisions of the
Collective Bargaining Agreement (CBA)[2] on grievance machinery, arbitration,
and the no-strike clause, with prayer for the issuance of a temporary restraining
order.
The antecedent facts are as follows:
In July 1990, San Miguel Corporation, alleging the need to streamline its
operations due to financial losses, shut down some of its plants and declared 55
positions as redundant, listed as follows: seventeen (17) employees in the
Business Logistics Division (BLD), seventeen (17) in the Ayala Operations
Center (AOC), and eighteen (18) in the Magnolia-Manila Buying
[3]
Station (Magnolia-MBS). Consequently, the private respondent union filed
several grievance cases for the said retrenched employees, praying for
the redeployment of the said employees to the other divisions of the company.
The grievance proceedings were conducted pursuant to Sections 5 and 8,
Article VIII of the parties 1990 Collective Bargaining Agreement providing for the
following procedures, to wit:
Sec.5. Processing of Grievance. - Should a grievance arise, an
earnest effort shall be made to settle the grievance expeditiously in
accordance with the following procedures:
Step 1. - The individual employee concerned and the Union
Directors, or the Union Steward shall, first take up the employees
grievance orally with his immediate superior. If no satisfactory
agreement or adjustment of the grievance is reached, the
grievance shall, within twenty (20) working days from the
occurrence of the cause or event which gave rise to the grievance,
be filed in writing with the Department Manager or the next level
superior who shall render his decision within ten (10) working days
from the receipt of the written grievance. A copy of the decision
shall be furnished the Plant Personnel Officer.
Step 2. - If the decision in Step 1 is rejected, the employee
concerned may elevate or appeal this in writing to the Plant
Manager/Director or his duly authorized representative within
twenty (20) working days from the receipt of the Decision of the
Department Manager. Otherwise, the decision in Step 1 shall be
deemed accepted by the employee.
The Plant Manager/Director assisted by the Plant Personnel Officer
shall determine the necessity of conducting grievance meetings. If
necessary, the Plant Manager/Director and the Plant Personnel
Officer shall meet the employee concerned and the Union
Director/Steward on such date(s) as may be designated by the
Plant Manager. In every plant/office, Grievance Meetings shall be
scheduled at least twice a month.
The Plant Manager shall give his written comments and decision
within ten (10) working days after his receipt of such grievance or
the date of submission of the grievance for resolution, as the case
may be. A copy of his Decision shall be furnished the Employee
Relations Directorate.
Step 3. - If no satisfactory adjustment is arrived at Step 2, the
employee may appeal the Decision to the Conciliation Board as
provided under Section 6 hereof, within fifteen (15) working days
from the date of receipt of the decision of the Plant
Manager/Director or his designate. Otherwise, the decision in Step
2 shall be deemed accepted by the employee.
The Conciliation Board shall meet on the grievance in such dates
as shall be designated by the Division/Business Unit Manager or
his representative. In every Division/Business Unit, Grievance
Meetings of the Conciliation Board shall be scheduled at least once
a month.
The Conciliation Board shall have fifteen (15) working days from
the date of submission of the grievance for resolution within which
to decide on the grievance.
SEC. 6. Conciliation Board. - There shall be a conciliation Board
per Business Unit or Division. Every Conciliation Board shall be
composed of not more than five (5) representatives each from the
Company and the Union. Management and the Union may be
assisted by their respective legal counsels.
In every Division/Business Unit, the names of the Company and
Union representatives to the Conciliation Board shall be submitted
to the Division/Business Unit Manager not later than January of
every year.The Conciliation Board members shall act as such for
one (1) year until removed by the Company or the Union, as the
case may be.
xxx
Sec. 8. Submission to Arbitration. - If the employee or Union is
not satisfied with the Decision of the Conciliation Board and desires
to submit the grievance to arbitration, the employee or the Union
shall serve notice of such intention to the Company within fifteen
(15) working days after receipt of the Boards decision. If no such
written notice is received by the Company within fifteen (15)
 working days, the grievance shall be considered settled on the
basis of the companys position and shall no longer be available for
arbitration.[4]
During the grievance proceedings, however, most of the employees were
redeployed, while others accepted early retirement. As a result only 17
employees remained when the parties proceeded to the third level (Step 3) of the
grievance procedure. In a meeting on October 26, 1990, petitioner informed
private respondent union that if by October 30, 1990, the remaining 17
employees could not yet be redeployed, their services would be terminated on
November 2, 1990. The said meeting adjourned when Mr. Daniel S. L. Borbon II,
a representative of the union, declared that there was nothing more to discuss in
view of the deadlock.[5]
On November 7, 1990, the private respondent filed with the National
Conciliation and Mediation Board (NCMB) of the Department of Labor and
Employment (DOLE) a notice of strike on the following grounds: a) bargaining
deadlock; b) union busting; c) gross violation of the Collective Bargaining
Agreement (CBA), such as non-compliance with the grievance
procedure; d) failure to provide private respondent with a list of vacant positions
pursuant to the parties side agreement that was appended to the 1990 CBA;
and e) defiance of voluntary arbitration award. Petitioner on the other hand,
moved to dismiss the notice of strike but the NCMB failed to act on the motion.
On December 21, 1990, petitioner SMC filed a complaint [6] with the
respondent NLRC, praying for: (1) the dismissal the notice of strike; (2) an order
compelling the respondent union to submit to grievance and arbitration the issue
listed in the notice of strike; (3) the recovery of the expenses of litigation.
On April 16, 1991, respondent NLRC came out with a minute resolution
dismissing the complaint; holding, thus:
NLRC NCR IC NO. 000094-90, entitled San Miguel Corporation,
Complainant -versus- San Miguel Corporation Employees Union-
PTWO (SMCEU), Respondent. - Considering the allegations in the
complaint to restrain Respondent Union from declaring a strike and
to enforce mutual compliance with the provisions of the collective
bargaining agreement on grievance machinery, and the no-strike
clause, with prayer for issuance of temporary restraining order, and
the evidence adduced therein, the Answer filed by the respondent
and the memorandum filed by the complainant in support of its
application for the issuance of an injunction, the Second Division,
after due deliberation, Resolved to dismiss the complaint for lack of
merit.[7]
Aggrieved by the said resolution, petitioner found its way to this court via the
present petition, contending that:
I
IT IS THE POSITIVE LEGAL DUTY OF RESPONDENT NLRC TO COMPEL
ARBITRATION AND TO ENJOIN A STRIKE IN VIOLATION OF A NO
STRIKE CLAUSE.
II
 INJUNCTION IS THE ONLY IMMEDIATE, EFFECTIVE SUBSTITUTE FOR
THE DISASTROUS ECONOMIC WARFARE THAT ARBITRATION IS
DESIGNED TO AVOID.[8]
On June 3, 1991, to preserve the status quo, the Court issued a
Resolution[9] granting petitioners prayer for the issuance of a Temporary
Restraining Order.
The Petition is impressed with merit.
Rule XXII, Section I, of the Rules and Regulations Implementing Book V the
Labor Code[10], reads:
Section 1. Grounds for strike and lockout. -- A strike or lockout may
be declared in cases of bargaining deadlocks and unfair labor
practices. Violations of the collective bargaining agreements,
except flagrant and/or malicious refusal to comply with its economic
provisions, shall not be considered unfair labor practice and shall
not be strikeable. No strike or lockout may be declared on grounds
involving inter-union and intra-union disputes or on issues brought
to voluntary or compulsory arbitration.
In the case under consideration, the grounds relied upon by the private
respondent union are non-strikeable. The issues which may lend
substance to the notice of strike filed by the private respondent union are:
collective bargaining deadlock and petitioners alleged violation of the
collective bargaining agreement. These grounds, however, appear more
illusory than real.
Collective Bargaining Deadlock is defined as the situation between the labor
and the management of the company where there is failure in the collective
bargaining negotiations resulting in a stalemate [11]This situation, is non-existent
in the present case since there is a Board assigned on the third level (Step
3) of the grievance machinery to resolve the conflicting views of the
parties. Instead of asking the Conciliation Board composed of five
representatives each from the company and the union, to decide the
conflict, petitioner declared a deadlock, and thereafter, filed a notice of
strike. For failing to exhaust all the steps in the grievance machinery and
arbitration proceedings provided in the Collective Bargaining Agreement,
the notice of strike should have been dismissed by the NLRC and private
respondent union ordered to proceed with the grievance and arbitration
proceedings. In the case of Liberal Labor Union vs. Phil. Can Co.,[12] the court
declared as illegal the strike staged by the union for not complying with the
grievance procedure provided in the collective bargaining agreement, ruling
that:
x x x the main purpose of the parties in adopting a procedure in the
settlement of their disputes is to prevent a strike. This procedure must
be followed in its entirety if it is to achieve its objective. x x x strikes
held in violation of the terms contained in the collective bargaining
agreement are illegal, specially when they provide for conclusive arbitration
clauses. These agreements must be strictly adhered to and respected if their
ends have to be achieved. x x x[13]
 As regards the alleged violation of the CBA, we hold that such a
violation is chargeable against the private respondent union. In
abandoning the grievance proceedings and stubbornly refusing to avail of
the remedies under the CBA, private respondent violated the mandatory
provisions of the collective bargaining agreement.
Abolition of departments or positions in the company is one of the recognized
management prerogatives.[14] Noteworthy is the fact that the private respondent
does not question the validity of the business move of petitioner. In the absence
of proof that the act of petitioner was ill-motivated, it is presumed that petitioner
San Miguel Corporation acted in good faith. In fact, petitioner acceded to the
demands of the private respondent union by redeploying most of the employees
involved; such that from an original 17 excess employees in BLD, 15 were
successfully redeployed. In AOC, out of the 17 original excess, 15 were
redeployed. In the Magnolia - Manila Buying Station, out of 18 employees, 6
were redeployed and only 12 were terminated. [15]
So also, in filing complaint with the NLRC, petitioner prayed that the private
respondent union be compelled to proceed with the grievance and arbitration
proceedings. Petitioner having evinced its willingness to negotiate the fate of the
remaining employees affected, there is no ground to sustain the notice of strike
of the private respondent union.
All things studiedly considered, we are of the ineluctable conclusion, and so
hold, that the NLRC gravely abused its discretion in dismissing the complaint of
petitioner SMC for the dismissal of the notice of strike, issuance of a temporary
restraining order, and an order compelling the respondent union to settle the
dispute under the grievance machinery of their CBA.
WHEREFORE, the instant petition is hereby GRANTED. Petitioner San
Miguel Corporation and private respondent San Miguel Corporation Employees
Union - PTGWO are hereby directed to complete the third level (Step 3) of the
Grievance Procedure and proceed with the Arbitration proceedings if
necessary. No pronouncement as to costs.
SO ORDERED.

c) No strike/no lockout clause

Malayang Samahan ng mga Manggagawa sa M Greenfield vs. Ramos, 326

SCRA 428 [2000]

DECISION

PURISIMA, J.:

At bar is a Petition for Certiorari under Rule 65 of the Revised Rules of Court to
annul the decision of the National Labor Relations Commission in an unfair labor
practice case instituted by a local union against its employer company and the
officers of its national federation.
The petitioner, Malayang Samahan ng mga Manggagawa sa M. Greenfield, Inc.,
(B) (MSMG), hereinafter referred to as the "local union", is an affiliate of the
private respondent, United Lumber and General Workers of the Philippines
(ULGWP), referred to as the "federation". The collective bargaining agreement
between MSMG and M. Greenfield, Inc. names the parties as follows:

"This agreement made and entered into by and between:

M. GREENFIELD, INC. (B) a corporation duly organized in

accordance with the laws of the Republic of the Philippines
with office address at Km. 14, Merville Road, Paraaque,
Metro Manila, represented in this act by its General
manager, Mr. Carlos T. Javelosa, hereinafter referred to as
the Company;

-and-

MALAYANG SAMAHAN NG MGA MANGGAGAWA SA M.

GREENFIELD (B) (MSMG)/UNITED LUMBER AND
GENERAL WORKERS OF THE PHILIPPINES (ULGWP), a
legitimate labor organization with address at Suite 404,
Trinity Building, T.M. Kalaw Street, Manila, represented in
this act by a Negotiating Committee headed by its National
President, Mr. Godofredo Paceno, Sr., referred to in this
Agreement as the UNION."[1]

The CBA includes, among others, the following pertinent provisions:

Article II-Union Security

Section 1. Coverage and Scope. All employees who are covered by

this Agreement and presently members of the UNION shall remain
members of the UNION for the duration of this Agreement as a
condition precedent to continued employment with the COMPANY.

xxxxxx

xxxxxx

Section 4. Dismissal. Any such employee mentioned in Section 2

hereof, who fails to maintain his membership in the UNION for non-
payment of UNION dues, for resignation and for violation of
UNIONs Constitution and By-Laws and any new employee as
defined in Section 2 of this Article shall upon written notice of such
failure to join or to maintain membership in the UNION and upon
written recommendation to the COMPANY by the UNION, be
 dismissed from the employment by the COMPANY; provided,
however, that the UNION shall hold the COMPANY free and
blameless from any and all liabilities that may arise should the
dismissed employee question, in any manner, his dismissal;
provided, further that the matter of the employees dismissal under
this Article may be submitted as a grievance under Article XIII and,
provided, finally, that no such written recommendation shall be
made upon the COMPANY nor shall COMPANY be compelled to
act upon any such recommendation within the period of sixty (60)
days prior to the expiry date of this Agreement conformably to law."

Article IX

Section 4. Program Fund - The Company shall provide the amount

of P10, 000.00 a month for a continuing labor education program
which shall be remitted to the Federation x x x." [2]

On September 12, 1986, a local union election was held under the auspices of
the ULGWP wherein the herein petitioner, Beda Magdalena Villanueva, and the
other union officers were proclaimed as winners. Minutes of the said election
were duly filed with the Bureau of Labor Relations on September 29, 1986.

On March 21, 1987, a Petition for Impeachment was filed with the national
federation ULGWP by the defeated candidates in the aforementioned election.

On June 16, 1987, the federation conducted an audit of the local union funds.
The investigation did not yield any unfavorable result and the local union officers
were cleared of the charges of anomaly in the custody, handling and disposition
of the union funds.

The 14 defeated candidates filed a Petition for Impeachment/Expulsion of the

local union officers with the DOLE NCR on November 5, 1987, docketed as
NCR-OD-M-11-780-87. However, the same was dismissed on March 2, 1988, by
Med-Arbiter Renato Parungo for failure to substantiate the charges and to
present evidence in support of the allegations.

On April 17, 1988, the local union held a general membership meeting at the
Caruncho Complex in Pasig. Several union members failed to attend the
meeting, prompting the Executive Board to create a committee tasked to
investigate the non-attendance of several union members in the said assembly,
pursuant to Sections 4 and 5, Article V of the Constitution and By-Laws of the
union, which read:

"Seksyon 4. Ang mga kinukusang hindi pagdalo o hindi paglahok sa

lahat ng hakbangin ng unyon ng sinumang kasapi o pinuno ay
 maaaring maging sanhi ng pagtitiwalag o pagpapataw ng multa ng
hindi hihigit sa P50.00 sa bawat araw na nagkulang.

Seksyon 5. Ang sinumang dadalo na aalis ng hindi pa natatapos

ang pulong ay ituturing na pagliban at maparusahan ito ng
alinsunod sa Article V, Seksyong 4 ng Saligang Batas na ito. Sino
mang kasapi o pisyales na mahuli and dating sa takdang oras ng di
lalampas sa isang oras ay magmumulta ng P25.00 at babawasin sa
sahod sa pamamagitan ng salary deduction at higit sa isang oras
ng pagdating ng huli ay ituturing na pagliban. [3]

On June 27, 1988, the local union wrote respondent company a letter requesting
it to deduct the union fines from the wages/salaries of those union members who
failed to attend the general membership meeting. A portion of the said letter
stated:

"xxx xxx xxx

In connection with Section 4 Article II of our existing Collective

Bargaining Agreement, please deduct the amount of P50.00 from
each of the union members named in said annexes on the payroll
of July 2-8, 1988 as fine for their failure to attend said general
membership meeting."[4]

In a Memorandum dated July 3, 1988, the Secretary General of the national

federation, Godofredo Paceo, Jr. disapproved the resolution of the local union
imposing the P50.00 fine. The union officers protested such action by the
Federation in a Reply dated July 4, 1988.

On July 11, 1988, the Federation wrote respondent company a letter advising the
latter not to deduct the fifty-peso fine from the salaries of the union members
requesting that:

" x x x any and all future representations by MSMG affecting a

number of members be first cleared from the federation before
corresponding action by the Company."[5]

The following day, respondent company sent a reply to petitioner unions request
in a letter, stating that it cannot deduct fines from the employees salary without
going against certain laws. The company suggested that the union refer the
matter to the proper government office for resolution in order to avoid placing the
company in the middle of the issue.

The imposition of P50.00 fine became the subject of bitter disagreement between
the Federation and the local union culminating in the latters declaration of
general autonomy from the former through Resolution No. 10 passed by the local
executive board and ratified by the general membership on July 16, 1988.

In retaliation, the national federation asked respondent company to stop the

remittance of the local unions share in the education funds effective August 1988.
This was objected to by the local union which demanded that the education fund
be remitted to it in full.

The company was thus constrained to file a Complaint for Interpleader with a
Petition for Declaratory Relief with the Med-Arbitration Branch of the Department
of Labor and Employment, docketed as Case No. OD-M-8-435-88. This was
resolved on October 28, 1988, by Med-Arbiter Anastacio Bactin in an Order,
disposing thus:

"WHEREFORE, premises considered, it is hereby ordered:

1. That the United Lumber and General Workers of the Philippines

(ULGWP) through its local union officers shall administer the
collective bargaining agreement (CBA).

2. That petitioner company shall remit the P10,000.00 monthly

labor education program fund to the ULGWP subject to the
condition that it shall use the said amount for its intended purpose.

3. That the Treasurer of the MSMG shall be authorized to collect

from the 356 union members the amount of P50.00 as penalty for
their failure to attend the general membership assembly on April 17,
1988.

However, if the MSMG Officers could present the individual written

authorizations of the 356 union members, then the company is
obliged to deduct from the salaries of the 356 union members the
P50.00 fine."[6]

On appeal, Director Pura-Ferrer Calleja issued a Resolution dated February 7,

1989, which modified in part the earlier disposition, to wit:

"WHEREFORE, premises considered, the appealed portion is

hereby modified to the extent that the company should remit the
amount of five thousand pesos (P5,000.00) of the P10,000.00
monthly labor education program fund to ULGWP and the other
P5,000.00 to MSMG, both unions to use the same for its intended
purpose."[7]

Meanwhile, on September 2, 1988, several local unions (Top Form, M.

Greenfield, Grosby, Triumph International, General Milling, and Vander Hons
chapters) filed a Petition for Audit and Examination of the federation and
education funds of ULGWP which was granted by Med-Arbiter Rasidali Abdullah
on December 25, 1988 in an Order which directed the audit and examination of
the books of account of ULGWP.

On September 30, 1988, the officials of ULGWP called a Special National

Executive Board Meeting at Nasipit, Agusan del Norte where a Resolution was
passed placing the MSMG under trusteeship and appointing respondent Cesar
Clarete as administrator.

On October 27, 1988, the said administrator wrote the respondent company
informing the latter of its designation of a certain Alfredo Kalingking as local union
president and "disauthorizing" the incumbent union officers from representing the
employees. This action by the national federation was protested by the
petitioners in a letter to respondent company dated November 11, 1988.

On November 13, 1988, the petitioner union officers received identical letters
from the administrator requiring them to explain within 72 hours why they should
not be removed from their office and expelled from union membership.

On November 26, 1988, petitioners replied:

(a) Questioning the validity of the alleged National Executive Board

Resolution placing their union under trusteeship;

(b) Justifying the action of their union in declaring a general

autonomy from ULGWP due to the latters inability to give proper
educational, organizational and legal services to its affiliates and
the pendency of the audit of the federation funds;

(c) Advising that their union did not commit any act of disloyalty as it
has remained an affiliate of ULGWP;

(d) Giving ULGWP a period of five (5) days to cease and desist
from further committing acts of coercion, intimidation and
harrassment.[8]

However, as early as November 21, 1988, the officers were expelled from the
ULGWP. The termination letter read:

"Effective today, November 21, 1988, you are hereby expelled from
UNITED LUMBER AND GENERAL WORKERS OF THE
PHILIPPINES (ULGWP) for committing acts of disloyalty and/or
acts inimical to the interest and violative to the Constitution and by-
laws of your federation.
 You failed and/or refused to offer an explanation inspite of the time
granted to you.

Since you are no longer a member of good standing, ULGWP is

constrained to recommend for your termination from your
employment, and provided in Article II Section 4, known as UNION
SECURITY, in the Collective Bargaining agreement." [9]

On the same day, the federation advised respondent company of the expulsion of
the 30 union officers and demanded their separation from employment pursuant
to the Union Security Clause in their collective bargaining agreement. This
demand was reiterated twice, through letters dated February 21 and March 4,
1989, respectively, to respondent company.

Thereafter, the Federation filed a Notice of Strike with the National Conciliation
and Mediation Board to compel the company to effect the immediate termination
of the expelled union officers.

On March 7, 1989, under the pressure of a threatened strike, respondent

company terminated the 30 union officers from employment, serving them
identical copies of the termination letter reproduced below:

We received a demand letter dated 21 November 1988 from the

United Lumber and General Workers of the Philippines (ULGWP)
demanding for your dismissal from employment pursuant to the
provisions of Article II, Section 4 of the existing Collective
Bargaining Agreement (CBA). In the said demand letter, ULGWP
informed us that as of November 21, 1988, you were expelled from
the said federation "for committing acts of disloyalty and/or acts
inimical to the interest of ULGWP and violative to its Constitution
and By-laws particularly Article V, Section 6, 9, and 12, Article XIII,
Section 8."

In subsequent letters dated 21 February and 4 March 1989, the

ULGWP reiterated its demand for your dismissal, pointing out that
notwithstanding your expulsion from the federation, you have
continued in your employment with the company in violation of Sec.
1 and 4 of Article II of our CBA, and of existing provisions of law.

In view thereof, we are left with no alternative but to comply with the
provisions of the Union Security Clause of our CBA. Accordingly,
we hereby serve notice upon you that we are dismissing you from
your employment with M. Greenfield, Inc., pursuant to Sections 1
and 4, Article II of the CBA effective immediately." [10]
On that same day, the expelled union officers assigned in the first shift were
physically or bodily brought out of the company premises by the companys
security guards. Likewise, those assigned to the second shift were not allowed to
report for work. This provoked some of the members of the local union to
demonstrate their protest for the dismissal of the said union officers. Some union
members left their work posts and walked out of the company premises.

On the other hand, the Federation, having achieved its objective, withdrew the
Notice of Strike filed with the NCMB.

On March 8, 1989, the petitioners filed a Notice of Strike with the NCMB, DOLE,
Manila, docketed as Case No. NCMB-NCR-NS-03-216-89, alleging the following
grounds for the strike:

(a) Discrimination

(b) Interference in union activities

(c) Mass dismissal of union officers and shop stewards

(d) Threats, coercion and intimidation

(e) Union busting

The following day, March 9, 1989, a strike vote referendum was conducted and
out of 2, 103 union members who cast their votes, 2,086 members voted to
declare a strike.

On March 10, 1989, the thirty (30) dismissed union officers filed an urgent
petition, docketed as Case No. NCMB-NCR-NS-03-216-89, with the Offfice of the
Secretary of the Department of Labor and Employment praying for the
suspension of the effects of their termination from employment. However, the
petition was dismissed by then Secretary Franklin Drilon on April 11, 1989, the
pertinent portion of which stated as follows:

"At this point in time, it is clear that the dispute at M. Greenfield is

purely an intra-union matter. No mass lay-off is evident as the
terminations have been limited to those allegedly leading the
secessionist group leaving MSMG-ULGWP to form a union under
the KMU. xxx

xxx xxx xxx

WHEREFORE, finding no sufficient jurisdiction to warrant the

exercise of our extraordinary authority under Article 277 (b) of the
 Labor Code, as amended, the instant Petition is hereby
DISMISSED for lack of merit.

SO ORDERED."[11]

On March 13 and 14, 1989, a total of 78 union shop stewards were placed under
preventive suspension by respondent company. This prompted the union
members to again stage a walk-out and resulted in the official declaration of
strike at around 3:30 in the afternoon of March 14, 1989. The strike was attended
with violence, force and intimidation on both sides resulting to physical injuries to
several employees, both striking and non-striking, and damage to company
properties.

The employees who participated in the strike and allegedly figured in the violent
incident were placed under preventive suspension by respondent company. The
company also sent return-to-work notices to the home addresses of the striking
employees thrice successively, on March 27, April 8 and April 31, 1989,
respectively. However, respondent company admitted that only 261 employees
were eventually accepted back to work. Those who did not respond to the return-
to-work notice were sent termination letters dated May 17, 1989, reproduced
below:

M. Greenfield Inc., (B)

Km. 14, Merville Rd., Paraaque, M.M.

May 17, 1989

xxx

On March 14, 1989, without justifiable cause and without due

notice, you left your work assignment at the prejudice of the
Companys operations. On March 27, April 11, and April 21, 1989,
we sent you notices to report to the Company. Inspite of your
receipt of said notices, we have not heard from you up to this date.

Accordingly, for your failure to report, it is construed that you have

effectively abandoned your employment and the Company is,
therefore, constrained to dismiss you for said cause.

Very truly yours,

M. GREENFIELD, INC., (B)

By:
 WENZEL STEPHEN LIGOT

Asst. HRD Manager"[12]

On August 7, 1989, the petitioners filed a verified complaint with the Arbitration
Branch, National Capital Region, DOLE, Manila, docketed as Case No. NCR-00-
09-04199-89, charging private respondents of unfair labor practice which
consists of union busting, illegal dismissal, illegal suspension, interference in
union activities, discrimination, threats, intimidation, coercion, violence, and
oppresion.

After the filing of the complaint, the lease contracts on the respondent companys
office and factory at Merville Subdivision, Paraaque expired and were not
renewed. Upon demand of the owners of the premises, the company was
compelled to vacate its office and factory.

Thereafter, the company transferred its administration and account/client

servicing department at AFP-RSBS Industrial Park in Taguig, Metro Manila. For
failure to find a suitable place in Metro Manila for relocation of its factory and
manufacturing operations, the company was constrained to move the said
departments to Tacloban, Leyte. Hence, on April 16, 1990, respondent company
accordingly notified its employees of a temporary shutdown. in operations.
Employees who were interested in relocating to Tacloban were advised to enlist
on or before April 23, 1990.

The complaint for unfair labor practice was assigned to Labor Arbiter Manuel
Asuncion but was thereafter reassigned to Labor Arbiter Cresencio Ramos when
respondents moved to inhibit him from acting on the case.

On December 15, 1992, finding the termination to be valid in compliance with the
union security clause of the collective bargaining agreement, Labor Arbiter
Cresencio Ramos dismissed the complaint.

Petitioners then appealed to the NLRC. During its pendency, Commissioner

Romeo Putong retired from the service, leaving only two commissioners,
Commissioner Vicente Veloso III and Hon. Chairman Bartolome Carale in the
First Division. When Commissioner Veloso inhibited himself from the case,
Commissioner Joaquin Tanodra of the Third Division was temporarily designated
to sit in the First Division for the proper disposition of the case.

The First Division affirmed the Labor Arbiters disposition. With the denial of their
motion for reconsideration on January 28, 1994, petitioners elevated the case to
this Court, attributing grave abuse of discretion to public respondent NLRC in:

I. UPHOLDING THE DISMISSAL OF THE UNION OFFICERS BY

RESPONDENT COMPANY AS VALID;
 II. HOLDING THAT THE STRIKE STAGED BYTHE PETITIONERS
AS ILLEGAL;

III. HOLDING THAT THE PETITIONER EMPLOYEES WERE

DEEMED TO HAVE ABANDONED THEIR WORK AND HENCE,
VALIDLY DISMISSED BY RESPONDENT COMPANY; AND

IV. NOT FINDING RESPONDENT COMPANY AND RESPONDENT

FEDERATION OFFICERS GUILTY OF ACTS OF UNFAIR LABOR
PRACTICE.

Notwithstanding the several issues raised by the petitioners and respondents in

the voluminous pleadings presented before the NLRC and this Court, they
revolve around and proceed from the issue of whether or not respondent
company was justified in dismissing petitioner employees merely upon the labor
federations demand for the enforcement of the union security clause embodied in
their collective bargaining agreement.

Before delving into the main issue, the procedural flaw pointed out by the
petitioners should first be resolved.

Petitioners contend that the decision rendered by the First Division of the NLRC
is not valid because Commissioner Tanodra, who is from the Third Division, did
not have any lawful authority to sit, much less write the ponencia, on a case
pending before the First Division. It is claimed that a commissioner from one
division of the NLRC cannot be assigned or temporarily designated to another
division because each division is assigned a particular territorial jurisdiction.
Thus, the decision rendered did not have any legal effect at all for being
irregularly issued.

Petitioners argument is misplaced. Article 213 of the Labor Code in enumerating

the powers of the Chairman of the National Labor Relations Commission
provides that:

"The concurrence of two (2) Commissioners of a division shall be

necessary for the pronouncement of a judgment or resolution.
Whenever the required membership in a division is not complete
and the concurrence of two (2) commissioners to arrive at a
judgment or resolution cannot be obtained, the Chairman shall
designate such number of additional Commissioners from the other
divisions as may be necessary."

It must be remembered that during the pendency of the case in the First Division
of the NLRC, one of the three commissioners, Commissioner Romeo Putong,
retired, leaving Chairman Bartolome Carale and Commissioner Vicente Veloso
III. Subsequently, Commissioner Veloso inhibited himself from the case because
the counsel for the petitioners was his former classmate in law school. The First
Division was thus left with only one commissioner. Since the law requires the
concurrence of two commisioners to arrive at a judgment or resolution, the
Commission was constrained to temporarily designate a commissioner from
another division to complete the First Division. There is nothing irregular at all in
such a temporary designation for the law empowers the Chairman to make
temporary assignments whenever the required concurrence is not met. The law
does not say that a commissioner from the first division cannot be temporarily
assigned to the second or third division to fill the gap or vice versa. The territorial
divisions do not confer exclusive jurisdiction to each division and are merely
designed for administrative efficiency.

Going into the merits of the case, the court finds that the Complaint for unfair
labor practice filed by the petitioners against respondent company which charges
union busting, illegal dismissal, illegal suspension, interference in union activities,
discrimination, threats, intimidation, coercion, violence, and oppression actually
proceeds from one main issue which is the termination of several employees by
respondent company upon the demand of the labor federation pursuant to the
union security clause embodied in their collective bargaining agreement.

Petitioners contend that their dismissal from work was effected in an arbitrary,
hasty, capricious and illegal manner because it was undertaken by the
respondent company without any prior administrative investigation; that, had
respondent company conducted prior independent investigation it would have
found that their expulsion from the union was unlawful similarly for lack of prior
administrative investigation; that the federation cannot recommend the dismissal
of the union officers because it was not a principal party to the collective
bargaining agreement between the company and the union; that public
respondents acted with grave abuse of discretion when they declared petitioners
dismissals as valid and the union strike as illegal and in not declaring that
respondents were guilty of unfair labor practice.

Private respondents, on the other hand, maintain that the thirty dismissed
employees who were former officers of the federation have no cause of action
against the company, the termination of their employment having been made
upon the demand of the federation pursuant to the union security clause of the
CBA; the expelled officers of the local union were accorded due process of law
prior to their expulsion from their federation; that the strike conducted by the
petitioners was illegal for noncompliance with the requirements; that the
employees who participated in the illegal strike and in the commission of violence
thereof were validly terminated from work; that petitioners were deemed to have
abandoned their employment when they did not respond to the three return to
work notices sent to them; that petitioner labor union has no legal personality to
file and prosecute the case for and on behalf of the individual employees as the
right to do so is personal to the latter; and that, the officers of respondent
company cannot be liable because as mere corporate officers, they acted within
the scope of their authority.

Public respondent, through the Labor Arbiter, ruled that the dismissed union
officers were validly and legally terminated because the dismissal was effected in
compliance with the union security clause of the CBA which is the law between
the parties. And this was affimed by the Commission on appeal. Moreover, the
Labor Arbiter declared that notwithstanding the lack of a prior administrative
investigation by respondent company, under the union security clause provision
in the CBA, the company cannot look into the legality or illegality of the
recommendation to dismiss by the union nd the obligation to dismiss is
ministerial on the part of the company.[13]

This ruling of the NLRC is erroneous. Although this Court has ruled that
union security clauses embodied in the collective bargaining agreement
may be validly enforced and that dismissals pursuant thereto may likewise
be valid, this does not erode the fundamental requirement of due process.
The reason behind the enforcement of union security clauses which is the
sanctity and inviolability of contracts[14] cannot override ones right to due
process.

In the case of Cario vs. National Labor Relations Commission, [15] this Court
pronounced that while the company, under a maintenance of membership
provision of the collective bargaining agreement, is bound to dismiss any
employee expelled by the union for disloyalty upon its written request, this
undertaking should not be done hastily and summarily. The company acts
in bad faith in dismissing a worker without giving him the benefit of a
hearing.

"The power to dismiss is a normal prerogative of the employer.

However, this is not without limitation. The employer is bound to
exercise caution in terminating the services of his employees
especially so when it is made upon the request of a labor union
pursuant to the Collective Bargaining Agreement, xxx. Dismissals
must not be arbitrary and capricious. Due process must be
observed in dismissing an employee because it affects not only his
position but also his means of livelihood. Employers should respect
and protect the rights of their employees, which include the right to
labor."

In the case under scrutiny, petitioner union officers were expelled by the
federation for allegedly committing acts of disloyalty and/or inimical to the interest
of ULGWP and in violation of its Constitution and By-laws. Upon demand of the
federation, the company terminated the petitioners without conducting a separate
and independent investigation. Respondent company did not inquire into the
cause of the expulsion and whether or not the federation had sufficient grounds
to effect the same. Relying merely upon the federations allegations, respondent
company terminated petitioners from employment when a separate inquiry could
have revealed if the federation had acted arbitrarily and capriciously in expelling
the union officers. Respondent companys allegation that petitioners were
accorded due process is belied by the termination letters received by the
petitioners which state that the dismissal shall be immediately effective.

As held in the aforecited case of Cario, "the right of an employee to be informed

of the charges against him and to reasonable opportunity to present his side in a
controversy with either the company or his own union is not wiped away by a
union security clause or a union shop clause in a collective bargaining
agreement. An employee is entitled to be protected not only from a company
which disregards his rights but also from his own union the leadership of which
could yield to the temptation of swift and arbitrary expulsion from membership
and mere dismissal from his job."

While respondent company may validly dismiss the employees expelled by the
union for disloyalty under the union security clause of the collective bargaining
agreement upon the recommendation by the union, this dismissal should not be
done hastily and summarily thereby eroding the employees right to due process,
self-organization and security of tenure. The enforcement of union security
clauses is authorized by law provided such enforcement is not
characterized by arbitrariness, and always with due process. [16] Even on the
assumption that the federation had valid grounds to expell the union
officers, due process requires that these union officers be accorded a
separate hearing by respondent company.

In its decision, public respondent also declared that if complainants (herein

petitioners) have any recourse in law, their right of action is against the federation
and not against the company or its officers, relying on the findings of the Labor
Secretary that the issue of expulsion of petitioner union officers by the federation
is a purely intra-union matter.

Again, such a contention is untenable. While it is true that the issue of expulsion
of the local union officers is originally between the local union and the federation,
hence, intra-union in character, the issue was later on converted into a
termination dispute when the company dismissed the petitioners from work
without the benefit of a separate notice and hearing. As a matter of fact, the
records reveal that the the termination was effective on the same day that the the
termination notice was served on the petitioners.

In the case of Liberty Cotton Mills Workers Union vs. Liberty Cotton Mills, Inc. [17],
the Court held the company liable for the payment of backwages for having acted
in bad faith in effecting the dismissal of the employees.
 "xxx Bad faith on the part of the respondent company may be
gleaned from the fact that the petitioner workers were dismissed
hastily and summarily. At best, it was guilty of a tortious act, for
which it must assume solidary liability, since it apparently chose to
summarily dismiss the workers at the unions instance secure in the
unions contractual undertaking that the union would hold it free
from any liability arising from such dismissal."

Thus, notwithstanding the fact that the dismissal was at the instance of the
federation and that it undertook to hold the company free from any liability
resulting from such a dismissal, the company may still be held liable if it was
remiss in its duty to accord the would-be dismissed employees their right to be
heard on the matter.

Anent petitioners contention that the federation was not a principal party to the
collective bargaining agreement between the company and the union, suffice it to
say that the matter was already ruled upon in the Interpleader case filed by
respondent company. Med-Arbiter Anastacio Bactin thus ruled:

After a careful examination of the facts and evidences presented by

the parties, this Officer hereby renders its decision as follows:

1.) It appears on record that in the Collective Bargaining Agreement

(CBA) which took effect on July 1, 1986, the contracting parties are
M. Greenfield, Inc. (B) and Malayang Samahan ng Mga
Manggagawa sa M. Greenfield, Inc. (B) (MSMG)/United Lumber
and General Workers of the Philippines (ULGWP). However,
MSMG was not yet a registered labor organization at the time of the
signing of the CBA. Hence, the union referred to in the CBA is the
ULGWP."[18]

Likewise on appeal, Director Pura Ferrer-Calleja put the issue to rest as follows:

It is undisputed that ULGWP is the certified sole and exclusive

collective bargaining agent of all the regular rank-and-file workers
of the company, M. Greenfield, Inc. (pages 31-32 of the records).

It has been established also that the company and ULGWP signed
a 3-year collective bargaining agreement effective July 1, 1986 up
to June 30, 1989.[19]

Although the issue of whether or not the federation had reasonable grounds to
expel the petitioner union officers is properly within the original and exclusive
jurisdiction of the Bureau of Labor Relations, being an intra-union conflict, this
Court deems it justifiable that such issue be nonetheless ruled upon, as the
Labor Arbiter did, for to remand the same to the Bureau of Labor Relations would
be to intolerably delay the case.

The Labor Arbiter found that petitioner union officers were justifiably expelled
from the federation for committing acts of disloyalty when it "undertook to
disaffiliate from the federation by charging ULGWP with failure to provide any
legal, educational or organizational support to the local. x x x and declared
autonomy, wherein they prohibit the federation from interfering in any internal and
external affairs of the local union."[20]

It is well-settled that findings of facts of the NLRC are entitled to great respect
and are generally binding on this Court, but it is equally well-settled that the Court
will not uphold erroneous conclusions of the NLRC as when the Court finds
insufficient or insubstantial evidence on record to support those factual findings.
The same holds true when it is perceived that far too much is concluded, inferred
or deduced from the bare or incomplete facts appearing of record. [21]

In its decision, the Labor Arbiter declared that the act of disaffiliation and
declaration of autonomy by the local union was part of its "plan to take over the
respondent federation." This is purely conjecture and speculation on the part of
public respondent, totally unsupported by the evidence.

A local union has the right to disaffiliate from its mother union or declare its
autonomy. A local union, being a separate and voluntary association, is free to
serve the interests of all its members including the freedom to disaffiliate or
declare its autonomy from the federation to which it belongs when circumstances
warrant, in accordance with the constitutional guarantee of freedom of
association.[22]

The purpose of affiliation by a local union with a mother union or a federation

"xxx is to increase by collective action the bargaining power in

respect of the terms and conditions of labor. Yet the locals
remained the basic units of association, free to serve their own and
the common interest of all, subject to the restraints imposed by the
Constitution and By-Laws of the Association, and free also to
renounce the affiliation for mutual welfare upon the terms laid down
in the agreement which brought it into existence." [23]

Thus, a local union which has affiliated itself with a federation is free to sever
such affiliation anytime and such disaffiliation cannot be considered disloyalty. In
the absence of specific provisions in the federations constitution prohibiting
disaffiliation or the declaration of autonomy of a local union, a local may
dissociate with its parent union.[24]
The evidence on hand does not show that there is such a provision in ULGWPs
constitution. Respondents reliance upon Article V, Section 6, of the federations
constitution is not right because said section, in fact, bolsters the petitioner
unions claim of its right to declare autonomy:

Section 6. The autonomy of a local union affiliated with ULGWP

shall be respected insofar as it pertains to its internal affairs, except
as provided elsewhere in this Constitution.

There is no disloyalty to speak of, neither is there any violation of the federations
constitution because there is nothing in the said constitution which specifically
prohibits disaffiliation or declaration of autonomy. Hence, there cannot be any
valid dismissal because Article II, Section 4 of the union security clause in the
CBA limits the dismissal to only three (3) grounds, to wit: failure to maintain
membership in the union (1) for non-payment of union dues, (2) for resignation;
and (3) for violation of the unions Constitution and By-Laws.

To support the finding of disloyalty, the Labor Arbiter gave weight to the fact that
on February 26, 1989, the petitioners declared as vacant all the responsible
positions of ULGWP, filled these vacancies through an election and filed a
petition for the registration of UWP as a national federation. It should be pointed
out, however, that these occurred after the federation had already expelled the
union officers. The expulsion was effective November 21, 1988. Therefore, the
act of establishing a different federation, entirely separate from the federation
which expelled them, is but a normal retaliatory reaction to their expulsion.

With regard to the issue of the legality or illegality of the strike, the Labor Arbiter
held that the strike was illegal for the following reasons: (1) it was based on an
intra-union dispute which cannot properly be the subject of a strike, the right to
strike being limited to cases of bargaining deadlocks and unfair labor practice (2)
it was made in violation of the "no strike, no lock-out" clause in the CBA, and (3)
it was attended with violence, force and intimidation upon the persons of the
company officials, other employees reporting for work and third persons having
legitimate business with the company, resulting to serious physical injuries to
several employees and damage to company property.

On the submission that the strike was illegal for being grounded on a non-
strikeable issue, that is, the intra-union conflict between the federation and the
local union, it bears reiterating that when respondent company dismissed the
union officers, the issue was transformed into a termination dispute and brought
respondent company into the picture. Petitioners believed in good faith that in
dismissing them upon request by the federation, respondent company was guilty
of unfair labor pratice in that it violated the petitioners right to self-organization.
The strike was staged to protest respondent companys act of dismissing the
union officers. Even if the allegations of unfair labor practice are subsequently
found out to be untrue, the presumption of legality of the strike prevails. [25]
Another reason why the Labor Arbiter declared the strike illegal is due to the
existence of a no strike no lockout provision in the CBA. Again, such a ruling is
erroneous. A no strike, no lock out provision can only be invoked when the strike
is economic in nature, i.e. to force wage or other concessions from the employer
which he is not required by law to grant. [26] Such a provision cannot be used to
assail the legality of a strike which is grounded on unfair labor practice, as was
the honest belief of herein petitioners. Again, whether or not there was indeed
unfair labor practice does not affect the strike.

On the allegation of violence committed in the course of the strike, it must be

remembered that the Labor Arbiter and the Commission found that "the parties
are agreed that there were violent incidents x x x resulting to injuries to both
sides, the union and management."[27] The evidence on record show that the
violence cannot be attributed to the striking employees alone for the company
itself employed hired men to pacify the strikers. With violence committed on both
sides, the management and the employees, such violence cannot be a ground
for declaring the strike as illegal.

With respect to the dismissal of individual petitioners, the Labor Arbiter declared
that their refusal to heed respondents recall to work notice is a clear indication
that they were no longer interested in continuing their employment and is
deemed abandonment. It is admitted that three return to work notices were sent
by respondent company to the striking employees on March 27, April 11, and
April 21, 1989 and that 261 employees who responded to the notice were
admittted back to work.

However, jurisprudence holds that for abandonment of work to exist, it is

essential (1) that the employee must have failed to report for work or must have
been absent without valid or justifiable reason; and (2) that there must have been
a clear intention to sever the employer-employee relationship manifested by
some overt acts.[28] Deliberate and unjustified refusal on the part of the employee
to go back to his work post amd resume his employment must be established.
Absence must be accompanied by overt acts unerringly pointing to the fact that
the employee simply does not want to work anymore. [29] And the burden of proof
to show that there was unjustified refusal to go back to work rests on the
employer.

In the present case, respondents failed to prove that there was a clear intention
on the part of the striking employees to sever their employer-employee
relationship. Although admittedly the company sent three return to work notices
to them, it has not been substantially proven that these notices were actually sent
and received by the employees. As a matter of fact, some employees deny that
they ever received such notices. Others alleged that they were refused entry to
the company premises by the security guards and were advised to secure a
clearance from ULGWP and to sign a waiver. Some employees who responded
to the notice were allegedly told to wait for further notice from respondent
company as there was lack of work.

Furthermore, this Court has ruled that an employee who took steps to protest his
lay-off cannot be said to have abandoned his work. [30] The filing of a complaint for
illegal dismissal is inconsistent with the allegation of abandonment. In the case
under consideration, the petitioners did, in fact, file a complaint when they were
refused reinstatement by respondent company.

Anent public respondents finding that there was no unfair labor practice on the
part of respondent company and federation officers, the Court sustains the same.
As earlier discussed, union security clauses in collective bargaining agreements,
if freely and voluntarily entered into, are valid and binding. Corrolarily, dismissals
pursuant to union security clauses are valid and legal subject only to the
requirement of due process, that is, notice and hearing prior to dismissal. Thus,
the dismissal of an employee by the company pursuant to a labor unions demand
in accordance with a union security agreement does not constitute unfair labor
practice.[31]

However, the dismissal was invalidated in this case because of respondent

companys failure to accord petitioners with due process, that is, notice and
hearing prior to their termination. Also, said dismissal was invalidated because
the reason relied upon by respondent Federation was not valid. Nonetheless, the
dismissal still does not constitute unfair labor practice.

Lastly, the Court is of the opinion, and so holds, that respondent company
officials cannot be held personally liable for damages on account of the
employees dismissal because the employer corporation has a personality
separate and distinct from its officers who merely acted as its agents.

It has come to the attention of this Court that the 30-day prior notice requirement
for the dismissal of employees has been repeatedly violated and the sanction
imposed for such violation enunciated in Wenphil Corporation vs. NLRC[32] has
become an ineffective deterrent. Thus, the Court recently promulgated a decision
to reinforce and make more effective the requirement of notice and hearing, a
procedure that must be observed before termination of employment can be
legally effected.

In Ruben Serrano vs. NLRC and Isetann Department Store (G.R. No. 117040,
January 27, 2000), the Court ruled that an employee who is dismissed, whether
or not for just or authorized cause but without prior notice of his termination, is
entitled to full backwages from the time he was terminated until the decision in
his case becomes final, when the dismissal was for cause; and in case the
dismissal was without just or valid cause, the backwages shall be computed from
the time of his dismissal until his actual reinstatement. In the case at bar, where
the requirement of notice and hearing was not complied with, the aforecited
doctrine laid down in the Serrano case applies.

WHEREFORE, the Petition is GRANTED; the decision of the National Labor

Relations Commission in case No. NCR-00-09-04199-89 is REVERSED and
SET ASIDE; and the respondent company is hereby ordered to immediately
reinstate the petitioners to their respective positions. Should reinstatement be not
feasible, respondent company shall pay separation pay of one month salary for
every year of service. Since petitioners were terminated without the requisite
written notice at least 30 days prior to their termination, following the recent ruling
in the case of Ruben Serrano vs. National Labor Relations Commission and
Isetann Department Store, the respondent company is hereby ordered to pay full
backwages to petitioner-employees while the Federation is also ordered to pay
full backwages to petitioner-union officers who were dismissed upon its
instigation. Since the dismissal of petitioners was without cause, backwages shall
be computed from the time the herein petitioner employees and union officers
were dismissed until their actual reinstatement. Should reinstatement be not
feasible, their backwages shall be computed from the time petitioners were
terminated until the finality of this decision. Costs against the respondent
company.

SO ORDERED.

Gonzaga-Reyes, J., concur.

2.2 Union dues vs. Agency fees/special assessments; check-off

Art. 241. Rights and conditions of membership in a labor organization. The

following are the rights and conditions of membership in a labor organization:
n. No special assessment or other extraordinary fees may be levied upon
the members of a labor organization unless authorized by a written
resolution of a majority of all the members in a general membership
meeting duly called for the purpose. The secretary of the organization shall
record the minutes of the meeting including the list of all members present, the
votes cast, the purpose of the special assessment or fees and the recipient of
such assessment or fees. The record shall be attested to by the president.

o. Other than for mandatory activities under the Code, no special assessments,
attorney’s fees, negotiation fees or any other extraordinary fees may be
checked off from any amount due to an employee without an individual
written authorization duly signed by the employee. The authorization
should specifically state the amount, purpose and beneficiary of the
deduction; and

Art. 222. Appearances and Fees

b. No attorney’s fees, negotiation fees or similar charges of any kind arising from
any collective bargaining agreement shall be imposed on any individual
member of the contracting union: Provided, However, that attorney’s fees
may be charged against union funds in an amount to be agreed upon by
the parties. Any contract, agreement or arrangement of any sort to the contrary
shall be null and void. (As amended by Presidential Decree No. 1691, May 1,
1980)

Palacol vs. Calleja, 26 Feb. 1990

GANCAYCO, J.:

Can a special assessment be validly deducted by a labor union from the lump-
sum pay of its members, granted under a collective bargaining agreement (CBA),
notwithstanding a subsequent disauthorization of the same by a majority of the
union members? This is the main issue for resolution in the instant petition for
certiorari.

As gleaned from the records of the case, the pertinent facts are as follows:

On October 12, 1987, the respondent Manila CCBPI Sales Force Union
(hereinafter referred to as the Union), as the collective bargaining agent of all
regular salesmen, regular helpers, and relief helpers of the Manila Plant and
Metro Manila Sales Office of the respondent Coca-Cola Bottlers (Philippines),
Inc. (hereinafter referred to as the Company) concluded a new collective
bargaining agreement with the latter. 1 Among the compensation benefits granted
to the employees was a general salary increase to be given in lump sum
including recomputation of actual commissions earned based on the new rates of
increase.

On the same day, the president of the Union submitted to the Company the
ratification by the union members of the new CBA and authorization for the
Company to deduct union dues equivalent to P10.00 every payday or P20.00
every month and, in addition, 10% by way of special assessment, from the CBA
lump-sum pay granted to the union members. The last one among the
aforementioned is the subject of the instant petition.

As embodied in the Board Resolution of the Union dated September 29, 1987,
the purpose of the special assessment sought to be levied is "to put up a
cooperative and credit union; purchase vehicles and other items needed for the
benefit of the officers and the general membership; and for the payment for
services rendered by union officers, consultants and others." 2 There was also an
additional proviso stating that the "matter of allocation ... shall be at the discretion
of our incumbent Union President."

This "Authorization and CBA Ratification" was obtained by the Union through a
secret referendum held in separate local membership meetings on various
dates. 3 The total membership of the Union was about 800. Of this number, 672
members originally authorized the 10% special assessment, while 173 opposed
the same. 4

Subsequently however, one hundred seventy (170) members of the Union

submitted documents to the Company stating that although they have ratified the
new CBA, they are withdrawing or disauthorizing the deduction of any amount
from their CBA lump sum. Later, 185 other union members submitted similar
documents expressing the same intent. These members, numbering 355 in all
(170 + 185), added to the original oppositors of 173, turned the tide in favor of
disauthorization for the special assessment, with a total of 528 objectors and a
remainder of 272 supporters. 5

On account of the above-mentioned disauthorization, the Company, being in a

quandary as to whom to remit the payment of the questioned amount, filed an
action for interpleader with the Bureau of Labor Relations in order to resolve the
conflicting claims of the parties concerned. Petitioners, who are regular rank-and-
file employees of the Company and bona fide members of the Union, filed a
motion/complaint for intervention therein in two groups of 161 and 94,
respectively. They claimed to be among those union members who either did not
sign any individual written authorization, or having signed one, subsequently
withdrew or retracted their signatures therefrom.

Petitioners assailed the 10% special assessment as a violation of Article 241(o)

in relation to Article 222(b) of the Labor Code. Article 222(b) provides as follows:

ART. 222. Appearances and Fees. —

xxx xxx xxx

(b) No attorney's fees, negotiation fees or similar

charges of any kind arising from any collective
bargaining negotiations or conclusion of the collective
agreement shall be imposed on any individual
member of the contracting union; Provided, however,
that attorney's fees may be charged against union
funds in an amount to be agreed upon by the parties.
Any contract, agreement or arrangement of any sort
to the contrary shall be null and void.

On the other hand, Article 241(o) mandates that:

ART. 241. Rights and conditions of membership in a labor

organization. —

xxx xxx xxx

 (o) Other than for mandatory activities under the
Code, no special assessments, attorney's fees,
negotiation fees or any other extraordinary fees may
be checked off from any amount due to an employee
without an individual written authorization duly signed
by the employee. The authorization should specifically
state the amount, purpose and beneficiary of the
deduction;

As authority for their contention, petitioners cited Galvadores v.

Trajano, 6 wherein it was ruled that no check-offs from any amount due
employees may be effected without individual written authorizations duly
signed by the employees specifically stating the amount, purpose, and
beneficiary of the deduction.

In its answer, the Union countered that the deductions not only have the popular
indorsement and approval of the general membership, but likewise complied with
the legal requirements of Article 241 (n) and (o) of the Labor Code in that the
board resolution of the Union imposing the questioned special assessment had
been duly approved in a general membership meeting and that the collection of a
special fund for labor education and research is mandated.

Article 241(n) of the Labor Code states that —

ART. 241. Rights and conditions of membership in a labor

organization. —

xxx xxx xxx

(n) No special assessment or other extraordinary fees may be

levied upon the members of a labor organization unless authorized
by a written resolution of a majority of all the members at a general
membership meeting duly called for the purpose. The secretary of
the organization shall record the minutes of the meeting including
the list of all members present, the votes cast, the purpose of the
special assessment or fees and the recipient of such assessments
or fees. The record shall be attested to by the president;

Med-Arbiter Manases T. Cruz ruled in favor of petitioners in an order dated

February 15, 1988 whereby he directed the Company to remit the amount it had
kept in trust directly to the rank-and-file personnel without delay.

On appeal to the Bureau of Labor Relations, however, the order of the Med-
Arbiter was reversed and set aside by the respondent-Director in a resolution
dated August 19, 1988 upholding the claim of the Union that the special
assessment is authorized under Article 241 (n) of the Labor Code, and that the
Union has complied with the requirements therein.

Hence, the instant petition.

Petitioners allege that the respondent-Director committed a grave abuse of

discretion amounting to lack or excess of jurisdiction when she held Article 241
(n) of the Labor Code to be the applicable provision instead of Article 222(b) in
relation to Article 241(o) of the same law.

According to petitioners, a cursory examination and comparison of the two

provisions of Article 241 reveals that paragraph (n) cannot prevail over paragraph
(o). The reason advanced is that a special assessment is not a matter of major
policy affecting the entire union membership but is one which concerns the
individual rights of union members.

Petitioners further assert that assuming arguendo that Article 241(n) should
prevail over paragraph (o), the Union has nevertheless failed to comply with the
procedure to legitimize the questioned special assessment by: (1) presenting
mere minutes of local membership meetings instead of a written resolution; (2)
failing to call a general membership meeting; (3) having the minutes of three (3)
local membership meetings recorded by a union director, and not by the union
secretary as required; (4) failing to have the list of members present included in
the minutes of the meetings; and (5) failing to present a record of the votes
cast. 7 Petitioners concluded their argument by citing Galvadores.

After a careful review of the records of this case, We are convinced that the
deduction of the 10% special assessment by the Union was not made in
accordance with the requirements provided by law.

Petitioners are correct in citing the ruling of this Court in Galvadores which is
applicable to the instant case. The principle "that employees are protected by
law from unwarranted practices that diminish their compensation without
their known edge and consent" 8 is in accord with the constitutional
principle of the State affording full protection to labor. 9

The respondent-Union brushed aside the defects pointed out by petitioners in the
manner of compliance with the legal requirements as "insignificant technicalities."
On the contrary, the failure of the Union to comply strictly with the
requirements set out by the law invalidates the questioned special
assessment. Substantial compliance is not enough in view of the fact that
the special assessment will diminish the compensation of the union
members. Their express consent is required, and this consent must be
obtained in accordance with the steps outlined by law, which must be
followed to the letter. No shortcuts are allowed.
The applicable provisions are clear. The Union itself admits that both paragraphs
(n) and (o) of Article 241 apply. Paragraph (n) refers to "levy" while paragraph (o)
refers to "check-off" of a special assessment. Both provisions must be
complied with. Under paragraph (n), the Union must submit to the
Company a written resolution of a majority of all the members at a general
membership meeting duly called for the purpose. In addition, the secretary
of the organization must record the minutes of the meeting which, in turn,
must include, among others, the list of all the members present as well as
the votes cast.

As earlier outlined by petitioners, the Union obviously failed to comply with the
requirements of paragraph (n). It held local membership meetings on separate
occasions, on different dates and at various venues, contrary to the express
requirement that there must be a general membership meeting. The contention
of the Union that "the local membership meetings are precisely the very general
meetings required by law" 10 is untenable because the law would not have
specified a general membership meeting had the legislative intent been to allow
local meetings in lieu of the latter.

It submitted only minutes of the local membership meetings when what is

required is a written resolution adopted at the general meeting. Worse still, the
minutes of three of those local meetings held were recorded by a union director
and not by the union secretary. The minutes submitted to the Company contained
no list of the members present and no record of the votes cast. Since it is quite
evident that the Union did not comply with the law at every turn, the only
conclusion that may be made therefrom is that there was no valid levy of the
special assessment pursuant to paragraph (n) of Article 241 of the Labor Code.

Paragraph (o) on the other hand requires an individual written authorization duly
signed by every employee in order that a special assessment may be validly
checked-off. Even assuming that the special assessment was validly levied
pursuant to paragraph (n), and granting that individual written authorizations
were obtained by the Union, nevertheless there can be no valid check-off
considering that the majority of the union members had already withdrawn their
individual authorizations. A withdrawal of individual authorizations is equivalent to
no authorization at all. Hence, the ruling in Galvadores that "no check-offs from
any amounts due employees may be effected without an individual written
authorization signed by the employees ... " is applicable.

The Union points out, however, that said disauthorizations are not valid for being
collective in form, as they are "mere bunches of randomly procured signatures,
under loose sheets of paper." 11 The contention deserves no merit for the simple
reason that the documents containing the disauthorizations have the signatures
of the union members. The Court finds these retractions to be valid. There is
nothing in the law which requires that the disauthorization must be in individual
form.
Moreover, it is well-settled that "all doubts in the implementation and
interpretation of the provisions of the Labor Code ... shall be resolved in favor of
labor."12 And as previously stated, labor in this case refers to the union members,
as employees of the Company. Their mere desire to establish a separate
bargaining unit, albeit unproven, cannot be construed against them in relation to
the legality of the questioned special assessment. On the contrary, the same may
even be taken to reflect their dissatisfaction with their bargaining representative,
the respondent-Union, as shown by the circumstances of the instant petition, and
with good reason.

The Med-Arbiter correctly ruled in his Order that:

The mandate of the majority rank and file have (sic) to be respected
considering they are the ones directly affected and the realities of
the high standards of survival nowadays. To ignore the mandate of
the rank and file would enure to destabilizing industrial peace and
harmony within the rank and file and the employer's fold, which we
cannot countenance.

Moreover, it will be recalled that precisely union dues are collected

from the union members to be spent for the purposes alluded to by
respondent. There is no reason shown that the regular union dues
being now implemented is not sufficient for the alleged expenses.
Furthermore, the rank and file have spoken in withdrawing their
consent to the special assessment, believing that their regular
union dues are adequate for the purposes stated by the
respondent. Thus, the rank and file having spoken and, as we have
earlier mentioned, their sentiments should be respected.

Of the stated purposes of the special assessment, as embodied in the board

resolution of the Union, only the collection of a special fund for labor and
education research is mandated, as correctly pointed out by the Union. The two
other purposes, namely, the purchase of vehicles and other items for the benefit
of the union officers and the general membership, and the payment of services
rendered by union officers, consultants and others, should be supported by the
regular union dues, there being no showing that the latter are not sufficient to
cover the same.

The last stated purpose is contended by petitioners to fall under the coverage of
Article 222 (b) of the Labor Code. The contention is impressed with merit. Article
222 (b) prohibits attorney's fees, negotiations fees and similar charges
arising out of the conclusion of a collective bargaining agreement from
being imposed on any individual union member. The collection of the
special assessment partly for the payment for services rendered by union
officers, consultants and others may not be in the category of "attorney's
fees or negotiations fees." But there is no question that it is an exaction
which falls within the category of a "similar charge," and, therefore, within
the coverage of the prohibition in the aforementioned article. There is an
additional proviso giving the Union President unlimited discretion to allocate the
proceeds of the special assessment. Such a proviso may open the door to abuse
by the officers of the Union considering that the total amount of the special
assessment is quite considerable — P1,027,694.33 collected from those union
members who originally authorized the deduction, and P1,267,863.39 from those
who did not authorize the same, or subsequently retracted their
authorizations. 13 The former amount had already been remitted to the Union,
while the latter is being held in trust by the Company.

The Court, therefore, stakes down the questioned special assessment for being a
violation of Article 241, paragraphs (n) and (o), and Article 222 (b) of the Labor
Code.

WHEREFORE, the instant petition is hereby GRANTED. The Order of the

Director of the Bureau of Labor Relations dated August 19, 1988 is hereby
REVERSED and SET ASIDE, while the order of the Med-Arbiter dated February
17, 1988 is reinstated, and the respondent Coca-Cola Bottlers (Philippines), Inc.
is hereby ordered to immediately remit the amount of P1,267,863.39 to the
respective union members from whom the said amount was withheld. No
pronouncement as to costs. This decision is immediately executory.

SO ORDERED.

Effect of ER fails to implement check-off – Holy Cross of Davao vs.

Joaquin, 263 SCRA 358 [18 Oct 1996]
A collective bargaining agreement, effective from June 1, 1986 to May 31,
1989 was entered into between petitioner Holy Cross of Davao College, Inc.
(hereafter Holy Cross), an educational institution, and the affiliate labor
organization representing its employees, respondent Holy Cross of Davao
College Union-KAMAPI (hereafter KAMAPI). Shortly before the expiration of the
agreement, KAMAPI President Jose Lagahit, wrote Holy Cross under date of
April 12, 1989 expressing his unions desire to renew the agreement, withal
seeking its extension for two months, or until July 31, 1989, on the ground that
the teachers were still on summer vacation and union activities necessary or
incident to the negotiation of a new agreement could not yet be conducted. [1] Holy
Cross President Emilio P. Palma-Gil replied that he had no objection to the
extension sought, it being allowable under the collective bargaining agreement. [2]
On July 24, 1989, Jose Lagahit convoked a meeting of the KAMAPI
membership for the purpose of electing a new set of union officers, at which
Rodolfo Gallera won election as president. To the surprise of many, and with
resultant dissension among the membership, Galera forthwith initiated
discussions for the unions disaffiliation from the KAMAPI Federation.
 Galleras group subsequently formed a separate organization known as the
Holy Cross of Davao College Teachers Union, and elected its own officers. For its
part, the existing union, KAMAPI, sent to the School its proposals for a new
collective bargaining contract; this it did on July 31, 1989, the expiry date of the
two-month extension it had sought.[3]
Holy Cross thereafter stopped deducting from the salaries and wages of its
teachers and employees the corresponding union dues and special assessment
(payable by union members), and agency fees (payable by non-members), in
accordance with the check-off clause of the CBA, [4] prompting KAMAPI, on
September 1, 1989, to demand an explanation.
In the meantime, there ensued between the two unions a full-blown action on
the basic issue of representation, which was to last for some two years.It began
with the filing by the new union (headed by Gallera) of a petition for certification
election in the Office of the Med-Arbiter. [5] KAMAPI responded by filing a motion
asking the Med-Arbiter to dismiss the petition. On August 31, 1989, KAMAPI also
advised Holy Cross of the election of a new set of officers who would also
comprise its negotiating panel.[6]
The Med-Arbiter denied KAMAPIs motion to dismiss, and ordered the holding
of a certification election. On appeal, however, the Secretary of Labor reversed
the Med-Arbiters ruling and ordered the dismissal of the petition for certification
election, which action was eventually sustained by this Court in appropriate
proceedings.
After its success in the certification election case KAMAPI presented, on April
11, 1991, revised bargaining proposals to Holy Cross; [7] and on July 11, 1991, it
sent a letter to the School asking for its counter-proposals. The School replied,
that it did not know if the Supreme Court had in fact affirmed the Labor
Secretarys decision in favor of KAMAPI as the exclusive bargaining
representative of the School employees, whereupon KAMAPIs counsel furnished
it with a copy of the Courts resolution to that effect; and on September 7, 1991,
KAMAPI again wrote to Holy Cross asking for its counter-proposals as regards
the terms of a new CBA.
In response, Holy Cross declared that it would take no action towards a new
CBA without a definitive ruling on the proper interpretation of Article I of the old
CBA which should have expired on May 31, 1989 (but, as above stated, had
been extended for two months at the KAMAPIs request). Said Article
provides inter alia for the automatic extension of the CBA for another period of
three (3) years counted from its expiration, if the parties fail to agree on a
renewal, modification or amendment thereof. It appears, in fact, that the opinion
of the DOLE Regional Director on the meaning and import of said article I had
earlier been sought by the College president, Emilio Palma Gil. [8]
KAMAPI then sent another letter to Holy Cross, this time accusing it of unfair
labor practice for refusing to bargain despite the formers repeated demands; and
on the following day, it filed a notice of strike with the National Mediation and
Conciliation Board..[9]
KAMAPI and Holy Cross were ordered to appear before Conciliator-Mediator
Agapito J. Adipen on October 2, 1991. Several conciliation meetings were
thereafter held between them, and when these failed to bring about any amicable
settlement, the parties agreed to submit the case to voluntary arbitration. [10] Both
parties being of the view that the dispute did indeed revolve around the
interpretation of 1 and 2 of Article I of the CBA, they submitted position papers
explicitly dealing with the following issues presented by them for resolution to the
voluntary arbitrator:
a. Whether or not the CBA which expired on May 31, 1989 was
automatically renewed and did not serve merely as a holdover CBA;
and
b. Whether or not there was refusal to negotiate on the part of the Holy
Cross of Davao College.
On both issues, Voluntary Arbitrator Jerome C. Joaquin found in favor of
KAMAPI.
Respecting the matter of the automatic renewal of the bargaining agreement,
the Voluntary Arbitrator ruled that the request for extension filed by
KAMAPI constituted seasonable notice of its intention to renew, modify or amend
the agreement, which it could not however pursue because of the absence of the
teachers who were then on summer vacation.[11] He rejected the contention of
Holy Cross that KAMAPI had unreasonably delayed (until July 31, 1989) the
submission of bargaining proposals, opining that the delay was partly attributable
to the Schools prolonged inaction on KAMAPIs request for extension of the
CBA. He also ruled that Holy Cross was estopped from claiming automatic
renewal of the CBA because it ceased to implement the check-off provision
embodied in the CBA, declaring said Schools argument -- that a "definitive ruling"
by the DOLE on the correct interpretation of the automatic-extension clause of
the old CBA was a condition precedent to negotiation for a new CBA -- to be a
mere afterthought set up to justify its refusal to bargain with KAMAPI after the
latter had proven that it was the legally-empowered bargaining agent of the
school employees. In the dispositive portion of his award, the Voluntary Arbitrator
ordered Holy Cross to:
1. sit down, negotiate and conclude (an agreement) with the Holy Cross of
Davao College Faculty Union-KAMAPI, which, by Resolution of the
Supreme Court, remains the collective bargaining agent of the permanent
and regular teachers of said educational institution; (and)
2. pay to the Union the amount equivalent to the uncollected union dues from
August 1989 up to the time respondent shall have concluded a new CBA
with the Union, it appearing that respondent stopped complying with the
CBAs check-off provisions as of said date. [12]
The Voluntary Arbitrator also requested the Fiscal Examiner of the NLRC, region
XI, Davao City, to make the proper computation of the union dues to be paid by
management to the complainant union.
Dissatisfied, Holy Cross filed the petition at bar, challenging the Voluntary
Arbitrators decision on the following grounds, viz.: [13]
1. That the voluntary arbitrator erred and acted in grave abuse of discretion
amounting to lack or excess of jurisdiction in ordering petitioner to pay the
union the uncollected union dues to private respondent which was not
even an issue submitted for voluntary arbitration, resulting in serious
violation of due process.
2. That the voluntary arbitrator erred in considering that petitioner refused to
negotiate with (the) Union, contrary to the records and evidence
presented in the case.
The Voluntary Arbitrators conclusion -- that petitioner Holy Cross had, in light
of the evidence on record, failed to negotiate with KAMAPI, adjudged as the
collective bargaining agent of the schools permanent and regular teachers -- is a
conclusion of fact that the Court will not review, the inquiry at bar being limited to
the issue of whether or not said Voluntary Arbitrator had acted without or in
excess of his jurisdiction, or with grave abuse of discretion; nor does the Court
see its way clear, after analyzing the record, to pronouncing that reasoned
conclusion to have been made so whimsically, capriciously, oppressively, or
unjustifiably -- in other words, attended by grave abuse of discretion amounting
to lack or excess of jurisdiction -- as to call for extension of the Courts correcting
hand through the extraordinary writ of certiorari. Said finding should therefore be,
and is hereby, sustained.
Now, concerning its alleged failure to observe the check-off provisions of the
collective bargaining agreement, Holy Cross contends that this was not one of
the issues raised in the arbitration proceedings; that said issue was therefore
extraneous and improper; and that even assuming the contrary, it (Holy Cross)
had not in truth violated the CBA.
Holy Cross asserts that it could not comply with the check-off provisions
because contrary to established practice prior to August, 1989, KAMAPI failed to
submit to the college comptroller every 8 th day of the month, a list of employees
from whom union dues and the corresponding agency fees were to be deducted;
further, that there was an uncertainty as to the recognized bargaining agent with
whom it would deal -- a matter settled only upon its receipt of a copy of this
Courts Resolution on July 18, 1991 -- and in any case, the Voluntary Arbitrators
order for it to pay to the union the uncollected employees' dues or agency fees --
would amount to the unions unjust enrichment. [14]
KAMAPI maintains, on the other hand, that the check-off issue was raised in
the position paper it submitted in the voluntary arbitration proceedings; and that
in any case, the issue was intimately connected with those submitted for
resolution and necessary for complete adjudication of the rights and obligations
of the parties;[15] and that said position paper had alleged the manifest bad faith of
management in not providing information as to who were regular employees,
thereby precluding determination of teachers eligible for union membership.
Disregarding the objection of failure to seasonably set up the check-off
question -- the factual premises thereof not being indisputable, and technical
objections of this sort being generally inconsequential in quasi-judicial
proceedings -- the issues here ultimately boil down to whether or not an
employer is liable to pay to the union of its employees, the amounts it failed to
deduct from their salaries -- as union dues (with respect to union members)
or agency fees (as regards those not union members) -- in accordance with the
check-off provisions of the collective bargaining contract (CBA) which it claims to
have been automatically extended.
A check-off is a process or device whereby the employer, on agreement with
the union recognized as the proper bargaining representatives, or on prior
authorization from its employees, deducts union dues or agency fees from the
latter's wages and remits them directly to the union. [16] Its desirability to a labor
organization is quite evident; by it, it is assured of continuous funding. Indeed,
this Court has acknowledged that the system of check-off is primarily for the
benefit of the union and, only indirectly, of the individual laborers. [17] When
stipulated in a collective bargaining agreement, or authorized in writing by the
employees concerned -- the labor Code and its Implementing Rules recognize it
to be the duty of the employer to deduct sums equivalent to the amount of union
dues from the employees' wages for direct remittance to the union, in order to
facilitate the collection of funds vital to the role of the union as representative of
employees in a bargaining unit to the role of the union as representative of
employees in a bargaining unit if not, indeed, to its very existence. And it may be
mentioned in this connection that the right to union dues deducted pursuant to a
check of, pertains to the local union which continues to represent the employees
under the terms of a CBA, and not to the parent association from which it has
dissaffiliated.[18]
The legal basis of check-off is thus found in statute or in contract. [19] Statutory
limitations on check-offs generally require written authorization from each
employee to deduct wages; however, a resolution approved and adopted by a
majority of the union members at a general meeting will suffice when the right to
check-off has been recognized by the employer, including collection of
reasonable assessments in connection with mandatory activities of the union, or
other special assessments and extraordinary fees.[20]
Authorization to effect a check-off of union dues is co-terminous with the
union affiliation or membership of employees. [21] On the other hand, the collection
of agency fees in an amount equivalent to union dues and fees, from employees
who are not union members, is recognized by Article 248 (e) of the Labor
Code. No requirement of written authorization from the non-union employee is
imposed. The employees acceptance of benefits resulting from a collective
bargaining agreement justifies the deduction of agency fees from his pay and the
unions entitlement thereto. In this aspect, the legal basis of the unions right to
agency fees is neither contractual nor statutory, but quasi-contractual, deriving
from the established principle that non-union employees may not unjustly enrich
themselves by benefiting from employment conditions negotiated by the
bargaining union.[22]
No provision of law makes the employer directly liable for the payment to the
labor organization of union dues and assessments that the former fails to deduct
from its employees salaries and wages pursuant to a check-off stipulation. The
employers failure to make the requisite deductions may constitute a violation of a
contractual commitment for which it may incur liability for unfair labor practice.
[23]
But it does not by that omission, incur liability to the union for the aggregate of
dues or assessments uncollected from the union members, or agency fees for
non-union employees.
Check-offs in truth impose as extra burden on the employer in the form of
additional administrative and bookkeeping costs. It is a burden assumed by
management at the instance of the union and for its benefit, in order to facilitate
the collection of dues necessary for the latters life and sustenance. But the
obligation to pay union dues and agency fees obviously devolves not upon the
employer, but the individual employee. It is a personal obligation not demandable
from the employer upon default or refusal of the employer to consent to a check-
off. The only obligation of the employer under a check-off is to effect the
deductions and remit the collections to the union. The principle of unjust
enrichment necessarily precludes recovery of union dues -- or agency fees --
from the employer, these being, to repeat, obligations pertaining to the individual
worker in favor of the bargaining union. Where the employer fails or refuses to
implement a check-off agreement, logic and prudence dictate that the union itself
undertake the collection of union dues and assessments from its members (and
agency fees from non-union employees); this, of course, without prejudice to
suing the employer for unfair labor practice.
There was thus no basis for the Voluntary Arbitrator to require Holy Cross to
assume liability for the union dues and assessments, and agency fees that it had
failed to deduct from its employees salaries on the proffered plea that contrary to
established practice, KAMAPI had failed to submit to the college comptroller
every 8th day of the month, a list of employees from whose pay union dues and
the corresponding agency fees were to be deducted.
WHEREFORE, the requirement imposed on petitioner Holy Cross by the
challenged decision of the Voluntary Arbitrator, to pay respondent KAMAPI the
amount equivalent to the uncollected union dues and agency fees from August
1989 up to the time a new collective bargaining agreement is concluded, is
NULLIFIED and SET ASIDE; but in all other respects, the decision of the
Voluntary Arbitrator is hereby AFFIRMED.
SO ORDERED.
Davide, Jr., Melo, Francisco, and Panganiban, JJ., concur.
2.3 Union security clauses: nature and kinds

Bank of the Philippine Islands vs. BPI Employees Union - Davao Chapter -
Federation of Unions in BPI Unibank, G.R. No. 164301, 10 August 2010; En
Banc.

May a corporation invoke its merger with another corporation as a valid ground to
exempt its absorbed employees from the coverage of a union shop clause
contained in its existing Collective Bargaining Agreement (CBA) with its own
certified labor union? That is the question we shall endeavor to answer in this
petition for review filed by an employer after the Court of Appeals decided in
favor of respondent union, which is the employees recognized collective
bargaining representative.

At the outset, we should call to mind the spirit and the letter of the Labor
Code provisions on union security clauses, specifically Article 248 (e), which
states, x x x Nothing in this Code or in any other law shall stop the parties
from requiring membership in a recognized collective bargaining agent as
a condition for employment, except those employees who are already
members of another union at the time of the signing of the collective bargaining
agreement.[1] This case which involves the application of a collective bargaining
agreement with a union shop clause should be resolved principally from the
standpoint of the clear provisions of our labor laws, and the express terms of the
CBA in question, and not by inference from the general consequence of the
merger of corporations under the Corporation Code, which obviously does not
deal with and, therefore, is silent on the terms and conditions of employment in
corporations or juridical entities.
This issue must be resolved NOW, instead of postponing it to a future time
when the CBA is renegotiated as suggested by the Honorable Justice Arturo D.
Brion because the same issue may still be resurrected in the renegotiation if the
absorbed employees insist on their privileged status of being exempt from any
union shop clause or any variant thereof.
We find it significant to note that it is only the employer, Bank of the
Philippine Islands (BPI), that brought the case up to this Court via the instant
petition for review; while the employees actually involved in the case did not
pursue the same relief, but had instead chosen in effect to acquiesce to the
decision of the Court of Appeals which effectively required them to comply with
the union shop clause under the existing CBA at the time of the merger of BPI
with Far East Bank and Trust Company (FEBTC), which decision had already
become final and executory as to the aforesaid employees. By not appealing
the decision of the Court of Appeals, the aforesaid employees are bound by the
said Court of Appeals decision to join BPIs duly certified labor union. In view of
the apparent acquiescence of the affected FEBTC employees in the Court of
Appeals decision, BPI should not have pursued this petition for review. However,
even assuming that BPI may do so, the same still cannot prosper.
 What is before us now is a petition for review under Rule 45 of the Rules
of Court of the Decision [2] dated September 30, 2003 of the Court of Appeals, as
reiterated in its Resolution [3] of June 9, 2004, reversing and setting aside the
Decision[4] dated November 23, 2001 of Voluntary Arbitrator Rosalina Letrondo-
Montejo, in CA-G.R. SP No. 70445, entitled BPI Employees Union-Davao
Chapter-Federation of Unions in BPI Unibank v. Bank of the Philippine Islands, et
al.
The antecedent facts are as follows:
On March 23, 2000, the Bangko Sentral ng Pilipinas approved the Articles
of Merger executed on January 20, 2000 by and between BPI, herein petitioner,
and FEBTC.[5] This Article and Plan of Merger was approved by the Securities
and Exchange Commission on April 7, 2000.[6]
Pursuant to the Article and Plan of Merger, all the assets and liabilities of
FEBTC were transferred to and absorbed by BPI as the surviving
corporation. FEBTC employees, including those in its different branches across
the country, were hired by petitioner as its own employees, with their status and
tenure recognized and salaries and benefits maintained.
Respondent BPI Employees Union-Davao Chapter - Federation of Unions
in BPI Unibank (hereinafter the Union, for brevity) is the exclusive bargaining
agent of BPIs rank and file employees in Davao City. The former FEBTC rank-
and-file employees in Davao City did not belong to any labor union at the time of
the merger. Prior to the effectivity of the merger, or on March 31, 2000,
respondent Union invited said FEBTC employees to a meeting regarding the
Union Shop Clause (Article II, Section 2) of the existing CBA between petitioner
BPI and respondent Union.[7]

The parties both advert to certain provisions of the existing CBA, which are
quoted below:

ARTICLE I
Section 1. Recognition and Bargaining Unit The BANK recognizes
the UNION as the sole and exclusive collective bargaining
representative of all the regular rank and file employees of the Bank
offices in Davao City.

Section 2. Exclusions

Section 3. Additional Exclusions

Section 4. Copy of Contract

ARTICLE II

Section 1. Maintenance of Membership All employees within the

bargaining unit who are members of the Union on the date of the
 effectivity of this Agreement as well as employees within the
bargaining unit who subsequently join or become members of the
Union during the lifetime of this Agreement shall as a condition of
their continued employment with the Bank, maintain their
membership in the Union in good standing.

Section 2. Union Shop - New employees falling within the

bargaining unit as defined in Article I of this Agreement, who may
hereafter be regularly employed by the Bank shall, within thirty
(30) days after they become regular employees, join the Union as a
condition of their continued employment. It is understood that
membership in good standing in the Union is a condition of their
continued employment with the Bank.[8] (Emphases supplied.)

After the meeting called by the Union, some of the former FEBTC
employees joined the Union, while others refused. Later, however, some of
those who initially joined retracted their membership. [9]

Respondent Union then sent notices to the former FEBTC employees who
refused to join, as well as those who retracted their membership, and called them
to a hearing regarding the matter. When these former FEBTC employees refused
to attend the hearing, the president of the Union requested BPI to implement the
Union Shop Clause of the CBA and to terminate their employment pursuant
thereto.[10]

After two months of management inaction on the request, respondent

Union informed petitioner BPI of its decision to refer the issue of the
implementation of the Union Shop Clause of the CBA to the Grievance
Committee. However, the issue remained unresolved at this level and so it was
subsequently submitted for voluntary arbitration by the parties. [11]

Voluntary Arbitrator Rosalina Letrondo-Montejo, in a Decision [12] dated

November 23, 2001, ruled in favor of petitioner BPIs interpretation that the former
FEBTC employees were not covered by the Union Security Clause of the CBA
between the Union and the Bank on the ground that the said employees were not
new employees who were hired and subsequently regularized, but were
absorbed employees by operation of law because the former employees of
FEBTC can be considered assets and liabilities of the absorbed
corporation. The Voluntary Arbitrator concluded that the former FEBTC
employees could not be compelled to join the Union, as it was their constitutional
right to join or not to join any organization.

Respondent Union filed a Motion for Reconsideration, but the Voluntary

Arbitrator denied the same in an Order dated March 25, 2002. [13]
 Dissatisfied, respondent then appealed the Voluntary Arbitrators decision to
the Court of Appeals. In the herein assailed Decision dated September 30, 2003,
the Court of Appeals reversed and set aside the Decision of the Voluntary
Arbitrator.[14] Likewise, the Court of Appeals denied herein petitioners Motion for
Reconsideration in a Resolution dated June 9, 2004.

The Court of Appeals pertinently ruled in its Decision:

A union-shop clause has been defined as a form of union

security provision wherein non-members may be hired, but to retain
employment must become union members after a certain period.

There is no question as to the existence of the union-shop

clause in the CBA between the petitioner-union and the
company. The controversy lies in its application to the absorbed
employees.

This Court agrees with the voluntary arbitrator that the

ABSORBED employees are distinct and different from NEW
employees BUT only in so far as their employment service is
concerned. The distinction ends there. In the case at bar, the
absorbed employees length of service from its former employer is
tacked with their employment with BPI. Otherwise stated, the
absorbed employees service is continuous and there is no gap in
their service record.

This Court is persuaded that the similarities of new and

absorbed employees far outweighs the distinction between
them. The similarities lies on the following, to wit: (a) they have a
new employer; (b) new working conditions; (c) new terms of
employment and; (d) new company policy to follow. As such, they
should be considered as new employees for purposes of applying
the provisions of the CBA regarding the union-shop clause.

To rule otherwise would definitely result to a very awkward

and unfair situation wherein the absorbed employees shall be in a
different if not, better situation than the existing BPI
employees. The existing BPI employees by virtue of the union-shop
clause are required to pay the monthly union dues, remain as
members in good standing of the union otherwise, they shall be
terminated from the company, and other union-related
obligations. On the other hand, the absorbed employees shall enjoy
the fruits of labor of the petitioner-union and its members for
nothing in exchange. Certainly, this would disturb industrial peace
in the company which is the paramount reason for the existence of
the CBA and the union.
 The voluntary arbitrators interpretation of the provisions of
the CBA concerning the coverage of the union-shop clause is at
war with the spirit and the rationale why the Labor Code itself
allows the existence of such provision.

The Supreme Court in the case of Manila Mandarin

Employees Union vs. NLRC (G.R. No. 76989, September 29, 1987)
rule, to quote:

This Court has held that a valid form of union

security, and such a provision in a collective
bargaining agreement is not a restriction of the right of
freedom of association guaranteed by the
Constitution.

A closed-shop agreement is an agreement

whereby an employer binds himself to hire only
members of the contracting union who must continue
to remain members in good standing to keep their
jobs. It is THE MOST PRIZED ACHIEVEMENT OF
UNIONISM. IT ADDS MEMBERSHIP AND
COMPULSORY DUES. By holding out to loyal
members a promise of employment in the closed-
shop, it wields group solidarity. (Emphasis
supplied)

Hence, the voluntary arbitrator erred in construing the CBA

literally at the expense of industrial peace in the company.

With the foregoing ruling from this Court, necessarily, the

alternative prayer of the petitioner to require the individual
respondents to become members or if they refuse, for this Court to
direct respondent BPI to dismiss them, follows.[15]

Hence, petitioners present recourse, raising the following issues:

I
WHETHER OR NOT THE COURT OF APPEALS GRAVELY
ERRED IN RULING THAT THE FORMER FEBTC EMPLOYEES
SHOULD BE CONSIDERED NEW EMPLOYEES OF BPI FOR
PURPOSES OF APPLYING THE UNION SHOP CLAUSE OF THE
CBA

II
 WHETHER OR NOT THE COURT OF APPEALS GRAVELY
ERRED IN FINDING THAT THE VOLUNTARY ARBITRATORS
INTERPRETATION OF THE COVERAGE OF THE UNION SHOP
CLAUSE IS AT WAR WITH THE SPIRIT AND THE RATIONALE
WHY THE LABOR CODE ITSELF ALLOWS THE EXISTENCE OF
SUCH PROVISION[16]

In essence, the sole issue in this case is whether or not the former FEBTC
employees that were absorbed by petitioner upon the merger between FEBTC
and BPI should be covered by the Union Shop Clause found in the existing CBA
between petitioner and respondent Union.

Petitioner is of the position that the former FEBTC employees are not new
employees of BPI for purposes of applying the Union Shop Clause of the CBA,
on this note, petitioner points to Section 2, Article II of the CBA, which provides:

New employees falling within the bargaining unit as

defined in Article I of this Agreement, who may hereafter be
regularly employed by the Bank shall, within thirty (30) days
after they become regular employees, join the Union as a
condition of their continued employment. It is understood that
membership in good standing in the Union is a condition of their
continued employment with the Bank.[17] (Emphases supplied.)

Petitioner argues that the term new employees in the Union Shop Clause
of the CBA is qualified by the phrases who may hereafter be regularly employed
and after they become regular employees which led petitioner to conclude that
the new employees referred to in, and contemplated by, the Union Shop Clause
of the CBA were only those employees who were new to BPI, on account of
having been hired initially on a temporary or probationary status for possible
regular employment at some future date. BPI argues that the FEBTC employees
absorbed by BPI cannot be considered as new employees of BPI for purposes of
applying the Union Shop Clause of the CBA.[18]

According to petitioner, the contrary interpretation made by the Court of

Appeals of this particular CBA provision ignores, or even defies, what petitioner
assumes as its clear meaning and scope which allegedly contradicts the Courts
strict and restrictive enforcement of union security agreements.

We do not agree.

Section 2, Article II of the CBA is silent as to how one becomes a regular

employee of the BPI for the first time. There is nothing in the said provision
which requires that a new regular employee first undergo a temporary or
probationary status before being deemed as such under the union shop
clause of the CBA.
 Union security is a generic term which is applied to and
comprehends closed shop, union shop, maintenance of membership or
any other form of agreement which imposes upon employees the
obligation to acquire or retain union membership as a condition affecting
employment. There is union shop when all new regular employees are required
to join the union within a certain period for their continued employment. There is
maintenance of membership shop when employees, who are union members
as of the effective date of the agreement, or who thereafter become members,
must maintain union membership as a condition for continued employment until
they are promoted or transferred out of the bargaining unit or the agreement is
terminated. A closed-shop, on the other hand, may be defined as an enterprise
in which, by agreement between the employer and his employees or their
representatives, no person may be employed in any or certain agreed
departments of the enterprise unless he or she is, becomes, and, for the duration
of the agreement, remains a member in good standing of a union entirely
comprised of or of which the employees in interest are a part. [19]
In the case of Liberty Flour Mills Employees v. Liberty Flour Mills, Inc.,
[20]
we ruled that:

It is the policy of the State to promote unionism to

enable the workers to negotiate with management on the same
level and with more persuasiveness than if they were to
individually and independently bargain for the improvement of
their respective conditions. To this end, the Constitution
guarantees to them the rights to self-organization, collective
bargaining and negotiations and peaceful concerted actions
including the right to strike in accordance with law. There is no
question that these purposes could be thwarted if every worker
were to choose to go his own separate way instead of joining his
co-employees in planning collective action and presenting a united
front when they sit down to bargain with their employers. It is for
this reason that the law has sanctioned stipulations for the union
shop and the closed shop as a means of encouraging the workers
to join and support the labor union of their own choice as their
representative in the negotiation of their demands and the
protection of their interest vis--vis the employer. (Emphasis ours.)

In other words, the purpose of a union shop or other union security

arrangement is to guarantee the continued existence of the union through
enforced membership for the benefit of the workers.

All employees in the bargaining unit covered by a Union Shop

Clause in their CBA with management are subject to its terms. However,
under law and jurisprudence, the following kinds of employees are
exempted from its coverage, namely, employees who at the time the union
shop agreement takes effect are bona fide members of a religious
organization which prohibits its members from joining labor unions on
religious grounds;[21] employees already in the service and already
members of a union other than the majority at the time the union shop
agreement took effect;[22] confidential employees who are excluded from
the rank and file bargaining unit; [23] and employees excluded from the union
shop by express terms of the agreement.

When certain employees are obliged to join a particular union as a

requisite for continued employment, as in the case of Union Security Clauses,
this condition is a valid restriction of the freedom or right not to join any
labor organization because it is in favor of unionism. This Court, on
occasion, has even held that a union security clause in a CBA is not a restriction
of the right of freedom of association guaranteed by the Constitution. [24]
Moreover, a closed shop agreement is an agreement whereby an
employer binds himself to hire only members of the contracting union who must
continue to remain members in good standing to keep their jobs. It is the most
prized achievement of unionism. It adds membership and compulsory
dues. By holding out to loyal members a promise of employment in the closed
shop, it wields group solidarity.[25]
Indeed, the situation of the former FEBTC employees in this case clearly
does not fall within the first three exceptions to the application of the Union Shop
Clause discussed earlier. No allegation or evidence of religious exemption or
prior membership in another union or engagement as a confidential employee
was presented by both parties. The sole category therefore in which petitioner
may prove its claim is the fourth recognized exception or whether the former
FEBTC employees are excluded by the express terms of the existing CBA
between petitioner and respondent.

To reiterate, petitioner insists that the term new employees, as the same is used
in the Union Shop Clause of the CBA at issue, refers only to employees hired by
BPI as non-regular employees who later qualify for regular employment and
become regular employees, and not those who, as a legal consequence of a
merger, are allegedly automatically deemed regular employees of BPI. However,
the CBA does not make a distinction as to how a regular employee attains such a
status. Moreover, there is nothing in the Corporation Law and the merger
agreement mandating the automatic employment as regular employees by the
surviving corporation in the merger.

It is apparent that petitioner hinges its argument that the former FEBTC
employees were absorbed by BPI merely as a legal consequence of a merger
based on the characterization by the Voluntary Arbiter of these absorbed
employees as included in the assets and liabilities of the dissolved corporation -
assets because they help the Bank in its operation and liabilities because
redundant employees may be terminated and company benefits will be paid to
them, thus reducing the Banks financial status. Based on this ratiocination, she
ruled that the same are not new employees of BPI as contemplated by the CBA
at issue, noting that the Certificate of Filing of the Articles of Merger and Plan of
Merger between FEBTC and BPI stated that x x x the entire assets and liabilities
of FAR EASTERN BANK & TRUST COMPANY will be transferred to
and absorbed by the BANK OF THE PHILIPPINE ISLANDS x x x (underlining
supplied).[26] In sum, the Voluntary Arbiter upheld the reasoning of petitioner that
the FEBTC employees became BPI employees by operation of law because they
are included in the term assets and liabilities.

Absorbed FEBTC Employees are Neither

Assets nor Liabilities

In legal parlance, however, human beings are never embraced in the term
assets and liabilities. Moreover, BPIs absorption of former FEBTC employees
was neither by operation of law nor by legal consequence of contract. There was
no government regulation or law that compelled the merger of the two banks or
the absorption of the employees of the dissolved corporation by the surviving
corporation. Had there been such law or regulation, the absorption of employees
of the non-surviving entities of the merger would have been mandatory on the
surviving corporation.[27] In the present case, the merger was voluntarily entered
into by both banks presumably for some mutually acceptable consideration. In
fact, the Corporation Code does not also mandate the absorption of the
employees of the non-surviving corporation by the surviving corporation in
the case of a merger. Section 80 of the Corporation Code provides:

SEC. 80. Effects of merger or consolidation. The merger or

consolidation, as provided in the preceding sections shall have the
following effects:

1. The constituent corporations shall become a single corporation

which, in case of merger, shall be the surviving corporation
designated in the plan of merger; and, in case of consolidation,
shall be the consolidated corporation designated in the plan of
consolidation;

2. The separate existence of the constituent corporations shall

cease, except that of the surviving or the consolidated corporation;

3. The surviving or the consolidated corporation shall possess all

the rights, privileges, immunities and powers and shall be subject to
all the duties and liabilities of a corporation organized under this
Code;

4. The surviving or the consolidated corporation shall thereupon

and thereafter possess all the rights, privileges, immunities and
franchises of each of the constituent corporations; and all property,
 real or personal, and all receivables due on whatever account,
including subscriptions to shares and other choses in action, and all
and every other interest of, or belonging to, or due to each
constituent corporation, shall be taken and deemed to be
transferred to and vested in such surviving or consolidated
corporation without further act or deed; and

5. The surviving or the consolidated corporation shall be

responsible and liable for all the liabilities and obligations of each of
the constituent corporations in the same manner as if such
surviving or consolidated corporation had itself incurred such
liabilities or obligations; and any claim, action or proceeding
pending by or against any of such constituent corporations may be
prosecuted by or against the surviving or consolidated corporation,
as the case may be. Neither the rights of creditors nor any lien
upon the property of any of such constituent corporations shall be
impaired by such merger or consolidated.

Significantly, too, the Articles of Merger and Plan of Merger dated April 7, 2000
did not contain any specific stipulation with respect to the employment contracts
of existing personnel of the non-surviving entity which is FEBTC. Unlike the
Voluntary Arbitrator, this Court cannot uphold the reasoning that the general
stipulation regarding transfer of FEBTC assets and liabilities to BPI as set forth in
the Articles of Merger necessarily includes the transfer of all FEBTC employees
into the employ of BPI and neither BPI nor the FEBTC employees allegedly could
do anything about it. Even if it is so, it does not follow that the absorbed
employees should not be subject to the terms and conditions of
employment obtaining in the surviving corporation.

The rule is that unless expressly assumed, labor contracts such as

employment contracts and collective bargaining agreements are
not enforceable against a transferee of an enterprise, labor
contracts being in personam, thus binding only between the
parties. A labor contract merely creates an action in personam and
does not create any real right which should be respected by third
parties. This conclusion draws its force from the right of an
employer to select his employees and to decide when to engage
them as protected under our Constitution, and the same can only
be restricted by law through the exercise of the police power. [28]

Furthermore, this Court believes that it is contrary to public policy to

declare the former FEBTC employees as forming part of the assets or liabilities
of FEBTC that were transferred and absorbed by BPI in the Articles of
Merger. Assets and liabilities, in this instance, should be deemed to refer only to
property rights and obligations of FEBTC and do not include the employment
contracts of its personnel. A corporation cannot unilaterally transfer its employees
to another employer like chattel. Certainly, if BPI as an employer had the right to
choose who to retain among FEBTCs employees, FEBTC employees had the
concomitant right to choose not to be absorbed by BPI. Even though FEBTC
employees had no choice or control over the merger of their employer with BPI,
they had a choice whether or not they would allow themselves to be absorbed by
BPI.Certainly nothing prevented the FEBTCs employees from resigning or
retiring and seeking employment elsewhere instead of going along with the
proposed absorption.

Employment is a personal consensual contract and absorption by BPI of a

former FEBTC employee without the consent of the employee is in violation of an
individuals freedom to contract. It would have been a different matter if there was
an express provision in the articles of merger that as a condition for the merger,
BPI was being required to assume all the employment contracts of all existing
FEBTC employees with the conformity of the employees. In the absence of such
a provision in the articles of merger, then BPI clearly had the business
management decision as to whether or not employ FEBTCs employees. FEBTC
employees likewise retained the prerogative to allow themselves to be absorbed
or not; otherwise, that would be tantamount to involuntary servitude.

There appears to be no dispute that with respect to FEBTC employees

that BPI chose not to employ or FEBTC employees who chose to retire or be
separated from employment instead of being absorbed, BPIs assumed
liability to these employees pursuant to the merger is FEBTCs liability to them in
terms of separation pay, [29] retirement pay[30] or other benefits that may be due
them depending on the circumstances.
Legal Consequences of Mergers

Although not binding on this Court, American jurisprudence on the

consequences of voluntary mergers on the right to employment and seniority
rights is persuasive and illuminating. We quote the following pertinent discussion
from the American Law Reports:

Several cases have involved the situation where as a result

of mergers, consolidations, or shutdowns, one group of
employees, who had accumulated seniority at one plant or for one
employer, finds that their jobs have been discontinued except to the
extent that they are offered employment at the place or by the
employer where the work is to be carried on in the future. Such
cases have involved the question whether such transferring
employees should be entitled to carry with them their accumulated
seniority or whether they are to be compelled to start over at the
bottom of the seniority list in the "new" job. It has been recognized
in some cases that the accumulated seniority does not survive and
cannot be transferred to the "new" job.

In Carver v Brien (1942) 315 Ill App 643, 43 NE2d 597, the
shop work of three formerly separate railroad corporations, which
had previously operated separate facilities, was consolidated in the
shops of one of the roads. Displaced employees of the other two
roads were given preference for the new jobs created in the shops
of the railroad which took over the work.A controversy arose
between the employees as to whether the displaced employees
were entitled to carry with them to the new jobs the seniority rights
they had accumulated with their prior employers, that is, whether
the rosters of the three corporations, for seniority purposes, should
be "dovetailed" or whether the transferring employees should go to
the bottom of the roster of their new employer. Labor
representatives of the various systems involved attempted to work
out an agreement which, in effect, preserved the seniority status
obtained in the prior employment on other roads, and the action
was for specific performance of this agreement against a demurring
group of the original employees of the railroad which was operating
the consolidated shops.The relief sought was denied, the court
saying that, absent some specific contract provision otherwise,
seniority rights were ordinarily limited to the employment in which
they were earned, and concluding that the contract for which
specific performance was sought was not such a completed and
binding agreement as would support such equitable relief, since the
railroad, whose concurrence in the arrangements made was
essential to their effectuation, was not a party to the agreement.

Where the provisions of a labor contract provided that in the

event that a trucker absorbed the business of another private
contractor or common carrier, or was a party to a merger of
lines, the seniority of the employees absorbed or affected thereby
should be determined by mutual agreement between the trucker
and the unions involved, it was held in Moore v International
Brotherhood of Teamsters, etc. (1962, Ky) 356 SW2d 241, that
the trucker was not required to absorb the affected employees as
well as the business, the court saying that they could find no such
meaning in the above clause, stating that it dealt only with seniority,
and not with initial employment. Unless and until the absorbing
company agreed to take the employees of the company whose
business was being absorbed, no seniority problem was created,
said the court, hence the provision of the contract could have no
application. Furthermore, said the court, it did not require that the
absorbing company take these employees, but only that if it did
take them the question of seniority between the old
 and new employees would be worked out by agreement or else be
submitted to the grievance procedure.[31] (Emphasis ours.)

Indeed, from the tenor of local and foreign authorities, in voluntary

mergers, absorption of the dissolved corporations employees or the recognition
of the absorbed employees service with their previous employer may be
demanded from the surviving corporation if required by provision of law or
contract. The dissent of Justice Arturo D. Brion tries to make a distinction as to
the terms and conditions of employment of the absorbed employees in the case
of a corporate merger or consolidation which will, in effect, take away from
corporate management the prerogative to make purely business decisions on the
hiring of employees or will give it an excuse not to apply the CBA in force to the
prejudice of its own employees and their recognized collective bargaining
agent. In this regard, we disagree with Justice Brion.

Justice Brion takes the position that because the surviving corporation continues
the personality of the dissolved corporation and acquires all the latters rights and
obligations, it is duty-bound to absorb the dissolved corporations employees,
even in the absence of a stipulation in the plan of merger. He proposes that this
interpretation would provide the necessary protection to labor as it spares
workers from being left in legal limbo.

However, there are instances where an employer can validly discontinue or

terminate the employment of an employee without violating his right to security of
tenure. Among others, in case of redundancy, for example, superfluous
employees may be terminated and such termination would be authorized under
Article 283 of the Labor Code.[32]

Moreover, assuming for the sake of argument that there is an obligation to hire or
absorb all employees of the non-surviving corporation, there is still no basis to
conclude that the terms and conditions of employment under a valid collective
bargaining agreement in force in the surviving corporation should not be made to
apply to the absorbed employees.

The Corporation Code and the Subject

Merger Agreement are Silent on Efficacy,
Terms and Conditions of Employment
Contracts

The lack of a provision in the plan of merger regarding the transfer of

employment contracts to the surviving corporation could have very well been
deliberate on the part of the parties to the merger, in order to grant the surviving
corporation the freedom to choose who among the dissolved corporations
employees to retain, in accordance with the surviving corporations business
needs. If terminations, for instance due to redundancy or labor-saving devices or
to prevent losses, are done in good faith, they would be valid.The surviving
corporation too is duty-bound to protect the rights of its own employees who may
be affected by the merger in terms of seniority and other conditions of their
employment due to the merger. Thus, we are not convinced that in the absence
of a stipulation in the merger plan the surviving corporation was compelled, or
may be judicially compelled, to absorb all employees under the same terms and
conditions obtaining in the dissolved corporation as the surviving corporation
should also take into consideration the state of its business and its obligations to
its own employees, and to their certified collective bargaining agent or labor
union.

Even assuming we accept Justice Brions theory that in a merger situation the
surviving corporation should be compelled to absorb the dissolved corporations
employees as a legal consequence of the merger and as a social justice
consideration, it bears to emphasize his dissent also recognizes that the
employee may choose to end his employment at any time by voluntarily
resigning. For the employee to be absorbed by BPI, it requires the employees
implied or express consent. It is because of this human element in employment
contracts and the personal, consensual nature thereof that we cannot agree that,
in a merger situation, employment contracts are automatically transferable from
one entity to another in the same manner that a contract pertaining to purely
proprietary rights such as a promissory note or a deed of sale of property is
perfectly and automatically transferable to the surviving corporation.

That BPI is the same entity as FEBTC after the merger is but a legal fiction
intended as a tool to adjudicate rights and obligations between and among the
merged corporations and the persons that deal with them. Although in a merger it
is as if there is no change in the personality of the employer, there is in reality a
change in the situation of the employee. Once an FEBTC employee is absorbed,
there are presumably changes in his condition of employment even if his
previous tenure and salary rate is recognized by BPI.It is reasonable to assume
that BPI would have different rules and regulations and company practices than
FEBTC and it is incumbent upon the former FEBTC employees to obey these
new rules and adapt to their new environment. Not the least of the changes in
employment condition that the absorbed FEBTC employees must face is the fact
that prior to the merger they were employees of an unorganized establishment
and after the merger they became employees of a unionized company that had
an existing collective bargaining agreement with the certified union. This
presupposes that the union who is party to the collective bargaining agreement is
the certified union that has, in the appropriate certification election, been shown
to represent a majority of the members of the bargaining unit.

Likewise, with respect to FEBTC employees that BPI chose to employ and
who also chose to be absorbed, then due to BPIs blanket assumption of liabilities
and obligations under the articles of merger, BPI was bound to respect the years
of service of these FEBTC employees and to pay the same, or commensurate
salaries and other benefits that these employees previously enjoyed with FEBTC.

As the Union likewise pointed out in its pleadings, there were benefits under
the CBA that the former FEBTC employees did not enjoy with their previous
employer. As BPI employees, they will enjoy all these CBA benefits upon their
absorption. Thus, although in a sense BPI is continuing FEBTCs employment of
these absorbed employees, BPIs employment of these absorbed employees was
not under exactly the same terms and conditions as stated in the latters
employment contracts with FEBTC. This further strengthens the view that BPI
and the former FEBTC employees voluntarily contracted with each other for their
employment in the surviving corporation.
Proper Appreciation of the Term New
Employees Under the CBA

In any event, it is of no moment that the former FEBTC employees

retained the regular status that they possessed while working for their former
employer upon their absorption by petitioner. This fact would not remove them
from the scope of the phrase new employees as contemplated in the Union Shop
Clause of the CBA, contrary to petitioners insistence that the term new
employees only refers to those who are initially hired as non-regular employees
for possible regular employment.

The Union Shop Clause in the CBA simply states that new employees who
during the effectivity of the CBA may be regularly employed by the Bank must
join the union within thirty (30) days from their regularization. There is nothing in
the said clause that limits its application to only new employees who possess
non-regular status, meaning probationary status, at the start of their
employment. Petitioner likewise failed to point to any provision in the CBA
expressly excluding from the Union Shop Clause new employees who are
absorbed as regular employees from the beginning of their employment. What is
indubitable from the Union Shop Clause is that upon the effectivity of the CBA,
petitioners new regular employees (regardless of the manner by which they
became employees of BPI) are required to join the Union as a condition of their
continued employment.

The dissenting opinion of Justice Brion dovetails with Justice Carpios view
only in their restrictive interpretation of who are new employees under the
CBA. To our dissenting colleagues, the phrase new employees (who are covered
by the union shop clause) should only include new employees who were hired as
probationary during the life of the CBA and were later granted regular
status. They propose that the former FEBTC employees who were deemed
regular employees from the beginning of their employment with BPI should be
treated as a special class of employees and be excluded from the union shop
clause.
Justice Brion himself points out that there is no clear, categorical definition of new
employee in the CBA. In other words, the term new employee as used in the
union shop clause is used broadly without any qualification or
distinction. However, the Court should not uphold an interpretation of the term
new employee based on the general and extraneous provisions of the
Corporation Code on merger that would defeat, rather than fulfill, the purpose of
the union shop clause. To reiterate, the provision of the Article 248(e) of the
Labor Code in point mandates that nothing in the said Code or any other
law should stop the parties from requiring membership in a recognized
collective bargaining agent as a condition of employment.

Significantly, petitioner BPI never stretches its arguments so far as to state

that the absorbed employees should be deemed old employees who are not
covered by the Union Shop Clause. This is not surprising.

By law and jurisprudence, a merger only becomes effective upon approval

by the Securities and Exchange Commission (SEC) of the articles of
merger. In Associated Bank v. Court of Appeals,[33] we held:

The procedure to be followed is prescribed under the Corporation

Code. Section 79 of said Code requires the approval by the
Securities and Exchange Commission (SEC) of the articles of
merger which, in turn, must have been duly approved by a majority
of the respective stockholders of the constituent corporations. The
same provision further states that the merger shall be effective only
upon the issuance by the SEC of a certificate of merger. The
effectivity date of the merger is crucial for determining when
the merged or absorbed corporation ceases to exist; and when
its rights, privileges, properties as well as liabilities pass on to
the surviving corporation. (Emphasis ours.)

In other words, even though BPI steps into the shoes of FEBTC as the
surviving corporation, BPI does so at a particular point in time, i.e., the effectivity
of the merger upon the SECs issuance of a certificate of merger. In fact, the
articles of merger themselves provided that both BPI and FEBTC will continue
their respective business operations until the SEC issues the certificate of merger
and in the event SEC does not issue such a certificate, they agree to hold each
other blameless for the non-consummation of the merger.

Considering the foregoing principle, BPI could have only become the
employer of the FEBTC employees it absorbed after the approval by the SEC of
the merger. If the SEC did not approve the merger, BPI would not be in the
position to absorb the employees of FEBTC at all. Indeed, there is evidence on
record that BPI made the assignments of its absorbed employees in BPI effective
April 10, 2000, or after the SECs approval of the merger. [34] In other words, BPI
became the employer of the absorbed employees only at some point after the
effectivity of the merger, notwithstanding the fact that the absorbed employees
years of service with FEBTC were voluntarily recognized by BPI.

Even assuming for the sake of argument that we consider the absorbed
FEBTC employees as old employees of BPI who are not members of any union
(i.e., it is their date of hiring by FEBTC and not the date of their absorption
that is considered), this does not necessarily exclude them from the union
security clause in the CBA. The CBA subject of this case was effective from April
1, 1996 until March 31, 2001. Based on the allegations of the former FEBTC
employees themselves, there were former FEBTC employees who were hired
by FEBTC after April 1, 1996 and if their date of hiring by FEBTC is considered
as their date of hiring by BPI, they would undeniably be considered new
employees of BPI within the contemplation of the Union Shop Clause of the said
CBA. Otherwise, it would lead to the absurd situation that we would discriminate
not only between new BPI employees (hired during the life of the CBA) and
former FEBTC employees (absorbed during the life of the CBA) but also among
the former FEBTC employees themselves. In other words, we would be treating
employees who are exactly similarly situated (i.e., the group of absorbed FEBTC
employees) differently. This hardly satisfies the demands of equality and justice.

Petitioner limited itself to the argument that its absorbed employees do not
fall within the term new employees contemplated under the Union Shop Clause
with the apparent objective of excluding all, and not just some, of the former
FEBTC employees from the application of the Union Shop Clause.

However, in law or even under the express terms of the CBA, there is no special
class of employees called absorbed employees. In order for the Court to apply or
not apply the Union Shop Clause, we can only classify the former FEBTC
employees as either old or new. If they are not old employees, they are
necessarily new employees. If they are new employees, the Union Shop Clause
did not distinguish between new employees who are non-regular at their hiring
but who subsequently become regular and new employees who are absorbed as
regular and permanent from the beginning of their employment. The Union Shop
Clause did not so distinguish, and so neither must we.

No Substantial Distinction Under the CBA

Between Regular Employees Hired After
Probationary Status and Regular
Employees Hired After the Merger

Verily, we agree with the Court of Appeals that there are no substantial
differences between a newly hired non-regular employee who was regularized
weeks or months after his hiring and a new employee who was absorbed from
another bank as a regular employee pursuant to a merger, for purposes of
applying the Union Shop Clause. Both employees were hired/employed only after
the CBA was signed. At the time they are being required to join the Union, they
are both already regular rank and file employees of BPI. They belong to the
same bargaining unit being represented by the Union. They both enjoy benefits
that the Union was able to secure for them under the CBA. When they both
entered the employ of BPI, the CBA and the Union Shop Clause therein were
already in effect and neither of them had the opportunity to express their
preference for unionism or not. We see no cogent reason why the Union Shop
Clause should not be applied equally to these two types of new employees, for
they are undeniably similarly situated.

The effect or consequence of BPIs so-called absorption of former FEBTC

employees should be limited to what they actually agreed to, i.e. recognition of
the FEBTC employees years of service, salary rate and other benefits with their
previous employer. The effect should not be stretched so far as to exempt former
FEBTC employees from the existing CBA terms, company policies and rules
which apply to employees similarly situated. If the Union Shop Clause is valid as
to other new regular BPI employees, there is no reason why the same clause
would be a violation of the absorbed employees freedom of association.

Non-Application of Union Shop Clause

Contrary to the Policy of the Labor Code
and Inimical to Industrial Peace

It is but fair that similarly situated employees who enjoy the same
privileges of a CBA should be likewise subject to the same obligations the CBA
imposes upon them. A contrary interpretation of the Union Shop Clause will be
inimical to industrial peace and workers solidarity. This unfavorable situation will
not be sufficiently addressed by asking the former FEBTC employees to simply
pay agency fees to the Union in lieu of union membership, as the dissent of
Justice Carpio suggests. The fact remains that other new regular employees, to
whom the absorbed employees should be compared, do not have the option to
simply pay the agency fees and they must join the Union or face termination.
Petitioners restrictive reading of the Union Shop Clause could also
inadvertently open an avenue, which an employer could readily use, in order to
dilute the membership base of the certified union in the collective bargaining unit
(CBU). By entering into a voluntary merger with a non-unionized company that
employs more workers, an employer could get rid of its existing union by the
simple expedient of arguing that the absorbed employees are not new
employees, as are commonly understood to be covered by a CBAs union
security clause. This could then lead to a new majority within the CBU that could
potentially threaten the majority status of the existing union and, ultimately, spell
its demise as the CBUs bargaining representative. Such a dreaded but not
entirely far-fetched scenario is no different from the ingenious and creative union-
busting schemes that corporations have fomented throughout the years, which
this Court has foiled time and again in order to preserve and protect the valued
place of labor in this jurisdiction consistent with the Constitutions mandate of
insuring social justice.

There is nothing in the Labor Code and other applicable laws or the CBA
provision at issue that requires that a new employee has to be of probationary or
non-regular status at the beginning of the employment relationship. An employer
may confer upon a new employee the status of regular employment even at the
onset of his engagement.Moreover, no law prohibits an employer from voluntarily
recognizing the length of service of a new employee with a previous employer in
relation to computation of benefits or seniority but it should not unduly be
interpreted to exclude them from the coverage of the CBA which is a binding
contractual obligation of the employer and employees.

Indeed, a union security clause in a CBA should be interpreted to give

meaning and effect to its purpose, which is to afford protection to the certified
bargaining agent and ensure that the employer is dealing with a union that
represents the interests of the legally mandated percentage of the members of
the bargaining unit.

The union shop clause offers protection to the certified bargaining agent
by ensuring that future regular employees who (a) enter the employ of the
company during the life of the CBA; (b) are deemed part of the collective
bargaining unit; and (c) whose number will affect the number of members of the
collective bargaining unit will be compelled to join the union. Such compulsion
has legal effect, precisely because the employer by voluntarily entering in to a
union shop clause in a CBA with the certified bargaining agent takes on the
responsibility of dismissing the new regular employee who does not join the
union.

Without the union shop clause or with the restrictive interpretation thereof as
proposed in the dissenting opinions, the company can jeopardize the majority
status of the certified union by excluding from union membership all new regular
employees whom the Company will absorb in future mergers and all new regular
employees whom the Company hires as regular from the beginning of their
employment without undergoing a probationary period. In this manner, the
Company can increase the number of members of the collective bargaining unit
and if this increase is not accompanied by a corresponding increase in union
membership, the certified union may lose its majority status and render it
vulnerable to attack by another union who wishes to represent the same
bargaining unit.[35]

Or worse, a certified union whose membership falls below twenty percent (20%)
of the total members of the collective bargaining unit may lose its status as a
legitimate labor organization altogether, even in a situation where there is no
competing union.[36] In such a case, an interested party may file for the
cancellation of the unions certificate of registration with the Bureau of Labor
Relations.[37]

Plainly, the restrictive interpretation of the union shop clause would place the
certified unions very existence at the mercy and control of the
employer. Relevantly, only BPI, the employer appears to be interested in
pursuing this case. The former FEBTC employees have not joined BPI in this
appeal.

For the foregoing reasons, Justice Carpios proposal to simply require the former
FEBTC to pay agency fees is wholly inadequate to compensate the certified
union for the loss of additional membership supposedly guaranteed by
compliance with the union shop clause. This is apart from the fact that treating
these absorbed employees as a special class of new employees does not
encourage worker solidarity in the company since another class of new
employees (i.e. those whose were hired as probationary and later regularized
during the life of the CBA) would not have the option of substituting union
membership with payment of agency fees.

Justice Brion, on the other hand, appears to recognize the inherent unfairness of
perpetually excluding the absorbed employees from the ambit of the union shop
clause. He proposes that this matter be left to negotiation by the parties in the
next CBA. To our mind, however, this proposal does not sufficiently address the
issue. With BPI already taking the position that employees absorbed pursuant to
its voluntary mergers with other banks are exempt from the union shop clause,
the chances of the said bank ever agreeing to the inclusion of such employees in
a future CBA is next to nil more so, if BPIs narrow interpretation of the union shop
clause is sustained by this Court.

Right of an Employee not to Join a Union is

not Absolute and Must Give Way to the
Collective Good of All Members of the
Bargaining Unit

The dissenting opinions place a premium on the fact that even if the
former FEBTC employees are not old employees, they nonetheless were
employed as regular and permanent employees without a gap in their
service. However, an employees permanent and regular employment status in
itself does not necessarily exempt him from the coverage of a union shop clause.

In the past this Court has upheld even the more stringent type of union security
clause, i.e., the closed shop provision, and held that it can be made applicable to
old employees who are already regular and permanent but have chosen not to
join a union. In the early case of Juat v. Court of Industrial Relations,[38] the Court
held that an old employee who had no union may be compelled to join the union
even if the collective bargaining agreement (CBA) imposing the closed shop
provision was only entered into seven years after of the hiring of the said
employee. To quote from that decision:

A closed-shop agreement has been considered as one form of

union security whereby only union members can be hired and
workers must remain union members as a condition of continued
employment. The requirement for employees or workers to become
members of a union as a condition for employment redounds to
the benefit and advantage of said employees because by
holding out to loyal members a promise of employment in the
closed-shop the union wields group solidarity. In fact, it is said
that "the closed-shop contract is the most prized achievement of
unionism."
xxxx
This Court had categorically held in the case of Freeman Shirt
Manufacturing Co., Inc., et al. vs. Court of Industrial Relations, et
al., G.R. No. L-16561, Jan. 28, 1961, that the closed-shop
proviso of a collective bargaining agreement entered into between
an employer and a duly authorized labor union is applicable not
only to the employees or laborers that are employed after the
collective bargaining agreement had been entered into but
also to old employees who are not members of any labor
union at the time the said collective bargaining agreement was
entered into. In other words, if an employee or laborer is already a
member of a labor union different from the union that entered into a
collective bargaining agreement with the employer providing for a
closed-shop, said employee or worker cannot be obliged to become
a member of that union which had entered into a collective
bargaining agreement with the employer as a condition for his
continued employment. (Emphasis and underscoring supplied.)

Although the present case does not involve a closed shop provision that included
even old employees, the Juat example is but one of the cases that laid down the
doctrine that the right not to join a union is not absolute. Theoretically, there is
nothing in law or jurisprudence to prevent an employer and a union from
stipulating that existing employees (who already attained regular and permanent
status but who are not members of any union) are to be included in the coverage
of a union security clause. Even Article 248(e) of the Labor Code only expressly
exempts old employees who already have a union from inclusion in a union
security clause.[39]

Contrary to the assertion in the dissent of Justice Carpio, Juat has not been
overturned by Victoriano v. Elizalde Rope Workers Union[40] nor by Reyes v.
Trajano.[41] The factual milieus of these three cases are vastly different.
In Victoriano, the issue that confronted the Court was whether or not employees
who were members of the Iglesia ni Kristo (INK) sect could be compelled to join
the union under a closed shop provision, despite the fact that their religious
beliefs prohibited them from joining a union. In that case, the Court was asked to
balance the constitutional right to religious freedom against a host of other
constitutional provisions including the freedom of association, the non-
establishment clause, the non-impairment of contracts clause, the equal
protection clause, and the social justice provision. In the end, the Court held that
religious freedom, although not unlimited, is a fundamental personal right and
liberty, and has a preferred position in the hierarchy of values. [42]

However, Victoriano is consistent with Juat since they both affirm that the right to
refrain from joining a union is not absolute. The relevant portion of Victoriano is
quoted below:

The right to refrain from joining labor organizations

recognized by Section 3 of the Industrial Peace Act is,
however, limited. The legal protection granted to such right to
refrain from joining is withdrawn by operation of law, where a
labor union and an employer have agreed on a closed shop, by
virtue of which the employer may employ only member of the
collective bargaining union, and the employees must continue
to be members of the union for the duration of the contract in
order to keep their jobs. Thus Section 4 (a) (4) of the Industrial
Peace Act, before its amendment by Republic Act No. 3350,
provides that although it would be an unfair labor practice for
an employer "to discriminate in regard to hire or tenure of
employment or any term or condition of employment to
encourage or discourage membership in any labor
organization" the employer is, however, not precluded "from
making an agreement with a labor organization to require as a
condition of employment membership therein, if such labor
organization is the representative of the employees." By virtue,
therefore, of a closed shop agreement, before the enactment of
Republic Act No. 3350, if any person, regardless of his religious
beliefs, wishes to be employed or to keep his employment, he must
become a member of the collective bargaining union. Hence, the
right of said employee not to join the labor union is curtailed
and withdrawn.[43] (Emphases supplied.)

If Juat exemplified an exception to the rule that a person has the right not to join
a union, Victoriano merely created an exception to the exception on the ground
of religious freedom.
Reyes, on the other hand, did not involve the interpretation of any union security
clause. In that case, there was no certified bargaining agent yet since the
controversy arose during a certification election. In Reyes, the Court highlighted
the idea that the freedom of association included the right not to associate or join
a union in resolving the issue whether or not the votes of members of the INK
sect who were part of the bargaining unit could be excluded in the results of a
certification election, simply because they were not members of the two
contesting unions and were expected to have voted for NO UNION in view of
their religious affiliation. The Court upheld the inclusion of the votes of the INK
members since in the previous case of Victoriano we held that INK members
may not be compelled to join a union on the ground of religious freedom and
even without Victoriano every employee has the right to vote no union in a
certification election as part of his freedom of association. However, Reyes is not
authority for Justice Carpios proposition that an employee who is not a member
of any union may claim an exemption from an existing union security clause
because he already has regular and permanent status but simply prefers not to
join a union.

The other cases cited in Justice Carpios dissent on this point are likewise
inapplicable. Basa v. Federacion Obrera de la Industria Tabaquera y Otros
Trabajadores de Filipinas,[44] Anucension v. National Labor Union,
[45]
and Gonzales v. Central Azucarera de Tarlac Labor Union [46] all involved
members of the INK. In line with Victoriano, these cases upheld the INK
members claimed exemption from the union security clause on religious
grounds. In the present case, the former FEBTC employees never claimed any
religious grounds for their exemption from the Union Shop Clause. As for Philips
Industrial Development, Inc. v. National Labor Relations
Corporation[47] and Knitjoy Manufacturing, Inc. v. Ferrer-Calleja,[48] the employees
who were exempted from joining the respondent union or who were excluded
from participating in the certification election were found to be not members of
the bargaining unit represented by respondent union and were free to
form/join their own union. In the case at bar, it is undisputed that the former
FEBTC employees were part of the bargaining unit that the Union
represented. Thus, the rulings in Philips and Knitjoy have no relevance to the
issues at hand.

Time and again, this Court has ruled that the individual employees right
not to join a union may be validly restricted by a union security clause in a
CBA[49] and such union security clause is not a violation of the employees
constitutional right to freedom of association.[50]

It is unsurprising that significant provisions on labor protection of the 1987

Constitution are found in Article XIII on Social Justice. The constitutional
guarantee given the right to form unions [51] and the State policy to promote
unionism[52] have social justice considerations. In Peoples Industrial and
Commercial Employees and Workers Organization v. Peoples Industrial and
Commercial Corporation,[53] we recognized that [l]abor, being the weaker in
economic power and resources than capital, deserve protection that is actually
substantial and material.

The rationale for upholding the validity of union shop clauses in a CBA,
even if they impinge upon the individual employees right or freedom of
association, is not to protect the union for the unions sake. Laws and
jurisprudence promote unionism and afford certain protections to the certified
bargaining agent in a unionized company because a strong and effective union
presumably benefits all employees in the bargaining unit since such a union
would be in a better position to demand improved benefits and conditions of work
from the employer. This is the rationale behind the State policy to promote
unionism declared in the Constitution, which was elucidated in the above-cited
case of Liberty Flour Mills Employees v. Liberty Flour Mills, Inc. [54]

In the case at bar, since the former FEBTC employees are deemed covered by
the Union Shop Clause, they are required to join the certified bargaining agent,
which supposedly has gathered the support of the majority of workers within the
bargaining unit in the appropriate certification proceeding. Their joining the
certified union would, in fact, be in the best interests of the former FEBTC
employees for it unites their interests with the majority of employees in the
bargaining unit. It encourages employee solidarity and affords sufficient
protection to the majority status of the union during the life of the CBA which are
the precisely the objectives of union security clauses, such as the Union Shop
Clause involved herein. We are indeed not being called to balance the interests
of individual employees as against the State policy of promoting unionism, since
the employees, who were parties in the court below, no longer contested the
adverse Court of Appeals decision. Nonetheless, settled jurisprudence has
already swung the balance in favor of unionism, in recognition that ultimately the
individual employee will be benefited by that policy. In the hierarchy of
constitutional values, this Court has repeatedly held that the right to abstain from
joining a labor organization is subordinate to the policy of encouraging unionism
as an instrument of social justice.

Also in the dissenting opinion of Justice Carpio, he maintains that one of the dire
consequences to the former FEBTC employees who refuse to join the union is
the forfeiture of their retirement benefits. This is clearly not the case precisely
because BPI expressly recognized under the merger the length of service of the
absorbed employees with FEBTC.Should some refuse to become members of
the union, they may still opt to retire if they are qualified under the law, the
applicable retirement plan, or the CBA, based on their combined length of service
with FEBTC and BPI. Certainly, there is nothing in the union shop clause that
should be read as to curtail an employees eligibility to apply for retirement if
qualified under the law, the existing retirement plan, or the CBA as the case may
be.
 In sum, this Court finds it reasonable and just to conclude that the Union
Shop Clause of the CBA covers the former FEBTC employees who were
hired/employed by BPI during the effectivity of the CBA in a manner which
petitioner describes as absorption. A contrary appreciation of the facts of this
case would, undoubtedly, lead to an inequitable and very volatile labor situation
which this Court has consistently ruled against.

In the case of former FEBTC employees who initially joined the union but
later withdrew their membership, there is even greater reason for the union to
request their dismissal from the employer since the CBA also contained a
Maintenance of Membership Clause.

A final point in relation to procedural due process, the Court is not

unmindful that the former FEBTC employees refusal to join the union and BPIs
refusal to enforce the Union Shop Clause in this instance may have been based
on the honest belief that the former FEBTC employees were not covered by said
clause. In the interest of fairness, we believe the former FEBTC employees
should be given a fresh thirty (30) days from notice of finality of this decision to
join the union before the union demands BPI to terminate their employment
under the Union Shop Clause, assuming said clause has been carried over in the
present CBA and there has been no material change in the situation of the
parties.

WHEREFORE, the petition is hereby DENIED, and the Decision dated

September 30, 2003 of the Court of Appeals is AFFIRMED, subject to the thirty
(30) day notice requirement imposed herein. Former FEBTC employees who opt
not to become union members but who qualify for retirement shall receive their
retirement benefits in accordance with law, the applicable retirement plan, or the
CBA, as the case may be.

SO ORDERED.

Termination due to union security clause

Olvido vs. CA, 536 SCRA 81 [2007]

Subject of the present petition for review on certiorari is the

Decision[1] dated May 19, 1999, as well as the Resolution [2] dated December
9, 1999, of the Court of Appeals in CA-G.R. SP Nos. 52108 and 52109. The
appellate court affirmed the Resolution dated July 31, 1996 of the National
Labor Relations Commission (NLRC) in NCR CA No. 008784-95, which had
reversed the Decision dated February 6, 1995 of the Labor Arbiter in NLRC
NCR No. 00-03-02163-93.
These are the facts:
Petitioners Ronilo Olvido, Cristina Dulguime, Sofronia Hernandez,
Wilma Suico, Arsenia Mayores, Erlinda Hidalgo, Marietta Mondero, Ma.
Theresa Macasinag, Elmira Pamaranglas, Cristina Sambitan, Elizabeth
Manalon, Gloria Vizcarra, Laarni Apuli, Castiela Mendoza and Meriam Olvido
were regular employees of respondent Sicaltek Manufacturing, Inc.
Petitioners R. Olvido, Suico, and Macasinag were also the President,
Vice-President, and Sergeant-at-Arms, respectively, of respondent Sicaltek
Employees Union-ADFLO [3] (SEU-ADFLO) while the other petitioners were the
founding or original members thereof.
On August 24, 1992, R. Olvido, Suico, and Macasinag, with the
assistance of respondent Antonio C. Cedilla, President of their Federation,
ADFLO, filed a complaint for illegal lay-off, illegal deductions, non-payment of
overtime pay, premium pay for holiday, service incentive leave pay, 13 th month
pay, and night shift differential pay.
In the meantime, SEU-ADFLO filed a petition for certification election
on August 28, 1992. During the certification proceedings, ADFLO
and Sicaltek agreed that SEU-ADFLO will withdraw the labor case in
exchange for the companys voluntary recognition of SEU-ADFLO as the sole
bargaining agent of its employees. On September 10, 1992, the Med-Arbiter
issued an order certifying SEU-ADFLO as the sole bargaining agent
of Sicalteks rank-and-file employees.
ADFLO then prepared a motion to dismiss the labor case, but
petitioners refused to sign it. Thus, ADFLO barred R. Olvido and Suico from
attending and participating in the initial negotiations of the new Collective
Bargaining Agreement (CBA). This prompted petitioners to disaffiliate from
SEU-ADFLO on September 17, 1992. They formed another union, the Sicaltek
Workers Union (SWU), and filed a petition for certification election on October
5, 1992. The petition was, however, dismissed due to the earlier certification
order by the Med-Arbiter. SWU appealed to the Secretary of Labor and
Employment, but the appeal was also denied.
On October 10, 1992, Sicaltek and SEU-ADFLO concluded their new
CBA made effective on October 1, 1992.
SEU-ADFLO, through its new President, respondent Dina Villagracia,
forthwith demanded that Sicaltek dismiss petitioners as provided in the
Modified Union Shop Provision in the CBA, [4] due to falsification and
disloyalty. On March 3, 1993, Sicaltek required petitioners to explain in writing
why they should not be dismissed. Petitioners countered that the demand for
their dismissal was pure harassment since the certification issue between the
two unions was still pending at the time with the Secretary of Labor and
Employment while the falsification charge had no basis.
On March 22, 1993, Sicaltek dismissed petitioners. Petitioners then
filed a complaint for unfair labor practice, illegal dismissal, damages, and
attorneys fees.
The Labor Arbiter dismissed the complaint for lack of merit. On appeal,
the NLRC reversed the decision of the Labor Arbiter. It ordered petitioners
reinstatement to their former positions but without backwages.
Petitioners and respondents filed separate petitions, docketed as G.R.
Nos. 129104 and 128798, respectively, with this Court. After the petitions were
consolidated, this Court referred the case to the Court of Appeals in
accordance with St. Martin Funeral Home v. NLRC.[5]
In CA-G.R. SP No. 52108, Sicaltek contended that the NLRC committed grave
abuse of discretion when it ruled that (1) petitioners dismissal was unjustified;
(2) petitioners cannot be validly charged with disloyalty to SEU-ADFLO
because they were not members thereof; and (3) petitioners are entitled to
reinstatement. Sicaltekargued that since petitioners were former officers and
members of SEU-ADFLO, the certified exclusive bargaining agent of the rank-
and-file employees, they are covered by the Modified Union Shop provision in
the CBA. In CA-G.R. SP No. 52109, petitioners assailed the denial of the
payment of backwages.
On May 19, 1999, the appellate court dismissed the consolidated petitions:
WHEREFORE, the petitions in these cases are
hereby DENIED DUE COURSE and accordingly DISMISSED, for
lack of merit.
SO ORDERED.[6]
The appellate court ruled that petitioners were not covered by the Modified
Union Shop provision in the CBA. The provision requires all new employees to
become union members after sometime, but does not require present
employees to join the union. The appellate court noted that when the CBA was
signed on October 10, 1992, petitioners were already regular employees and
were already members of SWU as of September 17, 1992. Thus, they could
not be obliged to become members of SEU-ADFLO after the signing of the
CBA under pain of being dismissed from employment.
Nevertheless, the appellate court ruled that the dismissal was not attended by
bad faith. The appellate court held that contrary to petitioners contentions,
there was nothing sinister about the companys act of settling amicably the
labor case with ADFLO. Sicaltek also had a right to inform the Med-Arbiter that
there was already a certified collective bargaining agent in the
company. Further, there was no evidence that Sicaltek and SEU-ADFLO
rushed the execution of the CBA to prevent SWU from being certified as the
new collective bargaining agent. The appellate court further held
that Sicaltek cannot be faulted for complying with the demand of SEU-ADFLO
to dismiss petitioners since it was only protecting itself. In any event,
according to the appellate court, Sicaltek sent petitioners show-cause letters
before actually terminating their employment.
Petitioners now come to this Court via the present petition. They argue that
the Court of Appeals erred:
IN RULING THAT PETITIONERS ARE NOT ENTITLED TO
THEIR BACKWAGES DESPITE [THE] CLEAR FINDING THAT
PETITIONERS WERE ILLEGALLY DISMISSED BY THE
COMPANY[.] [7]
Thus, the sole issue for our resolution is: Are petitioners entitled to
backwages?
Notably, Sicaltek did not assail the finding of the Court of Appeals that
petitioners were not covered by the Modified Union Shop provision in the
CBA. The appellate court found that petitioners were already members of
SWU when the CBA was signed on October 10, 1992. Thus, they could not be
obliged to become members of SEU-ADFLO after the CBA was signed, and
their dismissal by reason of disloyalty or disaffiliation was illegal. Such being
the case, the ruling of the appellate court in this regard should now be
considered final.
Nevertheless, petitioners contend that their dismissal was effected
by Sicaltek in bad faith, thus, entitling them not only to reinstatement but also
the payment of backwages. Sicaltek counters that it merely complied in good
faith with its covenant in the CBA.
It has been the jurisprudential rule for quite sometime that the employer
is not considered guilty of unfair labor practice if it merely complied in good
faith with the request of the certified union for the dismissal of employees
expelled from the union pursuant to the union security clause in the CBA.
[8]
Hence, the company may not be ordered to grant either backwages or
financial assistance in the form of separation pay as a form of penalty. [9]
However, we have recently ruled that this doctrine is inconsistent with
Article 279[10] of the Labor Code, as amended by Republic Act No. 6715. [11] It
is now provided in the Labor Code that an employee who is unjustly dismissed
from work 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 monetary equivalent computed from the time his
compensation was withheld from him up to the time of his actual
reinstatement. Thus, where reinstatement is adjudged, the award of
backwages and other benefits continues beyond the date of the Labor Arbiters
decision ordering reinstatement and extends up to the time said order of
reinstatement is actually carried out. [12]
WHEREFORE, the petition is GRANTED. The Decision dated May 19,
1999 and the Resolution dated December 9, 1999 of the Court of Appeals in
CA-G.R. SP Nos. 52108 and 52109, which affirmed the Resolution dated July
31, 1996 of the National Labor Relations Commission in NCR CA No. 008784-
95, are MODIFIED accordingly. Petitioners 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 petitioners, in accordance with Article
279 of the Labor Code, as expeditiously as possible.
SO ORDERED.

Inguillo vs. First Philippines Scales, Inc., 588 SCRA 471 [2009]

Assailed in this petition for review under Rule 45 of the Rules of Court are the
Court of Appeals (1) Decision [1] dated March 11, 2004 in CA-G.R. SP No. 73992,
which dismissed the Petition for Certiorari of petitioners Zenaida Bergante
(Bergante) and Herminigildo Inguillo (Inguillo); and
(2) Resolution[2] dated September 17, 2004 denying petitioners' Motion for
Reconsideration. The appellate court sustained the ruling of the National Labor
Relations Commission (NLRC) that petitioners were validly dismissed pursuant to
a Union Security Clause in the collective bargaining agreement.
The facts of the case are as follows:

First Philippine Scales, Inc. (FPSI), a domestic corporation engaged in the

manufacturing of weighing scales, employed Bergante and Inguillo as
assemblers on August 15, 1977 and September 10, 1986, respectively.

In 1991, FPSI and First Philippine Scales Industries Labor Union (FPSILU)
[3]
entered into a Collective Bargaining Agreement (CBA), [4] the duration of which
was for a period of five (5) years starting on September 12, 1991 until September
12, 1996. On September 19, 1991, the members of FPSILU ratified the CBA in a
document entitled RATIPIKASYON NG KASUNDUAN.[5] Bergante and Inguillo,
who were members of FPSILU, signed the said document. [6]

During the lifetime of the CBA, Bergante, Inguillo and several FPSI employees
joined another union, the Nagkakaisang Lakas ng Manggagawa (NLM), which
was affiliated with a federation called KATIPUNAN (NLM-KATIPUNAN, for
brevity). Subsequently, NLM-KATIPUNAN filed with the Department of Labor and
Employment (DOLE) an intra-union dispute[7] against FPSILU and FPSI. In said
case, the Med-Arbiter decided[8] in favor of FPSILU. It also ordered the officers
and members of NLM-KATIPUNAN to return to FPSILU the amount
of P90,000.00 pertaining to the union dues erroneously collected from the
employees. Upon finality of the Med-Arbiter's Decision, a Writ of Execution [9] was
issued to collect the adjudged amount from NLM-KATIPUNAN. However, as no
amount was recovered, notices of garnishment were issued to United Coconut
Planters Bank (Kalookan City Branch)[10] and to FPSI[11] for the latter to hold for
FPSILU the earnings of Domingo Grutas, Jr. (Grutas) and Inguillo, formerly
FPSILU's President and Secretary for Finance, respectively, to the extent
of P13,032.18. Resultantly, the amount of P5,140.55 was collected,[12] P1,695.72
of which came from the salary of Grutas, while the P3,444.83 came from that of
Inguillo.

Meanwhile, on March 29, 1996, the executive board and members of the FPSILU
addressed a document dated March 18, 1996 denominated as Petisyon [13] to
FPSI's general manager, Amparo Policarpio (Policarpio), seeking the termination
of the services of the following employees, namely: Grutas, Yolanda Tapang,
Shirley Tapang, Gerry Trinidad, Gilbert Lucero, Inguillo, Bergante, and Vicente
Go, on the following grounds:[14] (1) disloyalty to the Union by separating from it
and affiliating with a rival Union, the NLM-KATIPUNAN; (2) dereliction of duty by
failing to call periodic membership meetings and to give financial reports; (3)
depositing Union funds in the names of Grutas and former Vice-President
Yolanda Tapang, instead of in the name of FPSILU, care of the President; (4)
causing damage to FPSI by deliberately slowing down production, preventing the
Union to even attempt to ask for an increase in benefits from the former; and (5)
poisoning the minds of the rest of the members of the Union so that they would
be enticed to join the rival union.

On May 13, 1996, Inguillo filed with the NLRC a complaint against FPSI and/or
Policarpio (respondents) for illegal withholding of salary and damages, docketed
as NLRC-NCR-Case No. 00-05-03036-96.[15]
On May 16, 1996, respondents terminated the services of the employees
mentioned in the Petisyon.
The following day, two (2) separate complaints for illegal dismissal, reinstatement
and damages were filed against respondents by: (1) NLM-KATIPUNAN,
Grutas, Trinidad, Bergante, Yolanda Tapang, Go, Shirley Tapang and
Lucero[16] (Grutas complaint, for brevity); and (2) Inguillo [17] (Inguillo
complaint). Both complaints were consolidated with Inguillo's prior complaint for
illegal withholding of salary, which was pending before Labor Arbiter Manuel
Manansala. After the preliminary mandatory conference, some of the
complainants agreed to amicably settle their cases. Consequently, the Labor
Arbiter issued an Order[18] dated October 1, 1996, dismissing with prejudice the
complaints of Go, Shirley Tapang, Yolanda Tapang, Grutas, and Trinidad.
[19]
Lucero also settled the case after receiving his settlement money and
executing a Quitclaim and Release in favor of FPSI and Policarpio. [20]

Bergante and Inguillo, the remaining complainants, were directed to submit their
respective position papers, after which their complaints were submitted for
resolution on February 20, 1997.[21]
In their Position Paper,[22] Bergante and Inguillo claimed that they were not aware
of a petition seeking for their termination, and neither were they informed of the
grounds for their termination. They argued that had they been informed, they
would have impleaded FPSILU in their complaints. Inguillo could not think of a
valid reason for his dismissal except the fact that he was a very vocal and active
member of the NLM-KATIPUNAN. Bergante, for her part, surmised that she was
dismissed solely for being Inguillo's sister-in-law. She also reiterated the absence
of a memorandum stating that she committed an infraction of a company rule or
regulation or a violation of law that would justify her dismissal.
Inguillo also denounced respondents' act of withholding his salary, arguing that
he was not a party to the intra-union dispute from which the notice of
garnishment arose. Even assuming that he was, he argued that his salary was
exempt from execution.

In their Position Paper,[23] respondents maintained that Bergante and Inguillo's

dismissal was justified, as the same was done upon the demand of FPSILU, and
that FPSI complied in order to avoid a serious labor dispute among its officers
and members, which, in turn, would seriously affect production. They also
justified that the dismissal was in accordance with the Union Security Clause in
the CBA, the existence and validity of which was not disputed by Bergante and
Inguillo. In fact, the two had affixed their signatures to the document which
ratified the CBA.
In his Decision[24] dated November 27, 1997, the Labor Arbiter dismissed the
remaining complaints of Bergante and Inguillo and held that they were not
illegally dismissed. He explained that the two clearly violated the Union Security
Clause of the CBA when they joined NLM-KATIPUNAN and committed acts
detrimental to the interests of FPSILU and respondents. The dispositive portion
of the said Decision states:
WHEREFORE, premises considered, judgment is hereby rendered:

1. Declaring respondents First Philippines Scales,

Inc. (First Philippine Scales Industries [FPSI] and Amparo
Policarpio, in her capacity as President and General Manager of
respondent FPSI, not guilty of illegal dismissal as above
discussed. However, considering the length of services rendered by
complainants Herminigildo Inguillo and Zenaida Bergante as
employees of respondent FPSI, plus the fact that the other
complainants in the above-entitled cases were previously granted
financial assistance/separation pay through amicable settlement,
the afore-named respondents are hereby directed to pay
complainants Herminigildo Inguillo and Zenaida Bergante
separation pay and accrued legal holiday pay, as earlier computed,
to wit:
Herminigildo Inguillo
Separation pay ................P22,490.00
Legal Holiday Pay........... 839.00
Total 23,329.00

Zenaida Bergante
Separation pay.................P43,225.00
Legal Holiday Pay........... 839.00
Total 44,064.00

2. Directing the afore-named respondents to pay

ten (10%) percent attorney's fees based on the total monetary
award to complainants Inguillo and Bergante.

3. Dismissing the claim for illegal withholding of

salary of complainant Inguillo for lack of merit as above discussed.

4. Dismissing the other money claims and/or other

charges of complainants Inguillo and Bergante for lack of factual
and legal basis.

5. Dismissing the complaint of complainant

Gilberto Lucero with prejudice for having executed a Quitclaim and
Release and voluntary resignation in favor of respondents FPSI
 and Amparo Policarpio as above-discussed where the former
received the amount of P23,334.00 as financial
assistance/separation pay and legal holiday pay from the latter.

SO ORDERED.[25]

Bergante and Inguillo appealed before the NLRC, which reversed the Labor
Arbiter's Decision in a Resolution [26] dated June 8, 2001, the dispositive portion of
which provides:
WHEREFORE, the assailed decision is set aside. Respondents are
hereby ordered to reinstate complainants Inguillo and Bergante with
full backwages from the time of their dismissal up [to] their
actual reinstatement. Further, respondents are also directed to pay
complainant Inguillo the amount representing his withheld salary for
the period March 15, 1998 to April 16, 1998. The sum
corresponding to ten percent (10%) of the total judgment award by
way of attorney's fees is likewise ordered. All other claims are
ordered dismissed for lack of merit.

SO ORDERED.[27]

In reversing the Labor Arbiter, the NLRC[28] ratiocinated that respondents failed to
present evidence to show that Bergante and Inguillo committed acts inimical to
FPSILU's interest. It also observed that, since the two (2) were not informed of
their dismissal, the justification given by FPSI that it was merely constrained to
dismiss the employees due to persistent demand from the Union clearly proved
the claim of summary dismissal and violation of the employees' right to due
process.
Respondents filed a Motion for Reconsideration, which was referred by the
NLRC to Executive Labor Arbiter Vito C. Bose for report and recommendation. In
its Resolution[29]dated August 26, 2002, the NLRC adopted in toto the report and
recommendation of Arbiter Bose which set aside its previous Resolution
reversing the Labor Arbiter's Decision.This time, the NLRC held that Bergante
and Inguillo were not illegally dismissed as respondents merely put in force the
CBA provision on the termination of the services of disaffiliating Union members
upon the recommendation of the Union. The dispositive portion of the said
Resolution provides:

WHEREFORE, the resolution of the Commission dated June 8,

2001 is set aside. Declaring the dismissal of the complainants as
valid, [t]his complaint for illegal dismissal is dismissed.However,
respondents are hereby directed to pay complainant Inguillo the
amount representing his withheld salary for the period March 15,
1998 to April 16, 1998, plus ten (10%) percent as attorney's fees.
 All other claims are ordered dismissed for lack of merit.

SO ORDERED.[30]

Not satisfied with the disposition of their complaints, Bergante and Inguillo filed a
petition for certiorari under Rule 65 of the Rules of Court with the Court of
Appeals (CA). The CA dismissed the petition for lack of merit [31] and denied the
subsequent motion for reconsideration. [32] In affirming the legality of the dismissal,
the CA ratiocinated, thus:

x x x on the merits, we sustain the view adopted by the NLRC that:

x x x it cannot be said that the stipulation providing

that the employer may dismiss an employee whenever
the union recommends his expulsion either for
disloyalty or for any violation of its by-laws and
constitution is illegal or constitutive of unfair labor
practice, for such is one of the matters on which
management and labor can agree in order to bring
about the harmonious relations between them and the
union, and cohesion and integrity of their
organization. And as an act of loyalty, a union may
certainly require its members not to affiliate with any
other labor union and to consider its infringement as a
reasonable cause for separation.

The employer FPSI did nothing but to put in

force their agreement when it separated the
disaffiliating union members, herein complainants,
upon the recommendation of the union. Such a
stipulation is not only necessary to maintain loyalty
and preserve the integrity of the union, but is allowed
by the Magna Carta of Labor when it provided that
while it is recognized that an employee shall have the
right of self-organization, it is at the same time
postulated that such rights shall not injure the right of
the labor organization to prescribe its own rules with
respect to the acquisition or retention of membership
therein. Having ratified their CBA and being then
members of FPSILU, the complainants owe fealty and
are required under the Union Security clause to
maintain their membership in good standing with it
during the term thereof, a requirement which ceases
to be binding only during the 60-day freedom period
 immediately preceding the expiration of the CBA,
which was not present in this case.

x x x the dismissal of the complainants pursuant to the

demand of the majority union in accordance with their
union security [clause] agreement following the loss of
seniority rights is valid and privileged and does not
constitute unfair labor practice or illegal dismissal.

Indeed, the Supreme Court has for so long a time already

recognized a union security clause in the CBA, like the one at bar,
as a specie of closed-shop arrangement and trenchantly upheld
the validity of the action of the employer in enforcing its terms as a
lawful exercise of its rights and obligations under the contract.

The collective bargaining agreement in this

case contains a union security clause-a closed-shop
agreement.

A closed-shop agreement is an agreement

whereby an employer binds himself to hire only
members of the contracting union who must continue
to remain members in good standing to keep their
jobs. It is the most prized achievement of unionism. It
adds membership and compulsory dues. By holding
out to loyal members a promise of employment in the
closed-shop, it welds group solidarity. (National Labor
Union v. Aguinaldo's Echague Inc., 97 Phil. 184). It is
a very effective form of union security agreement.

This Court has held that a closed-shop is a

valid form of union security, and such a provision in a
collective bargaining agreement is not a restriction of
the right of freedom of association guaranteed by the
Constitution. (Lirag Textile Mills, Inc. v. Blanco, 109
SCRA 87; Manalang v. Artex Development Company,
Inc., 21 SCRA 561.)[33]

Hence, the present petition.

Essentially, the Labor Code of the Philippines has several provisions under
which an employee may be validly terminated, namely: (1) just causes under
Article 282;[34] (2) authorized causes under Article 283; [35] (3) termination due to
disease under Article 284;[36] and (4) termination by the employee or resignation
under Article 285.[37] While the said provisions did not mention as ground the
enforcement of the Union Security Clause in the CBA, the dismissal from
employment based on the same is recognized and accepted in our jurisdiction. [38]

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. [39] 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. [40] 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.[41]

In their Petition, Bergante and Inguillo assail the legality of their termination
based on the Union Security Clause in the CBA between FPSI and
FPSILU. Article II[42] of the CBA pertains to Union Security and Representatives,
which provides:

The Company hereby agrees to a UNION SECURITY [CLAUSE]

with the following terms:

1. All bonafide union members as

of the effective date of this agreement and all those
employees within the bargaining unit who shall
subsequently become members of the UNION during
the period of this agreement shall, as a condition to
their continued employment, maintain their
membership with the UNION under the FIRST PHIL.
SCALES INDUSTRIES LABOR UNION Constitution
and By-laws and this Agreement;

2. Within thirty (30) days from the

signing of this Agreement, all workers eligible for
membership who are not union members shall
become and to remain members in good standing as
bonafide union members therein as a condition of
continued employment;
 3. New workers hired shall likewise
become members of the UNION from date they
become regular and permanent workers and shall
remain members in good standing as bonafide union
members therein as a condition of continued
employment;

4. In case a worker refused to join

the Union, the Union will undertake to notify workers
to join and become union members. If said worker or
workers still refuses, he or they shall be notified by
the Company of his/her dismissal as a consequence
thereof and thereafter terminated after 30 days notice
according to the Labor Code.

5. Any employee/union member

who fails to retain union membership in good
standing may be recommended for suspension or
dismissal by the Union Directorate and/or FPSILU
Executive Council for any of the following causes:
a) Acts of Disloyalty;
b) Voluntary Resignation or
Abandonment from the UNION;
c) Organization of or joining another labor
union or any labor group that would
work against the UNION;
d) Participation in any unfair labor practice or
violation of the Agreement, or activity
derogatory to the UNION decision;
e) Disauthorization of, or Non-payment of,
monthly membership dues, fees, fines
and other financial assessments to
the Union;
f) Any criminal violation or violent conduct or
activity against any UNION member
without justification and affecting UNION
rights or obligations under the said
Agreement.
Verily, the aforesaid provision requires all members to maintain their membership
with FPSILU during the lifetime of the CBA. Failing so, and for any of the causes
enumerated therein, the Union Directorate and/or FPSILU Executive Council may
recommend to FPSI an employee/union member's suspension or
dismissal. Records show that Bergante and Inguillo were former members of
FPSILU based on their signatures in the document which ratified the CBA. It can
also be inferred that they disaffiliated from FPSILU when the CBA was still in
force and subsisting, as can be gleaned from the documents relative to the intra-
union dispute between FPSILU and NLM-KATIPUNAN. In view of their
disaffiliation, as well as other acts allegedly detrimental to the interest of both
FPSILU and FPSI, a Petisyon was submitted to Policarpio, asking for the
termination of the services of employees who failed to maintain their Union
membership.

The Court is now tasked to determine whether the enforcement of the aforesaid
Union Security Clause justified herein petitioners' dismissal from the service.

In terminating the employment of an employee by enforcing the Union Security

Clause, the employer needs only 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 union's decision to expel the employee from the union or company. [43]

We hold that all the requisites have been sufficiently met and FPSI was justified
in enforcing the Union Security Clause, for the following reasons:

First. FPSI was justified in applying the Union Security Clause, as it was a valid
provision in the CBA, the existence and validity of which was not questioned by
either party.Moreover, petitioners were among the 93 employees who affixed
their signatures to the document that ratified the CBA. They cannot now turn their
back and deny knowledge of such provision.

Second. FPSILU acted on its prerogative to recommend to FPSI the dismissal of

the members who failed to maintain their membership with the Union. Aside from
joining another rival union, FPSILU cited other grounds committed by petitioners
and the other employees which tend to prejudice FPSIs interests, i.e., dereliction
of duty - by failing to call periodic membership meetings and to give financial
reports; depositing union funds in the names of Grutas and former Vice-President
Yolanda Tapang, instead of in the name of FPSILU care of the President; causing
damage to FPSI by deliberately slowing down production, preventing the Union
from even attempting to ask for an increase in benefits from the former; and
poisoning the minds of the rest of the members of the Union so that they would
be enticed to join the rival union.

Third. FPSILU's decision to ask for the termination of the employees in the
Petisyon was justified and supported by the evidence on record. Bergante and
Inguillo were undisputably former members of FPSILU. In fact, Inguillo was the
Secretary of Finance, the underlying reason why his salary was garnished to
satisfy the judgment of the Med-Arbiter who ordered NLM-KATIPUNAN to return
the Union dues it erroneously collected from the employees. Their then affiliation
with FPSILU was also clearly shown by their signatures in the document which
ratified the CBA. Without a doubt, they committed acts of disloyalty to
the Union when they failed not only to maintain their membership but also
disaffiliated from it. They abandoned FPSILU and even joined another union
which works against the former's interests. This is evident from the intra-union
dispute filed by NLM-KATIPUNAN against FPSILU. Once affiliated with NLM-
KATIPUNAN, Bergante and Inguillo proceeded to recruit other employees to
disaffiliate from FPSILU and even collected Union dues from them.

In Del Monte Philippines,[44] the stipulations in the CBA authorizing the dismissal
of employees are of equal import as the statutory provisions on dismissal under
the Labor Code, since a CBA is the law between the company and the Union,
and compliance therewith is mandated by the express policy to give protection to
labor. In Caltex Refinery Employees Association (CREA) v. Brillantes,[45] the Court
expounded on the effectiveness of union security clause when it held that it is
one intended to strengthen the contracting union and to protect it from the
fickleness or perfidy of its own members. For without such safeguards, group
solidarity becomes uncertain; the union becomes gradually weakened and
increasingly vulnerable to company machinations. In this security clause lies the
strength of the union during the enforcement of the collective bargaining
agreement. It is this clause that provides labor with substantial power in collective
bargaining.
Nonetheless, while We uphold dismissal pursuant to a union security clause, the
same is not without a condition or restriction. For to allow its untrammeled
enforcement would encourage arbitrary dismissal and abuse by the employer, to
the detriment of the employees. Thus, to safeguard the rights of the employees,
We have said time and again that dismissals pursuant to union security clauses
are valid and legal, subject only to the requirement of due process, that is, notice
and hearing prior to dismissal. [46] In like manner, We emphasized that the
enforcement of union security clauses is authorized by law, provided such
enforcement is not characterized by arbitrariness, and always with due process.
[47]

There are two (2) aspects which characterize the concept of due process under
the Labor Code: one is substantivewhether the termination of employment was
based on the provisions of the Labor Code or in accordance with the prevailing
jurisprudence; the other is procedural - the manner in which the dismissal was
effected.

The second aspect of due process was clarified by the Court in King of Kings
Transport v. Mamac,[48] stating, thus:

(1) The first written notice to be served on the employees

should contain the specific causes or grounds for
termination against them, and a directive that the employees are
given the opportunity to submit their written explanation within a
reasonable period. x x x

(2) After serving the first notice, the employers should

schedule and conduct a hearing or conference wherein
 the employees will be given the opportunity to: (1) explain and
clarifytheir defenses to the charge against them; (2) present
evidence in support of their defenses; and (3) rebut the
evidence presented against them by the management. During the
hearing or conference, the employees are given the chance to
defend themselves personally, with the assistance of a
representative or counsel of their choice. Moreover, this conference
or hearing could be used by the parties as an opportunity to come
to an amicable settlement.

(3) After determining that termination of employment is

justified, the employers shall serve the employees a written notice
of termination indicating that: (1) all circumstances involving the
charge against the employees have been considered; and
(2) grounds have been established to justify the severance of their
employment.

Corollarily, procedural due process in the dismissal of employees requires notice

and hearing. The employer must furnish the employee two written notices before
termination may be effected. The first notice apprises the employee of the
particular acts or omissions for which his dismissal is sought, while the second
notice informs the employee of the employers decision to dismiss him. [49] 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.[50]

In the present case, the required two notices that must be given to herein
petitioners Bergante and Inguillo were lacking. The records are bereft of any
notice that would have given a semblance of substantial compliance on the part
of herein respondents. Respondents, however, aver that they had furnished the
employees concerned, including petitioners, with a copy of FPSILU's
Petisyon. We cannot consider that as compliance with the requirement of either
the first notice or the second notice. While the Petisyon enumerated the several
grounds that would justify the termination of the employees mentioned therein,
yet such document is only a recommendation by the Union upon which the
employer may base its decision. It cannot be considered a notice of
termination. For as agreed upon by FPSI and FPSILU in their CBA, the latter
may only recommend to the former a Union member's suspension or
dismissal. Nowhere in the controverted Union Security Clause was there a
mention that once the union gives a recommendation, the employer is bound
outright to proceed with the termination.
Even assuming that the Petisyon amounts to a first notice, the employer cannot
be deemed to have substantially complied with the procedural
requirements. True, FPSILU enumerated the grounds in said Petisyon. But a
perusal of each of them leads Us to conclude that what was stated were general
descriptions, which in no way would enable the employees to intelligently
prepare their explanation and defenses. In addition, the Petisyon did not provide
a directive that the employees are given opportunity to submit their written
explanation within a reasonable period. Finally, even if We are to assume that
the Petisyon is a second notice, still, the requirement of due process is
wanting. For as We have said, the second notice, which is aimed to inform the
employee that his service is already terminated, must state that the employer
has considered all the circumstances which involve the charge and the grounds
in the first notice have been established to justify the severance of
employment. After the claimed dialogue between Policarpio and the employees
mentioned in the Petisyon, the latter were simply told not to report for work
anymore.
These defects are bolstered by Bergante and Inguillo who remain steadfast in
denying that they were notified of the specific charges against them nor were
they given any memorandum to that effect. They averred that had they been
informed that their dismissal was due to FPSILU's demand/petition, they could
have impleaded the FPSILU together with the respondents. The Court has
always underscored the significance of the two-notice rule in dismissing an
employee and has ruled in a number of cases that non-compliance therewith is
tantamount to deprivation of the employees right to due process. [51]

As for the requirement of a hearing or conference, We hold that respondents

also failed to substantially comply with the same. Policarpio alleged that she had
a dialogue with the concerned employees; that she explained to them the
demand of FPSILU for their termination as well as the consequences of the
Petisyon; and that she had no choice but to act accordingly. She further averred
that Grutas even asked her to pay all the involved employees one (1)-month
salary for every year of service, plus their accrued legal holiday pay, but which
she denied. She informed them that it has been FPSI's practice to give
employees, on a case-to-case basis, only one-half () month salary for every year
of service and after they have tendered their voluntary resignation. The
employees refused her offer and told her that they will just file their claims with
the DOLE.[52]
Policarpio's allegations are self-serving. Except for her claim as stated in the
respondent's Position Paper, nowhere from the records can We find that
Bergante and Inguillo were accorded the opportunity to present evidence in
support of their defenses. Policarpio relied heavily on the Petisyon
of FPSILU. She failed to convince Us that during the dialogue, she was able to
ascertain the validity of the charges mentioned in the Petisyon. In her futile
attempt to prove compliance with the procedural requirement, she reiterated that
the objective of the dialogue was to provide the employees the opportunity to
receive the act of grace of FPSI by giving them an amount equivalent to one-half
() month of their salary for every year of service. We are not convinced. We
cannot even consider the demand and counter-offer for the payment of the
employees as an amicable settlement between the parties because what took
place was merely a discussion only of the amount which the employees are
willing to accept and the amount which the respondents are willing to give. Such
non-compliance is also corroborated by Bergante and Inguillo in their pleadings
denouncing their unjustified dismissal. In fine, We hold that the dialogue is not
tantamount to the hearing or conference prescribed by law.
We reiterate, FPSI was justified in enforcing the Union Security Clause in the
CBA. However, We cannot countenance respondents' failure to accord herein
petitioners the due process they deserve after the former dismissed them
outright in order to avoid a serious labor dispute among the officers and
members of the bargaining agent. [53] In enforcing the Union Security Clause in
the CBA, We are upholding the sanctity and inviolability of contracts. But in doing
so, We cannot override an employees right to due process. [54] In Carino v.
National Labor Relations Commission,[55] We took a firm stand in holding that:

The power to dismiss is a normal prerogative of the

employer. However, this is not without limitation. The employer is
bound to exercise caution in terminating the services of his
employees especially so when it is made upon the request of a
labor union pursuant to the Collective Bargaining Agreement x
x x. Dismissals must not be arbitrary and capricious. Due process
must be observed in dismissing an employee because it
affects not only his position but also his means of livelihood.
Employers should respect and protect the rights of their employees,
which include the right to labor."

Thus, as held in that case, "the right of an employee to be informed of the

charges against him and to reasonable opportunity to present his side in a
controversy with either the company or his own Union is not wiped away by a
Union Security Clause or a Union Shop Clause in a collective bargaining
agreement. An employee is entitled to be protected not only from a company
which disregards his rights but also from his own Union, the leadership of which
could yield to the temptation of swift and arbitrary expulsion from membership
and mere dismissal from his job."[56]
In fine, We hold that while Bergante and Inguillo's dismissals were valid pursuant
to the enforcement of Union Security Clause, respondents however did not
comply with the requisite procedural due process. As in the case of Agabon v.
National Labor Relations Commission, [57] where the dismissal is for a cause
recognized by the prevailing jurisprudence, the absence of the statutory due
process should not nullify the dismissal or render it illegal, or
ineffectual. Accordingly, for violating Bergante and Inguillo's statutory rights,
respondents should indemnify them the amount of P30,000.00 each as nominal
damages.

In view of the foregoing, We see no reason to discuss the other matters

raised by petitioners.
WHEREFORE, premises considered, the instant Petition is DENIED. The Court
of Appeals Decision dated March 11, 2004 and Resolution dated September 17,
2004, in CA-G.R. SP No. 73992, are hereby AFFIRMED WITH
MODIFICATION in that while there was a valid ground for dismissal, the
procedural requirements for termination, as mandated by law and jurisprudence,
were not observed. Respondents First Philippine Scales, Inc. and/or Amparo
Policarpio are hereby ORDERED to PAY petitioners Zenaida Bergante and
Herminigildo Inguillo the amount of P30,000.00 each as nominal damages. No
pronouncement as to costs.

SO ORDERED.

PICOP Resources, Inc. (PRI) vs. Anacleto Taneca et. al, G.R. No. 160828, 09
August 2010

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court
seeking the reversal of the Decision[1] dated July 25, 2003 and Resolution [2] dated
October 23, 2003 of the Court of Appeals in CA-G.R. SP No. 71760, setting aside
the Resolutions dated October 8, 2001 [3] and April 29, 2002[4] of the National
Labor Relations Commission in NLRC CA No. M-006309-2001 and reinstating
the Decision[5] dated March 16, 2001 of the Labor Arbiter.

The facts, as culled from the records, are as follows:

On February 13, 2001, respondents Anacleto Taeca, 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 sa PRI 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 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 ones 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.

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 PRIs 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 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 Decision[8] 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 P420,339.30 as shown in the said Annex A plus damages in the
amount of P10,000.00 each, or a total of P210,000.00 and
attorneys 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 respondents
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.
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.
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.
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
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 attorneys 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 AFFIRMEDaccordingly. 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.

2.4 Signing bonus

Caltex Refinery, supra. 279 SCRA 218

Unless shown to be clearly whimsical, capricious or arbitrary, the orders or

resolutions of the secretary of labor and employment resolving conflicts on what
should be the contents of a collective bargaining agreement will be respected by
this Court. We realize that, oftentimes, such orders and resolutions are based
neither on definitive shades of black or white, nor on what is legally right or
wrong. Rather, they are grounded largely on what is possible, fair and reasonable
under the peculiar circumstances of each case.

Statement of the Case

 Petitioner Caltex Refinery Employees Association (CREA) seeks through
Rule 65 of the Rules of Court reversal or modification of three orders of public
respondent, then Acting Secretary of Labor of Employment Jose S. Brillantes, in
Case No. OS-AJ-0044-95 [1] entitled In re: Labor Dispute at Caltex (Phils.),
Inc. The disposition of the first assailed Order [2] of public respondent dated
October 29, 1995: [3]

WHEREFORE, ON THE BASIS OF THE FOREGOING, the Caltex Refinery

Employees Association and Caltex Philippines, Inc. are hereby directed to
execute a new collective bargaining agreement embodying therein the
appropriate dispositions above spelled out including those subject of previous
agreements.

Provisions in the old CBA, or existing benefits subject of Company policy or

practice not otherwise modified or improved herein are deemed maintained.

New demands not otherwise touched upon or disposed of are hereby denied.

The motions for reconsideration and clarification of the above Order filed by
both petitioner and private respondent were denied in the second assailed Order
dated November 21, 1995, which disposed: [4]

WHEREFORE, except the modifications hereinabove set forth, the Order dated 9
October 1995 is hereby affirmed.

Moreover, pursuant to the Agreement reached by the parties on 13 September

1995 for this Office to commence the proceedings concerning the legality of
strike and the termination of the union officers, after the resolution of the CBA
issues, both parties are hereby directed to submit their position papers and
evidence within ten (10) days from receipt of a copy of this Order. For this
purpose, Atty. Tito F. Genilo is hereby designated as Hearing Officer and
authorized as such, to immediately conduct hearings and receive evidence and,
thereafter, submit his report and recommendations thereon.

Petitioners second motion for reconsideration of the above Order was

likewise denied by the third assailed Order dated January 9, 1996, as follows: [5]

WHEREFORE, PREMISES CONSIDERED, our Order of 21 November 1995 is

hereby affirmed en toto, subject to the afore-mentioned clarification on the issue
of Sunday work.

No further motions of this nature shall be entertained by this Office.

The parties are given another ten (10) days from receipt hereof to submit their
respective position papers and evidences (sic) relative to the issue of the legality
of strike and termination of the union officers.
 The Facts

Anticipating the expiration of their Collective Bargaining Agreement on July

31, 1995, petitioner and private respondent negotiated the terms and conditions
of employment to be contained in a new CBA. The negotiation between the two
parties was participated in by the National Conciliation and Meditation Board
(NCMB) and the Office of the Secretary of Labor and Employment. Some items
in the new CBA were amicably arrived at and agreed upon, but some others were
unresolved.
To settle the unresolved issues, eight meetings between the parties were
conducted. Because the parties failed to reach any significant progress in these
meetings, petitioner declared a deadlock. On July 24, 1995, petitioner filed a
notice of strike. Six (6) conciliation meetings conducted by the NCMB failed to
settle the parties differences. Then, the parties held marathon meetings at the
plant level, but this remedy proved also unavailing.
During a strike vote on August 16, 1995, the members of petitioner opted for
a walkout. Private respondent then filed with the Department of Labor and
Employment (DOLE) a petition for assumption of jurisdiction in accordance with
Article 263 (g) of the Labor Code.
In an Order dated August 22, 1995, public respondent assumed jurisdiction
over the entire labor dispute at Caltex (Philippines) Inc., with the following
disposition: [6]

WHEREFORE ABOVE PREMISES CONSIDERED, this Office hereby assumes

jurisdiction over the entire labor dispute at Caltex (Philippines) Inc. pursuant to
Article 263 (g) of the Labor Code, as amended.

Accordingly, any strike or lockout, whether actual or intended, is hereby enjoined.

The parties are further directed to cease and desist from committing any and all
acts which might exacerbate the situation.

To expedite the resolution of the instant dispute, the parties are further directed to
submit their respective position papers and evidence within ten (10) days from
receipt hereof.

In defiance of the above Order expressly restraining any strike or lockout,

petitioner began a strike and set up a picket in the premises of private
respondent on August 25, 1995.Thereafter, several company notices directing
the striking employees to return to work were issued, but the members of
petitioner defied them and continued their mass action.
In the course of the strike, DOLE Undersecretary Bienvenido Laguesma
interceded and conducted several conciliation meetings between the contending
parties. He was able to convince the members of the union to return to work and
to enter into a memorandum of agreement with private respondent. On
September 9, 1995, the picket lines were finally lifted.Thereafter, the contending
parties filed their position papers pertaining to unresolved issues. [7]
Because of the strike, private respondent terminated the employment of
some officers of petitioner union. The legality of these dismissals brought
additional contentious issues. [8]
Again, the parties tried to resolve their differences through
conciliation. Failing to come to any substantial agreement, the parties stopped
further negotiation and, on September 13, 1995, decided to refer the problem to
the secretary of labor and employment: [9]

It appearing that the possibility of an amicable settlement appears remote, the

parties agreed to submit their respective position paper and evidence
simultaneously on 27 September 1995 at the Office of the Secretary. The parties
further agreed that there will be no extension of time for filing and no further
pleading will be filed.

The decision of the Secretary of Labor and Employment will be rendered on or

before October 9, 1995.

The proceedings concerning the legal issues involving the legality of strike and
the termination of the Union officers will be commenced by the Office of the
Secretary after the resolution of the CBA issues.

As already stated, public respondent issued as scheduled on October 9,

1995 the assailed Order resolving the deadlock, followed by two more assailed
Orders on November 21, 1995 and January 16, 1996 disposing of the motions for
reconsideration/clarification of both parties. Dissatisfied with these Orders issued
by public respondent, petitioner sought remedy from this Court.
After realizing the urgency of the case and after meticulously reviewing
the Petition dated February 23, 1996; Comment by the private respondent dated
April 16, 1996 which was adopted as its own by the public respondent; Reply by
the petitioner dated September 7, 1996; Rejoinder dated October 3, 1996
and Sur-Rejoinder dated November 12, 1996, the Court resolved to give due
course to the petition and to consider the case submitted for resolution without
requiring memoranda from the parties.

The Issues

Petitioner does not specifically pinpoint the issues it wants the Court to rule
upon. It appears, however, that petitioner questions public respondents resolution
of five issues in the CBA, specifically on wage increase, union security clause,
retirement benefits or application of the new retirement plan, signing bonus and
grievance and arbitration machineries.
[10]
Private respondent, on the other hand, submits this lone issue:

Whether or not the Honorable Secretary of Labor and Employment committed

grave abuse of discretion in resolving the instant labor dispute.

The Courts Ruling

The petition is partly meritorious.

Preliminary Matter: Certiorari in Labor Cases

At the outset, we must reiterate several settled rules in a petition

for certiorari involving labor cases.
First, the factual findings of quasi-judicial agencies (such as the Department
of Labor and Employment), when supported by substantial evidence, are binding
on this Court and entitled to great respect, considering the expertise of these
agencies in their respective fields. [11] It is well-established that findings of these
administrative agencies are generally accorded not only respect but even
finality. [12]
Second, substantial evidence in labor cases is such amount of relevant
evidence which a reasonable mind will accept as adequate to justify a
conclusion. [13]
[14]
Third, in Flores vs. National Labor Relations Commission we explained
the role and function of rule 65 as an extraordinary remedy:

It should be noted, in the first place, that the instant petition is a special civil
action for certiorari under Rule 65 of the Revised Rules of Court. An
extraordinary remedy, its use is available only and restrictively in truly exceptional
cases -- those wherein the action of an inferior court, board or officer performing
judicial or quasi-judicial acts is challenged for being wholly void on grounds of
jurisdiction.The sole office of the writ of certiorari is the correction of errors of
jurisdiction including the commission of grave abuse of discretion amounting to
lack or excess of jurisdiction. It does not include correction of public respondent
NLRCs evaluation of the evidence and factual findings based thereon, which are
generally accorded not only great respect but even finality.

No question of jurisdiction whatsoever is being raised and/or pleaded in the case

at bench. Instead, what is being sought is a judicial re-evaluation of the adequacy
or inadequacy of the evidence on record, which is certainly beyond the province
 of the extraordinary writ of certiorari. Such demand is impermissible for it would
involve this court in determining what evidence is entitled to belief and the weight
to be assigned it. As we have reiterated countless times, judicial review by this
Court in labor cases does not go so far as to evaluate the sufficiency of the
evidence upon which the proper labor officer or office based his or its
determination but is limited only to issues of jurisdiction or grave abuse of
discretion amounting to lack of jurisdiction.

We shall thus use the foregoing time-tested standards in deciding this

petition.

1. Wage Increase

The main assailed Order dated October 9, 1995 resolved the ticklish demand
for wage increase as follows: [15]

With this in mind and taking into view similar factors as financial capacity,
position in the industry, package of existing benefits, inflation rate, seniority, and
maintenance of the wage differentiation between and among the various classes
of employees within the entire Company, this Office hereby finds the following
improved benefits fair, reasonable and equitable:

1. Wage Increases

Effective August 1, 1995 - 14%

Effective August 1, 1996 - 14%

Effective August 1, 1997 - 13%

2. meal subsidy - P15.00

In denying the motions for reconsideration/clarification of the above award,

public respondent rules in the challenged Order dated November 21, 1995: [16]

First, on the matter of wages, we find no compelling reasons to alter or modify

our award after having sufficiently passed upon the same arguments raised by
both parties in our previous Order. The subsequent agreement on a package of
wage increases at Shell Company, adverted to by the Union as the usual
yardstick for purposes of developing its own package of improved wage
increases, would not be sufficient basis to grant the same increases to the Union
members herein considering that other factors, among which is employment size,
were carefully taken into account. While it is true that inflation has direct impact
on wage increases, it is not quite accurate to state that inflation as of September
1995 is already registered at 11.8%. The truth of the matter is that the average
inflation for the first ten (10) months was only 7.496% and Central Bank
projections indicate that it will take a 13.5% inflation for November and December
to record an average inflation of 8.5% for the year. We, therefore, maintain the
reasonableness of the package of wage increases that we awarded.

Petitioner belittles the awarded increases. It insists that the increase should
be ruled on the basis of four factors: (a) the economic needs of the [u]nions
members; (b) the [c]ompanys financial capacity; (c) the bargaining history
between the [u]nion and the [c]ompany; and (d) the traditional parity in wages
between Caltex and Shell Refinery Employees. [17]
Petitioner contends that the inflation rate rose to 11.8% in September [1995],
rose further in October, and is still a double-digit figure at the time of this
writing. Therefore, public respondents so-called improved benefits are in reality
retrogressive. [18]
Petitioner tries to show private respondents immense financial capacity by
citing Caltexs Banaba Housing Up-grading which would cost not less
than P200,000,000.00 [19] Petitioner does not begrudge private respondents
pampering of its [r]efinery [m]anagers and supervisors, but asks that the rank and
file employees be not left too far behind. [20]
Petitioner maintains that the salaries of Shell Refinery employees be used as
a reference point in upgrading the compensation of private respondents
employees because these two companies are in the same industry and their
refineries are both in Batangas. Thus, the wage increase of petitioners members
should be 15%/15%/15%. [21]
Private respondent counters with a proposed 9% 7% 7% increase for the
same period with automatic adjustment should the increase fall short of the
inflation rate. Hence, the Secretarys award of 14% 14% 13% increase really
comes closer to the Unions position. [22]
Petitioners arguments fail to impress us. First, the matter of inflation rate was
clearly addressed in public respondents Order dated November 21,
1995. Contrary to petitioners undocumented claim of 11.8% inflation in
September of 1995, the truth of the matter is that the average inflation for the first
ten (10) months was only 7.496%, and Central Bank projections indicate that it
will take a 13.5% inflation for November and December to record an average
inflation of 8.5% for the year. [23] Second, private respondents financial capacity
has been insufficiently explained in its Comment dated April 16, 1996 in which it
stated that the Banaba upgrading should not be construed as a yardstick of its
financial standing: [24]

It is equally amazing how the Union (petitioner) desperately justifies their

demands by comparing the upgrading cost of the Companys (private respondent)
Banaba Housing Facilities, a matter totally unrelated to the case, to the cost of
their demands. The Union not only errs in its choice of yardstick of the Companys
capacity to pay, it likewise displays its ignorance of the Banaba Housing
Program.

The Banaba Housing Facility is not a benefit. It is an integral part of an

indispensable requirement for smooth Plant operations and assurance of an
emergency response crew in times of calamities and accidents. Employees who
are required to stay in the housing facility are members of the Refinerys
emergency response organization. It is also not a case of upgrading. The
Banaba Housing Facility was built in 1954. A significant number of its structure
are dilapidated and in dire need of rehabilitation and preservation. Finally,
Banaba is not a yardstick of the Companys capacity to pay, but rather, an
eloquent demonstration of the Companys will to survive and remain globally
competitive.

The above reasoning convinces us that such upgrading should not be equated
with private respondents financial capacity to pay the proposed wage increase,
but should be evaluated as a business judgment to survive and remain globally
competitive. We believe that the standard proof of a companys financial standing
is its financial statements duly audited by independent and credible external
auditors. [25] Third, the traditional parity in wages used by petitioner to justify its
proposal is flimsy and trivial. Aside from its bare allegation of similarity in salaries
and locations, petitioner did not proffer any substantial reason to impute grave
abuse of discretion on the part of the public respondent. On the other hand, we
find private respondents discussion of this matter reasonable, as the following
shows: [26]

It is further amazing that the Union continues to use an outmoded concept of the
Shell yardstick and relative parities in wages to justify an imperative need for
them to keep their traditional edge in pay over their industry counterparts. It is not
just a matter of being above the rest. Sound compensation principle of higher
productivity equals higher pay, as well as, recent developments in the industry
have negated this argument. Both Shell and Petron continue to benefit from
increasing manpower productivity. Shell, for instance, produces 155,000 barrels
per day on a 120 manpower complement of operatives and rank and file; while
the Company only produces 65,000 barrels per day with its 221 manpower
complement. In addition, the counterpart union at Shell incurs an average
overtime rate of 37%, as a percentage of base pay; the Unions overtime rate is
102%.

Thus, the issue is productivity, not sales, and so far, the Companys Refinery is
not as productive as Shells or Petrons. To ask for relative parity in the face of this
reality is not only unreasonable, it is likewise illogical.

As it is, the wage increase of 14%, 14% and 13% will result in an average basic
salary of P23,510.00 at the end of the three-year cycle. The resulting pay is
excessive and disproportionately high compared with the value of the jobs within
the bargaining unit. Stated differently, this average salary will be unreasonably
high for the skills and qualifications needed for the job.

Even now, with an average monthly salary (prior to the DOLE awarded CBA
increases) of P16,010 plus overtime, holiday and other premiums way above
those mandated by law, the Union members are already the highest paid in the
Philippines, in terms of gross income.

The alleged similarity in the situation of Caltex and Shell cannot be

considered a valid ground for a demand of wage increase, in the absence of a
showing that the two companies are also similar in substantial aspects, as
discussed above. Private respondent is merely asking that an employee should
be paid on the basis of work done. If such employee is absent on a certain day,
he should not, as a rule, be paid wages for that day. And if the employee has
worked only for a portion of a day, he is not entitled to the pay corresponding to a
full day. A contrary precept would ultimately result in the financial ruin of the
employer. The age-old general rule governing relations between labor and
capital, or management and employee, is a fair days wage for a fair days work. If
no work is performed by the employee, there can be no wage or pay unless, of
course, the laborer was ready, willing and able to work but was locked out,
dismissed, suspended or otherwise illegally prevented from working. [27] True,
union members have the right to demand wage increases through their collective
force; but it is equally cogent that they should also be able to justify an
appreciable increase in wages. We observe that private respondents detailed
allegations on productivity are unrebutted. It is noteworthy that petitioner ignored
this argument of private respondent and based its demand for wage
increase not on the ground that they were as productive as the Shell
employees. Thus, we cannot attribute grave abuse of discretion to public
respondent.

2. Union Security Clause

In the impugned Order dated October 9, 1995, public respondents contested

resolution on the union [security] clause reads: [28]

The relevant provisions found in Article III of the CBA, which is hereby read, thus:

Section 1. Employees of the COMPANY who at the signing of this Agreement are
members of the UNION and those who subsequently become members thereof
shall maintain their membership with the UNION for the duration of this
Agreement as a condition of employment.

Section 2. Members of the UNION who cease to be members of the UNION in

good standing by reason of resignation or expulsion shall not be retained in the
employment of the COMPANY.
 xxxxxxx
are sought to be amended by the Union, to read as follows:

Section 1. Employees of the Company who at the signing of this Agreement are
members of the Union and those who subsequently become members thereof
shall maintain their membership in GOOD STANDING with the Union for the
duration of this Agreement as a condition of CONTINUOUS employment.

Section 2. PURSUANT TO THE FOREGOING, ANY UNION MEMBER WHO

CEASES TO BE SUCH MEMBER ON GROUNDS PROVIDED IN ITS
CONSTITUTION AND BY-LAWS SHALL , UPON PRIOR WRITTEN NOTICE BY
THE UNION TO THE COMPANY, BUT SUBJECT TO THE OBSERVANCE OF
DUE PROCESS AND THE EXPRESS RATIFICATION OF THE MAJORITY OF
THE UNION MEMBERSHIP, BE DISMISSED FROM EMPLOYMENT BY THE
COMPANY; PROVIDED, HOWEVER, THAT THE UNION SHALL HOLD THE
COMPANY FREE AND BLAMELESS FROM ANY LIABILITY IN THE EVENT
THAT THE EMPLOYEE IN ANY MANNER QUESTIONS HIS DISMISSAL.

The proposed amendment of the Union gives the same substantial effect as the
existing provision. Rather, the same tackles more on procedure which, to our
belief, is already sufficiently provided under its constitution and by-laws. Insofar
as Union security is concerned, this is sufficiently addressed by the present
provisions in the CBA. Hence, we find we are not competent to arbitrarily
incorporate any modification thereof. We are convinced that any amendment on
this matter should be a product of mutual concern and agreement. [29]

Petitioner contends that the foregoing disposition leaving to the parties the
decision on the union security clause issue is contrary to the whole idea of
assumption of jurisdiction.Petitioner argues that in spite of the provisions on the
union security clause, it may expel a member only on any of three grounds: non-
payment of dues, subversion, or conviction for a crime involving moral
turpitude. If the employees act does not constitute any of these three grounds,
the member would continue to be employed by private respondent. Thus, the
disagreement between petitioner and private respondent on this issue is not only
procedural but also substantial. [30]
On the other hand, private respondent argues that nothing prevents
petitioner from expelling its members; however, termination of employment
should be based only on these three grounds agreed upon in the existing
CBA. Further, private respondent explains that petitioners citation of Article 249
(a) [31] of the Labor Code is out of context. It adds that the cited section provides
only for the right of a union to prescribe its own rules with respect to the
acquisition and retention of membership, and that upholding the arguments of
petitioner would make the private respondent a policeman of the union. [32]
We agree with petitioner. The disagreement between petitioner and private
respondent on the union security clause should have been definitively resolved
by public respondent. The labor secretary should take cognizance of an issue
which is not merely incidental to but essentially involved in the labor dispute
itself, or which is otherwise submitted to him for resolution. [33] In this case, the
parties have submitted the issue of the union security clause for public
respondents disposition. But the secretary of labor has given no valid reason for
avoiding the said issue; he merely points out that this issue is a procedural
matter. Such vacillation clearly sidesteps the nature of the union security clause
as one intended to strengthen the contracting union and to protect it from the
fickleness or perfidy of its own members. Without such safeguard, group
solidarity becomes uncertain; the union becomes gradually weakened and
increasingly vulnerable to company machinations. In this security clause lies the
strength of the union during the enforcement of the collective bargaining
agreement. It is this clause that provides labor with substantial power in collective
bargaining. The secretary of labor assumed jurisdiction over this labor dispute in
an industry indispensable to national interest, precisely to settle once and for all
the disputes over which he has jurisdiction at his level. In not performing his duty,
the secretary of labor committed a grave abuse of discretion.

3. New Retirement Plan

Public respondents contested resolution on retirement benefits (application of

the new retirement plan)in the Order dated November 21, 1995 reads: [34]

Third, the matter of retirement benefits deserves a second look considering that
the concerned employees were already previously granted the option to choose
between the old and the new plan at the time the latter was initiated and they
choose to be covered under the Old Plan. To accede to the Unions demand to
cover them under the new plan entails a different arrangement under a new
scheme and likewise requires the approval of a Board of Trustees. It is, therefore,
understood that the new Retirement Plan does not apply to the more or less 40
employees being sought by the Union to be covered under the New Plan.

Petitioner contends that 40 of its members who are still covered by the Old
Retirement Plan because they were not able to exercise the option to shift to the
New Retirement Plan, for one reason or another, when such option was given in
the past are included in the New Retirement Plan. Petitioner argues that the
exclusion of forty employees from the New Plan constitutes grave abuse of
discretion for three reasons. First, it is a case of the left hand taking away, so to
speak, what the right hand had given. Second, the change was done for a very
shallow reason. The new scheme was no longer new, as the New Retirement
Plan had been in place for at least two years. Third, in not applying the New
Retirement Plan to the 40 employees, public respondent was perpetrating his
departments discriminatory practice. [35]
 Private respondent counters that these 40 or so employees have opted to
remain covered by the old plan despite opportunities given them in 1985 to shift
to the New Plan. [36]
We hold that public respondent did not commit grave abuse of discretion in
respecting the free and voluntary decision of the employees in regard to the
Provident Plan and the irrevocable one-time option provided for in the New
Retirement Plan. Although the union has every right to represent its members in
the negotiation regarding the terms and conditions of their employment, it cannot
negate their wishes on matters which are purely personal and individual to
them. In this case, the forty employees freely opted to be covered by the Old
Plan; their decision should be respected. The company gave them every
opportunity to choose, and they voluntarily exercised their choice. The union
cannot pretend to know better; it cannot impose its will on them.

4. Grievance Machinery and Arbitration

The public respondents contested resolution on grievance and arbitration

machineries in the Order dated November 21, 1995 reads: [37]

Seventh, we are constrained to take a closer look at the existing procedure

concerning grievance in relation to the modifications being proposed by the
Union. In this regard, we affirm our resolution to shorten the periods to
process/resolve grievances based on existing practice from (45) days to (30)
days at the first step and (10) days to seven (7) days at the second step which is
the level of the VP for manufacturing. We further reviewed the steps through
which a grievance may be processed and in line with the principle to expedite the
early resolution of grievances, we find that the establishment of a joint Council as
an additional step in the grievance procedure, may only serve to protract the
proceeding and, therefore, no longer necessary. Instead, the
unresolved grievance, if, not settled within (7) days at the level of the VP for
Manufacturing, shall automatically be referred by both parties to voluntary
arbitration in accordance with R.A. 6715. As to the number of Arbitrators for
which the Union proposes to employ only one instead of a panel of three
Arbitrators, we find it best to leave the matter to the agreement of both
parties. Finally, we hereby advise the parties that the list of accredited voluntary
arbitrators is now being maintained and disseminated by the National
Conciliation and Meditation Board and no longer by the Bureau of Labor
Relations.

Petitioner contends that public respondent derailed the grievance and

arbitration scheme proposed by the Union. [38] Petitioner argues that the proposed
Grievance Settlement Council is intended to supplement the effort of the Vice
President for Manufacturing in reviewing the grievance elevated to him, so that
instead of acting alone x x x he will be obliged to convoke a conference of the
Council to afford the grievant a thorough hearing. Petitioners recommendation for
a single arbitrator is based on the proposition that if voluntary arbitration should
be resorted to at all, this recourse should entail the least possible expense. [39]
Private respondent counters that the disposition on the grievance machinery
is likewise fair and reasonable under the circumstances and in fact was merely a
reiteration of the (u)nions position during the conciliation meetings conducted by
Undersecretary Bienvenido Laguesma. [40]
No particular setup for a grievance machinery is mandated by law. Rather,
Article 260 of the Labor Code, as incorporated by RA 6715, provides for only a
single grievance machinery in the company to settle problems arising from
interpretation or implementation of their collective bargaining agreement and
those arising from the interpretation or enforcement of company personnel
policies. Article 260, as amended, reads:

Article 260. Grievance Machinery and Voluntary Arbitration. The parties to a

Collective Bargaining Agreement shall include therein provisions that will ensure
the mutual observance of its terms and conditions. They shall establish a
machinery for the adjustment and resolution of grievances arising from the
interpretation or implementation of their Collective Bargaining Agreement and
those arising from the interpretation or enforcement of company personnel
policies.

All grievances submitted to the grievance machinery which are not settled within
seven (7) calendar days from the date of its submission shall automatically be
referred to voluntary arbitration prescribed in the Collective Bargaining
Agreement.

For this purpose, parties to a Collective Bargaining Agreement shall name and
designate in advance a Voluntary Arbitrators or panel of voluntary arbitrators,
include in the agreement a procedure for the selection of such Voluntary
Arbitrator or panel of Voluntary Arbitrators, preferably from the listing of qualified
Voluntary Arbitrators duly accredited by the Board. In case the parties fail to
select a Voluntary Arbitrator or panel of Voluntary Arbitrators, the Board shall
designate the Voluntary Arbitrator or panel of Voluntary Arbitrators, as may be
necessary, pursuant to the selection procedure agreed upon in the Collective
Bargaining Agreement, which shall act with same force and effect as if the
Arbitrator or panel of Arbitrators has been selected by the parties as described
above.

We believe that the procedure described by public respondent sufficiently

complies with the minimum requirement of the law. Public respondent even
provided for two steps in hearing grievances prior to their referral to
arbitration. The parties will decide on the number of arbitrators who may hear a
dispute only when the need for it arises. Even the law itself does not specify the
number of arbitrators. Their alternatives whether to have one or three arbitrators
have their respective advantages and disadvantages. In this matter, cost is not
the only consideration; full deliberation on the issues is another, and it is best
accomplished in a hearing conducted by three arbitrators. In effect, the parties
are afforded the latitude to decide for themselves the composition of the
grievance machinery as they find appropriate to a particular situation. At bottom,
we cannot really impute grave abuse of discretion to public respondent on this
issue.

5. Signing Bonus

The public respondents contested resolution on the signing bonus in the

Order dated November 21, 1995 reads: [41]

Fifth, specifically on the issue of whether the signing bonus is covered under
the maintenance of existing benefits clause, we find that a clarification is indeed
imperative. Despite the expressed provision for a signing bonus in the previous
CBA, we uphold the principle that the award for a signing bonus should partake
the nature of an incentive and premium for peaceful negotiations and amicable
resolution of disputes which apparently are not present in the instant case. Thus,
we are constrained to rule that the award of signing bonus is not covered by
the maintenance of existing benefits clause.

Petitioner asseverates that the signing bonus is an existing benefit embodied

in the old CBA. [42] It explains that public respondent erred in removing the award
of a signing bonus which is given not only as an incentive for peaceful
negotiations and amicable settlement of disputes but also as an extra award to
the workers following the settlement of a CBA dispute by whatever means. [43]
Private respondent disagrees, contending that a signing bonus is not
awarded when CBA negotiations result in a strike. There are two reasons
therefor: First, the grant of a signing bonus is a matter of discretion and cannot
be demanded as a matter of right; and second, the signing bonus is meant as an
incentive for a peaceful negotiation. Once these negotiations result in a strike, an
illegal one at that, the basis or rationale for such an award is lost. [44]
Although proposed by petitioner, [45] the signing bonus was not accepted by
private respondent. [46] Besides, a signing bonus is not a benefit which may be
demanded under the law.Rather, it is now claimed by petitioner under the
principle of maintenance of existing benefits of the old CBA. However, as clearly
explained by private respondent, a signing bonus may not be demanded as a
matter of right. If it is not agreed upon by the parties or unilaterally offered as an
additional incentive by private respondent, the condition for awarding it must be
duly satisfied. In the present case, the condition sine qua non for its grant a non
strike was not complied with. In fact, private respondent categorically stated in its
counter-proposal to the exclusion of those agreed upon before that new
collective bargaining agreement would constitute the only agreement between
the parties, as follows:

SECTION 4. Scope of Agreement. The terms and conditions of employment of

the employees within the appropriate bargaining unit are embodied in this
Agreement. On the other hand, all such benefits which are not expressly
provided for in this Agreement, but which are now being accorded, may in the
future be accorded, or might have been previously accorded to employees, by
the COMPANY shall be deemed as purely discretionary or pure acts of grace and
magnanimity on the part of the COMPANY in each particular case, and the
continuance or repetition thereof now or in the future, no matter how long or how
often, shall not be construed as establishing a right for the employee and/or
obligation on the part of the COMPANY. [47]

This provision on the scope of the agreement is further buttressed by the

clause on waiver: [48]

The parties acknowledge that during the negotiations which resulted in the
execution of this Agreement, each of them had the unlimited opportunity to make
demands and proposals with respect to any and all subjects and matters proper
for collective bargaining and not prohibited by law; and the parties further
acknowledge that the understandings and agreements arrived at by them after
the exercise of that right and unlimited opportunity are fully set forth in this
Agreement. Therefore, the COMPANY and the UNION during the life of this
Agreement, each voluntarily and unqualifiedly waives the right and each agrees
that the other shall not be obligated to bargain collectively with respect to any
subject or matter referred to or covered in this Agreement or with respect to any
subject or matter not specifically referred to or covered in this Agreement even
though such subject or matter may not have been within the knowledge or
contemplation of either or both parties at the time they negotiated or signed this
Agreement.

Epilogue

We have carefully reviewed the assailed Orders. Other than his failure to rule
on the issue of union security, the secretary of labor cannot be indicted for grave
abuse of discretion amounting to want or excess of jurisdiction.

Basically, there is grave abuse of discretion amounting to lack of jurisdiction

where the respondent board, tribunal or officer exercising judicial functions
exercised its judgment in a capricious, whimsical, arbitrary or despotic
manner. However, it has also been said that grave abuse is committed when the
lower court acted capriciously, and whimsically or the petitioners contention
appears to be clearly tenable or the broader interest of justice or public policy [so]
require x x x. Also, grave abuse of discretion is committed when the board,
tribunal or officer exercising judicial function fails to consider evidence adduced
by the parties. [49]

In Saballa vs. National Labor Relations Commission, [50] we ruled on how a

decision of an administrative body must be drawn:

The Court has previously held that judges and arbiters should draw up their
decisions and resolutions with due care, and make certain that they truly and
accurately reflect their conclusions and their final dispositions. x x x The same
thing goes for the findings of fact made by the NLRC, as it is a settled rule that
such findings are entitled to great respect and even finality when supported by
substantial evidence; otherwise, they shall be struck down for being whimsical
and capricious and arrived at with grave abuse of discretion. It is a requirement
of due process and fair play that the parties to a litigation be informed of how it
was decided, with an explanation of the factual and legal reasons that led to the
conclusions of the court. A decision that does not clearly and distinctly state the
facts and the law of which it is based leaves the parties in the dark as to how it
was reached and is especially prejudicial to the losing party, who is unable to
pinpoint the possible errors of the court for review by a higher tribunal.

In the present case, the foregoing requirements has been sufficiently

met. Petitioners claim of grave abuse of discretion is anchored on the simple fact
that public respondent adopted largely the proposals of private respondent. It
should be understood that bargaining is not equivalent to an adversarial litigation
where rights and obligations are delineated and remedies applied. It is simply a
process of finding a reasonable solution to a conflict and harmonizing opposite
positions into a fair and reasonable compromise. When parties agree to submit
unresolved issues to the secretary of labor for his resolution, they should not
expect their positions to be adopted in toto. It is understood that they defer to his
wisdom and objectivity in insuring industrial peace. And unless they can clearly
demonstrate bias, arbitrariness, capriciousness or personal hostility on the part of
such public officer, the Court will not interfere or substitute the said officers
judgment with its own. In this case, it is possible that this Court, or some its
members at least, may even agree with the wisdom of petitioners claims. But
unless grave abuse of discretion is cogently shown, this Court will refrain from
using its extraordinary power of certiorari to strike down decisions and orders of
quasi-judicial officers specially tasked by law to settle administrative questions
and disputes. This is particularly true in the resolution of controversies in
collective bargaining agreements where the question is rarely one of legal right or
wrong nay, of black and white but one of wisdom, cogency and compromise as to
what is possible, fair and reasonable under the circumstances.
WHEREFORE, premises considered, the petition is partly GRANTED. The
assailed Orders are AFFIRMED with the modification that the issue on the union
security clause be REMANDED to the Department of Labor and Employment for
definite resolution within one month from the finality of this Decision. No costs.
 SO ORDERED.

2.5 Interpretation in favor of labor in cases of doubt or ambiguity

BPI vs. BPI Employees Union – Metro Manila, G.R. No. 175678, 22 August 2012

THIRD DIVISION

[ G.R. No. 175678, August 22, 2012 ]

BANK OF THE PHILIPPINE ISLANDS, PETITIONER, VS. BANK OF THE

PHILIPPINE ISLANDS EMPLOYEES UNION- METRO MANILA, 22 AUGUST
2012 RESPONDENT.

DECISION

PERALTA, J.:
For resolution of this Court is the Petition for Review under Rule 45 of the
Revised Rules of Court, dated January 20, 2007, of petitioner Bank of the
Philippine Islands (BPI) which seeks to reverse and set aside the Court of
Appeals' (CA) Decision[1] and Resolution,[2] dated June 8, 2006 and November
29, 2006, respectively, in CA-G.R. SP No. 83387.

The antecedent facts follow.

Respondent Bank of the Philippine Islands Employees Union-Metro Manila

(BPIEU-MM), a legitimate labor organization and the sole and exclusive
bargaining representative of all the regular rank-and-file employees of petitioner
BPI in Metro Manila and petitioner BPI have an existing Collective Bargaining
Agreement (CBA)[3] which took effect on April 1, 2001. The CBA provides for loan
benefits and relatively low interest rates. The said provisions state:

Article VIII - Fringe Benefits

xxxx

Section 14. Multi-Purpose Loan, Real Estate Secured Housing Loan and Car
Loan. - The Bank agrees to continue and maintain its present policy and practice,
embodied in its Collective Bargaining Agreement with the Union which expired on
31 March 2001, extending to qualified regular employees the multi-purpose and
real estate secured housing loans, subject to the increased limits and provisions
hereinbelow, to wit:
(a) Multi-Purpose Loan not exceeding FORTY THOUSAND PESOS
(P40,000.00), payable within the period not exceeding three (3) years via semi-
monthly salary deductions, with interest at the rate of eight percent (8%) per
annum computed on the diminishing balance.

(b) Real Estate-Secured Housing Loan not exceeding FOUR HUNDRED FIFTY
THOUSAND " PESOS (P450,000.00), payable over a period not exceeding
fifteen (15) years via semi-monthly salary deductions, with interest at the rate of
nine percent (9%) per annum computed on the diminishing balance.

The rate of interest on real estate secured loans, however, may be reduced to six
percent (6%) per annum, subject to the following conditions:

1. If the loan is accepted for coverage by the Home Insurance and Guaranty
Corporation (HIGC).

2. The HIGC premium shall be paid by the borrower.

3. The borrower procures a Mortgage Redemption Insurance coverage from an

insurance company selected by the BANK.

4. The BANK may increase the six percent (6%) interest if the HIGC or the
Government imposes new conditions or restrictions necessitating a higher
interest in order to maintain the BANK'S position before such conditions or
restrictions were imposed.

5. Such other terms or conditions imposed or which may be imposed by the

HIGC.

6. It is distinctly understood that the rate of interest shall automatically revert to

nine percent (9%) per annum upon cancellation of the HIGC coverage for any
cause.

The BANK shall make strong representations with the Bangko Sentral ng
Pilipinas for a second upgrade and/or availment under the Housing Loan
Program.

(c) Car Loan. - The BANK shall submit a revised plan for the approval of the
Bangko Sentral ng Pilipinas which shall incorporate a car loan program in its
existing Housing Loan Program. The said car loan shall be a sub-limit under the
program such that any availment thereof shall operate to decrease the available
housing loan limit. Therefore, the combined amount of both housing and car
loans that may be availed of shall not exceed FOUR HUNDRED FIFTY
THOUSAND PESOS (P450,000.00). This supplemental revision of the loan
program shall be subject to the rules and regulations {e.g., amount of sub-limit,
credit ratio, type and age of vehicle, interest rate, etc.) which the BANK may
promulgate, and to the terms of the approval of the Bangko Sentral ng Pilipinas.

The multi-purpose and housing loans stated in the next preceding paragraphs, as
well as the car loan which shall be incorporated in the housing loan program,
shall be subject further to the applicable provisions, guidelines and restrictions
set forth in the Central Bank Circular No. 561, as amended by Central Bank
Circular No. 689, and to the rules, regulations and policies of the BANK on such
loans insofar as they do not violate the provisions, guidelines and restrictions set
forth in said Central Bank Circular No. 561, as amended.

Section 15. Emergency Loans. - The BANK agrees to increase the amount of
emergency loans assistance, upon approval by the Central Bank of the
Philippines, from a maximum amount of Ten Thousand Pesos (PI 0,000.00) to a
maximum amount of Fifteen Thousand Pesos (P15,000.00) to qualified
employees intended to cover emergencies only, i.e., expenses incurred but could
not be foreseen such as those arising from natural calamities, emergency
medical treatment and/or hospitalization of an employee and/or his immediate
family and other genuine emergency cases of serious hardship as the BANK may
determine. Hospital expenses for caesarian delivery of a female employee or an
employee's wife not covered by the Group Hospitalization Insurance Plan shall
qualify for the emergency loan.

Emergency loans shall be playable in twenty-four (24) months via semi-monthly

salary deductions and shall be charged interest at the minimal rate of Seven
percent (7%) per annum for the first P10,000.00 and Nine percent (9%) for the
additional P5.000.00 computed on the diminishing balance. The emergency loan
assistance program shall be governed by the rules, regulations and policies of
the BANK and such amendments or modifications thereof which the BANK may
issue from time to time.[4]

Thereafter, petitioner issued a "no negative data bank policy" [5] for the
implementation/availment of the manpower loans which the respondent objected
to, thus, resulting into labor-management dialogues. Unsatisfied with the result of
those dialogues, respondent brought the matter to the grievance machinery and
afterwards, the issue, not having been resolved, the parties raised it to the
Voluntary Arbitrator.

In his decision, the Voluntary Arbitrator found merit in the respondent's cause.
Hence, the dispositive portion of the said decision reads as follows:
WHEREFORE, viewed in the light of the foregoing circumstances, this Arbitrator
hereby rules:

1. That the imposition of the NO NEGATIVE DATA BANK as a new condition for
the implementation and availment of the manpower loan benefits by the
employees evidently violates the CBA;

2. That all employees who were not allowed or deprived of the manpower loan
benefits due to the NO NEGATIVE DATA BANK POLICY be immediately granted
in accordance with their respective loan benefits applied for;

3. That the respondent herein is ordered likewise to pay ten percent (10%) of the
total amount of all loans to be granted to all employees concerned as Attorney's
Fees; and

4. That the parties herein are directed to report compliance with the above
directives within ten (10) days from receipt of this ORDER.

SO ORDERED.[6]

Aggrieved, petitioner appealed the case to the CA via Rule 43, but the latter
affirmed the decision of the Voluntary Arbitrator with the modification that the
award of attorney's fees be deleted. The dispositive portion states:

WHEREFORE, premises considered, the Voluntary Arbitrator's Decision dated

April 5, 2004 is hereby AFFIRMED with the MODIFICATION that the award of
attorney's fees is hereby deleted.

SO ORDERED.[7]
Petitioner filed a motion for reconsideration, but it was denied in a
Resolution[8] dated November 29, 2006.

Hence, the present petition.

Petitioner raises the following arguments:

A. The "No NDB policy" is a valid and reasonable requirement that is consistent
with sound banking practice and is meant to inculcate among officers and
employees of the petitioner the need for fiscal responsibility and discipline,
especially in an industry where the element of trust is paramount.

B. The "No NDB policy" does not violate the parties' Collective Bargaining
Agreement.
C. The "No NDB policy" conforms to existing BSP regulations and circulars, and
to safe and sound banking practices.[9]

Respondent, on the other hand, claims that the petition did not comply with
Section 4, Rule 45 of the Revised Rules of Court and must be dismissed outright
in accordance with Section 5 of the same rule; that the CA did not commit any
reversible error in the questioned judgment to warrant the exercise of its
discretionary appellate jurisdiction; and that the Voluntary Arbitrator and the CA
duly passed upon the same issues raised in the instant petition and their
decisions are based on substantial evidence and are in accordance with law and
jurisprudence.[10]

Tn its Reply[11] dated September 21, 2007, petitioner reiterates the issues it
presented in its petition. It also argues that the present petition must not be
dismissed based on mere technicality.

Subsequently, the parties submitted their respective memoranda.

Petitioner's arguments are mere rehash of those it raised in the CA. It insists that
the rationale behind the use of the "no negative data bank policy" aims to
encourage employees of a banking institution to exercise the highest standards
of conduct, considering the bank's fiduciary relationship with its depositors and
clients. It likewise contends that a scrutiny of the CBA reveals an express
conformity to petitioner's prerogative to issue policies that would guide the parties
in the availment of manpower loans under the CBA.

Furthermore, petitioner avers that the subject policy does not only conform to the
provisions of the parties' CBA, but it is also in harmony with the circulars and
regulations of the Bangko Sentral ng Pilipinas.

The petition lacks merit.

In a petition for review on certiorari, this Court's jurisdiction is limited to reviewing

errors of law in the absence of any showing that the factual findings complained
of are devoid of support in the records or are glaringly erroneous. [13] Firm is the
doctrine that this Court is not a trier of facts, and this applies with greater force in
labor cases.[14] The issues presented by the petitioner are factual in nature.
Nevertheless, the CA committed no error in its questioned decision and
resolution.

A 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, including mandatory provisions for
grievances and arbitration machineries.[15] As in all other contracts, there must be
clear indications that the parties reached a meeting of the minds. [16] Therefore,
the terms and conditions of a CBA constitute the law between the parties. [17]

The CBA in this case contains no provision on the "no negative data bank policy"
as a prerequisite in the entitlement of the benefits it set forth for the employees.
In fact, a close reading of the CBA would show that the terms and conditions
contained therein relative to the availment of the loans are plain and clear, thus,
all they need is the proper implementation in order to reach their objective. The
CA was, therefore, correct when it ruled that, although it can be said that
petitioner is authorized to issue rules and regulations pertinent to the availment
and administration of the loans under the CBA, the additional rules and
regulations, however, must not impose new conditions which are not
contemplated in the CBA and should be within the realm of reasonableness. The
"no negative data bank policy" is a new condition which is never contemplated in
the CBA and at some points, unreasonable to the employees because it provides
that before an employee or his/her spouse can avail of the loan benefits under
the CBA, the said employee or his/her spouse must not be listed in the negative
data bank, or if previously listed therein, must obtain a clearance at least one
year or six months as the case may be, prior to a loan application.

It must be remembered that negotiations between an employer and a union

transpire before they agree on the terms and conditions contained in the CBA. If
the petitioner, indeed, intended to include a "no negative data bank policy" in the
CBA, it should have presented such proposal to the union during the
negotiations. To include such policy after the effectivity of the CBA is deceptive
and goes beyond the original agreement between the contracting parties.

This Court also notes petitioner's argument that the "no negative data bank
policy" is intended to exact a high standard of conduct from its employees.
However, the terms and conditions of the CBA must prevail. Petitioner can
propose the inclusion of the said policy upon the expiration of the CBA, during
the negotiations for a new CBA, but in the meantime, it has to honor the
provisions of the existing CBA.

Article 1702 of the New Civil Code provides that, in case of doubt, all labor
legislation and all labor contracts shall be construed in favor of the safety and
decent living of the laborer. Thus, this Court has ruled that any doubt or
ambiguity in the contract between management and the union members should
be resolved in favor of the latter.[18] Therefore, there is no doubt, in this case, that
the welfare of the laborers stands supreme.

WHEREFORE, the Petition for Review under Rule 45 of the Revised Rules of
Court, dated January 20, 2007, of petitioner Bank of the Philippine Islands, is
hereby DENIED and the Court of Appeals' Decision and Resolution, dated June
8, 2006 and November 29, 2006, respectively, are hereby AFFIRMED.

SO ORDERED.
Velasco, Jr., (Chairperson), Abad, Mendoza, and Perlas-Bernabe, JJ., concur.

[1]
Penned by Associate Justice Mariflor P. Punzalan Castillo, with Associate
Justices Remedios A. Salazar-Fernando and Noel G.Tijam, concurring; rollo, pp.
30-41.
[2]
Id at. 42-43.
[3]
Rollo, pp. at 84-105.
[4]
Id. at 96-98.
[5]
As bank employees, one is expected to practice the highest standards of
financial prudence and sensitivity to basic rules of credit and management of
his/her financial resources and needs, it is for this reason that Management
deemed fit that reference to the Negative Data Bank (NDB) and other sources of
financial data handling shall be made for purposes of evaluation of manpower
loans.

xxx These procedures apply to all employees, whether officer or staff, regardless
of loan type (multi-purpose, emergency, car, housing).

NDB (whether record is in his own name or spouse's)

1. Outstanding obligation should be fully paid at least one year prior to loan
application.

- even if cleared/fully paid, but within the one-year penalty box, the application
wili not be considered.

2. Clearance certification should be obtained from the card company/lending

company/bank/court:

- if card or lending company, the date of full payment should be clearly indicated
in the certification.
- if closed account due to mishandling, date of account closure.
- f court case, date of dismissal of case.
3. Employees will be asked to explain in writing the reason/circumstances for
being in the NDB.

4. Final approval of the loan will be with the HR Head, SVP Jess Razon.

- if provincial Business Center account, the employee to submit 2 and 3 to BC

with his/her loan application; BC to send to HR for evaluation and approval prior
to implementation of the loan.

Suspended/Past Due (not vet in NDB) Accounts within the Unibank.

1. Outstanding obligation should be fully paid at least six months prior to the loan
application.

- even if cleared/fully paid, but within the 6-month penalty box.

2. Clearance certification from BCC or other Unibank unit where the obligation
occurred.

Other Past Due Obligation

Management reserves the right to evaluate an employee's credit-worthiness

based on his handling of other obligations, outside of NDB or Unibank units, as
basis for granting manpower loans. This is particularly considered in the case of
housing ioan take-out, if the employee-applicant has been grossly delinquent in
his payments to the previous financing company. (Id. at 49-50).
[6]
Id. at 60-61.
[7]
Id. at 40.
[8]
Id. at 42-43.
[9]
Id. at 16.
[10]
Comment dated June 7, 2007, id. at 118-129.
[11]
Rollo, pp. 134-138.
[12]
Id. at 143-181.
[13]
Reluya v. Dumarpa, G.R. No. 148848, August 5, 2003, 408 SCRA 315, 326.
[14]
Gerlach v. Reuters Limited, Phils., G.R. No. 148542, January 17, 2005, 448
SCRA 535, 545.
[15]
University of the Immaculate Conception, Inc. v. Secretary of Labor and
Employment, et al., G.R. No. 146291, January 23, 2002, 374 SCRA 471, 480,
citing Manila Fashions v. National Labor Relations Commission, 111 Phil. 121
(1996).
[16]
Id. at 480-481.
[17]
Mactan Workers Union v. Aboitiz, G.R. No. L-30241, June 30, 1972, 45 SCRA
577, 581.
[18]
Holy Cross- of Davao College, Inc. v. Holy Cross of Davao Faculty Union-
KAMAPI, G.R. No. 156098, June 27, 2005, 461 SCRA 319, Babcock-Hitachi
(Phils.) Inc. v. Babcock Hitachi (Phils.) Inc., Makati Employees Union, G.R. No.
156260, March 10, 2005, 453 SCRA 156, 161; Mindanao Steel Corporation v.
Minsteel-Free Workers Organization Cagayan de Oro, G.R. No. 130693. March
4, 2004, 424 SCRA 614, 618 and Plastic Town Center Corporation v. National
Labor Relations Commission, G.R. No. 81176, April 19, 1989, 172 SCRA 580,
587.

Philippine Journalist Inc. vs. Journal Employees Union, G.R. No. 192601, 26
June 2013

G.R. No. 192601 June 3, 2013

PHILIPPINE JOURNALISTS, INC., Petitioner,

vs.
JOURNAL EMPLOYEES UNION (JEU), FOR ITS UNION MEMBER, MICHAEL
ALFANTE, Respondents.

DECISION

BERSAMIN, J.:

The coverage of the term legal dependent as used in a stipulation in a collective

bargaining agreement (CBA) granting funeral or bereavement benefit to a regular
employee for the death of a legal dependent, if the CBA is silent about it, is to be
construed as similar to the meaning that contemporaneous social legislations
have set. This is because the terms of such social legislations are deemed
incorporated in or adopted by the CBA.
The decision of the Court of Appeals (CA) under review summarizes the factual
and procedural antecedents, as follows:

Complainant Judith Pulido alleged that she was hired by respondent as

proofreader on 10 January 1991; that she was receiving a monthly basic salary
of P-15,493.66 plus P-155.00 longevity pay plus other benefits provided by law
and their Collective Bargaining Agreement; that on 21 February 2003, as union
president, she sent two letters to President Gloria Arroyo, regarding their
complaint of mismanagement being committed by PIJ executive; that sometime
in May 2003, the union was furnished with a letter by Secretary Silvestre Afable,
Jr. head of Presidential Management Staff (PMS), endorsing their letter-
complaint to Ombudsman Simeon V. Marcelo; that respondents took offense and
started harassments to complainant union president; that on 30 May 2003,
complainant received a letter from respondent Fundador Soriano, International
Edition managing editor, regarding complainant’s attendance record; that
complainant submitted her reply to said memo on 02 June 2003; that on 06 June
2003, complainant received a memorandum of reprimand; that on 04 July 2003,
complainant received another memo from Mr. Soriano, for not wearing her
company ID, which she replied the next day 05 July 2003; that on 04 August
2003, complainant again received a memo regarding complainant’s tardiness;
that on 05 August 2003, complainant received another memorandum asking her
to explain why she should not be accused of fraud, which she replied to on 07
August 2003; and that on the same day between 3:00 to 4:00 P.M., Mr. Ernesto
"Estong" San Agustin, a staff of HRD handed her termination paper.

Complainant added that in her thirteen (13) years with the company and after so
many changes in its management and executives, she had never done anything
that will cause them to issue a memorandum against her or her work attitude,
more so, reasons to terminate her services; that she got dismissed because she
was the Union President who was very active in defending and pursuing the
rights of her union members, and in fighting against the abuses of respondent
Corporate Officers; and that she got the ire of respondents when the employees
filed a complaint against the Corporate Officers before Malacañang and which
was later indorsed to the Office of the Ombudsman.

The second complainant Michael L. Alfante alleged that he started to work with
respondents as computer technician at Management Information System under
manager Neri Torrecampo on 16 May 2000; that on 15 July 2001, he was
regularized receiving a monthly salary of ₱9,070.00 plus other monetary benefits;
that sometime in 2001, Rico Pagkalinawan replaced Torrecampo, which was
opposed by complainant and three other co-employees; that Pagkalinawan took
offense of their objection; that on 22 October 2002, complainant Alfante received
a memorandum from Pagkalinawan regarding his excessive tardiness; that on 10
June 2003, complainant Alfante received a memorandum from Executive Vice-
President Arnold Banares, requiring him to explain his side on the evaluation of
his performance submitted by manager Pagkalinawan; that one week after
complainant submitted his explanation, he was handed his notice of dismissal on
the ground of "poor performance"; and that complainant was dismissed effective
28 July 2003.

Complainant Alfante submitted that he was dismissed without just cause.

Respondents, in their position paper, averred that complainants Pulido and

Alfante were dismissed for cause and with due process.

With regard to complainant Pulido, respondents averred that in a memorandum

dated 30 May 2003, directed complainant to explain her habitual tardiness, at
least 75 times from January to May of 2003. In a memorandum, dated 06 June
2003, directed complainant to observe the 3 p.m. rule to avoid grammatical
lapses, use of stale stories just to beat the 10:00 p.m. deadline. In the same
memorandum complainant was given the warning that any repeated violation of
the rules shall be dealt with more severely. Once again, in a memorandum, dated
04 August 2003, complainant Pulido was required to explain why no disciplinary
action should be taken against her for habitual tardiness – 18 times out of the 23
reporting days during the period from 27 June – 27 July 2003 and on 05 August
2003, complainant was directed to explain in writing why complainant should not
be administratively sanctioned for committing fraud or attempting to commit fraud
against respondents. Respondents found complainant’s explanations
unsatisfactory. On 07 August 2003, respondents dismissed complainant Pulido
for habitual tardiness, gross insubordination, utter disrespect for superiors, and
committing fraud or attempting to commit fraud which led to the respondents’ loss
of confidence upon complainant Pulido.

In case of complainant Alfante, respondents averred in defense that complainant

was dismissed for "poor performance" after an evaluation by his superior, and
after being forewarned that complainant may be removed if there was no
showing of improvement in his skills and knowledge on current technology.

In both instances, respondents maintained that they did not commit any act of
unfair labor practices; that they did not commit acts tantamount to interfering,
restraining, or coercing employees in the exercise of their right to self-
organization.

Respondents deny liabilities as far as complainants’ monetary claims are

concerned. Concerning violations of the provision on wage distortion under Wage
Order No. 9, respondents stressed that complainants were not affected since
their salary is way over the minimum wage.

With respect to the alleged non-adjustment of longevity pay and burial aid,
respondent PJI pointed out that it complies with the provisions of the CBA and
that both complainants have not claimed for the burial aid.
Respondents put forward the information that the alleged nonpayment of rest
days – every Monday for the past three (3) years is a matter that is still at issue in
NLRC Case No. 02-0402973-93, which case is still pending before this
Commission.

Respondents asserted that the respondents Arturo Dela Cruz, Bobby Capco,
Arnold Banares, Ruby Ruiz-Bruno and Fundador Soriano should not be held
liable on account of complainants’ dismissal as they merely acted as agents of
respondent PJI.1

Upon the foregoing backdrop, Labor Arbiter Corazon C. Borbolla rendered her
decision on March 29, 2006, disposing thusly:

WHEREFORE, foregoing premises considered, judgment is hereby rendered,

finding complainant Judith Pulido to have been illegally dismissed. As such, she
is entitled to reinstatement and backwages from 07 August 2003 up to her actual
or payroll reinstatement. To date, complainant’s backwages is ₱294,379.54.

Respondent Philippine Journalist, Inc. is hereby ordered to pay complainant

Judith Pulido her backwages from 07 August 2003 up to her actual or payroll
reinstatement and to reinstate her to her former position without loss of seniority
right.

Respondent is further ordered to submit a report to this Office on complainant’s

reinstatement ten (10) days from receipt of this decision.

The charge of illegal dismissal by Michael Alfante is hereby dismissed for lack of
merit.

The charge of unfair labor practice is dismissed for lack of basis.

SO ORDERED.2

Complainant Michael Alfante (Alfante), joined by his labor organization, Journal

Employees Union (JEU), filed a partial appeal in the National Labor Relations
Commission (NLRC).3

In the meantime, on May 10, 2006, petitioner and Judith Pulido (Pulido), the
other complainant, jointly manifested to the NLRC that the decision of March 29,
2006 had been fully satisfied as to Pulido under the following terms, namely: (a)
she would be reinstated to her former position as editorial staffmember, or an
equivalent position, without loss of seniority rights, effective May 15, 2006; (b)
she would go on maternity leave, and report to work after giving birth; (c) she
would be entitled to backwages of ₱130,000.00; and (d) she would execute the
quitclaim and release on May 11, 2006 in favor of petitioner. 4 This left Alfante as
the remaining complainant.
On January 31, 2007, the NLRC rendered its decision dismissing the partial
appeal for lack of merit.

JEU and Alfante moved for the reconsideration of the decision, but the NLRC
denied their motion on April 24, 2007.

Thereafter, JEU and Alfante assailed the decision of the NLRC before the CA on
certiorari (C.A.-G.R. SP No. 99407).

On February 5, 2010, the CA promulgated its decision in C.A.-G.R. SP No.

99407,7 decreeing:

WHEREFORE, premises considered, the instant petition is PARTLY GRANTED.

The twin Resolutions dated January 31, 2007 and April 24, 2007, respectively, of
the Third Division of the National Labor Relations Commission (NLRC), in NLRC
NCR CA No. 048785-06 (NLRC NCR Case No. 00-10-11413-04), are MODIFIED
insofar as the funeral or bereavement aid is concerned, which is hereby
GRANTED, but only after submission of conclusive proofs that the deceased is a
parent, either father or mother, of the employees concerned, as well as the death
certificate to establish the fact of death of the deceased legal dependent.

The rest of the findings of fact and law in the assailed Resolutions are hereby
AFFIRMED.

SO ORDERED.

Both parties moved for reconsideration, but the CA denied their respective
motions for reconsideration on June 2, 2010.8

JEU and Alfante appealed to the Court (G.R. No. 192478) to challenge the CA’s
dispositions regarding the legality of: (a) Alfante’s dismissal; (b) the non-
compliance with Minimum Wage Order No. 9; and (c) the non-payment of the rest
day.9

On August 18, 2010, the Court denied due course to the petition in G.R. No.
192478 for failure of petitioners to sufficiently show that the CA had committed
any reversible error to warrant the Court’s exercise of its discretionary appellate
jurisdiction.10

The Court denied with finality JEU and Alfante’s ensuing motion for
reconsideration through the resolution of December 8, 2010. 11 The entry of
judgment in G.R. No. 192478 issued in due course on February 1, 2011. 12
On its part, petitioner likewise appealed (G.R. No. 192601), seeking the review of
the CA’s disposition in the decision of February 5, 2010 on the granting of the
funeral and bereavement aid stipulated in the CBA.

In its petition for review, petitioner maintained that under Section 4, Article XIII of
the CBA, funeral and bereavement aid should be granted upon the death of a
legal dependent of a regular employee; that consistent with the definition
provided by the Social Security System (SSS), the term legal dependent referred
to the spouse and children of a married regular employee, and to the parents and
siblings, 18 years old and below, of a single regular employee; 13that the CBA
considered the term dependents to have the same meaning as beneficiaries, as
provided in Section 5, Article XIII of the CBA on the payment of death
benefits;14 that its earlier granting of claims for funeral and bereavement aid
without regard to the foregoing definition of the legal dependents of married or
single regular employees did not ripen into a company policy whose unilateral
withdrawal would constitute a violation of Article 100 of the Labor Code, 15 the law
disallowing the non-diminution of benefits; 16 that it had approved only four claims
from 1999 to 2003 based on its mistaken interpretation of the term legal
dependents, but later corrected the same in 2000; 17 that the grant of funeral and
bereavement aid for the death of an employee’s legal dependent, regardless of
the employee’s civil status, did not occur over a long period of time, was not
consistent and deliberate, and was partly due to its mistake in appreciating a
doubtful question of law; and that its denial of subsequent claims did not amount
to a violation of the law against the non-diminution of benefits. 18

In their comment,19 JEU and Alfante countered that the CBA was a bilateral
contractual agreement that could not be unilaterally changed by any party during
its lifetime; and that the grant of burial benefits had already become a company
practice favorable to the employees, and could not anymore be reduced,
diminished, discontinued or eliminated by petitioner.

Issue

In view of the entry of judgment issued in G.R. No. 192478, JEU and Alfante’s
submissions on the illegality of his dismissal, the non-payment of his rest days,
and the violation of Minimum Wage Order No. 9 shall no longer be considered
and passed upon.

The sole remaining issue is whether or not petitioner’s denial of respondents’

claims for funeral and bereavement aid granted under Section 4, Article XIII of
their CBA constituted a diminution of benefits in violation of Article 100 of the
Labor Code.

Ruling

The petition for review lacks merit.

The nature and force of a CBA are delineated in Honda Phils., Inc. v. Samahan
ng Malayang Manggagawa sa Honda,20 thuswise:

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. 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.

Accordingly, the stipulations, clauses, terms and conditions of the CBA, being the
law between the parties, must be complied with by them. The literal meaning of
the stipulations of the CBA, as with every other contract, control if they are clear
and leave no doubt upon the intention of the contracting parties. 22

Here, a conflict has arisen regarding the interpretation of the term legal
dependent in connection with the grant of funeral and bereavement aid to a
regular employee under Section 4, Article XIII of the CBA, 23 which stipulates as
follows:

SECTION 4. Funeral/Bereavement Aid. The COMPANY agrees to grant a

funeral/bereavement aid in the following instances:

a. Death of a regular employee in line of duty – ₱50,000

b. Death of a regular employee not in line of duty – ₱40,000

c. Death of legal dependent of a regular employee – ₱15,000. (Emphasis

supplied)

Petitioner insists that notwithstanding the silence of the CBA, the term legal
dependent should follow the definition of it under Republic Act (R.A.) No. 8282
(Social Security Law),24 so that in the case of a married regular employee, his or
her legal dependents include only his or her spouse and children, and in the case
of a single regular employee, his or her legal dependents include only his or her
parents and siblings, 18 years old and below; and that the term dependents has
the same meaning as beneficiaries as used in Section 5, Article XIII of the CBA.

We cannot agree with petitioner’s insistence.

Social legislations contemporaneous with the execution of the CBA have given a
meaning to the term legal dependent. First of all, Section 8(e) of the Social
Security Law provides that a dependent shall be the following, namely: (a) the
legal spouse entitled by law to receive support from the member; (b) the
legitimate, legitimated, or legally adopted, and illegitimate child who is unmarried,
not gainfully employed and has not reached 21 of age, or, if over 21 years of age,
is congenitally or while still a minor has been permanently incapacitated and
incapable of self-support, physically or mentally; and (c) the parent who is
receiving regular support from the member. Secondly, Section 4(f) of R.A. No.
7875, as amended by R.A. No. 9241,25 enumerates who are the legal
dependents, to wit: (a) the legitimate spouse who is not a member; (b) the
unmarried and unemployed legitimate, legitimated, illegitimate, acknowledged
children as appearing in the birth certificate; legally adopted or step-children
below 21 years of age; (c) children who are 21 years old and order but suffering
from congenital disability, either physical or mental, or any disability acquired that
renders them totally dependent on the member of our support; and (d) the
parents who are 60 years old or older whose monthly income is below an amount
to be determined by the Philippine Health Insurance Corporation in accordance
with the guiding principles set forth in Article I of R.A. No. 7875. And, thirdly,
Section 2(f) of Presidential Decree No. 1146, as amended by R.A. No.
8291,dependent for support upon the member or pensioner; (b) the legitimate,
legitimated, legally adopted child, including the illegitimate child, who is
unmarried, not gainfully employed, not over the age of majority, or is over the age
of majority but incapacitated and incapable of self-support due to a mental or
physical defect acquired prior to age of majority; and (c) the parents dependent
upon the member for support.1âwphi1

It is clear from these statutory definitions of dependent that the civil status of the
employee as either married or single is not the controlling consideration in order
that a person may qualify as the employee’s legal dependent. What is rather
decidedly controlling is the fact that the spouse, child, or parent is actually
dependent for support upon the employee. Indeed, the Court has adopted this
understanding of the term dependent in Social Security System v. De Los
Santos,27 viz:

Social Security System v. Aguas is instructive in determining the extent of the

required "dependency" under the SS Law. In Aguas, the Court ruled that although
a husband and wife are obliged to support each other, whether one is actually
dependent for support upon the other cannot be presumed from the fact of
marriage alone.

Further, Aguas pointed out that a wife who left her family until her husband died
and lived with other men, was not dependent upon her husband for support,
financial or otherwise, during the entire period.

Said the Court:

In a parallel case involving a claim for benefits under the GSIS law, the Court
defined a dependent as "one who derives his or her main support from another.
Meaning, relying on, or subject to, someone else for support; not able to exist or
sustain oneself, or to perform anything without the will, power, or aid of someone
else." It should be noted that the GSIS law likewise defines a dependent spouse
as "the legitimate spouse dependent for support upon the member or pensioner."
In that case, the Court found it obvious that a wife who abandoned the family for
more than 17 years until her husband died, and lived with other men, was not
dependent on her husband for support, financial or otherwise, during that entire
period. Hence, the Court denied her claim for death benefits.

The obvious conclusion then is that a wife who is already separated de facto
from her husband cannot be said to be "dependent for support" upon the
husband, absent any showing to the contrary. Conversely, if it is proved that the
husband and wife were still living together at the time of his death, it would be
safe to presume that she was dependent on the husband for support, unless it is
shown that she is capable of providing for herself.

Considering that existing laws always form part of any contract, and are deemed
incorporated in each and every contract, 28 the definition of legal dependents
under the aforecited social legislations applies herein in the absence of a
contrary or different definition mutually intended and adopted by the parties in the
CBA. Accordingly, the concurrence of a legitimate spouse does not disqualify a
child or a parent of the employee from being a legal dependent provided
substantial evidence is adduced to prove the actual dependency of the child or
parent on the support of the employee.

In this regard, the differentiation among the legal dependents is significant only in
the event the CBA has prescribed a hierarchy among them for the granting of a
benefit; hence, the use of the terms primary beneficiaries and secondary
beneficiaries for that purpose. But considering that Section 4, Article XIII of the
CBA has not included that differentiation, petitioner had no basis to deny the
claim for funeral and bereavement aid of Alfante for the death of his parent
whose death and fact of legal dependency on him could be substantially proved.

Pursuant to Article 100 of the Labor Code, petitioner as the employer could not
reduce, diminish, discontinue or eliminate any benefit and supplement being
enjoyed by or granted to its employees. This prohibition against the diminution of
benefits is founded on the constitutional mandate to protect the rights of workers
and to promote their welfare and to afford labor full protection. 29 The application
of the prohibition against the diminution of benefits presupposes that a company
practice, policy or tradition favorable to the employees has been clearly
established; and that the payments made by the employer pursuant to the
practice, policy, or tradition have ripened into benefits enjoyed by them. 30 To be
considered as a practice, policy or tradition, however, the giving of the benefits
should have been done over a long period of time, and must be shown to have
been consistent and deliberate.31 It is relevant to mention that we have not yet
settled on the specific minimum number of years as the length of time sufficient
to ripen the practice, policy or tradition into a benefit that the employer cannot
unilaterally withdraw.32

The argument of petitioner that the grant of the funeral and bereavement benefit
was not voluntary but resulted from its mistaken interpretation as to who was
considered a legal dependent of a regular employee deserves scant
consideration. To be sure, no doubtful or difficult question of law was involved
inasmuch as the several cogent statutes existing at the time the CBA was
entered into already defined who were qualified as the legal dependents of
another. Moreover, the voluntariness of the grant of the benefit became even
manifest from petitioner’s admission that, despite the memorandum it issued in
200033 in order to "correct" the interpretation of the term legal dependent, it still
approved in 2003 the claims for funeral and bereavement aid of two employees,
namely: (a) Cecille Bulacan, for the death of her father; and (b) Charito Cartel, for
the death of her mother, based on its supposedly mistaken interpretation. 34

It is further worthy to note that petitioner granted claims for funeral and
bereavement aid as early as 1999, then issued a memorandum in 2000 to
correct its erroneous interpretation of legal dependent under Section 4, Article
XIII of the CBA. This notwithstanding, the 2001-2004 CBA 35 still contained the
same provision granting funeral or bereavement aid in case of the death of a
legal dependent of a regular employee without differentiating the legal
dependents according to the employee's civil status as married or single. The
continuity in the grant of the funeral and bereavement aid to regular employees
for the death of their legal dependents has undoubtedly ripened into a company
policy. With that, the denial of Alfante's qualified claim for such benefit pursuant
to Section 4, Article XIII of the CBA violated the law prohibiting the diminution of
benefits.

WHEREFORE, the Court AFFIRMS the decision promulgated on February 5, 201

0; and ORDERS petitioner to pay the costs of suit.

SO ORDERED.

En contra: Mitsubishi Motors Phils. Salaried Employees Union (MMPSEU) vs.

Mitsubishi Motors Phils Corp., G.R. No. 175773, 17 June 2013

G.R. No. 175773 June 17, 2013

MITSUBISHI MOTORS PHILIPPINES SALARIED EMPLOYEES UNION

(MMPSEU), Petitioner,
vs.
MITSUBISHI MOTORS PHILIPPINES CORPORATION, Respondent.
 DECISION

DEL CASTILLO, J.:

The Collective Bargaining Agreement (CBA) of the parties in this case provides
that the company shoulder the hospitalization expenses of the dependents of
covered employees subject to certain limitations and restrictions. Accordingly,
covered employees pay part of the hospitalization insurance premium through
monthly salary deduction while the company, upon hospitalization of the covered
employees' dependents, shall pay the hospitalization expenses incurred for the
same. The conflict arose when a portion of the hospitalization expenses of the
covered employees' dependents were paid/shouldered by the dependent's own
health insurance. While the company refused to pay the portion of the hospital
expenses already shouldered by the dependents' own health insurance, the
union insists that the covered employees are entitled to the whole and
undiminished amount of said hospital expenses.

By this Petition for Review on Certiorari,1 petitioner Mitsubishi Motors Philippines

Salaried Employees Union (MMPSEU) assails the March 31, 2006 Decision 2 and
December 5, 2006 Resolution3 of the Court of Appeals (CA) in CA-G.R. SP No.
75630, which reversed and set aside the Voluntary Arbitrator’s December 3, 2002
Decision4 and declared respondent Mitsubishi Motors Philippines Corporation
(MMPC) to be under no legal obligation to pay its covered employees’
dependents’ hospitalization expenses which were already shouldered by other
health insurance companies.

Factual Antecedents

The parties’ CBA5 covering the period August 1, 1996 to July 31, 1999 provides
for the hospitalization insurance benefits for the covered dependents, thus:

SECTION 4. DEPENDENTS’ GROUP HOSPITALIZATION INSURANCE – The

COMPANY shall obtain group hospitalization insurance coverage or assume
under a self-insurance basis hospitalization for the dependents of regular
employees up to a maximum amount of forty thousand pesos (₱40,000.00) per
confinement subject to the following:

a. The room and board must not exceed three hundred pesos (₱300.00)
per day up to a maximum of thirty-one (31) days. Similarly, Doctor’s Call
fees must not exceed three hundred pesos (₱300.00) per day for a
maximum of thirty-one (31) days. Any excess of this amount shall be
borne by the employee.

b. Confinement must be in a hospital designated by the COMPANY. For

this purpose, the COMPANY shall designate hospitals in different
convenient places to be availed of by the dependents of employees. In
 cases of emergency where the dependent is confined without the
recommendation of the company doctor or in a hospital not designated by
the COMPANY, the COMPANY shall look into the circumstances of such
confinement and arrange for the payment of the amount to the extent of
the hospitalization benefit.

c. The limitations and restrictions listed in Annex "B" must be observed.

d. Payment shall be direct to the hospital and doctor and must be covered
by actual billings.

Each employee shall pay one hundred pesos (₱100.00) per month through
salary deduction as his share in the payment of the insurance premium for the
above coverage with the balance of the premium to be paid by the COMPANY. If
the COMPANY is self-insured the one hundred pesos (₱100.00) per employee
monthly contribution shall be given to the COMPANY which shall shoulder the
expenses subject to the above level of benefits and subject to the same
limitations and restrictions provided for in Annex "B" hereof.

The hospitalization expenses must be covered by actual hospital and doctor’s

bills and any amount in excess of the above mentioned level of benefits will be
for the account of the employee.

For purposes of this provision, eligible dependents are the covered employees’
natural parents, legal spouse and legitimate or legally adopted or step children
who are unmarried, unemployed who have not attained twenty-one (21) years of
age and wholly dependent upon the employee for support.

This provision applies only in cases of actual confinement in the hospital for at
least six (6) hours.

Maternity cases are not covered by this section but will be under the next
succeeding section on maternity benefits. 6

When the CBA expired on July 31, 1999, the parties executed another
CBA7 effective August 1, 1999 to July 31, 2002 incorporating the same provisions
on dependents’ hospitalization insurance benefits but in the increased amount of
₱50,000.00. The room and board expenses, as well as the doctor’s call fees,
were also increased to ₱375.00.

On separate occasions, three members of MMPSEU, namely, Ernesto Calida

(Calida), Hermie Juan Oabel (Oabel) and Jocelyn Martin (Martin), filed claims for
reimbursement of hospitalization expenses of their dependents.

MMPC paid only a portion of their hospitalization insurance claims, not the full
amount. In the case of Calida, his wife, Lanie, was confined at Sto. Tomas
University Hospital from September 4 to 9, 1998 due to Thyroidectomy. The
medical expenses incurred totalled ₱29,967.10. Of this amount, ₱9,000.00
representing professional fees was paid by MEDICard Philippines, Inc.
(MEDICard) which provides health maintenance to Lanie. 8 MMPC only paid
₱12,148.63.9 It did not pay the ₱9,000.00 already paid by MEDICard and the
₱6,278.47 not covered by official receipts. It refused to give to Calida the
difference between the amount of medical expenses of ₱27,427.10 10 which he
claimed to be entitled to under the CBA and the ₱12,148.63 which MMPC directly
paid to the hospital.

In the case of Martin, his father, Jose, was admitted at The Medical City from
March 26 to 27, 2000 due to Acid Peptic Disease and incurred medical expenses
amounting to ₱9,101.30.14 MEDICard paid ₱8,496.00.15Consequently, MMPC
only paid ₱288.40,16 after deducting from the total medical expenses the amount
paid by MEDICard and the ₱316.90 discount given by the hospital.

Claiming that under the CBA, they are entitled to hospital benefits amounting to
₱27,427.10, ₱6,769.35 and ₱8,123.80, respectively, which should not be
reduced by the amounts paid by MEDICard and by Prosper, Calida, Oabel and
Martin asked for reimbursement from MMPC. However, MMPC denied the claims
contending that double insurance would result if the said employees would
receive from the company the full amount of hospitalization expenses despite
having already received payment of portions thereof from other health insurance
providers.

This prompted the MMPSEU President to write the MMPC

President17 demanding full payment of the hospitalization benefits. Alleging
discrimination against MMPSEU union members, she pointed out that full
reimbursement was given in a similar claim filed by Luisito Cruz (Cruz), a
member of the Hourly Union. In a letter-reply, 18 MMPC, through its Vice-President
for Industrial Relations Division, clarified that the claims of the said MMPSEU
members have already been paid on the basis of official receipts submitted. It
also denied the charge of discrimination and explained that the case of Cruz
involved an entirely different matter since it concerned the admissibility of
certified true copies of documents for reimbursement purposes, which case had
been settled through voluntary arbitration.

On August 28, 2000, MMPSEU referred the dispute to the National Conciliation
and Mediation Board and requested for preventive mediation. 19

Proceedings before the Voluntary Arbitrator

On October 3, 2000, the case was referred to Voluntary Arbitrator Rolando

Capocyan for resolution of the issue involving the interpretation of the subject
CBA provision.20
MMPSEU alleged that there is nothing in the CBA which prohibits an employee
from obtaining other insurance or declares that medical expenses can be
reimbursed only upon presentation of original official receipts. It stressed that the
hospitalization benefits should be computed based on the formula indicated in
the CBA without deducting the benefits derived from other insurance providers.
Besides, if reduction is permitted, MMPC would be unjustly benefited from the
monthly premium contributed by the employees through salary deduction.
MMPSEU added that its members had legitimate claims under the CBA and that
any doubt as to any of its provisions should be resolved in favor of its members.
Moreover, any ambiguity should be resolved in favor of labor. 21

On the other hand, MMPC argued that the reimbursement of the entire amounts
being claimed by the covered employees, including those already paid by other
insurance companies, would constitute double indemnity or double insurance,
which is circumscribed under the Insurance Code. Moreover, a contract of
insurance is a contract of indemnity and the employees cannot be allowed to
profit from their dependents’ loss.22

Meanwhile, the parties separately sought for a legal opinion from the Insurance
Commission relative to the issue at hand. In its letter 23 to the Insurance
Commission, MMPC requested for confirmation of its position that the covered
employees cannot claim insurance benefits for a loss that had already been
covered or paid by another insurance company. However, the Office of the
Insurance Commission opted not to render an opinion on the matter as the same
may become the subject of a formal complaint before it. 24 On the other hand,
when queried by MMPSEU,25the Insurance Commission, through Atty. Richard
David C. Funk II (Atty. Funk) of the Claims Adjudication Division, rendered an
opinion contained in a letter,26 viz:

Ms. Cecilia L. ParasPresident

Mitsubishi Motors Phils.

[Salaried] Employees Union

Ortigas Avenue Extension,
Cainta, Rizal

Madam:

We acknowledge receipt of your letter which, to our impression, basically poses

the question of whether or not recovery of medical expenses from a Health
Maintenance Organization bars recovery of the same reimbursable amount of
medical expenses under a contract of health or medical insurance.

We wish to opine that in cases of claims for reimbursement of medical expenses

where there are two contracts providing benefits to that effect, recovery may be
had on both simultaneously. In the absence of an Other Insurance provision in
these coverages, the courts have uniformly held that an insured is entitled to
receive the insurance benefits without regard to the amount of total benefits
provided by other insurance. (INSURANCE LAW, A Guide to Fundamental
Principles, Legal Doctrines, and Commercial Practices; Robert E. Keeton, Alau I.
Widiss, p. 261). The result is consistent with the public policy underlying the
collateral source rule – that is, x x x the courts have usually concluded that the
liability of a health or accident insurer is not reduced by other possible sources of
indemnification or compensation. (ibid).

Very truly yours,

RICHARD DAVID C. FUNK II

Officer-in-Charge
Claims Adjudication Division

(SGD.)
Attorney IV

On December 3, 2002, the Voluntary Arbitrator rendered a Decision 27 finding

MMPC liable to pay or reimburse the amount of hospitalization expenses already
paid by other health insurance companies. The Voluntary Arbitrator held that the
employees may demand simultaneous payment from both the CBA and their
dependents’ separate health insurance without resulting to double insurance,
since separate premiums were paid for each contract. He also noted that the
CBA does not prohibit reimbursement in case there are other health insurers.

Proceedings before the Court of Appeals

MMPC filed a Petition for Review with Prayer for the Issuance of a Temporary
Restraining Order and/or Writ of Preliminary Injunction 28 before the CA. It claimed
that the Voluntary Arbitrator committed grave abuse of discretion in not finding
that recovery under both insurance policies constitutes double insurance as both
had the same subject matter, interest insured and risk or peril insured against; in
relying solely on the unauthorized legal opinion of Atty. Funk; and in not finding
that the employees will be benefited twice for the same loss. In its
Comment,29 MMPSEU countered that MMPC will unjustly enrich itself and profit
from the monthly premiums paid if full reimbursement is not made.

On March 31, 2006, the CA found merit in MMPC’s Petition. It ruled that despite
the lack of a provision which bars recovery in case of payment by other insurers,
the wordings of the subject provision of the CBA showed that the parties intended
to make MMPC liable only for expenses actually incurred by an employee’s
qualified dependent. In particular, the provision stipulates that payment should be
made directly to the hospital and that the claim should be supported by actual
hospital and doctor’s bills. These mean that the employees shall only be paid
amounts not covered by other health insurance and is more in keeping with the
principle of indemnity in insurance contracts. Besides, a contrary interpretation
would "allow unscrupulous employees to unduly profit from the x x x benefits"
and shall "open the floodgates to questionable claims x x x." 30

The dispositive portion of the CA Decision31 reads:

WHEREFORE, the instant petition is GRANTED. The decision of the voluntary

arbitrator dated December 3, 2002 is REVERSED and SET ASIDE and judgment
is rendered declaring that under Art. XI, Sec. 4 of the Collective Bargaining
Agreement between petitioner and respondent effective August 1, 1999 to July
31, 2002, the former’s obligation to reimburse the Union members for the
hospitalization expenses incurred by their dependents is exclusive of those paid
by the Union members to the hospital.

SO ORDERED.32

In its Motion for Reconsideration,33 MMPSEU pointed out that the alleged
oppression that may be committed by abusive employees is a mere possibility
whereas the resulting losses to the employees are real. MMPSEU cited Samsel
v. Allstate Insurance Co.,34 wherein the Arizona Supreme Court explicitly ruled
that an insured may recover from separate health insurance providers,
regardless of whether one of them has already paid the medical expenses
incurred. On the other hand, MMPC argued in its Comment 35 that the cited
foreign case involves a different set of facts.

The CA, in its Resolution36 dated December 5, 2006, denied MMPSEU’s motion.

Hence, this Petition.

Issues

MMPSEU presented the following grounds in support of its Petition:

A.

THE COURT OF APPEALS SERIOUSLY ERRED WHEN IT REVERSED THE

DECISION DATED 03 [DECEMBER] 2002 OF THE VOLUNTARY ARBITRATOR
BELOW WHEN THE SAME WAS SUPPORTED BY SUBSTANTIAL EVIDENCE,
INCLUDING THE OPINION OF THE INSURANCE COMMISSION THAT
RECOVERY FROM BOTH THE CBA AND SEPARATE HEALTH CARDS IS NOT
PROHIBITED IN THE ABSENCE OF ANY SPECIFIC PROVISION IN THE CBA.

B.

THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN

OVERTURNING THE DECISION OF THE VOLUNTARY ARBITRATOR
WITHOUT EVEN GIVING ANY LEGAL OR JUSTIFIABLE BASIS FOR SUCH
REVERSAL.

C.

THE COURT OF APPEALS COMMITTED GRAVE ERROR IN REFUSING TO

CONSIDER OR EVEN MENTION ANYTHING ABOUT THE AMERICAN
AUTHORITIES CITED IN THE RECORDS THAT DO NOT PROHIBIT, BUT IN
FACT ALLOW, RECOVERY FROM TWO SEPARATE HEALTH PLANS.

D.

THE COURT OF APPEALS GRAVELY ERRED IN GIVING MORE

IMPORTANCE TO A POSSIBLE, HENCE MERELY SPECULATIVE, ABUSE BY
EMPLOYEES OF THE BENEFITS IF DOUBLE RECOVERY WERE ALLOWED
INSTEAD OF THE REAL INJURY TO THE EMPLOYEES WHO ARE PAYING
FOR THE CBA HOSPITALIZATION BENEFITS THROUGH MONTHLY SALARY
DEDUCTIONS BUT WHO MAY NOT BE ABLE TO AVAIL OF THE SAME IF
THEY OR THEIR DEPENDENTS HAVE OTHER HEALTH INSURANCE.37

MMPSEU avers that the Decision of the Voluntary Arbitrator deserves utmost
respect and finality because it is supported by substantial evidence and is in
accordance with the opinion rendered by the Insurance Commission, an agency
equipped with vast knowledge concerning insurance contracts. It maintains that
under the CBA, member-employees are entitled to full reimbursement of medical
expenses incurred by their dependents regardless of any amounts paid by the
latter’s health insurance provider. Otherwise, non-recovery will constitute unjust
enrichment on the part of MMPC. It avers that recovery from both the CBA and
other insurance companies is allowed under their CBA and not prohibited by law
nor by jurisprudence.

Our Ruling

The Petition has no merit.

Atty. Funk erred in applying the

collateral source rule.

The Voluntary Arbitrator based his ruling on the opinion of Atty. Funk that the
employees may recover benefits from different insurance providers without
regard to the amount of benefits paid by each. According to him, this view is
consistent with the theory of the collateral source rule.

As part of American personal injury law, the collateral source rule was originally
applied to tort cases wherein the defendant is prevented from benefiting from the
plaintiff’s receipt of money from other sources. 38 Under this rule, if an injured
person receives compensation for his injuries from a source wholly independent
of the tortfeasor, the payment should not be deducted from the damages which
he would otherwise collect from the tortfeasor. 39 In a recent Decision40 by the
Illinois Supreme Court, the rule has been described as "an established exception
to the general rule that damages in negligence actions must be compensatory."
The Court went on to explain that although the rule appears to allow a double
recovery, the collateral source will have a lien or subrogation right to prevent
such a double recovery.41 In Mitchell v. Haldar,42 the collateral source rule was
rationalized by the Supreme Court of Delaware:

The collateral source rule is ‘predicated on the theory that a tortfeasor has no
interest in, and therefore no right to benefit from monies received by the injured
person from sources unconnected with the defendant’. According to the collateral
source rule, ‘a tortfeasor has no right to any mitigation of damages because of
payments or compensation received by the injured person from an independent
source.’ The rationale for the collateral source rule is based upon the quasi-
punitive nature of tort law liability. It has been explained as follows:

The collateral source rule is designed to strike a balance between two competing
principles of tort law: (1) a plaintiff is entitled to compensation sufficient to make
him whole, but no more; and (2) a defendant is liable for all damages that
proximately result from his wrong. A plaintiff who receives a double recovery for a
single tort enjoys a windfall; a defendant who escapes, in whole or in part, liability
for his wrong enjoys a windfall. Because the law must sanction one windfall and
deny the other, it favors the victim of the wrong rather than the wrongdoer.

Thus, the tortfeasor is required to bear the cost for the full value of his or her
negligent conduct even if it results in a windfall for the innocent plaintiff. (Citations
omitted)

As seen, the collateral source rule applies in order to place the responsibility for
losses on the party causing them.43Its application is justified so that "'the
wrongdoer should not benefit from the expenditures made by the injured party or
take advantage of contracts or other relations that may exist between the injured
party and third persons."44Thus, it finds no application to cases involving no-fault
insurances under which the insured is indemnified for losses by insurance
companies, regardless of who was at fault in the incident generating the
losses.45 Here, it is clear that MMPC is a no-fault insurer. Hence, it cannot be
obliged to pay the hospitalization expenses of the dependents of its employees
which had already been paid by separate health insurance providers of said
dependents.

The Voluntary Arbitrator therefore erred in adopting Atty. Funk’s view that the
covered employees are entitled to full payment of the hospital expenses incurred
by their dependents, including the amounts already paid by other health
insurance companies based on the theory of collateral source rule.
The conditions set forth in the CBA provision indicate an intention to limit
MMPC’s liability only to actual expenses incurred by the employees’ dependents,
that is, excluding the amounts paid by dependents’ other health insurance
providers.

The Voluntary Arbitrator ruled that the CBA has no express provision barring
claims for hospitalization expenses already paid by other insurers. Hence, the
covered employees can recover from both. The CA did not agree, saying that the
conditions set forth in the CBA implied an intention of the parties to limit MMPC’s
liability only to the extent of the expenses actually incurred by their dependents
which excludes the amounts shouldered by other health insurance companies.

We agree with the CA. The condition that payment should be direct to the
hospital and doctor implies that MMPC is only liable to pay medical expenses
actually shouldered by the employees’ dependents. It follows that MMPC’s
liability is limited, that is, it does not include the amounts paid by other health
insurance providers. This condition is obviously intended to thwart not only
fraudulent claims but also double claims for the same loss of the dependents of
covered employees.

It is well to note at this point that the CBA constitutes a contract between the
parties and as such, it should be strictly construed for the purpose of limiting the
amount of the employer’s liability.46 The terms of the subject provision are clear
and provide no room for any other interpretation. As there is no ambiguity, the
terms must be taken in their plain, ordinary and popular sense. 47 Consequently,
MMPSEU cannot rely on the rule that a contract of insurance is to be liberally
construed in favor of the insured. Neither can it rely on the theory that any doubt
must be resolved in favor of labor.

Samsel v. Allstate Insurance Co. is not

on all fours with the case at bar.

MMPSEU cannot rely on Samsel v. Allstate Insurance Co. where the Supreme
Court of Arizona allowed the insured to enjoy medical benefits under an
automobile policy insurance despite being able to also recover from a separate
health insurer. In that case, the Allstate automobile policy does not contain any
clause restricting medical payment coverage to expenses actually paid by the
insured nor does it specifically provide for reduction of medical payments benefits
by a coordination of benefits.48 However, in the case before us, the dependents’
group hospitalization insurance provision in the CBA specifically contains a
condition which limits MMPC’s liability only up to the extent of the expenses that
should be paid by the covered employee’s dependent to the hospital and doctor.
This is evident from the portion which states that "payment by MMPC shall be
direct to the hospital and doctor."49 In contrast, the Allstate automobile policy
expressly gives Allstate the authority to pay directly to the insured person or on
the latter’s behalf all reasonable expenses actually incurred. Therefore, reliance
on Samsel is unavailing because the facts therein are different and not decisive
of the issues in the present case.

To allow reimbursement of amounts paid

under other insurance policies shall
constitute double recovery which is not
sanctioned by law.

MMPSEU insists that MMPC is also liable for the amounts covered under other
insurance policies; otherwise, MMPC will unjustly profit from the premiums the
employees contribute through monthly salary deductions.

This contention is unmeritorious.

To constitute unjust enrichment, it must be shown that a party was unjustly

enriched in the sense that the term unjustly could mean illegally or unlawfully. 50 A
claim for unjust enrichment fails when the person who will benefit has a valid
claim to such benefit.51

The CBA has provided for MMPC’s limited liability which extends only up to the
amount to be paid to the hospital and doctor by the employees’ dependents,
excluding those paid by other insurers. Consequently, the covered employees
will not receive more than what is due them; neither is MMPC under any
obligation to give more than what is due under the CBA.

Moreover, since the subject CBA provision is an insurance contract, the rights
and obligations of the parties must be determined in accordance with the general
principles of insurance law.52 Being in the nature of a non-life insurance contract
and essentially a contract of indemnity, the CBA provision obligates MMPC to
indemnify the covered employees’ medical expenses incurred by their
dependents but only up to the extent of the expenses actually incurred. 53 This is
consistent with the principle of indemnity which proscribes the insured from
recovering greater than the loss.54 Indeed, to profit from a loss will lead to unjust
enrichment and therefore should not be countenanced. As aptly ruled by the CA,
to grant the claims of MMPSEU will permit possible abuse by employees.

WHEREFORE, the Petition is DENIED. The Decision dated March 31, 2006 and
Resolution dated December 5, 2006 of the Court of Appeals in CA-G.R. SP No.
75630, are AFFIRMED.

SO ORDERED.

National Union Of Workers In Hotel Restaurant And Allied Industries

(NUWHRAIN) - Philippine Plaza Chapter Vs. Philippines Plaza Inc., G.R. No.
177524, 23 July 2014

3.Signing and ratification

ALU vs. Ferrer-Calleja, 173 SCRA 178

G.R. No. L-77282 May 5, 1989

ASSOCIATED LABOR UNIONS (ALU) petitioner,

vs.
HON. PURA FERRER-CALLEJA, as Director of the Bureau of Labor
Relations, Ministry of Labor and Employment; PHILIPPINE SOCIAL
SECURITY LABOR UNION (PSSLU); SOUTHERN PHILIPPINES
FEDERATION OF LABOR (SPFL) and GAW TRADING, INC., respondents.

Romeo S. Occena, Leonard U. Sawal, Edgemelo C. Rosales and Ernesto

Carreon for petitioner.

Henrick F. Gingoyon for respondent SPFL.

Wilfredo L. Orcullo for respondent Southern Philippines Federation of Labor.

Miguel A. Enrique, Jr. for respondent GAW Trading, Inc.

REGALADO, J.:

Petitioner Associated Labor Unions (ALU, for brevity) instituted this special civil
action for certiorari and prohibition to overturn the decision of the respondent
direcstor 1 dated December 10, 1986, which ordered the holding of a certification
election among the rank-and-file workers of the private respondent GAW Trading,
Inc. The averments in the petition therefor, which succinctly but sufficiently detail
the relevant factual antecedents of this proceedings, justify their being quoted in
full, thus:

1. The associated Labor Unions (ALU) thru its regional Vice-

Presidents Teofanio C. Nuñez, in a letter dated May 7, 1986
(ANNEX C) informed GAW Trading, Inc. that majority of the latter's
employees have authorized ALU to be their sole and exclusive
bargaining representative, and requested GAW Trading Inc., in the
same Letter for a conference for the execution of an initial
Collective Bargaining Agreement (CBA);

2. GAW Trading Inc. received the Letter of ALU aforesaid on the

same day of May 7, 1986 as acknowledged thereunder and
responded (sic) ALU in a letter dated May 12, 1986 (Annex D)
indicating its recognition of ALU as the sole and exclusive
bargaining agent for the majority of its employees and for which it
set the time for conference and/or negotiation at 4:00 P.M. on May
12, 1986 at the Pillsbury Office, Aboitiz Building Juan Luna Street,
Cebu City;

3. On the following day of May13, 1986, ALU in behalf of the

majority of the employees of GAW Trading Inc. signed and excuted
the Collective Bargaining (ANNEX F) ...

4. On May 15, 1986, ALU in behalf of the majority of the employees

of GAW Trading Inc. and GAW Trading Inc. signed and executed
the Collective Bargaining Agreements (ANNEX F) . . . .

5. In the meantime, at about 1:00 P.M. of May 9, 1986, the

Southern Philippines Federation of Labor (SPFL) together with
Nagkahiusang Mamumuo sa GAW (NAMGAW) undertook a ...
Strike ... after it failed to get the management of GAW Trading Inc.
to sit for a conference respecting its demands presented at 11: A.M.
on the same day in an effort to pressure GAW Trading Inc. to make
a turnabout of its standign recognition of ALU as the sole and
exclusive bargaining representative of its employees, as to which
strike GAW Trading Inc. filed a petition for Restraining
Order/Preliminary Injunction, dfated June 1, 1986 (Annex H) and
which strike Labor Arbiter Bonifacio B. Tumamak held as illegal in a
decision dated August 5, 1986 (ANNEX I);

6. On May 19, 1986, GAW Lumad Labor Union (GALLU-PSSLU)

Federation ... filed a Certification Election petition (ANNEX J), but
as found by Med-Arbiter Candido M. Cumba in its (sic) Order dated
Ju ne 11, 1986 (ANNEX K), without having complied (sic) the
subscription requirement for which it was merely considered an
intervenor until compliance thereof in the other petition for direct
recogbnition as bargaining agent filed on MAy 28, 1986 by southern
Philippines Federation of Labor (SPFL) as found in the same order
(ANNEX K);

7. Int he meantime, the Collective Bargaining Agreement executed

by ALU and GAW Trading Inc. (ANNEX F) was duly filed May 27,
1986 with the Ministry of Labor and Employment in Region VII,
Cebu city;

8. Nevertheless, Med-Arbiter Candido M. Cumba in his order of

June 11, 1986 (Annex K) ruled for the holding of a ceritfication
election in all branches of GAW Trading Inc. in Cebu City, as to
 which ALU filed a Motion for Reconsideration dated June 19, 1986
(ANNEX L) which was treated as an appeal on that questioned
Order for which reason the entire record of subject certification
case was forwarded for the Director, Bureau of LAbor Relations,
Ministry of Labor and Employment, Manila (ANNEX M);

9. Bureau of Labor Relations Director Cresencio B. Trajano,

rendered a Decision on August 13, 1986 (Annex B) granting ALU's
appeal (Motion for Reconsideration) and set aside the questioned
Med-Arbiter Order of June 11, 1986 (Annex K), on the ground that
the CBA has been effective and valid and the contract bar rule
applicable;

10. But the same Decision of Director Crecensio B. Trajano was

sought for reconsideratrion both by Southern Philippines Federation
of Labor (SPFL) on August 26, 1986 (ANNEX N), supplemented by
the 'SUBMISSION OD ADDITIONAL EVIDENCE' dated September
29, 1986 (ANNEX O), and the Philppine Social Security Labor
Union (PSSLU) on October 2, 1986 (ANNEX P), which were
opposed by both GAW Trading, Inc. on September 2, 1986
(ANNEX Q) and ALU on September 12, 1986 (ANNEX R); 2

The aforesaid decision of then Director Trajano was thereafter reversed by

respondent director in her aforecited decision which is now assailed in this
action. A motion for reconsideration of ALU 3 appears to have been disregarded,
hence, its present resort grounded on grave abuse of discretion by public
respondent.

Public respondent ordered the holding of a certification election ruling that the
"contract bar rule" relied upon by her predecessor does not apply in the present
controversy. According to the decision of said respondent, the collective
bargaining agreement involved herein is defective because it "was not duly
submitted in accordance with Section I, Rule IX, Book V of the Implementing
Rules of Batas Pambansa Blg. 130." It was further observed that "(t)here is no
proof tending to show that the CBA has been posted in at least two conspicuous
places in the 1 establishment at least five days before its ratification and that it
has been ratified by the majority of the employees in the bargaining unit."

We find no reversible error in the challenged decision of respondent director. A

careful consideration of the facts culled from the records of this case, especially
the allegations of petitioner itself as hereinabove quoted, yields the conclusion
that the collective bargaining agreement in question is indeed defective hence
unproductive of the legal effects attributed to it by the former director in his
decision which was subsequently and properly reversed.
We have previously held that the mechanics of collective bargaining are set in
motion only when the following jurisdictional preconditions are present, namely,
(1) possession of the status of majority representation by the employees'
representative in accordance with any of the means of selection and/or
designation provided for by the Labor Code; (2) proof of majority representation;
and (3) a demand to bargain under Article 251, paragraph (a), of the New Labor
Code. 4 In the present case, the standing of petitioner as an exclusive bargaining
representative is dubious, to say the least. It may be recalled that respondent
company, in a letter dated May 12, 1986 and addressed to petitioner, merely
indicated that it was "not against the desire of (its) workers" and required
petitioner to present proof that it was supported by the majority thereof in a
meeting to be held on the same date. 5 The only express recognition of petitioner
as said employees' bargaining representative that We see in the records is in the
collective bargaining agreement entered into two days thereafter. 6 Evidently,
there was precipitate haste on the part of respondent company in recognizing
petitioner union, which recognition appears to have been based on the self-
serving claim of the latter that it had the support of the majority of the employees
in the bargaining unit. Furthermore, at the time of the supposed recognition, the
employer was obviously aware that there were other unions existing in the unit.
As earlier stated, respondent company's letter is dated May 12, 1986 while the
two other unions, Southern Philippine Federation of Labor (hereafter, SPFL and
Philippine Social Security Labor Union (PSSLU, for short), went on strike earlier
on May 9, 1986. The unusual promptitude in the recognition of petitioner union by
respondent company as the exclusive bargaining representative of the workers in
GAW Trading, Inc. under the fluid and amorphous circumstances then obtaining,
was decidedly unwarranted and improvident.

It bears mention that even in cases where it was the then Minister of Labor
himself who directly certified the union as the bargaining representative, this
Court voided such certification where there was a failure to properly determine
with legal certainty whether the union enjoyed a majority representation. In such
a case, the holding of a certification election at a proper time would not
necessarily be a mere formality as there was a compelling reason not to directly
and unilaterally certify a union. 7

An additional infirmity of the collective bargaining agreement involved was the

failure to post the same in at least two (2) conspicuous places in the
establishment at least five days before its ratification. 8 Petitioners rationalization
was that "(b)ecause of the real existence of the illegal strike staged by SPFL in
all the stores of GAW Trading, Inc. it had become impossible to comply with the
posting requirement in so far as the realization of tits purpose is concerned as
there were no impartial members of the unit who could be appraised of the CBA's
contents. " 9 This justification is puerile and unacceptable.

In the first place, the posting of copies of the collective bargaining agreement is
the responsibility of the employer which can easily comply with the requirement
through a mere mechanical act. The fact that there were "no impartial members
of the unit" is immaterial. The purpose of the requirement is precisely to inform
the employees in the bargaining unit of the contents of said agreement so that
they could intelligently decide whether to accept the same or not. The assembly
of the members of ALU wherein the agreement in question was allegedly
explained does not cure the defect. The contract is intended for all employees
and not only for the members of the purpoted representative alone. It may even
be said the the need to inform the non-members of the terms thereof is more
exigent and compelling since, in all likehood, their contact with the persons who
are supposed to represent them is limited. Moreover, to repeat, there was an
apparent and suspicious hurry in the formulation and finalization of said collective
bargaining accord. In the sforementioned letter where respondent company
required petitioner union to present proof of its support by the employees, the
company already suggested that petitioner ALU at the same time submit the
proposals that it intended to embody in the projected agreement. This was on
May 12, 1986, and prompltly on thre following day the negoltiation panel; furnish
respondent company final copies of the desired agreement whcih, with equal
dispatch, was signed on May 15, 1986.

Another potent reason for annulling the disputed collective bargaining is the
finding of respondent director that one hundred eighty-one( 181) of the two
hundred eighty-one (281) workers who "ratified" the same now " strongly and
vehemently deny and/or repudiate the alleged negotiations and ratification of the
CBA. " 10 Although petitioner claims that only sev en (7) of the repudiating group
of workers belong to the total number who allegedly ratified the agreement,
nevertheless such substantiated contention weighed against the factujal that the
controverted contract will not promote industrial stability . The Court has long
since declared that:

... Basic to the contract bar rule is the proposition that the delay of
the right to select represen tatives can be justified only where
stability is deemed paramount. Excepted from the contract which
do not foster industrial stability, such as contracts where the identity
of the representative is in doubt. Any stability derived from such
contracts must be subordinated to the employees' freedom of
choice because it does nto establish the type of industrial peace
contemplated by the law. 11

At this juncture, petitioner should be reminded that the technical rules of

rpocedure do not strictly apply in the adjudication of labor
disputes. 12 Consequently, its objection that the evidence with respect to the
aforesaid repudiiation of the supposed collective bargaining agreement cannot
be considered for the first time on appeal on the Bureau of Labor Relations
should be disregarded, especially considering the weighty significance thereof.
Both petitioner and private respondent GAW Trading, Inc. allege that the
employees of the latter are now enjoying the benefits of the collective bargaining
agreement that both parties had forged. However, We cannot find sufficient
evidence of record to support this contention. The only evidence cited by
petitioner is supposed payment of union fees by said employees, a premise too
tenuous to sustain the desired conclusion. Even the actual number of workers in
the respondent company is not clear from the records. Said private respondent
claims that it is two hundred eighty-one (281) 13 but petitioner suggests that it is
more than that number. The said parties should be aware that this Court is not an
adjudicator of facts. Worse, to borrow a trite but apt phrase, they would heap the
Ossa of confusion upon the Pelion of uncertainty and still expect a definitive
ruling on the matter thus confounded.

Additionally, the inapplicability of the contract bar rule is further underscored by

the fact that when the disputed agreement was filed before the Labor Regional
Office on May 27, 1986, a petition for certification election had already been filed
on May 19, 1986. Although the petition was not supported by the signatures of
thirty percent (30%) of the workers in the bargaining unit, the same was enough
to initiate said certification election.

WHEREFORE, the order of the public respondent for the conduct of a

certification election among the rank-and-file workers of respondent GAW
Trading Inc. is AFFIRMED. The temporary restraining order issued in this case
pursuant to the Resolution of March 25, 1987 is hereby lifted.

SO ORDERED.

4.Effect:

4.1With respect to successor-employer

E. Razon vs. Secretary of Labor, 222 SCRA 1

G.R. No. 85867 May 13, 1993

E. RAZON, INC. [formerly known as Metro Services, Inc.], petitioner,

vs.
THE HONORABLE SECRETARY OF LABOR AND EMPLOYMENT (DOLE)
and MARINA PORT SERVICES, INC. (MARINA), respondents.

Cruz, Durian, Agabin, Atienza, Alday & Tuason for petitioner.

Abad & Associates for Marina Port Services, Inc.

MELO, J.:

The petition for certiorari before us seeks to annul and set aside: (a) the order of
May 31, 1988 of the then Secretary of the Department of Labor and Employment
directing the Metro Port Services, Inc., now known as E. Razon, Inc., to satisfy
fully the separation pay of its employees at the rate agree upon in the Agreement
of November 3, 1987; and (b) the order of November 21, 1988, denying the
motion for the reconsideration of the said earlier order (BLR-NS-10-499-87).

Petitioner E. Razon, Inc. (ERI) is a corporation organized in 1962 principally to

bid for the right tooperate arrastre services in Manila. Through public bidding on
January 18, 1974, ERI and the government, through the Philippine Ports
Authority (PPA), executed a management contract covering all the piers in South
Harbor, Manila for a term of five years renewable for another five years (p.
127, Rollo; Decision of June 22, 1987 in G.R. No. 75197, "E. Razon, Inc., et al.
vs. Philippine Ports Authority, et al.").

ERI became Metro Port Services, Inc. (MPSI) in 1978 when parties close to then
Presient Marcos, specifically his brother-in-law, Alfredo "Bejo" Romualdez,
allegedly coerced Enrique Razon, who owned 93% of ERI's equity, into
endorsing in blank stock certificates covering 60% of such equity. Upon the
expiration of the management contract in 1978, it was extented to June 30, 1980.
The PPA then executed a new contract with ERI/MPSI for a term of eight (8)
years beginning July 1, 1980 (p. 129, Rollo).

On July 19, 1986 or two years before the expiration of the eight-year term, the
PPA cancelled the management contract for alleged violations thereof. PPA took
over the cargo-handling operations as well as all the equipment of MPSI (p.
138, Rollo).

Two days later or on July 21, 1986, the PPA issued Permit No. 104286 for cargo-
handling services to Marina Port Services, Inc. (MARINA) (p. 78, Rollo). The
permit, which was to take effect for one-year period or until July 20,
1987,1 contained the following pertinent paragraph as part of the additional terms
and conditions appended as Annex B to the permit:

7. Labor and personnel of previous operator, except those positions

of trust and confidence, shall be absorbed by grantee. Labor or
employees benefits provided for under existing CBA shall likewise
be honored. (p. 79, Rollo.)

Thus, MARINA began the arrastre services and required all workers of ERI/MPSI
to accomplish individual information sheets. Weeks later, the bulk of the 2,700
employees concerned discovered that they had been hired by MARINA as new
employees effective July 21, 1986. Hence, they clamored for the payment of their
separation pay but both the MARINA and ERI/MPSI refused to be liable therefor.
In a bid to prevent disruption of work, PPA authorized MARINA to deduct
P2,000,000.00 from the amount due the MPSI as MARINA's rentals for MPSI
equipment, as partial payment of the employees' separation pay (p. 138, Rollo).

Still dissatisfied, the employees who were members of the Associated Workers
Union (AWU) filed a notice of strike on October 12, 1987. This move prompted
the PPA, MARINA, ERI, and representatives of the AWU, Associated Port
Checkers Workers Union (ASTEU), and Marina Management Employees
(MARINE ME) to meet and forge an Agreement on November 3, 1987 for the
"immediate and reasonable resolution of the long standing claim of separation
benefits which resulted in impending labor strikes". (p. 51, Rollo.) The agreement
provided that the separation benefits would be computed at "one (1) month for
every year of service". (pp. 51 and 192, Rollo.) Another provision of the
Agreement stated:

4. That Metro Port Services, Inc. and MARINA without admitting

liability of the labor claims of the workers agreed that PPA through
MARINA shall disburse the amount of P5 million directly to the
workers. Said amount partakes of the nature of rental subject to the
determination of the fair and reasonable rental of equipment from
the date of take-over of MARINA and of the fair market value
thereof by independent MARINA, and Metro Port Services, Inc. (p.
192, Rollo.)

Although the Agreement specifically stated that the remaining balance of the
separation benefits shall be paid in full before December 24, 1987, the workers
went on strike on December 22, 1987 because they were apprehensive that the
said benefits would not be paid as the appraisal of the pieces of equipment and
machinery of MPSI had not been completed. The members of the AWU were
joined by the APCWU, the ASTEU, and the MARINA ME (p. 139, Rollo).

The MPSI then requested the Secretary of Labor and Employment to

immediately assume jurisdiction over the dispute to prevent paralyzation of the
vital operations of the Port of Manila. Invoking Article 263(g) of the Labor Code,
then Secretary of Labor Franklin M. Drilon issued the order of December 23,
1987 holding that the labor dispute was "imbued with national interest" and
ordering the striking workers to return to work within 24 hours and the
management to accept them back. He also directed the parties to comply
faithfully with the Agreement of November 3, 1987 and, pending the appraisal of
the reasonable rental and market value of the MPSI equipment, the amount of P5
million which the Presidential Commission on Good Government (PCGG) had
committed to unfreeze from the account of MPSI was made available. He also
directed the National Conciliation and Mediation Board to form a committee to
monitor and assist in the implementation of the November 3, 1987 Agreement
(Annex "A" to Petition; pp. 51-55, Rollo).

The separation pay of the workers was later taken from the proceeds of the sale
to PPA of ERI cargo-handling equipment and the rentals from July 21, 1986 to
January 29,1988 of MARINA for the said equipment (Petition, pp. 6-7; pp. 24-
25, Rollo).

On May 31, 1988, Secretary Drilon issued the herein assailed order answering in
the negative the question of whether or not MARINA assumed liability for the
separation pay under Paragraph 7 of the Additional Terms and Conditions
annexed to PPA Permit No. 104286. Proceeding from the general rule laid out
in Fernando vs. Angat Labor Union (5 SCRA 248 [1962], that a collective
bargaining agreement is a contract in personam and, therefore, not enforceable
against the successor-employer, Secretary Drilon brushed aside MPSI's
contention that MARINA assumed the obligation to pay MPSI's workers their
separation pay when, upon the termination of MPSI's contract with PPA, MARINA
took over the arrastre operations. He emphasized a "seemingly minor but rather
crucial point" thus: "The present dispute crystallized not from a normal business
takeover, i.e., through sale or merger of a business enterprise, but from
cancellation of contract which was subsequently upheld valid by the Supreme
Court. The Agreement which now binds MARINA to assume obligations to the
workers is not between the two business enterprises but arose from the Permit to
Operate issued by the PPA to MARINA . . ."

Secretary Drilon rationalized that Paragraph 7 would only have been perceived
by the parties as applicable prospectively since "MARINA had then yet to start its
operations" and because Paragraph 14 of the same permit states that MARINA
shall be responsible for "all obligations, liabilites or claims arising out of any
transaction or undertakings in connection with their cargo handling operations as
of the actual date of transfer thereof." Accordingly, he opined that "the satisfaction
of any workers' claims is an undertaking connected with MARINA's actual cargo
handling operations" and, therefore, its obligations should commence only "as of
the actual takeover." Corollarily, he stated that "compensation for loss of
employment from the entity to whom past services have been rendered should
be forthcoming." He disposed of the case thus:

WHEREFORE, IN VIEW OF THE FOREGOING, this Office hereby

directs the Metro Port Services, Inc. to pay the remaining balance
due to the workers in full satisfaction of their separation pay at the
rate earlier agreed upon by the parties as embodied in the
Agreement of November 3, 1987.

SO ORDERED. (pp. 140-141, Rollo.)

MPSI and AWU move for the reconsideration of said order on the ground that
certain vital facts on record had not been considered. On November 21, 1988,
however, Secretary Drilon denied said motions (p. 159, Rollo). Hence, the instant
petition for certiorari filed by E. Razon, Inc. which had apparently renounced the
use of the name MPSI.

Claiming that it is a sequestered corporation as ownership of 60% of its shares of

stock is still in litigation at the Sandiganbayan and that, should said court rule that
the shares of stock mentioned belong to the government, "it would not be the
petitioner that would lose the millions of pesos paid to the workers" (p. 20, Rollo),
petitioner charges the then Secretary of Labor and Employment with grave abuse
of discretion amounting to excess of jurisdiction in: (a) refusing to hold that
MARINA became its successor-employer on July 20, 1986 and, therefore, bound
itself to honor the worker's rights to security of tenure and seniority priviledges,
despite the provision of Paragraph 7 of the permit to operate; (b) making a
"strained interpretation" of said permit to absolve MARINA from paying
separation pay; (c) refusing to hold that employment of the workers when it
absorbed them as new employees; (d) holding petitioner liable for separation pay
notwithstanding the fact that it never dismissed or separated said workers, and
(e) failing to hold MARINA liable for separation pay and to order MARINA to
reimburse petitioner the amounts paid from its assets and funds (pp. 12-13,
Petition; pp. 31-32, Rollo).

There appears to be no quarrel over the issue of whether or not separation pay
should be paid to the workers of ERI/MPSI. The controversy actually is: which of
the contending corporations, petitioner ERI/MPSI or private respondent MARINA,
should pay such benefit to the employees concerned.

Separation or severance pay is an allowance usually based on length or service

that is payable to an employee on severance except usually in case of
disciplinary discharge, or as compensation due an employee upon the severance
of his employment status with the employer (Marcopper Mining Corporation vs.
NLRC, 200 SCRA 167 [1991]). Under Article 283 of the Labor Code, separation
pay is required where the termination of employment relationship is occasioned
by the "cessation of operations" of an establishment. The said article, therefore,
puts the burden of paying separation pay on ERI/MPSI, the employer for whom
services had been rendered by the employees who were separated from
employment in view of the cessation of its business operations by the
cancellation of its management contract with the PPA. Petitioner, however,
argues otherwise and would shift liability for separation pay to MARINA on the
strength of Paragraph 7 of the additional terms and conditions appended to the
permit to operate granted to MARINA.

Paragraph 7 aforequoted provides that the employees of the "previous operator",

meaning ERI/MPSI, shall be "absorbed" by the permit "grantee", meaning
MARINA, and the benefits given the same employees under the "existing CBA"
shall be "honored". A key in the interpretation of this paragraph is the word
"absord" which is synonymous with the words "assimilate" or "incorporate" and
which, in business parlance, means "to take over" (Webster's Third New
International Dictionary, 1966 Ed., p. 7). As such, it appears at first blush, that an
"absorbing" employer shall be responsible for all the benefits accruing to the
"absorbed" employees.

The circumstances of this case, however, do not warrant the conclusion that, by
"absorbing" the ERI/MPSI employees, MARINA took the place of the ERI/MPSI
as an employer as if there had been no interruption in the employer-employee
relationship between ERI/MPSI and its employees and, therefore, MARINA
should assume all responsibilities of ERI/MPSI. For, while in Marina Port
Services, Inc. vs. NLRC (193 SCRA 420 [1991], the Court opined that by virtue of
Paragraph 7, security guards of the MPSI did become employees of MARINA,
the undeniable fact is that, by the termination of its management contract with the
PPA, ERI/MPSI ceased to be an employer. Admittedly, the consequent
separation from the employment of its employees was not of the ERI/MPSI's own
making. However, it may not validly lay such consequence on the lap of MARINA
which, like itself, had no hand in the termination of the management contract by
the PPA. The fact that a couple of days later, the PPA, without public bidding,
issued to MARINA, permit to operate, does not imply that MARINA stepped into
the shoes of ERI/MPSI as if there were absolute identity between them.
Parenthetically, the issue of the legality of the cancellation of MPSI's permit to
operate was laid to rest in E. Razon, Inc. vs. Philippine Ports Authority (151
SCRA 233 [1987]).

By absorbing ERI/MPSI employees and honoring the terms and conditions in the
collective bargaining agreement between ERI/MPSI and the employees, MARINA
did not assume the responsibility of ERI/MPSI to pay separation pay to its
employees. As correctly put by public respondent, Paragraph 7, insofar as it
refers to employees' benefits, should be applied prospectively with respect to
MARINA. This conclusion is supported by Paragraph 14 of Permit No. 104286
granted to MARINA which states:

14. Grantee shall be responsible for all obligations, liabilities or

claims arising out of any transactions or undertakings in
connections with their cargo handling operations as of the actual
date of transfer thereof to grantee. (Emphasis supplied.)

MARINA might have been impelled not only by compassion for the employees
but also by their tested skills in hiring them back upon their separation from the
employment of ERI/MPSI. It should be recalled, however, there is no law that
requires the purchaser to absorb the employees of the selling corporation (San
Felipe Neri School of Mandaluyong, Inc. vs. NLRC, 201 SCRA 478 [1991], citing
MDII Supervisors and Confidential Employees Association (FFW) vs. Presidential
Assistant on Legal Affairs, 79 SCRA 40 [1977]). As such, when MARINA rehired
the ERI/MPSI employees, it had all the right to consider them as new ones. On
the other hand, ERI/MPSI, to whom years of service had been rendered by its
suddenly jobless employees, had the corresponding obligation to grant them
what is theirs under the law and the collective bargaining agreement. After all, a
collective bargaining agreement is the law between the parties (Plastic Town
Center Corporation vs. NLRC, 172 SCRA580 [1989]; Roche [Phil.] vs, NLRC,
178 SCRA 386 [1989]), and compliance therewith is mandated by the express
policy of the law (Meycauayan College vs. Drilon, 185 SCRA 50 [1990]).

The situation in this case is completely different from that obtaining in Filipinas
Port Services, Inc. vs. NLRC (200 SCRA 773 [1991]), where the petitioner was
obligated "not only to absorb the workers of the dissolved companies but also to
include the length of service earned by the absorbed employees with their former
employers as well" because said case involved a merger of different companies
into a single company as a result of the PPA's integration of stevedoring/arastre
services. On the other hand, in the case at bar, there is no privity of contract
between ERI/MPSI and MARINA so as to make the latter a common or even
substitute employer that it should be burdened with the obligations of the former.

WHEREFORE, the petition is hereby DISMISSED and the assailed orders

AFFIRMED, with costs against petitioner.

SO ORDERED.

Metrobank Union vs. NLRC, 226 SCRA 268

METROPOLITAN BANK & TRUST COMPANY EMPLOYEES UNION-ALU-

TUCP and ANTONIO V. BALINANG, Petitioners, vs. NATIONAL LABOR
RELATIONS COMMISSION (2nd Division) and METROPOLITAN BANK and
TRUST COMPANY, Respondents.

Gilbert P. Lorenzo for petitioners.chanrobles virtual law library

Marcial G. dela Fuente for private respondents.

VITUG, J.:

In this petition for certiorari, the Metropolitan Bank & Trust Company Employees
Union-ALU-TUCP (MBTCEU) and its president, Antonio V. Balinang, raise the
issue of whether or not the implementation by the Metropolitan Bank and Trust
Company of Republic Act No. 6727, mandating an increase in pay of P25 per day
for certain employees in the private sector, created a distortion that would require
an adjustment under said law in the wages of the latter's other various groups of
employees.chanroblesvirtualawlibrarychanrobles virtual law library
On 25 May 1989, the bank entered into a collective bargaining agreement with
the MBTCEU, granting a monthly P900 wage increase effective 01 January
1989, P600 wage increase 01 January 1990, and P200 wage increase effective
01 January 1991. The MBTCEU had also bargained for the inclusion of
probationary employees in the list of employees who would benefit from the first
P900 increase but the bank had adamantly refused to accede thereto.
Consequently, only regular employees as of 01 January 1989 were given the
increase to the exclusion of probationary
employees.chanroblesvirtualawlibrarychanrobles virtual law library

Barely a month later, or on 01 January 1989, Republic Act 6727, "an act to
rationalize wage policy determination be establishing the mechanism and proper
standards thereof, . . . fixing new wage rates, providing wage incentives for
industrial dispersal to the countryside, and for other purposes," took effect. Its
provisions, pertinent to this case, state:

Sec. 4. (a) Upon the effectivity of this Act, the statutory minimum wage rates of all
workers and employees in the private sector, whether agricultural or non-
agricultural, shall be increased by twenty-five pesos (P25) per day, . . .: Provided,
That those already receiving above the minimum wage rates up to one hundred
pesos(P100.00) shall also receive an increase of twenty-five pesos (P25.00) per
day, . . .

xxx xxx xxxchanrobles virtual law library

(d) If expressly provided for and agreed upon in the collective bargaining
agreements, all increase in the daily basic wage rates granted by the employers
three (3) months before the effectivity of this Act shall be credited as compliance
with the increases in the wage rates prescribed herein, provided that, where such
increases are less than the prescribed increases in the wage rates under this Act,
the employer shall pay the difference. Such increase shall not include
anniversary wage increases, merit wage increase and those resulting from the
regularization or promotion of employees.chanroblesvirtualawlibrarychanrobles
virtual law library

Where the application of the increases in the wage rates under this Section
results in distortions as defined under existing laws in the wage structure within
an establishment and gives rise to a dispute therein, such dispute shall first be
settled voluntarily between the parties and in the event of a deadlock, the same
shall be finally resolved through compulsory arbitration by the regional branches
of the National Labor Relations Commission (NLRC) having jurisdiction over the
workplace.chanroblesvirtualawlibrarychanrobles virtual law library

It shall be mandatory for the NLRC to conduct continous hearings and decide
any dispute arising under this Section within twenty (20) calendar days from the
time said dispute is formally submitted to it for arbitration. The pendency of a
dispute arising from a wage distortion shall not in any way delay the applicability
of the increase in the wage rates prescribed under this Section.

Pursuant to the above provisions, the bank gave the P25 increase per day, or
P750 a month, to its probationary employees and to those who had been
promoted to regular or permanent status before 01 July 1989 but whose daily
rate was P100 and below. The bank refused to give the same increase to its
regular employees who were receiving more than P100 per day and recipients of
the P900 CBA increase.chanroblesvirtualawlibrarychanrobles virtual law library

Contending that the bank's implementation of Republic Act 6727 resulted in the
categorization of the employees into (a) the probationary employees as of 30
June 1989 and regular employees receiving P100 or less a day who had been
promoted to permanent or regular status before 01 July 1989, and (b) the regular
employees as of 01 July 1989, whose pay was over P100 a day, and that,
between the two groups, there emerged a substantially reduced salary gap, the
MBTCEU sought from the bank the correction of the alleged distortion in pay. In
order to avert an impeding strike, the bank petitioned the Secretary of Labor to
assume jurisdiction over the case or to certify the same to the National Labor
Relations Commission (NLRC) under Article 263 (g) of the Labor Code. 1The
parties ultimately agreed to refer the issue for compulsory arbitration to the
NLRC.chanroblesvirtualawlibrarychanrobles virtual law library

The case was assigned to Labor Arbiter Eduardo J. Carpio. In his decision of 05
February 1991, the labor arbiter disregard with the bank's contention that the
increase in its implementation of Republic Act 6727 did not constitute a distortion
because "only 143 employees or 6.8% of the bank's population of a total of 2,108
regular employees" benefited. He stressed that "it is not necessary that a big
number of wage earners within a company be benefited by the mandatory
increase before a wage distortion may be considered to have taken place," it
being enough, he said, that such increase "result(s) in the severe contraction of
an intentional quantitative difference in wage between employee
groups."chanrobles virtual law library

The labor arbiter concluded that since the "intentional quantitative difference" in
wage or salary rates between and among groups of employees is not based
purely on skills or length of service but also on "other logical bases of
differentiation, a P900.00 wage gap intentionally provided in a collective
bargaining agreement as a quantitative difference in wage between those who
WERE regular employees as of January 1, 1989 and those who WERE NOT as
of that date, is definitely a logical basis of differentiation (that) deserves
protection from any distorting statutory wage increase." Otherwise, he added, "a
minimum wage statute that seek to uplift the economic condition of labor would
itself destroy the mechanism of collective bargaining which, with perceived
stability, has been labor's constitutional and regular source of wage increase for
so long a time now." Thus, since the "subjective quantitative difference" between
wage rates had been reduced from P900.00 to barely P150.00, correction of the
wage distortion pursuant to Section 4(c) of the Rules Implementing Republic Act
6727 should be made.chanroblesvirtualawlibrarychanrobles virtual law library

The labor arbiter disposed of the case, thus:

WHEREFORE, premises considered, the respondent is hereby directed to

restore to complainants and their members the Nine Hundred (P900.00) Pesos
CBA wage gap they used to enjoy over non-regular employees as of January 1,
1989 by granting them a Seven Hundred Fifty (P750.00) Pesos monthly increase
effective July 1, 1989.chanroblesvirtualawlibrarychanrobles virtual law library

SO ORDERED. 2chanrobles virtual law library

The bank appealed to the NLRC. On 31 May 1991, the NLRC Second Division,
by a vote of 2 to 1, reversed the decision of the Labor Arbiter. Speaking, through
Commissioners Rustico L. Diokno and Domingo H. Zapanta, the NLRC said:

. . . a wage distortion can arise only in a situation where the salary structure is
characterized by intentional quantitative differences among employee groups
determined or fixed on the basis of skills, length of service, or other logical basis
of differentiation and such differences or distinction are obliterated (In Re: Labor
Dispute at the Bank of the Philippine Islands, NCMB-RB-7-11-096-89, Secretary
of Labor and Employment, February 18,
1991).chanroblesvirtualawlibrarychanrobles virtual law library

As applied in this case, We noted that in the new wage salary structure, the wage
gaps between Level 6 and 7 levels 5 and 6, and levels 6 and 7 (sic) were
maintained. While there is a noticeable decrease in the wage gap between levels
2 and 3, Levels 3 and 4, and Levels 4 and 5, the reduction in the wage gaps
between said levels is not significant as to obliterate or result in severe
contraction of the intentional quantitative differences in salary rates between the
employees groups. For this reason, the basis requirement for a wage in this
case. Moreover, there is nothing in the law which would justify an across-the-
board adjustment of P750.00 as ordered by the labor
Arbiter.chanroblesvirtualawlibrarychanrobles virtual law library

WHEREFORE, premises considered, the appealed decision is hereby set aside

and a new judgment is hereby entered, dismissing the complaint for lack of
merit.chanroblesvirtualawlibrarychanrobles virtual law library

SO ORDERED. 3chanrobles virtual law library

In her dissent, Presiding Commissioner Edna Bonto-Perez opined:

There may not be an obliteration nor elimination of said quantitative
distinction/difference aforecited but clearly there is a contraction. Would such
contraction be severe as to warrant the necessary correction sanctioned by the
law in point, RA 6727? It is may considered view that the quantitative intended
distinction in pay between the two groups of workers in respondent company was
contracted by more than fifty (50%) per cent or in particular by more or less
eighty-three (83%) per cent hence, there is no doubt that there is an evident
severe contraction resulting in the complained of wage
distortion.chanroblesvirtualawlibrarychanrobles virtual law library

Nonetheless, the award of P750.00 per month to all of herein individual

complainants as ordered by the Labor Arbiter below, to my mind is not the most
equitable remedy at bar, for the same would be an across the board increase
which is not the intention of RA 6727. For that matter, herein complainants
cannot by right claim for the whole amount of P750.00 a month or P25.00 per
day granted to the workers covered by the said law in the sense that they are not
covered by the said increase mandated by RA 6727. They are only entitled to the
relief granted by said law by way of correction of the pay scale in case of
distortion in wages by reason thereof.chanroblesvirtualawlibrarychanrobles
virtual law library

Hence, the formula offered and incorporated in Wage Order No. IV-02 issued on
21 May 1991 by the Regional Tripartite Wages and Productivity Commission for
correction of pay scale structures in case of wage distortion as in the case at bar
which is:

Minimum Wage = % x Prescribed = Distortion

------ Increased Adjustment

Actual Salary

would be the most equitable and fair under the circumstances obtaining in this
case.chanroblesvirtualawlibrarychanrobles virtual law library

For this very reason, I register my dissent from the majority opinion and opt for
the modification of the Labor Arbiter's decision as afore-discussed. 4chanrobles
virtual law library

The MBTCEU filed a motion for reconsideration of the decision of the NLRC;
having been denied, the MBTCEU and its president filed the instant petition
for certiorari, charging the NLRC with gave abuse of discretion by its refusal (a)
"to acknowledge the existence of a wage distortion in the wage or salary rates
between and among the employee groups of the respondent bank as a result of
the bank's partial implementation" of Republic Act 6727 and (b) to give due
course to its claim for an across-the-board P25 increase under Republic Act No.
6727. 5chanrobles virtual law library
We agree with the Solicitor General that the petition is impressed with
merit. 6chanrobles virtual law library

The term "wage distortion", under the Rules Implementing Republic Act 6727, is
defined, thus:

(p) Wage Distortion means a situation where an increase in prescribed wage

rates results in the elimination or severe contradiction of intentional quantitative
differences in wage or salary rates between and among employee groups in an
establishment as to effectively obliterate the distinctions embodied in such wage
structure based on skills, length of service, or other logical bases of
differentiation.

The issue of whether or not a wage distortion exists as a consequence of the

grant of a wage increase to certain employees, we agree, is, by and large, a
question of fact the determination of which is the statutory function of the
NLRC. 7 Judicial review of labor cases, we may add, does not go beyond the
evaluation of the sufficiency of the evidence upon which the labor official's
findings rest. 8 As such, factual findings of the NLRC are generally accorded not
only respect but also finality provided that its decision are supported by
substantial evidence and devoid of any taint of unfairness of
arbitrariness. 9 When, however, the members of the same labor tribunal are not in
accord on those aspects of a case, as in this case, this Court is well cautioned
not to be as so conscious in passing upon the sufficiency of the evidence, let
alone the conclusions derived therefrom.chanroblesvirtualawlibrarychanrobles
virtual law library

In this case, the majority of the members of the NLRC, as well as its dissenting
member, agree that there is a wage distortion arising from the bank's
implementation of the P25 wage increase; they do differ, however, on the extent
of the distortion that can warrant the adoption of corrective measures required by
law.chanroblesvirtualawlibrarychanrobles virtual law library

The definition of "wage distortion," 10 aforequoted, shows that such distortion can
so exist when, as a result of an increase in the prescribed wage rate, an
"elimination or severe contraction of intentional quantitative differences in wage
or salary rates" would occur "between and among employee groups in an
establishment as to effectively obliterate the distinctions embodied in such wage
structure based on skills, length of service, or other logical bases of
differentiation." In mandating an adjustment, the law did not require that there be
an elimination or total abrogation of quantitative wage or salary differences; a
severe contraction thereof is enough. As has been aptly observed by Presiding
Commissioner Edna Bonto-Perez in her dissenting opinion, the contraction
between personnel groupings comes close to eighty-three (83%), which cannot,
by any stretch of imagination, be considered less than
severe.chanroblesvirtualawlibrarychanrobles virtual law library
The "intentional quantitative differences" in wage among employees of the bank
has been set by the CBA to about P900 per month as of 01 January 1989. It is
intentional as it has been arrived at through the collective bargaining process to
which the parties are thereby concluded. 11 The Solicitor General, in
recommending the grant of due course to the petition, has correctly emphasized
that the intention of the parties, whether the benefits under a collective
bargaining agreement should be equated with those granted by law or not,
unless there are compelling reasons otherwise, must prevail and be given
effect. 12chanrobles virtual law library

In keeping then with the intendment of the law and the agreement of the parties
themselves, along with the often repeated rule that all doubts in the interpretation
and implementation of labor laws should be resolved in favor of labor, 13 we must
approximate an acceptable quantitative difference between and among the CBA
agreed work levels. We, however, do not subscribe to the labor arbiter's exacting
prescription in correcting the wage distortion. Like the majority of the members of
the NLRC, we are also of the view that giving the employees an across-the-board
increase of P750 may not be conducive to the policy of encouraging "employers
to grant wage and allowance increases to their employees higher than the
minimum rates of increases prescribed by statute or administrative regulation,"
particularly in this case where both Republic Act 6727 and the CBA allow a credit
for voluntary compliance. As the Court, through Associate Justice Florentino
Feliciano, also pointed out in Apex Mining Company, Inc. v. NLRC: 14

. . . . (T)o compel employers simply to add on legislated increases in salaries or

allowances without regard to what is already being paid, would be to penalize
employers who grant their workers more than the statutorily prescribed minimum
rates of increases. Clearly, this would be counter-productive so far as securing
the interests of labor is concerned. . . .

We find the formula suggested then by Commissioner Bonto-Perez, which has

also been the standard considered by the regional Tripartite Wages and
Productivity Commission for the correction of pay scale structures in cases of
wage distortion, 15 to well be the appropriate measure to balance the respective
contentions of the parties in this instance. We also view it as being just and
equitable.chanroblesvirtualawlibrarychanrobles virtual law library

WHEREFORE, finding merit in the instant petition for certiorari, the same is
GRANTED DUE PROCESS, the questioned NLRC decision is hereby SET
ASIDE and the decision of the labor arbiter is REINSTATED subject to the
MODIFICATION that the wage distortion in question be corrected in accordance
with the formula expressed in the dissenting opinion of Presiding Commissioner
Edna Bonto-Perez. This decision is immediately
executory.chanroblesvirtualawlibrarychanrobles virtual law library

SO ORDERED.
With respect to a change in exclusive bargaining agent -Substitutionary
Doctrine

Benguet Consolidated vs. BCI Ees Union, 23 SCRA 465

G.R. No. L-24711 April 30, 1968

BENGUET CONSOLIDATED, INC., plaintiff-appellant,

vs.
BCI EMPLOYEES and WORKERS UNION-PAFLU, PHILIPPINE
ASSOCIATION OF FREE LABOR UNIONS, CIPRIANO CID and JUANITO
GARCIA, defendants-appellees.

Ross, Selph, Del Rosario, Bito and Misa for plaintiff-appellant.

Cipriano Cid and Associates for defendants-appellees.

BENGZON, J.P., J.:

The contending parties in this case —Benguet Consolidated, Inc., ("BENGUET")

on the one hand, and on the other, BCI Employees & Workers Union ("UNION")
and the Philippine Association of Free Labor Unions ("PAFLU") —do not dispute
the following factual settings established by the lower court.

On June 23, 1959, the Benguet-Balatoc Workers Union ("BBWU"), for and in
behalf of all BENGUET employees in its mines and milling establishment located
at Balatoc, Antamok and Acupan, Municipality of Itogon, Mt. Province, entered
into a Collective Bargaining Contract, Exh. "Z" ("CONTRACT") with BENGUET.
Pursuant to its very terms, said CONTRACT became effective for a period of four
and a half (4-½) years, or from June 23, 1959 to December 23, 1963. It likewise
embodied a No-Strike, No-Lockout clause. 1

About three years later, or on April 6, 1962, a certification election was conducted
by the Department of Labor among all the rank and file employees of BENGUET
in the same collective bargaining units. UNION obtained more than 50% of the
total number of votes, defeating BBWU, and accordingly, the Court of Industrial
Relations, on August 18, 1962, certified UNION as the sole and exclusive
collective bargaining agent of all BENGUET employees as regards rates of pay,
wages, hours of work and such other terms and conditions of employment
allowed them by law or contract.

Subsequently, separate meetings were conducted on November 22, 23 and 24,

1962 at Antamok, Balatoc and Acupan Mines respectively by UNION. The result
thereof was the approval by UNION members of a resolution 2directing its
president to file a notice of strike against BENGUET for:
 1. [Refusal] to grant any amount as monthly living allowance for the
workers;

2. Violation of Agreements reached in conciliation meetings among which

is the taking down of investigation [sic] and statements of employees
without the presence of union representative;

3. Refusal to dismiss erring executive after affidavits had been presented,

thereby company showing [sic] bias and partiality to company personnel;

4. Discrimination against union members in the enforcement of disciplinary

actions.

The Notice of Strike 3 was filed on December 28, 1962. Three months later, in the
evening of March 2, 1963, UNION members who were BENGUET employees in
the mining camps at Acupan, Antamok and Balatoc, went on strike. Regarding
the conduct of the strike, the trial court reports: 4

... Picket lines were formed at strategic points within the premises of the
plaintiff. The picketers, by means of threats and intimidation, and in some
instances by the use of force and violence, prevented passage thru the
picket lines by personnel of the plaintiff who were reporting for work.
Human blocks were formed on points of entrance to working areas so that
even vehicles could not pass thru, while the officers of the plaintiff were
not allowed for sometime to leave the "staff" area.

The strikers forming picket lines bore placards with the letters BBWU-
PAFLU written thereon. As a general rule, the picketers were unruly,
aggressive and uttered threatening remarks to staff members and non-
strikers who desire to pass thru the picket lines. On some occasions, the
picketers resorted to violence by pushing back the car wherein staff
officers were riding who would like to enter the mine working area. The
picketers lifted one side of the vehicle and were in the act of overturning it
when they were prevented from doing so by the timely intervention of PC
soldiers, who threw tear gas bombs to make the crowd disperse. Many of
the picketers were apprehended by the PC soldiers and criminal charges
for grave coercion were filed against them before the Court of First
Instance of Baguio. Two of the strike leaders and twenty-two picketers,
however, were found guilty of light coercion while nineteen other accused
were acquitted.

There was a complete stoppage of work during the strike in all the mines.
After two weeks elapsed, repair and maintenance of the water pump was
allowed by the strikers and some of the staff members were permitted to
enter the mines, who inspected the premises in the company of PC
 soldiers to ascertain the extent of the damage to the equipment and
losses of company property.

xxx xxx xxx

On May 2, 1963, the parties agreed to end the raging dispute. Accordingly,
BENGUET and UNION executed the AGREEMENT, Exh. 1. PAFLU placed its
conformity thereto and said agreement was attested to by the Director of the
Bureau of Labor Relations. About a year later or on January 29, 1964, a
collective bargaining contract was finally executed between UNION-PAFLU and
BENGUET. 5

Meanwhile, as a result, allegedly, of the strike staged by UNION and its

members, BENGUET had to incur expenses for the rehabilitation of mine
openings, repair of mechanical equipment, cost of pumping water out of the
mines, value of explosives, tools and supplies lost and/or destroyed, and other
miscellaneous expenses, all amounting to P1,911,363.83. So, BENGUET sued
UNION, PAFLU and their respective Presidents to recover said amount in the
Court of First Instance of Manila, on the sole premise that said defendants
breached their undertaking in the existing CONTRACT not to strike during the
effectivity thereof .

In answer to BENGUET's complaint, defendants unions and their respective

presidents put up the following defenses: (1) they were not bound by the
CONTRACT which BBWU, the defeated union, had executed with BENGUET; (2)
the strike was due, inter alia, to unfair labor practices of BENGUET; and (3) the
strike was lawful and in the exercise of the legitimate rights of UNION-PAFLU
under Republic Act 875.

Issues having been joined, trial commenced. On February 23, 1965, the trial
court rendered judgment dismissing the complaint on the ground that the
CONTRACT, particularly the No-Strike clause, did not bind defendants. The
latters' counterclaim was likewise denied. Failing to get a reconsideration of said
decision, BENGUET interposed the present appeal.

The several errors assigned by BENGUET basically ask three questions:

(1) Did the Collective Bargaining Contract executed between BENGUET

and BBWU on June 23, 1959 and effective until December 23,
1963 automatically bind UNION-PAFLU upon its certification, on August
18, 1962, as sole bargaining representative of all BENGUET employees?

(2) Are defendants labor unions and their respective presidents liable for
the illegal acts committed during the course of the strike and picketing by
some union members?
 (3) Are defendants liable to pay the damages claimed by BENGUET?

In support of an affirmative answer to the first question, BENGUET first invokes

the so-called "Doctrine of Substitution" referred to in General Maritime
Stevedores' Union v. South Sea Shipping Lines, L-14689, July 26, 1960. There it
was remarked:

xxx xxx xxx

We also hold that where the bargaining contract is to run for more than
two years, the principle of substitution may well be adopted and enforced
by the CIR to the effect that after two years of the life of a bargaining
agreement, a certification election may be allowed by the CIR; that if a
bargaining agent other than the union or organization that executed the
contract, is elected, said new agent would have to respect said contract,
but that it may bargain with the management for the shortening of the life
of the contract if it considers it too long, or refuse to renew the contract
pursuant to an automatic renewal clause. (Emphasis supplied)

xxx xxx xxx

The submission utterly fails to persuade Us. The above-quoted pronouncement

was obiter dictum. The only issue in the General Maritime Stevedores'
Union case was whether a collective bargaining agreement which had practically
run for 5 years constituted a bar to certification proceedings. We held it did not
and accordingly directed the court a quo to order certification elections. With that,
nothing more was necessary for the disposition of the case. Moreover, the
pronouncement adverted to was rather premature. The possible certification of a
union different from that which signed the bargaining contract was a mere
contingency then since the elections were still to be held. Clearly, the Court was
not called upon to rule on possible effects of such proceedings on the bargaining
agreement. 6

But worse, BENGUET's reliance upon the Principle of Substitution is totally

misplaced. This principle, formulated by the NLRB 7 as its initial compromise
solution to the problem facing it when there occurs a shift in employees' union
allegiance after the execution of a bargaining contract with their employer, merely
states that even during the effectivity of a collective bargaining agreement
executed between employer and employees thru their agent, the employees can
change said agent but the contract continues to bind them up to its expiration
date. They may bargain however for the shortening of said expiration date. 8

In formulating the "substitutionary" doctrine, the only consideration involved was

the employees' interest in the existing bargaining agreement. The agent's interest
never entered the picture. In fact, the justification 9 for said doctrine was:
 ... that the majority of the employees, as an entity under the statute, is the
true party in interest to the contract, holding rights through the agency of
the union representative. Thus, any exclusive interest claimed by the
agent is defeasible at the will of the principal.... (Emphasis supplied)

Stated otherwise, the "substitutionary" doctrine only provides that the employees
cannot revoke the validly executed collective bargaining contract with their
employer by the simple expedient of changing their bargaining agent. And it is in
the light of this that the phrase "said new agent would have to respect said
contract" must be understood. It only means that the employees, thru their new
bargaining agent, cannot renege on their collective bargaining contract, except of
course to negotiate with management for the shortening thereof.

The "substitutionary" doctrine, therefore, cannot be invoked to support the

contention that a newly certified collective bargaining agent automatically
assumes all the personal undertakings — like the no-strike stipulation here — in
the collective bargaining agreement made by the deposed union. When BBWU
bound itself and its officers not to strike, it could not have validly bound also all
the other rival unions existing in the bargaining units in question. BBWU was the
agent of the employees, not of the other unions which possess distinct
personalities. To consider UNION contractually bound to the no-strike stipulation
would therefore violate the legal maxim that res inter alios nec prodest nec
nocet. 10

Of course, UNION, as the newly certified bargaining agent, could always

voluntarily assume all the personal undertakings made by the displaced agent.
But as the lower court found, there was no showing at all that, prior to the
strike, 11 UNION formally adopted the existing CONTRACT as its own and
assumed all the liability ties imposed by the same upon BBWU.

BENGUET also alleges that UNION is now in estoppel to claim that it is not
contractually bound by the CONTRACT for having filed on September 28, 1962,
in Civil Case No. 1150 of the Court of First Instance of Baguio, entitled "Bobok
Lumber Jack Ass'n. vs. Benguet Consolidated, Inc. and BCI Employees Workers
Union-PAFLU" 12 a motion praying for the dissolution of the ex parte writ of
preliminary injunction issued therein, wherein the following appears:

In that case, the CIR transfered the contactual rights of the BBWU to the
defendant union. One of such rights transferred was the right to the
modified union-shop — checked off union dues arrangement now under
injunction.

The collective bargaining contract mentioned in the plaintiff's complaint did

not expire by the mere fact that the defendant union was certified as
bargaining agent in place of the BBWU. The Court of Industrial Relations
in the case above mentioned made it clear that the collective bargaining
 contract would be respected unless and until the parties act otherwise. In
effect, the defendant union by act of subrogation took the place of the
BBWU as the UNION referred to in the contract. (Emphasis supplied)

There is no estoppel. UNION did not assert the above statement against
BENGUET to force it to rely upon the same to effect the union check-off in its
favor. UNION and BENGUET were together as co-defendants in said Civil Case
No. 1150. Rather, the statement was directed against Bobok Lumber Jack Ass'n.,
plaintiff therein, to weaken its cause of action. Moreover, BENGUET did not rely
upon said statement. What prompted Bobok Lumber Jack Ass'n. to file the
complaint for declaratory relief was the fact that "... the defendants [UNION and
BENGUET] are planning to agree to the continuation of a modified union shop in
the three camps mentioned above without giving the employees concerned the
opportunity to express their wishes on the matter ..." BENGUET even went
further in its answer filed on October 18, 1962, by asserting that "... defendants
have already agreed to the continuation of the modified union shop provision in
the collective bargaining agreement...." 13

Neither can we accept BENGUET's contention that the inclusion of said

aforequoted motion in the record on appeal filed in said Civil Case No. 1150, now
on appeal before Us docketed as case No. L-24729, refutes UNION's allegation
that it has subsequently abandoned its stand against Bobok Lumber Jack Ass'n.,
in said case. The mere appearance of such motion in the record on appeal is but
a compliance with the procedural requirement of Rule 41, Sec. 6, of the Rules of
Court, that all matters necessary for a proper understanding of the issues
involved be included in the record on appeal. This therefore cannot be taken as a
rebuttal of the UNION's explanation.

There is nothing then, in law as well as in fact, to support plaintiff BENGUET's

contention that defendants are contractually bound by the CONTRACT. And the
stand taken by the trial court all the more becomes unassailable in the light of Art.
1704 of the Civil Code providing that:

In the collective bargaining, the labor union or members of the board or

committee signing the contract shall be liable for non-fulfillment thereof.
(Emphasis supplied)

There is no question, defendants were not signatories nor participants in the

CONTRACT.

Lastly, BENGUET contends, citing Clause II in connection with Clause XVIII of

the CONTRACT, that since all the employees, as principals, continue being
bound by the no-strike stipulation until the CONTRACT's expiration, UNION, as
their agent, must necessarily be bound also pursuant to the Law on Agency. This
is untenable. The way We understand it, everything binding on a duly authorized
agent, acting as such, is binding on the principal; not vice-versa, unless there is a
mutual agency, or unless the agent expressly binds himself to the party with
whom he contracts. As the Civil Code decrees it: 14

The agent who acts as such is not personally liable to the party with whom
he contracts, unless he expressly binds himself or exceeds the limits of his
authority without giving such party sufficient notice of his powers.
(Emphasis supplied)1äwphï1.ñët

Here, it was the previous agent who expressly bound itself to the other party,
BENGUET. UNION, the new agent, did not assume this undertaking of BBWU.

In view of all the foregoing, We see no further necessity of delving further into the
other less important points raised by BENGUET in connection with the first
question.

On the second question, it suffices to consider, in answer thereto, that the rule of
vicarious liability has, since the passage of Republic Act 875, been expressly
legislated out. 15 The standing rule now is that for a labor union and/or its officials
and members to be liable, there must be clear proof of actual participation in, or
authorization or ratification of the illegal acts. 16 While the lower court found that
some strikers and picketers resorted to intimidation and actual violence, it also
found that defendants presented uncontradicted evidence that before and during
the strike, the strike leaders had time and again warned the strikers not to resort
to violence but to conduct peaceful picketing only. 17 Assuming that the strikers
did not heed these admonitions coming from their leaders, the failure of the union
officials to go against the erring union members pursuant to the UNION and
PAFLU constitutions and by-laws exposes, at the most, only a flaw or weakness
in the defense which, however, cannot be the basis for plaintiff BENGUET to
recover.

Lastly, paragraph VI of the Answer 18 sufficiently traverses the material allegations

in paragraph VI of the Complaint, 19 thus precluding a fatal admission on
defendants' part. The purpose behind the rule requiring specific denial is
obtained: defendants have set forth the matters relied upon in support of their
denial. Paragraph VI of the Answer may not be a model pleading, but it suffices
for purposes of the rule. Pleadings should, after all, be liberally construed. 20

Since defendants were not contractually bound by the no-strike clause in the
CONTRACT, for the simple reason that they were not parties thereto, they could
not be liable for breach of contract to plaintiff. The lower court therefore correctly
absolved them from liability.

WHEREFORE, the judgment of the lower court appealed from is hereby affirmed.
No costs. So ordered.1äwphï1.ñët
5.Procedure in registration of CBA Art. 231, LC; B5 R9 S1, IRR; DO 9, Rule XVI,
Secs. 1-5

Art. 231. Registry of unions and file of collective bargaining

agreements. The Bureau shall keep a registry of legitimate labor organizations.
The Bureau shall also maintain a file of all collective bargaining agreements and
other related agreements and records of settlement of labor disputes and copies
of orders and decisions of voluntary arbitrators. The file shall be open and
accessible to interested parties under conditions prescribed by the Secretary of
Labor and Employment, provided that no specific information submitted in
confidence shall be disclosed unless authorized by the Secretary, or when it is at
issue in any judicial litigation, or when public interest or national security so
requires.

Within thirty (30) days from the execution of a Collective Bargaining Agreement,
the parties shall submit copies of the same directly to the Bureau or the Regional
Offices of the Department of Labor and Employment for registration,
accompanied with verified proofs of its posting in two conspicuous places in the
place of work and ratification by the majority of all the workers in the bargaining
unit. The Bureau or Regional Offices shall act upon the application for registration
of such Collective Bargaining Agreement within five (5) calendar days from
receipt thereof. The Regional Offices shall furnish the Bureau with a copy of the
Collective Bargaining Agreement within five (5) days from its submission.

The Bureau or Regional Office shall assess the employer for every Collective
Bargaining Agreement a registration fee of not less than one thousand pesos
(P1,000.00) or in any other amount as may be deemed appropriate and
necessary by the Secretary of Labor and Employment for the effective and
efficient administration of the Voluntary Arbitration Program. Any amount
collected under this provision shall accrue to the Special Voluntary Arbitration
Fund.

The Bureau shall also maintain a file and shall undertake or assist in the
publication of all final decisions, orders and awards of the Secretary of Labor and
Employment, Regional Directors and the Commission. (As amended by Section
15, Republic Act No. 6715, March 21, 1989)

RULE IX
Registration of Collective Bargaining Agreements
SECTION 1. Registration of collective bargaining agreement. — The parties to a
collective bargaining agreement shall submit to the Bureau or the appropriate
Regional Office five (5) duly signed up copies thereof within thirty (30) calendar
days from execution. Such copies of the agreement shall be accompanied by
verified proof of its posting in two conspicuous places in the workplace and of
ratification by the majority of all the workers in the bargaining unit.cralaw
Five (5) copies of the collective bargaining agreement executed pursuant to an
award by the appropriate government authority or by a voluntary arbitrator shall
likewise be submitted by the parties to the Bureau or Regional Office
accompanied by verified proof of its posting in two conspicuous places in the
workplace.cralaw
Such proof shall consist of copies of the following documents certified under oath
by the union secretary and attested to by the union president:
(a) Statement that the collective bargaining agreement was posted in at least two
conspicuous places in the establishment at least five (5) days before its
ratification, and
(b) Statement that the collective bargaining agreement was ratified by the
majority of the employees in the bargaining unit.cralaw
The posting required in the preceding paragraph shall be the responsibility of the
parties.cralaw
The Bureau or the Regional Office shall assess the employer for every collective
bargaining agreement a registration fee of one thousand (P1,000.00)
pesos.cralaw
The Regional Office shall transmit two (2) copies of the agreement to the Bureau
and one (1) to the Board within five (5) calendar days from its registration. Where
the agreement is registered with the Bureau, one (1) copy shall be sent to the
Board and two (2) copies to the Regional Office where the company has its
principal office.cralaw
The Bureau or the Regional Office shall issue a certificate of registration within
five (5) calendar days from receipt of the agreement.cralaw

RULEXVI

.
REGISTRATION OF COLLECTIVE BARGAINING AGREEMENTS
.
Section 1. Registration of collective bargaining agreement.- The parties to a
collectivebargainingagreementshallsubmittothe appropriate Regional
Office two (2) duly signed copies thereof within thirty (30) calendar days
from execution.Such copies of the agreement shall be accompanied with
verified proof of posting in two conspicuous places in the work place and
of ratification by the majority of all the workers in the bargaining unit.

.
Such proof shall consist of copies of the following documents certified
under oath by the union secretary and attested to by the union
president:chanroblesvirtuallawlibrary
.
(a) Statement that the collective bargaining agreement was posted in at
least two conspicuous places in the establishment at least five (5) days
before its ratification; and

.
(b) Statement that the collective bargaining agreement was ratified by the
majority of the employees in the bargaining unit.

.
The posting required in the preceding paragraph shall be the responsibility
of the parties.

.
The Regional Office shall assess the employer for every collective
bargaining agreement aregistration fee of one thousand pesos (P1,000.00).

.
The Regional Office shall retain one (1) copy of the agreement for its file
and transmit one (1) copy thereofto the Bureauwithin five (5) calendar days
from its registration. The Regional Office shall issue a certificate of
registration within five (5) calendar days from receipt of the agreement and
the proofs of posting and ratification as required herein.

.
Section 2. Registration of agreement resulting from awards by the
Secretary, the Commission, or the Voluntary Arbitrator. - Where the
agreement results from an arbitration award, the same shall be registered
in accordance with the immediately preceding section, except that the
requirement of ratification and proof thereof shall be dispensed with.

.
Section 3. Term of representation status of agreement; contract-bar rule. -
The representation status of the incumbent exclusive bargaining
representative which is a party to a duly registered collective bargaining
agreement shall be for a term of five (5) years.No petition questioning the
majority status of the incumbent exclusive bargaining representative shall
be entertained and no certification election shall be conducted by the
Department outside of the sixty-day period immediately before the date of
expiry of such five-year term.

.
All other provisions of said agreement shall, as a matter of right,be
renegotiated not later than three (3) years after its execution.Any
agreement on such other provisions entered into within six (6) months
from the date of expiry of such provisions shall retroact to the day
immediately following such date.If any such provisions are entered into
beyond six months, the parties shall agree on the duration of retroactivity.
In case of a deadlock in the renegotiation of the agreement, the parties may
exercise their rights under the Code.In case of renegotiation, all
requirements for registration prescribed under the two immediately
preceding sections shall be complied with, whichever is applicable, except
payment of the registration fee.

Section 4. Exception to contract-bar rule.- Notwithstanding its registration,

a collective bargaining agreement shall not constitute a bar to a
certification election where it is found in appropriate proceedings before
the Regional Director that any of the following conditions
exist:chanroblesvirtuallawlibrary

.
a)The agreement contains provisions lower than the standards fixed by
law; or

.
b)The documents supporting its registration are falsified, fraudulent or
tainted with misrepresentation.

Section 5.Appeal.-The decision of the Regional Director granting or

denying an action to declare the registration ineffectual may be appealed to
the Bureau on the ground of grave abuse of discretion within ten (10) days
from receipt of the parties of a copy thereof.The Bureau shall have twenty
(20) days within which to resolve the appeal and its decision shall be final
and executory.

6. Scope of the agreement; who may avail of benefits -

Natl. Brewers and Allied Industries Labor Union vs. San Miguel Brewery

G.R. No. L-19017 December 27, 1963

NATIONAL BREWERY AND ALLIED INDUSTRIES LABOR UNION OF THE

PHILIPPINES (PAFLU), Plaintiff-Appellant, vs. SAN MIGUEL BREWERY,
INC., Defendant-Appellee.

Marcos Estacio and Ricardo P. Garcia for plaintiff-appellant.

Ponce Enrile, Siguion Reyna, Montecillo and Belo fordefendant-appellee.

BAUTISTA ANGELO, J.:

On November 25, 1960, the National Brewery and AlliedIndustries Labor Union
of the Philippines (PAFLU)filed before the Court of First Instance of Manila
againstthe San Miguel Brewery, Inc. a complaint alleging, amongothers, that said
union and the company entered into acollective bargaining agreement on
October 2, 1959 effectivefor a period of three years ending on June 30,
1962,Section 7, Article VII of which provides: "The Companyagrees to pay the
basic daily rates of those workerswithin the bargaining unit who may participate
in theLabor Day parade held on May 1st of every year; thatplaintiff's mother
union decided to hold its Labor Dayparade in the morning of May 1, 1960 at the
BalintawakMonument at Grace Park, Caloocan, Rizal; that about 600members of
the union joined and participated in saidparade whose total basic daily wage
amounts to P3,900.00;that the company knew that the members of the
unionparticipated in the parade and so the union demanded thepayment to said
members of their basic wages for thatday; that the company refused to honor its
obligation inbad faith and because of such refusal the union is entitledto collect
from the company actual or compensatory damages,as well as moral and
exemplary damages. Hence,the union prayed that judgment be rendered against
saidcompany for the payment of (a) the sum of P3,900.00, withlegal interest
thereon from May 1, 1961; (b) the sum ofP3,900.00 as actual and compensatory
damages; (c) the sum of P100,000.00 as moral damages; (d) exemplary or
correctivedamages in the discretion of the court; and (e) the sum of P6,000.00 as
attorney's fees.chanroblesvirtualawlibrarychanrobles virtual law library
The company in its answer set up special and affirmative defenses. Among the
latter, the company alleged that (a) the union has no cause of action against the
company, and (b) the court has no jurisdiction over the subject matter of the
action. With respect to the first ground, the companycontends that the union is
not the real party in interest but the individual members whose right to recover
the one day'swage is personal to them. As regards the question of jurisdiction,
the company argues that not one of the employeesto whom the cause of action
belongs receives a daily wage of more than P5,000.00, and hence the
jurisdictionof the case is determinable on the basis of the total claim of each
employee, which does not lie with the court of first instance. And on the basis of
the total amount P113,800.00 claimed in the complaint as damages, and on the
allegation that 600 union members had joined the parade,the amount pertaining
to each would be only about P189.66,which is still below the jurisdictional sum
cognizable by the lower court.chanroblesvirtualawlibrarychanrobles virtual law
library

After the parties had submitted memoranda in support of their respective

contentions, the court a quo issued an order requiring the complaint to be
amended by including as parties plaintiffs the real parties in interest and the
amount due to each one of them giving the plaintifffor that purpose ten days to
comply with the order. The union submitted a motion for reconsideration. The
company in turn moved for outright dismissal of the complaint on the plea that
lack of cause of action is not correctible by amendment. The court a quo denied
both motions, but after the company had sought a reconsideration on the ground
that the union failed to amend the complaint despite the lapse of the 10-day
period given to it to do so, the court a quo issued another order dismissing the
complaint without prejudice and with costs against the
plaintiff.chanroblesvirtualawlibrarychanrobles virtual law library

Hence, the present appeal..chanroblesvirtualawlibrarychanrobles virtual law

library

The order of the court a quo dated April 13, 1961 which requires appellant to
amend its complaint by includingas parties plaintiffs each and every one of the
600 membersof the union to which they belong and to state the individual
amounts due each of them is predicated on the following finding:

What is alleged to have been violated by defendant is the contractof defendant

with each and everyone of its employees, individually. That being the case, the
real party in interest is the employee who has the right to receive the salary
corresponding to one day. Inasmuch as the employees concerned are not made
party plaintiffs,there is a defect of the parties plaintiff. Moreover, the amount to
which each employee is entitled should be stated to determine whether this Court
has jurisdiction to try the case.
Appellant disagreed with the above finding for it contends that the basis of its
complaint is not the individual contracts of employment which its members had
entered into with the company but the collective bargaining agreement that was
concluded between the union and the company insofar as their participation in
the Labor Day parade held on May 1, 1960 is concerned wherein it was agreed
that those members who should so participate would be paid their daily basic
wage. And this is so because, it contends, before the conclusion of said collective
bargaining agreement the member of the union did not enjoy the benefitof the
provision of the Labor Day parade contained therein and, in fact, if not because
of that agreement theywould not now be entitled to such basic daily wage even if
they had participated in such Labor Day
parade.chanroblesvirtualawlibrarychanrobles virtual law library

On the other hand, the company is of the view that since the provision regarding
payment is of the basic daily wage to the members of the union contained in the
collective bargaining agreement runs to the benefit of the members concerned,
not to the union, said provision confers a right which is unique and personal to
the employees with the result that they are the ones who are the real parties in
interest with regard to the collection of their individual basic wages. And to bolster
up this contention, the company cites several cases decided in the United
States.chanroblesvirtualawlibrarychanrobles virtual law library

We are of the opinion that the complaint filed by the union comes under the
jurisdiction of the court a quo for the same is based upon the collective
bargaining agreementconcluded between the union and the company. Before the
conclusion of said agreement, the members of the union, and for that matter any
employee of the company,did not enjoy the benefit of payment of their basic daily
wage even if they should attend or participate in a Labor Day parade held on
Labor Day, since this right was only recognized when that agreement was
concluded. The basis of the right which is sought to be enforced is the
agreementitself and not the wages to be collected. The situationwould be
different if the purpose of the action were merely to collect wages that ordinarily
accrue to members of the union because of work or services rendered in
connection with their employment where the union to which the members belong
would have no personality to sue for said services in their behalf because in that
case the real parties in interest would be the laborers or employees
themselves.Not so when the wages accrue mainly on the strength of an
agreement entered into between the union and the company,as is the instant
case. The action then may be brought in the name of the union that has obliged
itself to secure those wages for this members. In this sense, the cases cited by
the company are inapplicable.chanroblesvirtualawlibrarychanrobles virtual law
library

In this respect, we find pertinent Section 3, Rule 3 of our Rules of Court, wherein
it is provided, among others, that a party with whom or in whose name a contract
has been made for the benefit of another may sue or besued without joining the
party for whose benefit the action is presented or defended even if the court may
at its discretion order such beneficiary to be made also a party.This provision
fittingly applies to this case. The union is the party with whom or in whose name
the collective bargaining agreement in question has been entered into for the
benefit of its members and, in line with the above rule, the union may sue
thereon without joining the members for whose benefit the action has been
presented. This is especially so when to join said members would be
cumbersome because they amount to more than 600. Verily, the court a
quo erred in ordering the dismissal of the complaint on the grounds invoked by
the company.chanroblesvirtualawlibrarychanrobles virtual law library

WHEREFORE, the orders appealed from are set aside. The case is remanded to
the court a quo for further proceedings. No
costs.chanroblesvirtualawlibrarychanroble

New Pacific Timber vs. NLRC, 328 SCRA 404 [2000]

FIRST DIVISION

[G.R. No. 124224. March 17, 2000]

NEW PACIFIC TIMBER SUPPLY COMPANY, CO., INC., petitioner, vs.

NATIONAL LABOR RELATIONS COMMISSION, MUSIB M. BUAT, LEON G.
GONZAGA, JR., ET AL., NATIONAL FEDERATION OF LABOR, MARIANO
AKILIT and 350 OTHERS, respondents. Juris sc

DECISION

KAPUNAN, J.:

May the term of a Collective Bargaining Agreement (CBA) as to its economic

provisions be extended beyond the term expressly stipulated therein, and, in the
absence of a new CBA, even beyond the three-year period provided by law? Are
employees hired after the stipulated term of a CBA entitled to the benefits
provided thereunder?

These are the issues at the heart of the instant petition for certiorari with prayer
for the issuance of preliminary injunction and/or temporary restraining order filed
by petitioner New Pacific Timber & Supply Company, Incorporated against the
National Labor Relations Commission (NLRC), et al. and the National Federation
of Labor, et al.
The antecedent facts, as found by the NLRC, are as follows:

The National Federation of Labor (NFL, for brevity) was certified as the sole and
exclusive bargaining representative of all the regular rank-and-file employees of
New Pacific Timber & Supply Co., Inc. (hereinafter referred to as petitioner
Company).[1] As such, NFL started to negotiate for better terms and conditions of
employment for the employees in the bargaining unit which it represented.
However, the same was allegedly met with stiff resistance by petitioner Company,
so that the former was prompted to file a complaint for unfair labor practice (ULP)
against the latter on the ground of refusal to bargain collectively. [2]Misj uris

On March 31, 1987, then Executive Labor Arbiter Hakim S. Abdulwahid issued an
order declaring (a) herein petitioner Company guilty of ULP; and (b) the CBA
proposals submitted by the NFL as the CBA between the regular rank-and-file
employees in the bargaining unit and petitioner Company. [3]

Petitioner Company appealed the above order to the NLRC. On November 15,
1989, the NLRC rendered a decision dismissing the appeal for lack of merit. A
motion for reconsideration thereof was, likewise, denied in a Resolution, dated
November 12, 1990.[4]

Unsatisfied, petitioner Company filed a petition for certiorari with this Court. But
the Court dismissed said petition in a Resolution, dated January 21, 1991. [5]

Thereafter, the records of the case were remanded to the arbitration branch of
origin for the execution of Labor Arbiter Abdulwahid's Order, dated March 31,
1987, granting monetary benefits consisting of wage increases, housing
allowances, bonuses, etc. to the regular rank-and-file employees. Following a
series of conferences to thresh out the details of computation, Labor Arbiter
Reynaldo S. Villena issued an Order, dated October 18, 1993, directing petitioner
Company to pay the 142 employees entitled to the aforesaid benefits the
respective amounts due them under the CBA. Petitioner Company complied;
and, the corresponding quitclaims were executed. The case was considered
closed following NFL's manifestation that it will no longer appeal the October 18,
1993 Order of Labor Arbiter Villena.[6]Jj lex

However, notwithstanding such manifestation, a "Petition for Relief" was filed in

behalf of 186 of the private respondents "Mariano J. Akilit and 350 others" on
May 12, 1994. In their petition, they claimed that they were wrongfully excluded
from enjoying the benefits under the CBA since the agreement with NFL and
petitioner Company limited the CBA's implementation to only the 142 rank-and-
file employees enumerated. They claimed that NFL's misrepresentations had
precluded them from appealing their exclusion. [7]

Treating the petition for relief as an appeal, the NLRC entertained the same. On
August 4, 1994, said commission issued a resolution [8] declaring that the 186
excluded employees "form part and parcel of the then existing rank-and-file
bargaining unit" and were, therefore, entitled to the benefits under the CBA. The
NLRC held, thus:

WHEREFORE, the appeal is hereby granted and the Order of the

Labor arbiter dated October 18, 1993 is hereby Set
Aside and Vacated. In lieu hereof, a new Order is hereby issued
directing respondent New Pacific Timber & Supply Co., Inc. to pay
all its regular rank-and-file workers their wage differentials and
other benefits arising from the decreed CBA as explained above,
within ten (10) days from receipt of this order.

SO ORDERED.[9]

Petitioner Company filed a motion for reconsideration of the aforequoted

resolution.

Meanwhile, four separate groups of the private respondents, including the

original 186 who had filed the "Petition for Relief" filed individual money claims,
docketed as NLRC Cases Nos. M-001991-94 to M-001994-94, before the
Arbitration Branch of the NLRC, Cagayan de Oro City. However, Labor Arbiter
Villena dismissed these cases in Orders, dated March 11, 1994; April 13, 1994;
March 9, 1994; and, May 10, 1994. The employees appealed the respective
dismissal of their complaints to the NLRC. The latter consolidated these appeals
with the aforementioned motion for reconsideration filed by petitioner
Company. New miso

On February 29, 1996, the NLRC issued a resolution, the dispositive portion of
which reads as follows:

WHEREFORE, the instant petition for reconsideration of

respondent is Denied for lack of merit and the Resolution of this
Commission dated August 4, 1994 Sustained. The separate orders
of the Labor Arbiter dated March 11, 1994, April 13, 1994, March 9,
1994 and May 10, 1994, respectively, in NLRC Cases Nos. M-
001991-94 to M-001994-94 are Set Aside and Vacated for lack of
legal bases.

Conformably, respondent New Pacific Timber and Supply Co., Inc.

is hereby directed to pay individual complainants their CBA benefits
in the aggregate amount of P13,559,510.37, the detailed
computation thereof is contained in Annex "A" which forms an
integral part of this resolution, plus ten (10%) percent thereof as
Attorney's fees.

SO ORDERED.[10]
Hence, the instant petition wherein petitioner Company raises the following
issues: Acct mis

THE PUBLIC RESPONDENT NLRC COMMITTED GRAVE ABUSE

OF DISCRETION IN ALLOWING THE "PETITION FOR RELIEF"
TO PROSPER.

II

THE PUBLIC RESPONDENT NLRC COMMITTED GRAVE ABUSE

OF DISCRETION IN RULING THAT PRIVATE RESPONDENTS
MARIANO AKILIT AND 350 OTHERS ARE ENTITLED TO
BENEFITS UNDER THE COLLECTIVE BARGAINING
AGREEMENT IN SPITE OF THE FACT THAT THEY WERE NOT
EMPLOYED BY THE PETITIONER MUCH LESS WERE THEY
MEMBERS OF THE BARGAINING UNIT DURING THE TERM OF
THE CBA. Mis act

III

PUBLIC RESPONDENT NLRC COMMITTED GRAVE ABUSE OF

DISCRETION IN MAKING FACTUAL FINDINGS WITHOUT BASIS.

IV

THE DISPOSITIVE PORTIONS OF THE ASSAILED

RESOLUTIONS ARE DEFECTIVE AND/OR REVEAL THE GRAVE
ABUSE OF DISCRETION COMMITTED BY PUBLIC
RESPONDENT.[11]

Petitioner Company contends that a "Petition for Relief" is not the proper mode of
seeking a review of a decision rendered by the arbitration branch of the NLRC.
[12]
According to the petitioner, nowhere in the Labor Code or in the NLRC Rules
of Procedure is there such a pleading. Rather, the remedy of a party aggrieved
by an unfavorable ruling of the labor arbiter is to appeal said judgment to the
NLRC.[13]

Petitioner asseverates that even assuming that the NLRC correctly treated the
petition for relief as an appeal, still, it should not have allowed the same to
prosper, because the petition was filed several months after the ten-day
reglementary period for filing an appeal had expired; and, therefore, it failed to
comply with the requirements of an appeal under the Labor Code and the NLRC
Rules of Procedure.
Petitioner Company further contends that in filing separate complaints and/or
money claims at the arbitration level in spite of their pending petition for relief and
in spite of the final order, dated October 18, 1993, in NLRC Case No.RAB-IX-
0334-82, the private respondents were in fact forum-shopping, an act which is
proscribed as trifling with the courts and abusing their practices. S djad

Anent the second issue, petitioner argues that the private respondents are not
entitled to the benefits under the CBA because employees hired after the term of
a CBA are not parties to the agreement, and therefore, may not claim benefits
thereunder, even if they subsequently become members of the bargaining unit.

As for the term of the CBA, petitioner maintains that Article 253 of the Labor
Code refers to the continuation in full force and effect of the previous CBA's
terms and conditions. By necessity, it could not possibly refer to terms and
conditions which, as expressly stipulated, ceased to have force and effect. [14]

According to petitioner, the provision on wage increase in the 1981 to 1984 CBA
between petitioner Company and NFL provided for yearly wage increases.
Logically, these provisions ended in the year 1984 - the last year that the
economic provisions of the CBA were, pursuant to contract and law, effective.
Petitioner claims that there is no contractual basis for the grant of CBA benefits
such as wage increases in 1985 and subsequent years, since the CBA stipulates
only the increases for the years 1981 to 1984.

Moreover, petitioner alleges that it was through no fault of theirs that no new CBA
was entered pending appeal of the decision in NLRC Case No. RAB-IX-0334-82.

Finally, petitioner Company claims that it was never given the opportunity to
submit a counter-computation of the benefits supposedly due the private
respondents. Instead, the NLRC allegedly relied on the self-serving computations
of private respondents. Sppedsc

Petitioner's contentions are untenable.

We find no grave abuse of discretion on the part of the NLRC, when it

entertained the petition for relief filed by the private respondents and treated it as
an appeal. even if it was filed beyond the reglementary period for filing an appeal.
Ordinarily, once a judgment has become final and executory, it can no longer be
disturbed, altered or modified. However, a careful scrutiny of the facts and
circumstances of the instant case warrants liberality in the application of technical
rules and procedure. It would be a greater injustice to deprive the concerned
employees of the monetary benefits rightly due them because of a circumstance
over which they had no control. As stated above, private respondents, in their
petition for relief, claimed that they were wrongfully excluded from the list of
those entitled to the CBA benefits by their union, NFL, without their knowledge;
and, because they were under the impression that they were ably represented,
they were not able to appeal their case on time. C alrsc

The Supreme Court has allowed appeals from decisions of the labor arbiter to
the NLRC, even if filed beyond the reglementary period, in the interest of justice.
[15]
Moreover, under Article 218 (c) of the Labor Code, the NLRC may, in the
exercise of its appellate powers, "correct, amend or waive any error, defect or
irregularity whether in substance or in form." Further, Article 221 of the same
provides that: "In any proceeding before the Commission or any of the Labor
Arbiters, the rules of evidence prevailing in courts of law or equity shall not be
controlling and it is the spirit and intention of this Code that the Commission and
its members and the Labor Arbiters shall use every and all reasonable means to
ascertain the facts in each case speedily and objectively and without regard to
technicalities of law or procedure, all in the interest of due process. x x x" [16]

Anent the issue of whether or not the term of an existing CBA, particularly as to
its economic provisions, can be extended beyond the period stipulated therein,
and even beyond the three-year period prescribed by law, in the absence of a
new agreement, Article 253 of the Labor Code explicitly provides:

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. (Underlining supplied. )

It is clear from the above provision of law that until a new Collective Bargaining
Agreement has been executed by and between the parties, they are duty-bound
to keep the status quo and to continue in full force and effect the terms and
conditions of the existing agreement. The law does not provide for any exception
nor qualification as to which of the economic provisions of the existing agreement
are to retain force and effect; therefore, it must be understood as encompassing
all the terms and conditions in the said agreement. Sccal r

In the case at bar, no new agreement was entered into by and between petitioner
Company and NFL pending appeal of the decision in NLRC Case No. RAB-IX-
0334-82; nor were any of the economic provisions and/or terms and conditions
pertaining to monetary benefits in the existing agreement modified or altered.
Therefore, the existing CBA in its entirety, continues to have legal effect.
In a recent case, the Court had occassion to rule that Articles 253 and 253-
A[17] mandate the 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 the expiration of the old CBA and/or until a new agreement is
reached by the parties. Consequently, the automatic renewal clause provided for
by the law, which is deemed incorporated in all CBA's, provides the reason why
the new CBA can only be given a prospective effect. [18]Calrsp ped

In the case of Lopez Sugar Corporation vs. Federation of Free Workers, et.al,
[19]
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 period and/or until a new agreement is reached by the parties. [20]

To rule otherwise, i.e., that the economic provisions of the existing CBA in the
instant case ceased to have force and effect in the year 1984, would be to create
a gap during which no agreement would govern, from the time the old contract
expired to the time a new agreement shall have been entered into. For if, as
contended by the petitioner, the economic provisions of the existing CBA were to
have no legal effect, what agreement as to wage increases and other monetary
benefits would govern at all? None, it would seem, if we are to follow the logic of
petitioner Company. Consequently, the employees from the year 1985 onwards
would be deprived of a substantial amount of monetary benefits which they could
have enjoyed had the terms and conditions of the CBA remained in force and
effect. Such a situation runs contrary to the very intent and purpose of Articles
253 and 253-A of the Labor Code which is to curb labor unrest and to promote
industrial peace, as can be gleaned from the discussions of the legislators
leading to the passage of said laws, thus:

HON. CHAIRMAN HERRERA: Pag nag-survey tayo sa mga unyon,

ganoon ang mangyayari. And I think our responsibility here is to
create a legal framework to promote industrial peace and to
develop responsible and fair labor movement.

HON. CHAIRMAN VELOSO: In other words, the longer the period

of the effectivity.... Sce dp

xxx

HON. CHAIRMAN VELOSO: (continuing).... in other words, the

longer period of effectivity of the CBA, the better for industrial
peace.

xxx.[21]
Having established that the CBA between petitioner Company and NFL remained
in full force and effect even beyond the stipulated term, in the absence of a new
agreement; and, therefore, that the economic provisions such as wage increases
continued to have legal effect, we are now faced with the question of who are
entitled to the benefits provided thereunder.

Petitioner Company insists that the rank-and-file employees hired after the term
of the CBA inspite of their subsequent membership in the bargaining unit, are not
parties to the agreement, and certainly may not claim the benefits thereunder.

We do not agree. In a long line of cases, this Court has held that when a
collective bargaining contract is entered into by the union representing the
employees and the employer, even the non-member employees are entitled to
the benefits of the contract. To accord its benefits only to members of the union
without any valid reason would constitute undue discrimination against
nonmembers.[22] It is even conceded, that a laborer can claim benefits from a
CBA entered into between the company and the union of which he is a member
at the time of the conclusion of the agreement, after he has resigned from said
union.[23]Edp sc

In the same vein, the benefits under the CBA in the instant case should be
extended to those employees who only became such after the year 1984. To
exclude them would constitute undue discrimination and deprive them of
monetary benefits they would otherwise be entitled to under a new collective
bargaining contract to which they would have been parties. Since in this
particular case, no new agreement had been entered into after the CBA's
stipulated term, it is only fair and just that the employees hired thereafter be
included in the existing CBA. This is in consonance with our ruling that the terms
and conditions of a collective bargaining agreement continue to have force and
effect beyond the stipulated term when no new agreement is executed by and
between the parties to avoid or prevent the situation where no collective
bargaining agreement at all would govern between the employer company and
its employees.

Anent the other issues raised by petitioner Company, the Court finds that these
pertain to questions of fact that have already been passed upon by the NLRC. It
is axiomatic that, the factual findings of the National Labor Relations
Commission, which have acquired expertise because its jurisdiction is confined
to specific matters, are accorded respect and finality by the Supreme Court,
when these are supported by substantial evidence. A perusal of the assailed
resolution reveals that the same was reached on the basis of the required
quantum of evidence.

WHEREFORE, in view of the foregoing, the instant petition for certiorari is hereby
DISMISSED for lack of merit.
SO ORDERED.

7.Duration of the CBA (Art. 253-A)

7.1 Economic provisions of the CBA: 3 years

DUTY OF PARTIES TO MAINTAIN STATUS QUO PENDING RENEGOTIATION.

-- General Milling Corporation-Independent Labor Union[GMC-ILU] vs. General
Milling Corporation/General Milling Corporation vs.General Milling Corporation-
Independent Labor Union [GMC-ILU], et al.,G.R. Nos.183122/183889, 15 June
2011.

G.R. No. 183122 June 15, 2011

GENERAL MILLING CORPORATION-INDEPENDENT LABOR UNION (GMC-

ILU), Petitioner,
vs.
GENERAL MILLING CORPORATION, Respondent.

x - - - - - - - - - - - - - - - - - - - - - - -x

G.R. No. 183889

GENERAL MILLING CORPORATION, Petitioner,

vs.
GENERAL MILLING CORPORATION-INDEPENDENT LABOR UNION (GMC-
ILU), ET. AL, Respondents.

DECISION

PEREZ, J.:

Assailed in these petitions for review on certiorari filed pursuant to Rule 45 of the
1997 Rules of Civil Procedure are the Court of Appeals’(CA) resolution of the
separate petitions for certiorari questioning the 20 July 2006 Decision 1rendered
and the 23 August 2006 Resolution2 issued by the Fourth Division of the National
Labor Relations Commission (NLRC), Cebu City, in NLRC Case No. V-000632-
2005. In G.R. No. 183122, petitioner General Milling Corporation-Independent
Labor Union (the Union) seeks the reversal of the 10 October 2007 Decision
rendered by the Special Twentieth Division of the CA in CA-G.R. CEB-SP No.
02226,3 the dispositive portion of which states:

WHEREFORE, all the foregoing premises considered, the instant Petition is

hereby PARTIALLY GRANTED.
The July 20, 2006 Decision of respondent NLRC in NLRC Case No. V-000632-
2005 is hereby AFFIRMED insofar as it affirmed the October 27, 2005 Order of
Executive Labor Arbiter Ortiz in RAB Case No. VII-06-0475-1992 with the
modification of: a) excluding the vacation leave salary rate differentials, sick
leave salary rate differentials, b) excluding employees who have executed
quitclaims which are hereby declared valid, and c) deducting salary increases
and other employment benefits voluntarily given by respondent GMC in the
computation of benefits.

Accordingly, the instant case is hereby REFERRED to the GRIEVANCE

MACHINERY under the imposed CBA for the recomputation of benefits claimed
by petitioner GMC-ILU under the said imposed CBA taking into consideration the
guidelines laid down by the Court in this Decision as well as the validity of the
subject quitclaims hereinbefore discussed.

SO ORDERED.4

In G.R. No. 183889, petitioner General Milling Corporation (GMC) prays for the
setting aside of the 16 November 2007 Decision rendered by the Eighteenth
Division of the CA in CA-G.R. CEB-SP No. 02232,5 the decretal portion of which
states:

WHEREFORE, the Decision dated July 20, 2006 and the Resolution dated
August 23, 2006 of public respondent NLRC are hereby AFFIRMED IN TOTO
and the instant petition is DISMISSED.

SO ORDERED.6

The Facts

On 28 April 1989, GMC and the Union entered into a collective bargaining
agreement (CBA) which provided, among other terms, the latter’s representation
of the collective bargaining unit for a three-year term made to retroact to 1
December 1988. On 29 November 1991 or one day before the expiration of the
subject CBA, the Union sent a draft CBA proposal to GMC, with a request for
counter-proposals from the latter, for the purpose of renegotiating the existing
CBA between the parties. In view of GMC’s failure to comply with said request,
the Union commenced the complaint for unfair labor practice which, under docket
of RAB Case No. VII-06-0475-92, was dismissed for lack of merit in a decision
dated 21 December 1993 issued by the Regional Arbitration Branch-VII (RAB-
VII) of the National Labor Relations Commission (NLRC). 7 On appeal, however,
said dismissal was reversed and set aside in the 30 January 1998 decision
rendered by the Fourth Division of the NLRC in NLRC Case No. V-0112-94, 8 the
dispositive portion of which states:
WHEREFORE, premises considered, the instant appeal is hereby GRANTED.
The Decision dated December 21, 1993 is hereby VACATED and SET ASIDE
and a new one issued ordering the imposition upon the respondent company of
the complainant union[‘s] draft CBA proposal for the remaining two years duration
of the original CBA which is from December 1, 1991 to November 30, 1993; and
for the respondent to pay attorney’s fees.

SO ORDERED.9

With the reconsideration and setting aside of the foregoing decision in the
NLRC’s resolution dated 6 October 1998,10 the Union filed the petitions for
certiorari docketed before the CA as CA-G.R. SP Nos. 50383 and 51763. In a
decision dated 19 July 2000, the then Fourteenth Division of the CA reversed and
set aside the NLRC’s 6 October 1998 resolution and reinstated the aforesaid 30
January 1998 decision, except with respect to the undetermined award of
attorney’s fees which was deleted for lack of statement of the basis therefor in
the assailed decision.11Aggrieved by the CA’s 26 October 2000 resolution
denying its motion for reconsideration, GMC elevated the case to this Court via
the petition for review on certiorari docketed before this Court as G.R. No.
146728. In a decision dated 11 February 2004 rendered by the Court’s then
Second Division, the CA’s 30 January 1998 decision and 26 October 2000
resolution were affirmed,12 upon the following findings and conclusions, to wit:

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 worker, 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.

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.

xxxx

x x x (I)t 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 World 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.

xxxx

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 with impunity to schemes feigning negotiations
by going through empty gestures. 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 the parties regained equal footing, which was
lost when GMC thwarted the negotiations for new economic terms of the CBA. 13

With the ensuing finality of the foregoing decision, the Union filed a motion for
issuance of a writ of execution dated 21 March 2005, to enforce the claims of the
covered employees which it computed in the sum of ₱433,786,786.36 and to
require GMC to produce said employee’s time cards for the purpose of
computing their overtime pay, night shift differentials and labor standard benefits
for work rendered on rest days, legal holidays and special holidays. 14On 18 April
2005, however, GMC opposed said motion on the ground, among other matters,
that the bargaining unit no longer exist in view of the resignation, retrenchment,
retirement and separation from service of workers who have additionally
executed waivers and quitclaims acknowledging full settlement of their claims;
that the covered employees have already received salary increases and benefits
for the period 1991 to 1993; and, that aside from the aforesaid supervening
events which precluded the enforcement thereof, the decision rendered in the
case simply called for the execution of a CBA incorporating the Union’s proposal,
not the outright computation of benefits thereunder. 15

In a "Submission" dated 27 May 2005, GMC further manifested that the Union
membership in the bargaining unit did not exceed 286 and that following
employees should be excluded from the coverage of the decision sought to be
enforced: (a) 47 employees who were hired after 1992; (b) 234 employees who
had been separated from the service; (c) 37 employees who, as daily paid rank
and file employees, were represented by another union and covered by a
different CBA; and, (d) 41 workers holding managerial/supervisory/confidential
positions.16 In its comment to the foregoing "Submission", however, the Union
argued that the benefits derived from its proposed CBA extended to both union
members and non-members; that the newly hired employees were entitled to the
benefits accruing after their employment by GMC; that the employees who had,
in the meantime, been separated from service could not have validly waived the
benefits which were only determined with finality in the 11 February 2004
decision rendered in G.R. No. 146728; that the CBA benefits can be extended
the daily paid employees upon their re-classification as monthly paid employees
as well as to GMC’s managerial and supervisory employees, prior to their
promotion; and, that the imposition of its CBA proposals necessarily calls for the
computation of the benefits therein provided. 17

Acting on the memoranda the parties filed in support of their respective

positions,18 Executive Labor Arbiter Violeta Ortiz-Bantug issued the 27 October
2005 order, limiting the computation of the benefits of the Union’s CBA proposal
to the remaining two years of the duration of the original CBA or from 1
December 1991 up to 30 November 1993. The computation covered the 436
employees included in the Union’s list, less the following: (a) 77 employees who
were hired or regularized after 30 November 1993; (b) 36 daily paid rank and file
employees who were covered by a separate CBA; (c) 41 managerial/supervisory
employees; and (d) 1 employee for whom no salary-rate information was
submitted in the premises.19 As a consequence, said Executive Labor Arbiter
disposed of the aforesaid pending motion and incidents in the following wise:

Based on all the foregoing, computations have been made, details of which are
prepared and reflected in separate pages but which still form part of this Order. By
way of summary, the grand total consists of the following:

Salary Increase Differentials ₱17,575,000.00

Rest Day 4,320,148.50
Vacation Leave Differentials 920,013.42
Sick Leave Differentials 920,013.42
School Opening Bonus 5,094,044.69
13th Month Pay Differentials 1,468,999.98
Christmas Bonus 4,560,816.78
Signing Bonus 1,310,000.00
Total Money Claims ₱36,169,036.79
Sacks of Rice 6,372

Issue the appropriate writ of execution based on the foregoing computations.

SO ORDERED.20

Aggrieved, the Union filed a partial appeal dated 2 November 2005, on the
ground that the Executive Labor Arbiter abused her discretion in: (a) confining the
computation of the benefits from 1 December 1991 to 30 November 1993 in favor
of only 281 employees out of the 436 included in its list; (b) computing only 10
out of the 15 benefits provided under its CBA proposal; and (c) failing to direct
the GMC to produce the employees’ time cards and other pertinent documents
essential for the computation of the benefits due in the premises. 21 In turn, GMC
filed its 17 November 2005 "Objections" to the aforesaid 22 October 2005 order,
arguing that the Executive Labor Arbiter not only varied the dispositive portion of
the NLRC decision dated 30 January 1998 but also ignored the quitclaims
executed and the benefits actually paid in the premises. 22 Reiterating the
foregoing arguments in its 16 May 2006 opposition to the Union’s partial appeal,
GMC further maintained that its not being duly heard on the computation of the
award in the subject 27 October 2005 order rendered the Union’s partial appeal
premature; and, that its CBA with the Union had expired on 30 November 1993,
with the latter exerting no effort at all for its renewal. 23

On 20 July 2006, the NLRC rendered a decision in NLRC Case No. V-000632-
2005, affirming the aforesaid 27 October 2005 order of execution. Finding that
the duty to maintain the status quo and to continue in full force and effect the
terms of the existing agreement under Article 253 of the Labor Code of the
Philippines applies only when the parties agreed to the terms and conditions of
the CBA, the NLRC upheld the Executive Labor Arbiter’s computation on the
ground, among others, that the decision sought to be enforced covered only the
remaining two years of the duration of the original CBA, i.e., from 1 December
1991 to 30 November 1993; that like GMC’s supposed grant of additional
benefits during the remaining term of the original CBA, the Union’s claims for
payment of vacation leave salary differentials, sick leave salary rate differentials,
dislocation allowance, separation pay for voluntary resignation and separation
pay salary rate differentials were not sufficiently established; that required by law
to preserve its records for a period of five years, GMC cannot possibly be
expected to preserve employees’ records for the period 1 December 1991 to 30
November 1993; and, that the claimant has the burden of proving entitlement to
holiday pay, premium for holiday and rest day as well night shift differentials.
Giving short shrift to GMC’s objections as aforesaid, the NLRC likewise ruled that
computation of the monetary award was necessary for the enforcement of this
Court’s 11 February 2004 decision and avoidance of multiplicity of suits. 24

Dissatisfied with the NLRC’s 23 August 2006 denial of their motions for
reconsideration of the foregoing decision,25GMC and the Union filed separate
Rule 65 petitions for certiorari before the CA. Docketed as CA-G.R. CEB-SP No.
02226 before the CA’s Special Twentieth Division, the Union’s petition was
partially granted in the 10 October 2007 decision rendered in the case, 26 upon
the finding that the parties’ old CBA was superseded by the imposed CBA which
provided a term of five years from 1 December 1991 and remained in force until
a new CBA is concluded between the parties. Brushing aside the Executive
Labor Arbiter’s computation of the benefits as "too sweeping" and "inaccurate",
the CA ruled that: (a) employees hired after the effectivity of the imposed CBA
are entitled to its benefits on their first day of work; (b) daily paid employees are
entitled to said benefits from the first day they became regular monthly paid
employees; (c) managerial and supervisory employees are entitled to the same
benefits until their promotion as such; (d) employees for whom no information as
to salary rate were submitted are entitled to the CBA benefits upon submission of
proof in respect thereto; and, (e) employees who signed Deeds of waiver, release
and quitclaim are no longer entitled to said benefits. 27

Rejecting the argument that the NLRC erred in upholding the Executive Labor
Arbiter’s computation of only 10 out of the 15 benefits provided under the
imposed CBA, the CA went on to take appropriate note of the fact that no proof
was submitted by the Union to justify the grant of said benefits. While ruling that
the imposed CBA had the same force and effect as a negotiated CBA, the CA,
however, faulted the Union for its "hasty" and "premature" filing of its motion for
issuance of a writ of execution, instead of first demanding the enforcement of the
imposed CBA from GMC and, failing the same, referring the matter to the
grievance machinery or voluntary arbitration provided under the imposed CBA, in
accordance with Articles 260 and 261 of the Labor Code. Acknowledging the
difficulty of computing the benefits demanded by the Union in the absence of
evidence upon which to base the same, the CA referred the case to the
Grievance Machinery under the imposed CBA and directed the exclusion of the
following items from said computation: (a) the Union’s claims for vacation leave
salary rate differentials and sick leave salary rate differentials; (b) the benefits in
favor of the employees who have already executed quitclaims in favor of GMC;
and (c) the salary increases and other employment benefits GMC had, in the
meantime, extended its employees.28Discontented with the CA’s 14 May 2008
resolution denying its motion for reconsideration of the foregoing decision, 29 the
Union filed its Rule 45 petition currently docketed before this Court as G.R. No.
183122.30

On the other hand, GMC’s petition for certiorari assailing the NLRC’s 20 July
2006 decision was docketed as CA-G.R. SP No. CEB-SP No. 02232 before the
CA’s Eighteenth Division31 which subsequently rendered the decision dated on 16
November 2007, dismissing the same for lack of merit. Finding that both parties
were given an opportunity to present their respective positions during the pre-
execution conference conducted a quo, the CA ruled that the Executive Labor
Arbiter’s 27 October 2005 order had attained finality insofar as GMC is
concerned, in view of its failure to perfect an appeal therefrom by paying the
required appeal fee and posting the cash or surety bond in an amount equivalent
to the benefits computed. In addition to rejecting GMC’s argument that the
quitclaims executed by its employees were in the nature of a supervening event
which rendered execution proceedings impossible, the CA held that said
quitclaims did not extend to the benefits provided under the imposed CBA and
that the additional benefits supposedly received by GMC’s employees should not
be deducted therefrom, for lack of sufficient evidence to prove the
same.32 Aggrieved by the denial of its motion for reconsideration of the foregoing
decision in the CA’s resolution dated 10 July, 2008, 33 GMC filed the petition for
review on certiorari docketed before us as G.R. No. 183889. 34
 The Issues

In G.R. No. 183122, the Union proffers the following grounds for the grant of its
petition, to wit:

I. THE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION AND

COMMITTED REVERSIBLE ERROR IN AFFIRMING THE
COMPUTATION OF THE NLRC IN ITS DECISION DATED JULY 20, 2006
AND DISTORTING THE APPLICATION OF ARTICLE 253 OF THE
LABOR CODE IN THE EXECUTION OF THE DECISION OF THIS
HONORABLE COURT IN G.R. NO. 146728.

II. THE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION

AND COMMITTED REVERSIBLE ERROR IN EXCLUDING FROM THE
COMPUTATION THE EMPLOYEES WHO HAVE EXECUTED
QUITCLAIMS, IN EXCLUDING FROM THE COMPUTATION VACATION
AND SICK LEAVE SALARY DIFFERENTIALS, AND IN DEDUCTING
ALLEGED SALARY INCREASES AND OTHER BENEFITS GIVEN BY
[GMC].

III. THE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION

AND COMMITTED REVERSIBLE ERROR IN REFERRING THE
INSTANT CASE TO THE GRIEVANCE MACHINERY FOR
COMPUTATION OF THE BENEFITS DUE UNDER THE IMPOSED CBA.

IV. THE DECISION IN THE INSTANT CASE IS IN DIRECT CONFLICT

WITH THE DECISION OF ANOTHER DIVISION OF THE COURT OF
APPEALS INVOLVING THE SAME ISSUES.35

In G.R. No. 183889, GMC prays for the setting aside of the CA’s 16 November
2007 decision in CA-G.R. CEB-SP No. 02232, on the following grounds, to wit:

A. THE DECISION OF NOVEMBER 16, 2007 AND THE RESOLUTION

OF JULY 10, 2008 OF THE COURT OF APPEALS ARE CONTRARY TO
LAW.

B. THE DECISION OF NOVEMBER 16, 2007 AND THE RESOLUTION

OF JULY 10, 2008 OF THE COURT OF APPEALS ARE NOT IN ACCORD
WITH THE APPLICABLE DECISIONS OF THIS HONORABLE COURT.

C. THE DECISION OF NOVEMBER 16, 2007 AND THE RESOLUTION

OF JULY 10, 2008 OF THE COURT OF APPEALS ARE CONTRARY TO
THE ESTABLISHED FACTS.
 D. THE DECISION OF NOVEMBER 16, 2007 AND THE RESOLUTION
OF JULY 10, 2008 OF THE COURT OF APPEALS VIOLATE THE LAW
OF THE CASE.

E. THE DECISION OF NOVEMBER 16, 2007 AND THE RESOLUTION

OF JULY 10, 2008 OF THE COURT OF APPEALS CONTRAVENE THEIR
OWN DECISION IN AN EXACTLY SIMILAR CASE INVOLVING THE
SAME PARTIES.36

As may be gleaned from the grounds GMC and the Union interpose in support of
their respective petitions, it is evident that we are called upon to determine the
following matters: (a) the period of effectivity of the imposed CBA; (b) the
employees covered by the imposed CBA; and, (c) the benefits to be included in
the execution of the 11 February 2004 decision rendered in G.R. No. 146728.
Preliminary to the foregoing considerations is the effect of the rendition of
diametrically opposed decisions in CA-G.R. CEB. SP Nos. 02226 and 02232 by
the CA’s Special Twentieth and Eighteenth Divisions on the parties’ conflicting
claims.

The Court’s Ruling

We find the reversal of the assailed decisions in order.

Both GMC and the Union call our attention to the fact that the 10 October 2007
decision rendered by the CA’s Special Twentieth Division in CA-G.R. CEB-SP
No. 02226 is in conflict with the 16 November 2007 decision rendered by the
same court’s Eighteenth Division in CA-G.R. CEB-SP No. 02232. In G.R. No.
183122, the Union argues that, given the identity of parties and issues raised in
said cases, the 16 November 2007 decision in CA-G.R. CEB-SP No. 02232
should have been taken considered and adopted by the CA’s Special Twentieth
Division in resolving its motion for reconsideration of the 10 October 2007
decision in CA-G.R. CEB-SP No. 02226.37 In G.R. No. 183889, on the other
hand, GMC maintains that, having been rendered ahead of the 16 November
2007 decision in CA-G.R. CEB-SP No. 02232, the CA’s Special Twentieth
Division’s 10 October 2007 in CA-G.R. CEB-SP No. 02226 is the law of the case
which the Eighteenth Division erroneously contravened when it dismissed its
petition for certiorari.38

The conflicting decisions in CA-G.R. CEB-SP Nos. 02226 and 02232 would have
been, in the first place, avoided had the CA consolidated said cases pursuant to
Section 3, Rule III of its 2002 Internal Rules (IRCA). 39 Being intimately and
substantially related cases, their consolidation should have been ordered to avert
the possibility of conflicting decisions in the two cases. 40 Although rendered on
the merits by a court of competent jurisdiction acting within its authority, neither
one of said decisions can, however, be invoked as law of the case insofar as the
other case is concerned. The doctrine of "law of the case" means that whatever
is once irrevocably established as the controlling legal rule or decision between
the same parties in the same case continues to be the law of the case, whether
correct on general principles or not, 41 so long as the facts on which such decision
was predicated continue to be the facts of the case before the
court.42 Considering that a decision becomes the law of the case once it attains
finality,43 it is evident that, without having achieved said status, the herein
assailed decisions cannot be invoked as the law of the case by either GMC or
the Union.

Anent its period of effectivity, Article XIV of the imposed CBA provides that "(t)his
Agreement shall be in full force and effect for a period of five (5) years from 1
December 1991, provided that sixty (60) days prior to the lapse of the third year
of effectivity hereof, the parties shall open negotiations on economic aspect for
the fourth and fifth years effectivity of this Agreement." 44 Considering that no new
CBA had been, in the meantime, agreed upon by GMC and the Union, we find
that the CA’s Special Twentieth Division correctly ruled in CA-G.R. CEB-SP No.
02226 that, pursuant to Article 253 of the Labor Code, 45 the provisions of the
imposed CBA continues to have full force and effect until a new CBA has been
entered into by the parties. Article 253 mandates the parties to keep the status
quoand to continue in full force and effect the terms and conditions of the existing
agreement during the 60-day period prior to the expiration of the old CBA and/or
until a new agreement is reached by the parties. 46 In the same manner that it
does not provide for any exception nor qualification on which economic
provisions of the existing agreement are to retain its force and effect, 47 the law
does not distinguish between a CBA duly agreed upon by the parties and an
imposed CBA like the one under consideration.

The foregoing disquisition notwithstanding, it bears emphasizing, however, that

the dispositive portion of the 30 January 1998 decision rendered by the Fourth
Division of the NLRC in NLRC Case No. V-0112-94 specifically ordered "the
imposition upon [GMC] of the [Union’s] draft CBA proposal for the remaining two
years duration of the original CBA which is from 1 December 1991 to 30
November 1993."48 Initially set aside in the 6 October 1998 resolution issued in
the same case by the NLRC49 and reinstated in the 19 July 2000 decision
rendered by the CA’s then Fourteenth Division in CA-G.R. SP Nos. 50383 and
51763,50 said 30 January 1998 decision was upheld in the 11 February 2004
decision rendered by this Court in G.R. No. 146728 which, in turn, affirmed the
CA’s 19 July 2000 decision as aforesaid. 51 Considering that the 30 January 1998
decision sought to be enforced confined the application of the imposed CBA to
the remaining two-year duration of the original CBA, we find that the computation
of the benefits due GMC’s covered employees was correctly limited to the period
1 December 1991 to 30 November 1993 in the 27 October 2005 order issued by
Executive Labor Arbiter Violeta Ortiz-Bantug and the 20 July 2006 decision
rendered by the NLRC in NLRC Case No. V-000632-2005.
Consequently, insofar as the execution of the 30 January 1998 decision is
concerned, the Union is out on a limb in espousing a computation which extends
the benefits of the imposed CBA beyond the remaining two-year duration of the
original CBA. The rule is, after all, settled that an order of execution which varies
the tenor of the judgment or exceeds the terms thereof is a nullity. 52 Since
execution not in harmony with the judgment is bereft of validity, 53 it must conform,
more particularly, to that ordained or decreed in the dispositive portion of the
decision sought to be enforced. Considering that the decision sought to be
enforced pertains to the period 1 December 1991 to 30 November 1993, it
necessarily follows that the computation of benefits under the imposed CBA
should be limited to covered employees who were in GMC’s employ during said
period of time. While it is true that the provisions of the imposed CBA extend
beyond said remaining two-year duration of the original CBA in view of the
parties’ admitted failure to conclude a new CBA, the corresponding computation
of the benefits accruing in favor of GMC’s covered employees after the term of
the original CBA was correctly excluded in the aforesaid 27 October 2005 order
issued in RAB VII-06-0475-1992. Rather than the abbreviated pre-execution
proceedings before Executive Labor Arbiter Violeta Ortiz-Bantug, the
computation of the same benefits beyond 30 November 1993 should, instead, be
threshed out by GMC and the Union in accordance with the Grievance Procedure
outlined as follows under Article XII of the imposed CBA, to wit:

Article XII
GRIEVANCE PROCEDURE

Section 1. Whenever an employee covered by the terms of this Agreement

believes that the COMPANY has violated the express terms thereof, or is
aggrieved on the enforcement or application of the COMPANY’s personnel
policies, he/she shall be required to follow the procedure hereinafter set forth in
processing the grievance. The COMPANY will not be required to consider a
grievance unless it is presented within 7 days from the alleged breach of the
express terms of this Agreement or the COMPANY personnel policies,

STEP I. The employee, through the UNION Steward, shall present the alleged
grievance in writing to the immediate superior and they shall endeavor to settle
the grievance within ten (10) days.

STEP II. Failing the settlement in Step I, the UNION President and the Personnel
Officer shall meet and adjust the grievance within fifteen (15) days.

STEP III. Any unresolved grievance shall be referred to the Arbitration Committee
provided hereunder.

Section 2. Procedure before the Grievance Committee.

 A. In the event a dispute arises concerning the application or
interpretation of the terms of this Agreement or
enforcement/application of the COMPANY personnel policies which
cannot be settled pursuant to Section I and II, Section 1 hereof, an
Arbitration Committee shall be formed for the purpose of settling
that particular dispute only. The Grievance Committee shall be
composed of three (3) members, one to be appointed by the
COMPANY as its representative, another to be appointed by the
UNION, and the third to be appointed by common agreement of the
two representatives selected from among the list of accredited
voluntary arbitrators in the Province of Cebu, or from government
officials or civic leaders and responsible citizens in the community.

B. In all meetings of the Grievance Committee organized for the

purpose of resolving a particular dispute, all members must be
present and no business shall be deliberated upon if any member
thereof is absent. However, if any member is unable to attend the
meeting, he/she shall immediately appoint one to represent
him/her, but if the one appointed by agreement of both
representatives of the COMPANY and the UNION is the one
absent, the two representatives present shall agree between
themselves on any person to take the place of the absent member.
Any business or matter shall be considered as passed and
approved by the Committee when there is a vote thereo[n] by at
least two (2) members present and the same shall be final and
binding on the parties concerned.

C. All decisions of the Committee shall be final: provided, however,

that all decisions of the Committee shall be limited to the terms and
provisions of this Agreement and in no event may the terms and
provisions of this Agreement be altered, amended or modified by
the Committee.54

Article II of the imposed CBA, relatedly, provides that "(t)he employees covered
by this Agreement are those employed as regular monthly paid employees at the
[GMC] offices in Cebu City and Lapulapu City, including cadet engineers,
salesmen, veterinarians, field and laboratory workers, with the exception of
managerial employees, supervisory employees, executive and confidential
secretaries, probationary employees and the employees covered by a separate
Collective Bargaining Agreement at the Company’s Mill in Lapulapu
City."55 Gauged from the express language of the foregoing provision, we find
that Executive Labor Arbiter Violeta Ortiz-Bantug correctly excluded the following
employees from the list of 436 employees submitted by the Union 56 and the
computation of the benefits for the period 1 December 1991 to 30 November
1993, to wit: (a) 77 employees who were hired or regularized after 30 November
1993; (b) 36 daily paid rank and file employees who were covered by a separate
CBA; (c) 41 managerial/supervisory employees; and, (d) 1 employee for whom
no salary-rate information was submitted in the premises. 57 However, we find that
the 234 employees who had already been separated from GMC’s employ by the
time of the rendition of the 11 February 2004 decision in G.R. No. 146728 should
further be added to these excluded employees.

The record shows that said 234 employees were union members whose
employment with GMC ceased as a consequence of death, termination due to
redundancy, termination due to closure of plant, termination for cause, voluntary
resignation, separation or dismissal from service as well as retirement. 58 Upon
compliance with GMC’s clearance requirements59 and in consideration of sums
ranging from ₱38,980.12 to ₱631,898.72, due payment and receipt of which
were duly acknowledged, it appears that said employees executed deeds of
waiver, release and quitclaim60 which uniformly stated as follows:

THAT, for and in consideration of the said payment, I have remised, released and
do hereby discharge, and by these presents do for myself, my heirs, executors
and administrators, remise, release and forever discharge said GENERAL
MILLING CORPORATION, its successors and assigns, and/or any of its officers
or employees of and from any and all manner of actions, cause or causes of
actions, sum or sums of money, account damages, claims and demands
whatsoever by way of separation pay, benefits, bonuses, and all other rights to
compensation, salary, wage, emolument, reimbursement, or monetary benefits,
which I ever had, now have or which my heirs , executors and administrators
hereafter can, shall or may have, upon or by reason of any matter, cause or
things whatsoever in connection with my former employment in and retirement
from the said GENERAL MILLING CORPORATION.1avvphi1

THAT, I have signed this Deed of Waiver, Release and Quitclaim after I have
read the contents thereof and understood the same and its legal effects.

In its assailed 16 November 2007 decision in CA-G.R. CEB-SP No. 02232, the
CA’s then Eighteenth Division brushed aside said deeds of waiver, release and
quitclaim on the ground, among other matters, that the same only covered the
employees’ separation pay and retirement benefits but did not extend to the
benefits which had accrued in their favor under the imposed CBA; and, that to be
valid, the waiver "should be couched in clear and unequivocal terms leaving no
doubt as to the intention of those giving up a right or a benefit that legally
pertains to them."61 In so doing, however, the CA’s Eighteenth Division
egregiously disregarded the clear intent on the part of the employees who
executed said deeds of waiver, release and quitclaim to relinquish all present and
future claims arising out of their employment with GMC. Although generally
looked upon with disfavor,62 it cannot be gainsaid that legitimate waivers that
represent a voluntary and reasonable settlement of laborers' claims should be so
respected by the Court as the law between the parties. 63 It is only where there is
clear proof that the waiver was wangled from an unsuspecting or gullible person,
or the terms of settlement are unconscionable on its face, that the law will step in
to annul the questionable transaction.64 The absence of showing of these factors
in the case at bench impels us to uphold the validity of said deeds of waiver,
release and quitclaim and, to exclude the employees who executed the same
from those still entitled to the benefits under the imposed CBA both before and
after the remaining term of the original CBA. The waiver was all inclusive. There
was not even a hint of a limitation of coverage.

Inasmuch as mere allegation is not evidence, the basic evidentiary rule is to the
effect that the burden of evidence lies with the party who asserts the affirmative
of an issue has the burden of proving the same 65 with such quantum of evidence
required by law. In administrative or quasi-judicial proceedings like those
conducted before the NLRC, the standard of proof is substantial evidence which
is understood to be more than just a scintilla or such amount of relevant evidence
which a reasonable mind might accept as adequate to justify a
conclusion.66 Since it does not mean just any evidence in the record of the case
for, otherwise, no finding of fact would be wanting in basis, the test to be applied
is whether a reasonable mind, after considering all the relevant evidence in the
record of a case, would accept the findings of fact as adequate. 67 Viewed in the
light of Union’s failure to prove the factual bases for the computation of the same,
we find that the NLRC correctly affirmed Executive Labor Arbiter Violeta Ortiz-
Bantug’s exclusion of the following benefits from the order dated 27 October,
2005, to wit: (a) vacation leave salary rate differentials; (b) sick leave salary rate
differentials; (c) dislocation allowance; (d) separation pay for voluntary
resignation; and (e) separation pay salary rate differentials. 68 For want of
substantial evidence to prove the same, the CA’s Eighteenth Division also
correctly brushed aside GMC’s insistence on the deduction of the additional
benefits it purportedly extended to its employees from 1 December 1991 to 30
November 1993.69

As for the benefits after the expiration of the term of the parties’ original CBA, we
find that the extent thereof as well as identity of the employees entitled thereto
will be better and more thoroughly threshed out by the parties themselves in
accordance with the grievance procedure outlined in Article XII of the imposed
CBA. Aside from being already beyond the scope of the decision sought to be
enforced, these matters will not be accurately ascertained from the summaries of
claims the parties have been wont to submit at the pre-execution conference
conducted a quo. Taking into consideration such factors as hiring of new
employees, personnel movement and/or promotions as well as separations from
employment which may have, in the meantime, occurred after the expiration of
the remaining term of the original CBA, the identity of the covered employees as
well as the extent of the benefits due them should clearly be reckoned from
acquisition and/or until loss of their status as regular monthly paid GMC
employees. Since the computation must likewise necessarily take into
consideration the increases in salaries and benefits that may have been given in
the intervening period, both GMC and the Union are enjoined to make the
pertinent employment and company records available to each other, to facilitate
the expeditious and accurate determination of said benefits.

WHEREFORE, premises considered the assailed decisions dated 10 October

2007 and 16 November 2007 are REVERSED and SET ASIDE. In lieu thereof,
the 27 October 2005 order issued by Labor Arbiter Violeta Ortiz-Bantug is
ordered REINSTATED and MODIFIED to further exclude the 234 employees who
have executed deeds of waiver, release and quitclaim from the computation of
the benefits for the remaining term of the original CBA.

SO ORDERED.

7.2 Representation question: 5 years - contract bar rule, DO 9 Rule XVI, Sec. 4

Section 4. Exception to contract-bar rule.- Notwithstanding its registration,

a collective bargaining agreement shall not constitute a bar to a
certification election where it is found in appropriate proceedings before
the Regional Director that any of the following conditions
exist:chanroblesvirtuallawlibrary

.
a)The agreement contains provisions lower than the standards fixed by
law; or

.
b)The documents supporting its registration are falsified, fraudulent or
tainted with misrepresentation.

May parties negotiate and agree to extend term of exclusive bargaining

status of majority union?

FVC Labor Union – Phil Transport and General Workers Org. (FVCLU- PTGWO)
vs Sama-samang Nagkakaisang Manggagawa sa FVC-Solidarity of Independent
and General Labor Organization (SANAMA-FVC-SIGLO), GR 176249, 27 Nov
2009.
 SECOND DIVISION

FVC LABOR UNION-PHILIPPINE G.R. No. 176249

TRANSPORT AND GENERAL
WORKERS ORGANIZATION Present:
(FVCLU-PTGWO),
Petitioner, CARPIO, J., Chairperson,
LEONARDO-DE CASTRO,
BRION,
- versus - DEL CASTILLO, and
ABAD, JJ.

SAMA-SAMANG NAGKAKAISANG
MANGGAGAWA SA FVC-SOLIDARITY
OF INDEPENDENT AND GENERAL
LABOR ORGANIZATIONS (SANAMA-
FVC-SIGLO), Promulgated:
Respondent.
November 27, 2009

x-------------------------------------------------------------------------------------- x
DECISION

BRION, J.:

We pass upon the petition for review on certiorari under Rule 45 of the Rules of
Court[1] filed by FVC Labor UnionPhilippine Transport and General Workers
Organization (FVCLU-PTGWO) to challenge the Court of Appeals (CA) decision
of July 25, 2006[2] and its resolution rendered on January 15, 2007 [3] in C.A. G.R.
SP No. 83292.[4]
THE ANTECEDENTS

The facts are undisputed and are summarized below.

On December 22, 1997, the petitioner FVCLU-PTGWO the recognized

bargaining agent of the rank-and-file employees of the FVC Philippines,
Incorporated (company) signed a five-year collective bargaining agreement
(CBA) with the company. The five-year CBA period was from February 1, 1998 to
January 30, 2003.[5] At the end of the 3 rd year of the five-year term and pursuant
to the CBA, FVCLU-PTGWO and the company entered into the renegotiation of
the CBA and modified, among other provisions, the CBAs duration.Article XXV,
Section 2 of the renegotiated CBA provides that this re-negotiation agreement
shall take effect beginning February 1, 2001 and until May 31, 2003 thus
extending the original five-year period of the CBA by four (4) months.

On January 21, 2003, nine (9) days before the January 30, 2003 expiration of the
originally-agreed five-year CBA term (and four [4] months and nine [9] days away
from the expiration of the amended CBA period), the respondent Sama-Samang
Nagkakaisang Manggagawa sa FVC-Solidarity of Independent and General
Labor Organizations (SANAMA-SIGLO) filed before the Department of Labor and
Employment (DOLE) a petition for certification election for the same rank-and-file
unit covered by the FVCLU-PTGWO CBA. FVCLU-PTGWO moved to dismiss
the petition on the ground that the certification election petition was filed outside
the freedom period or outside of the sixty (60) days before the expiration of the
CBA on May 31, 2003.

Action on the Petition and Related Incidents

On June 17, 2003, Med-Arbiter Arturo V. Cosuco dismissed the petition on the
ground that it was filed outside the 60-day period counted from the May 31, 2003
expiry date of the amended CBA.[6] SANAMA-SIGLO appealed the Med-Arbiters
Order to the DOLE Secretary, contending that the filing of the petition on January
21, 2003 was within 60-days from the January 30, 2003 expiration of the original
CBA term.

DOLE Secretary Patricia A. Sto. Tomas sustained SANAMA-SIGLOs

position, thereby setting aside the decision of the Med-Arbiter. [7] She ordered the
conduct of a certification election in the company. FVCLU-PTGWO moved for the
reconsideration of the Secretarys decision.

On November 6, 2003, DOLE Acting Secretary Manuel G. Imson granted

the motion; he set aside the August 6, 2003 DOLE decision and dismissed the
petition as the Med-Arbiters Order of June 17, 2003 did. [8] The Acting Secretary
held that the amended CBA (which extended the representation aspect of the
original CBA by four [4] months) had been ratified by members of the bargaining
unit some of whom later organized themselves as SANAMA-SIGLO, the
certification election applicant. Since these SANAMA-SIGLO members fully
accepted and in fact received the benefits arising from the amendments, the
Acting Secretary rationalized that they also accepted the extended term of the
CBA and cannot now file a petition for certification election based on the original
CBA expiration date.

SANAMA-SIGLO moved for the reconsideration of the Acting Secretarys

Order, but Secretary Sto. Tomas denied the motion in her Order of January 30,
2004.[9]

SANAMA-SIGLO sought relief from the CA through a petition for certiorari

under Rule 65 of the Rules of Court based on the grave abuse of discretion the
Labor Secretary committed when she reversed her earlier decision calling for a
certification election. SANAMA-SIGLO pointed out that the Secretarys new ruling
is patently contrary to the express provision of the law and established
jurisprudence.

THE CA DECISION
The CA found SANAMA-SIGLOs petition meritorious on the basis of the
applicable law[10] and the rules,[11] as interpreted in the congressional debates. It
set aside the challenged DOLE Secretary decisions and reinstated her earlier
ruling calling for a certification election. The appellate court declared:

It is clear from the foregoing that while the parties may renegotiate

the other provisions (economic and non-economic) of the CBA, this

should not affect the five-year representation aspect of the original

CBA. If the duration of the renegotiated agreement does not

coincide with but rather exceeds the original five-year term, the

same will not adversely affect the right of another union to

challenge the majority status of the incumbent bargaining agent

within sixty (60) days before the lapse of the original five (5) year

term of the CBA. In the event a new union wins in the certification

election, such union is required to honor and administer the

renegotiated CBA throughout the excess period.

FVCLU-PTGWO moved to reconsider the CA decision but the CA denied

the motion in its resolution of January 15, 2007. [12] With this denial, FVCLU-
PTGWO now comes before us to challenge the CA rulings. [13] It argues that in
light of the peculiar attendant circumstances of the case, the CA erred in strictly
applying Section 11 (11b), Rule XI, Book V of the Omnibus Rules Implementing
the Labor Code, as amended by Department Order No. 9, s. 1997. [14]

Apparently, the peculiar circumstances the FVCLU-PTGWO referred to relate to

the economic and other provisions of the February 1, 1998 to January 30, 2003
CBA that it renegotiated with the company. The renegotiated CBA changed the
CBAs remaining term from February 1, 2001 to May 31, 2003. To FVCLU-
PTGWO, this extension of the CBA term also changed the unions exclusive
bargaining representation status and effectively moved the reckoning point of the
60-day freedom period from January 30, 2003 to May 30, 2003. FVCLU-PTGWO
thus moved to dismiss the petition for certification election filed on January 21,
2003 (9 days before the expiry date on January 30, 2003 of the original CBA) by
SANAMA-SIGLO on the ground that the petition was filed outside the authorized
60-day freedom period.

It also submits in its petition that the SANAMA-SIGLO is estopped from

questioning the extension of the CBA term under the amendments because its
members are the very same ones who approved the amendments, including the
expiration date of the CBA, and who benefited from these amendments.

Lastly, FVCLU-PTGWO posits that the representation petition had been

rendered moot by a new CBA it entered into with the company covering the
period June 1, 2003 to May 31, 2008. [15]

Required to comment by the Court[16] and to show cause for its failure to
comply,[17] SANAMA-SIGLO manifested on October 10, 2007 that: since the
promulgation of the CA decision on July 25, 2006 or three years after the petition
for certification election was filed, the local leaders of SANAMA-SIGLO had
stopped reporting to the federation office or attending meetings of the council of
local leaders; the SANAMA-SIGLO counsel, who is also the SIGLO national
president, is no longer in the position to pursue the present case because the
local union and its leadership, who are principals of SIGLO, had given up and
abandoned their desire to contest the representative status of FVCLU-PTGWO;
and a new CBA had already been signed by FVCLU-PTGWO and the company.
[18]
Under these circumstances, SANAMA-SIGLO contends that pursuing the case
has become futile, and accordingly simply adopted the CA decision of July 25,
2006 as its position; its counsel likewise asked to be relieved from filing a
comment in the case. We granted the request for relief and dispensed with the
filing of a comment.[19]

THE COURTS RULING

While SANAMA-SIGLO has manifested its abandonment of its challenge to the

exclusive bargaining representation status of FVCLU-PTGWO, we deem it
necessary in the exercise of our discretion to resolve the question of law raised
since this exclusive representation status issue will inevitably recur in the future
as workplace parties avail of opportunities to prolong workplace harmony by
extending the term of CBAs already in place.[20]

The legal question before us centers on the effect of the amended or

extended term of the CBA on the exclusive representation status of the collective
bargaining agent and the right of another union to ask for certification as
exclusive bargaining agent. The question arises because the law allows a
challenge to the exclusive representation status of a collective bargaining agent
through the filing of a certification election petition only within 60 days from the
expiration of the five-year CBA.

Article 253-A of the Labor Code covers this situation and it provides:

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 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.

This Labor Code provision is implemented through Book V, Rule VIII of the
Rules Implementing the Labor Code[21] which states:
 Sec. 14. Denial of the petition; grounds. The Med-Arbiter

may dismiss the petition on any of the following grounds:

xxxx

(b) the petition was filed before or after the freedom period of

a duly registered collective bargaining

agreement; provided that the sixty-day period based on

the original collective bargaining agreement shall not be

affected by any amendment, extension or renewal of the

collective bargaining agreement (underscoring supplied).

xxxx

The root of the controversy can be traced to a misunderstanding of the

interaction between a unions exclusive bargaining representation status in a CBA
and the term or effective period of the CBA.

FVCLU-PTGWO has taken the view that its exclusive representation

status should fully be in step with the term of the CBA and that this status can be
challenged only within 60 days before the expiration of this term. Thus, when the
term of the CBA was extended, its exclusive bargaining status was similarly
extended so that the freedom period for the filing of a petition for certification
election should be counted back from the expiration of the amended CBA term.
 We hold this FVCLU-PTGWO position to be correct, but only with respect
to the original five-year term of the CBA which, by law, is also the effective period
of the unions exclusive bargaining representation status. While the parties may
agree to extend the CBAs original five-year term together with all other CBA
provisions, any such amendment or term in excess of five years will not carry
with it a change in the unions exclusive collective bargaining status. By express
provision of the above-quoted Article 253-A, the exclusive bargaining status
cannot go beyond five years and the representation status is a legal matter not
for the workplace parties to agree upon. In other words, despite an agreement for
a CBA with a life of more than five years, either as an original provision or by
amendment, the bargaining unions exclusive bargaining status is effective only
for five years and can be challenged within sixty (60) days prior to the expiration
of the CBAs first five years. As we said in San Miguel Corp. Employees
UnionPTGWO, et al. v. Confesor, San Miguel Corp., Magnolia Corp. and San
Miguel Foods, Inc.,[22] where we cited the Memorandum of the Secretary of Labor
and Employment dated February 24, 1994:

In the event however, that the parties, by mutual agreement,

enter into a renegotiated contract with a term of three (3) years or

one which does not coincide with the said five-year term and said

agreement is ratified by majority of the members in the bargaining

unit, the subject contract is valid and legal and therefore, binds the

contracting parties. The same will however not adversely affect the

right of another union to challenge the majority status of the

incumbent bargaining agent within sixty (60) days before the lapse

of the original five (5) year term of the CBA.

 In the present case, the CBA was originally signed for a period of five
years, i.e., from February 1, 1998 to January 30, 2003, with a provision for the
renegotiation of the CBAs other provisions at the end of the 3 rd year of the five-
year CBA term. Thus, prior to January 30, 2001 the workplace parties sat down
for renegotiation but instead of confining themselves to the economic and non-
economic CBA provisions, also extended the life of the CBA for another four
months, i.e., from the original expiry date on January 30, 2003 to May 30, 2003.

As discussed above, this negotiated extension of the CBA term has no

legal effect on the FVCLU-PTGWOs exclusive bargaining representation status
which remained effective only for five years ending on the original expiry date of
January 30, 2003. Thus, sixty days prior to this date, or starting December 2,
2002, SANAMA-SIGLO could properly file a petition for certification election. Its
petition, filed on January 21, 2003 or nine (9) days before the expiration of the
CBA and of FVCLU-PTGWOs exclusive bargaining status, was seasonably filed.

We thus find no error in the appellate courts ruling reinstating the DOLE
order for the conduct of a certification election. If this ruling cannot now be given
effect, the only reason is SANAMA-SIGLOs own desistance; we cannot
disregard its manifestation that the members of SANAMA themselves are no
longer interested in contesting the exclusive collective bargaining agent status of
FVCLU-PTGWO. This recognition is fully in accord with the Labor Codes intent
to foster industrial peace and harmony in the workplace.
WHEREFORE, premises considered, we AFFIRM the correctness of the
challenged Decision and Resolution of the Court of Appeals and
accordingly DISMISS the petition, but nevertheless DECLARE that no
certification election, pursuant to the underlying petition for certification election
filed with the Department of Labor and Employment, can be enforced as this
petition has effectively been abandoned.
 SO ORDERED.

7.3 Retroactivity –

Union of Filipro Employees vs. NLRC, 23 SCRA 465

[G.R. No. 91025. December 19, 1990.]

UNION OF FILIPRO EMPLOYEES, Petitioner, v. THE HONORABLE

NATIONAL LABOR RELATIONS COMMISSION and NESTLE PHILIPPINES,
INC., Respondents.

Banzuela, Flores, Miralles, Raneses, Sy, Taquio & Associates for Petitioner.

Siguion Reyna, Montecillo & Ongsiako for Private Respondent.

RESOLUTION

MEDIALDEA, J.:

This special civil action of certiorari assails the resolution (dated June 5, 1989) of
the National Labor Relations Commission (NLRC) relative to Certified Case No.
0522, and the resolution denying the motion for reconsideration (dated August 8,
1989).

The antecedents are:chanrob1es virtual 1aw library

On June 22, 1988, the petitioner Union of the Filipro Employees, the sole and
exclusive bargaining agent of all rank-and-file employees of Nestle Philippines,
(private respondent) filed a Notice of Strike at the Department of Labor raising
the issues of CBA deadlock and unfair labor practice.

The National Conciliation and Mediation Board (NCMB) invited the parties for a
conference on February 4, 1988 for the purpose of settling the dispute. The
private respondent however, assailed the legal personality of the proponents of
the said notice of strike to represent the Nestle employees. This notwithstanding,
the NCMB proceeded to invite the parties to attend the conciliation meetings and
to which private respondent failed to attend contending that it will deal only with a
negotiating panel duly constituted and mandated in accordance with the UFE
Constitution and By-laws.chanrobles law library : red

The records show that before the filing of said notice of strike, or on June 30,
1987, the respective CBAs in the four (4) units of Nestle, in Alabang-Cabuyao,
Makati, Cagayan de Oro and Cebu/Davao work locations had all expired. Under
the said CBAs, Alabang/Cabuyao and Makati units were represented by the UFE;
the Cagayan de Oro unit was represented by WATU; while the Cebu-Davao was
represented by TUPAS. Prior to the expiration of the CBAs for Makati and
Alabang/Cabuyao, UFE submitted to the company a list of CBA proposals. The
company, on the other hand, expressed its readiness to negotiate a new CBA for
Makati and Alabang/Cabuyao units but reserved the negotiation for Cagayan de
Oro and Cebu-Davao considering that the issue of representation for the latter
units was not yet settled. On June 10, 1987 and July 28, 1987, UFE was certified
as the sole and exclusive bargaining representative of Cagayan de Oro and
Cebu/Davao units, respectively.

On September 14, 1987, the Company terminated from employment all UFE
Union officers, headed by its president, Mr. Manuel Sarmiento, and all the
members of the negotiating panel for instigating and knowingly participating in a
strike staged at the Makati, Alabang, Cabuyao and Cagayan de Oro on
September 11, 1987 without any notice of strike filed and a strike vote obtained
for the purpose.

On September 21, 1987, the union filed a complaint for illegal dismissal. The
Labor Arbiter, in a decision dated January 12, 1988, upheld the validity of the
dismissal of said union officers. The decision was later on affirmed by the
respondent NLRC en banc, on November 2, 1988.

Respondent company contends that, "with the dismissal of UFE officers including
all the members of the union negotiating panel as later on confirmed by the
NLRC en banc, said union negotiating panel thus ceased to exist and its former
members divested of any legal personality, standing and capacity to act as such
or represent the union in any manner whatsoever."cralaw virtua1aw library

The union officers, on the other hand, asserted their authority to represent the
regular rank-and-file employees of Nestle, Philippines, being the duly elected
officers of the union.

In the meantime, private respondent sought guidelines from the Department of

Labor on how it should treat letters from several splinter groups claiming to have
possessed authority to negotiate in behalf of the UFE. It is noteworthy that aside
from the names of the negotiating panel submitted by one UFE officials, three (3)
other groups in the Nestle plant in Cabuyao and two groups in the Makati office
have expressed a desire to bargain with management professing alleged
authorization from and by the general membership. These groups however, it
must be noted, belong to just one (1) union, the UFE.

In a letter dated August 20, 1988, BLR Director Pura Ferrer-Calleja

advised:jgc:chanrobles.com.ph
"Any attempt on the part of management to directly deal with any of the factions
claiming to have the imprimatur of the majority of the employees, or to recognize
any act by a particular group to adopt the deadlock counter proposal of the
management, at this stage, would be most unwise. It may only fan the fire."
(Rollo, pp. 61-62)

On March 20, 1988 and August 5, 1988, the company concluded separate CBAs
with the general membership of the union at Cebu/Davao and Cagayan de Oro
units, respectively. The workers thereat likewise conducted separate elections of
their officers.

Assailing the validity of these agreements, the union filed a case of ULP against
the company with the NLRC-NCR Arbitration Branch on November 16, 1988.

Efforts to resolve the dispute amicably were taken by the NCMB but yielded
negative result because of the irreconcilable conflicts of the parties on the matter
of who should represent and negotiate for the workers.chanroblesvirtualawlibrary

On October 18, 1988, petitioner filed a motion asking the Secretary of Labor to
assume jurisdiction over the dispute of deadlock in collective bargaining between
the parties. On October 28, 1988, Labor Secretary Franklin Drilon certified to the
NLRC the said dispute between the UFE and Nestle, Philippines, the relevant
portion of which reads as follows:jgc:chanrobles.com.ph

"WHEREFORE, above premises considered, this office hereby certifies the sole
issue of deadlock in CBA negotiations affecting the Makati, Alabang and
Cabuyao units to the National Labor Relations Commission for compulsory
arbitration.

"The NLRC is further directed to call all the parties immediately and resolve the
CBA deadlock within twenty (20) days from submission of the case for
resolution." (Rollo, p. 225)

On June 5, 1989, the Second Division of the NLRC promulgated a resolution

granting wage increase and other benefits to Nestle’s employees, ruling on non-
economic issues, as well as absolving the private respondent of the Unfair Labor
Practice charge. The dispositive portion states as follows:jgc:chanrobles.com.ph

"WHEREFORE, as aforestated, the parties are hereby ordered to execute and

implement through their duly authorized representatives a collective bargaining
agreement for a duration of five (5) years from promulgation of this Resolution.

"SO ORDERED." (Rollo, p. 180)

Petitioner finds said resolution to be inadequate and accordingly, does not agree
therewith. It filed a motion for reconsideration, which was, however, denied on
August 8, 1989.

Hence, this petition for certiorari.

Petitioner originally raised 13 errors committed by the public Respondent.

However, in its Urgent Manifestation and Motion dated September 24, 1990,
petitioner limited the issues to be resolved into six (6). Thus, only the following
shall be dealt with in this resolution:chanrob1es virtual 1aw library

1. WHETHER OR NOT THE SECOND DIVISION OF THE NLRC ACTED

WITHOUT JURISDICTION IN RENDERING THE ASSAILED RESOLUTION,
THE SAME BEING RENDERED ONLY BY A DIVISION OF THE PUBLIC
RESPONDENT AND NOT BY EN BANC;

2. WHETHER OR NOT THE RESPONDENT NLRC SERIOUSLY ERRED IN

HOLDING THAT THE CBA TO BE SIGNED BY THE PARTIES SHALL COVER
SOLELY THE BARGAINING UNIT CONSISTING OF ALL REGULAR RANK-
AND-FILE EMPLOYEES OF THE RESPONDENT COMPANY AT MAKATI,
ALABANG AND CABUYAO;

3. WHETHER OR NOT THE RESPONDENT NLRC HAD ACTED WITH GRAVE

ABUSE OF DISCRETION AND COMMITTED SERIOUS ERRORS IN FACT AND
IN LAW WHEN IT RULED THAT THE CBA IS EFFECTIVE ONLY UPON THE
PROMULGATION OF THE ASSAILED RESOLUTION;

4. WHETHER OR NOT PUBLIC RESPONDENT HAD SERIOUSLY ERRED IN

DENYING PETITIONER’S DEMAND FOR A CONTRACT SIGNING BONUS
AND IN TOTALLY DISREGARDING THE LONG PRACTICE AND TRADITION IN
THE COMPANY WHICH AMOUNT TO DIMINUTION OF EMPLOYEES
BENEFITS;

5. WHETHER OR NOT PUBLIC RESPONDENT SERIOUSLY ERRED IN NOT

GRANTING THE UNION’S DEMAND FOR A "MODIFIED UNION SHOP"
SECURITY CLAUSE IN THE CBA AS ITS RULING CLEARLY COLLIDES WITH
SETTLED JURISPRUDENCE ON THE MATTER;

6. WHETHER OR NOT PUBLIC RESPONDENT ERRED IN ENTIRELY

ABSOLVING THE COMPANY FROM THE UNFAIR LABOR PRACTICE
CHARGE AND IN DISREGARDING THE SUBSTANTIAL INCRIMINATORY
EVIDENCE RELATIVE THERETO; (p. 9, Petitioner’s Urgent Manifestation and
Motion dated September 24, 1990).

Counsel for the private respondent company filed a motion for leave of court to
oppose the aforesaid urgent manifestation and motion. It appearing that the
allowance of said opposition would necessarily delay the early disposition of this
case, the Court Resolved to DISPENSE with the filing of the same.chanrobles
virtual lawlibrary

We affirm the public respondent’s findings and rule as regards the issue of
jurisdiction.

This case was certified on October 28, 1988 when existing rules prescribed that,
it is incumbent upon the Commission en banc to decide or resolve a certified
dispute. However, R.A. 6715 took effect during the pendency of this case. Aside
from vesting upon each division the power to adjudicate cases filed before the
Commission, said Act further provides that the divisions of the Commission shall
have exclusive appellate jurisdiction over cases within their respective territorial
jurisdiction.

Section 5 of RA 6715 provides as follows:jgc:chanrobles.com.ph

"Section 5. Article 213 of the Labor Code of the Philippines, as amended, is

further amended to read as follows:chanrob1es virtual 1aw library

Art. 213. National Labor Relations Commission. — There shall be a National

Labor Relations Commission which shall be attached to the Department of Labor
and Employment for program and policy coordination only, composed of (a)
Chairman and fourteen (14) Members.

Five (5) members each shall be chosen from among the nominees of the workers
and employers organization, respectively. The Chairman and the four (4)
remaining members shall come from the public sector, with the latter to be
chosen from among the recommendees of the Secretary of Labor and
Employment.

Upon assumption into office, the members nominated by the workers and
employers organizations shall divest themselves of any affiliation with or interest
in the federation or association to which they belong.

The Commission may sit en banc or in five (5) divisions, each composed of three
(3) members. The Commission shall sit en banc only for purposes of
promulgating rules and regulations governing the hearing and disposition of
cases before any of its divisions and regional branches and formulating policies
affecting its administration and operations. The Commission shall exercise its
adjudicatory and all other powers, functions and duties through its divisions. Of
the five (5) divisions, the first and second divisions shall handle cases coming
from the National Capital Region and the third, fourth and fifth divisions, cases
from other parts of Luzon, from the Visayas and Mindanao, respectively. The
divisions of the Commission shall have exclusive appellate jurisdiction over
cases within their respective territorial jurisdiction.
The concurrence of two (2) Commissioners of a division shall be necessary for
the pronouncement of a judgment or resolution. Whenever the required
membership in a division is not complete and the concurrence of two (2)
commissioners to arrive at a judgment or resolution cannot be obtained, the
Chairman shall designate such number of additional Commissioners from the
other divisions as may be necessary.

The conclusions of a division on any case submitted to it for decision shall be

reached in consultation before the case is assigned to a member for the writing
of the opinion. It shall be mandatory for the division to meet for purposes of the
consultation ordained therein. A certification to this effect signed by the Presiding
Commissioner of the division shall be issued, and a copy thereof attached to the
record of the case and served upon the parties.

The Chairman shall be the Presiding Commissioner of the first division, and the
four (4) other members from the public sector shall be the Presiding
Commissioners of the second, third, fourth and fifth divisions, respectively. In
case of the effective absence or incapacity of the Chairman, the Presiding
Commissioner of the second division shall be the Acting Chairman.

The Chairman, aided by the Executive Clerk of the Commission, shall have
administrative supervision over the Commission and its regional branches and all
its personnel, including the Executive Labor Arbiters and Labor Arbiters.

The Commission when sitting en banc, shall be assisted by the same Executive
Clerk, and, when acting thru its Divisions, by said Executive Clerk for its First
Division and four (4) other Deputy Executive Clerks for the Second, Third,
Fourth, and Fifth Divisions, respectively, in the performance of such similar or
equivalent functions and duties as are discharged by the Clerk of Court and
Deputy Clerks of Court of the Court of Appeals." (Emphasis supplied)

In view of the enactment of Republic Act 6715, the aforementioned rules

requiring the Commission en banc to decide or resolve a certified dispute have
accordingly been repealed. This is supported by the fact that on March 21, 1989,
the Secretary of Labor, issued Administrative Order No. 36 (Series of 1989),
which reads:jgc:chanrobles.com.ph

"2. Effective March 21, 1989, the date of the effectivity of Republic Act 6715, the
Commission shall cease holding en banc sessions for purposes of adjudicating
cases and shall discharge their adjudicatory functions and powers through their
respective Divisions."cralaw virtua1aw library

Contrary to the claim of the petitioner, the above-cited Administrative Order is

valid, having been issued in accordance with existing legislation as the Secretary
of Labor is clothed with the power to promulgate rules for the implementation of
the said amendatory law.chanrobles virtual lawlibrary
Section 36 of R.A. 6715 provides:chanrob1es virtual 1aw library

Section 36. Rule-Making Authority. — The Secretary of Labor and Employment is

hereby authorized to promulgate such rules and regulations as may be
necessary to implement the provisions of this Act."cralaw virtua1aw library

Moreover, it is to be emphasized and it is a matter of judicial notice that since the

effectivity of R.A. 6715, many cases have already been decided by the five (5)
divisions of the NLRC. We find no legal justification in entertaining petitioner’s
claim considering that the clear intent of the amendatory provision is to expedite
the disposition of labor cases filed before the Commission. To rule otherwise
would not be congruous to the proper administration of justice.

As to the second issue, the Court is convinced that the public respondent
committed no grave abuse of discretion in resolving only the sole issue certified
to by the Secretary and formulating a CBA which covers the bargaining units
consisting of all regular rank-and-file employees of the respondent company at
Makati, Alabang and Cabuyao only.

In its assailed resolution, public respondent stated:jgc:chanrobles.com.ph

"A perusal of the records and proceedings of this case reveals that after the
issuance by the Secretary of Labor of his Order dated 28 October 1988 certifying
the dispute to Us, the Union filed an Urgent Manifestation seeking the
modification of the certification order to include the Cebu Davao and Cagayan de
Oro divisions, the employees/workers therein being all bonafide members of the
Union which is the sole and exclusive bargaining representative of all the regular
rank-and-file workers of the company nationwide. Their non-inclusion in the
certification order, the union argues, would give premium to the alleged unlawful
act of the Company in entering into separate ‘Collective Bargaining Agreements’
directly with the workers thereat.

"In the same vein, the union manifested its intention to file a complaint for ULP
against the company and its officers responsible for such act, which it eventually
did.

"Considering that the Union had reserved the right to prosecute the Company
and its officers responsible for the alleged unlawful execution of the CBA directly
with the union members in Cagayan de Oro and Cebu/Davao units, as it has in
fact filed a case which is now pending with our Arbitration Branch, the issue as to
whether such acts constitute ULP is best heard and decided separately from the
certified case, not only because of the evidentiary need to resolve the issue, but
also because of the delay that may ensue in the resolution of the present conflict.

"Furthermore, the consolidation of the issue with the instant case poses
complicated questions regarding venue and joinder of parties. We feel that each
of the issues propounded by the parties shall be better dealt with separately
according to its own merits.

"Thus, We rule to resolve the sole issue in dispute certified to this Commission,
i.e., the deadlock in the collective bargaining negotiations in Cabuyao/Alabang
and Makati units." (Rollo, pp. 174-176)

We agree. Public respondent’s resolution is proper and in full compliance with the
order of the Secretary of Labor. The concomittant delay that will result in
resolving petitioner’s motion for the modification of the certification order to
determine whether to include Cebu/Davao and Cagayan de Oro Divisions or not
will defeat the very purpose of the Secretary of Labor’s assumption of jurisdiction
and his subsequent certification order for compulsory arbitration.

The assumption of jurisdiction by the Secretary of Labor over labor disputes

causing or likely to cause a strike or lockout in an industry indispensable to the
national interest is in the nature of a police power measure. It cannot be denied
that the private respondent is engaged in an undertaking affected with public
interest being one of the largest manufacturers of food products. The compelling
consideration of the Secretary’s assumption of jurisdiction is the fact that a
prolonged strike or lockout is inimical to the national economy and thus, the need
to implement some measures to suppress any act which will hinder the
company’s essential productions is indispensable for the promotion of the
common good. Under this situation, the Secretary’s certification order for
compulsory arbitration which was intended for the immediate formulation of an
already delayed CBA was proper.

Corollarily, the NLRC was thereby charged with the task of implementing the
certification order for compulsory arbitration. As the implementing body, its
authority did not include the power to amend the Secretary’s order (University of
Santo Tomas v. National Labor Relations Commission, UST Faculty Union, G.R.
No. 89920, October 18, 1990).cralawnad

For the same reason, We rule that the prayer to declare the respondent company
guilty of acts of unfair labor practice when it allegedly resorted to practices
designed to delay the collective bargaining negotiations cannot be subsumed in
this petition, it being beyond the scope of the certification order.

Petitioner argues that because of the public respondent’s actuation in this regard,
it committed grave abuse of discretion as it allowed multiplicity of suits and
splitting causes of action which are barred by procedural rule.

We cannot subscribe to this argument. In the recent case of the Philippine

Airlines, Inc. v. National Labor Relations Commission, this Court had occasion to
define what a compulsory arbitration is. In said case, this Court
stated:jgc:chanrobles.com.ph

"When the consent of one of the parties is enforced by statutory provisions, the
proceeding is referred to as compulsory arbitration In labor cases, compulsory
arbitration is the process of settlement of labor disputes by a government agency
which has the authority to investigate and to make an award which is binding on
all the parties. (G.R. No. 55159, 22 Dec. 89)."cralaw virtua1aw library

When sitting in a compulsory arbitration certified to by the Secretary of Labor, the

NLRC is not sitting as a judicial court but as an administrative body charged with
the duty to implement the order of the Secretary. Its function only is to formulate
the terms and conditions of the CBA and cannot go beyond the scope of the
order. Moreover, the Commission is further tasked to act within the earliest time
possible and with the end in view that its action would not only serve the interests
of the parties alone, but would also have favorable implications to the community
and to the economy as a whole. This is the clear intention of the legislative body
in enacting Art. 263 paragraph (g) of the Labor Code, as amended by Section 27
of R.A. 6175, which provides:chanrob1es virtual 1aw library

(g) When in his opinion, there exists a labor dispute causing or likely to cause a
strike or lockout in an industry indispensable to the national interest, the
Secretary of Labor and Employment may assume jurisdiction over the dispute
and decide it or certify the same to the Commission for compulsory arbitration.
Such assumption or certification shall have the effect of automatically enjoining
the intended or impending strike or lockout as specified in the assumption or
certification order. If one has already taken place at the time of assumption or
certification, all striking or lockout employees shall immediately return to work
and the employer shall immediately resume operations and readmit all workers
under the same terms and conditions prevailing before the strike or lockout. The
Secretary of Labor and Employment or the Commission may seek the assistance
of law enforcement agencies to ensure compliance with this provision as well as
with such orders as he may issue to enforce the same. (Emphasis supplied)

In view of the avowed but limited purpose of respondent’s assumption of

jurisdiction over this compulsory arbitration case, it cannot be faulted in not taking
cognizance of other matters that would defeat this purpose.

As regards the third issue raised by petitioner, this Court finds the provisions of
Article 253 and Article 253-A of the Labor Code as amended by R.A. 6715 as the
applicable laws, thus:jgc:chanrobles.com.ph

"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.

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 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 the
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." (Emphasis supplied)

In the 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.chanrobles lawlibrary :
rednad

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 assailing the public respondent’s actuation, the Union cited the case of Villar v.
Inciong (121 SCRA 444) where this Court ruled:jgc:chanrobles.com.ph

". . . While petitioners were charged for alleged commission of acts of disloyalty
inimical to the interests of the Amigo Employees Union-PAFLU in the Resolution
of February 14, 1977 of the Amigo-Employees Union-PAFLU and on February
15, 1977, PAFLU and the company entered into and concluded a new collective
bargaining agreement, petitioners may not escape the effects of the security
clause under either the old CBA or the new CBA by claiming that the old CBA
had expired and that the new CBA cannot be given retroactive enforcement. To
do so would be to create a gap during which no agreement would govern, from
the time the old contract expired to the time a new agreement shall have been
entered into with the union . . ."cralaw virtua1aw library

In the aforecited case, the Court only pointed out that, it is not right for union
members to argue that they cannot be covered by the past and the new CBAs
both containing the same closed-shop agreement for acts committed during the
interregnum. What was emphasized by this Court is that in no case should there
be a period in which no agreement would govern at all. But nowhere in the said
pronouncement did We rule that every CBA contracted after the expiry date of
the previous CBA must retroact to the day following such date. Hence, it is proper
to rule that in the case at bar, the clear and unmistakable terms of Articles 253
and 253-A must be deemed controlling.

Articles 253 and 253-A mandate the 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 the expiration of the old CBA and/or
until a new agreement is reached by the parties. Consequently, there being no
new agreement reached, the automatic renewal clause provided for by the law
which is deemed incorporated in all CBAs, provides the reason why the new CBA
can only be given a prospective effect.

Petitioner claims that because of the prospective effect of the CBA, union
members were deprived of substantial amount of monetary benefits which they
could have enjoyed had the CBA be given retroactive effect. This would include
backwages, the immediate effects of the mandated wage increase on the fringe
benefits such as the 13th and 14th month pay, overtime premium, and right to
differential pay, leaves, etc. This Court, is not unmindful of these. Nevertheless,
We are convinced that the CBA formulated by public respondent is fair,
reasonable and just. Even if prospective in effect, said CBA still entitles the
Nestle workers and employees reasonable compensation and benefits which, in
the opinion of this Court, is one of the highest, if not the highest in the industry.
Petitioner did not succeed in overcoming the presumption of regularity in the
performance of the public respondent’s functions. Even if the resolution fell short
of meeting the numerous demands of the union, the petitioner failed to establish
that public respondent committed grave abuse of discretion in not giving the CBA
a retrospective effect.

The fourth and fifth assignment of errors should be resolved jointly considering
that they are the terms and conditions of the CBA.

According to petitioner, the terms and conditions thereof are inadequate,

unreasonable, incompetitive and thus, prejudicial to the workers. It further decries
public respondent’s alleged taking side with the private Respondent. Petitioner
contends that in issuing the assailed resolutions, public respondent considered
only the position of the private respondent and totally disregarded that of the
petitioner. It further avers that the awards are bereft of any factual and legal
basis.

Petitioner made so many claims and statements which were adopted and
asserted without good ground. It fails to substantiate why, in not granting its
demands for the inclusion in the CBA of a "Contract Signing Bonus" and a
"Modified Union Shop Agreement," the assailed resolutions were erroneous and
were drawn up arbitrarily and whimsically.chanrobles.com:cralaw:red

In the case of Palencia v. National Labor Relations Commission, G.R. No. 75763,
August 21, 1987, 153 SCRA 247, We ruled that the findings of fact of the then
Court of Industrial Relations (now NLRC), are conclusive and will not be
disturbed. Thus:jgc:chanrobles.com.ph

"Following a long line of decisions this Court has consistently declined to disturb
the findings of fact of the then Court of Industrial Relations whose functions the
NLRC now performs. [Pambusco Employees Union Inc. v. Court of Industrial
Relations, 68 Phil. 591 (1939); Manila Electric Co. v. National Labor Union, 70
Phil. 617 (1940); San Carlos Milling Co. v. Court of Industrial Relations, 111 Phil.
323 (1961),1 SCRA 734; Philippine Educational Institution v. MLQSEA Faculty
Assn., 135 Phil. 282 (1968), 26 SCRA 272; University of Pangasinan Faculty
Union v. University of Pangasinan and NLRC, G.R. No. L-63122, February 20,
1984, 127 SCRA 691]. The findings of fact are conclusive and will not be
disturbed in the absence of a showing that there has been grave abuse of
discretion. [Philippine Educational Institution v. MLQSEA Faculty Association, 26
SCRA 272, 276] and there being no indication that the findings are
unsubstantiated by evidence [University of Pangasinan Faculty Union v.
University of Pangasinan and NLRC, G.R. No. 63122, February 20, 1984, 127
SCRA 694, 704]."cralaw virtua1aw library

Moreover, the NLRC is in the best position to formulate a CBA which is equitable
to all concerned. Because of its expertise in settling labor disputes, it is imbued
with competence to appraise and evaluate the evidence and positions presented
by the parties. In the absence of a clear showing of grave abuse of discretion, the
findings of the respondent NLRC on the terms of the CBA should not be
disturbed.

Taken as a whole, the assailed resolutions are after all responsive to the call of
compassionate justice observed in labor law and the dictates of reason which is
considered supreme in every adjudication.

ACCORDINGLY, PREMISES CONSIDERED, the petition is DISMISSED. The

Resolutions of the NLRC, dated June 5, 1989 and August 8, 1989 are
AFFIRMED, except insofar as the ruling absolving the private respondent of
unfair labor practice which is declared SET ASIDE.chanrobles virtual lawlibrary

SO ORDERED.

Manila Electric Company vs. Quisumbing, 302 SCRA 173 (1999)

FIRST DIVISION

[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.
SYNOPSIS
This is petition for certiorari filed by petitioner Manila Electric Company
(MERALCO) seeking to annul the orders of the Secretary of Labor dated August
19 1996 and December 28, 1996 wherein the Secretary, after assuming
jurisdiction, 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 Secretarys dispositions in the disputed economic and non-economic
issues.
The Court ruled that, after considering the parties position and the evidence
on record, 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 ordering the inclusion of benefits,
terms and conditions that the law and the parties did not intended to be reflected
in thier CBA; even the Solicitor General himself considered that the Secretary
gravely abused his discretion on at least three major points: (a) on the signing
bonus; (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 agreement. The petition is granted and the orders of the public
respondent Secretary of Labor dated August 19 1996 and December 28, 1996
were set aside. The parties were directed to execute a Collective Bargaining
Agreement incorporating the terms and conditions contained in the unaffected
portions of the Secretary of Labors orders and the modifications set forth in the
instant case. The retirement issue is remanded to the Secretary of Labor for
reception of evidence and determination of the legal personality of the
MERALCO retirement fund.
SYLLABUS
1. LABOR AND SOCIAL LEGISLATION; CONDITIONS OF EMPLOYMENT;
BONUS; NOT A DEMANDABLE AND ENFORCEABLE OBLIGATION. As a
rule, a bonus is not a demandable and enforceable obligation; it may
nevertheless be granted on equitable considerations as when the giving of
such bonus has been the companys long and regular practice. 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. Thus we have ruled in National Sugar Refineries Corporation vs.
NLRC: The test or rationale of this rule on long practice requires an
indubitable showing that the employer agreed to continue giving 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 13 th 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 employees existing benefits.
2. ID.; ID.; THE COOPERATIVE LAW DOES NOT REQUIRE THE
EMPLOYERS TO PROVIDE FUNDS THAT EMPLOYEES CAN USE TO
FORM COOPERATIVE. The Secretarys 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.
3. ID.; ID.; SIGNING BONUS; DEFINED; WITHOUT THE GOODWILL, THE
SIGNING BONUS CANNOT BE JUSTIFIED. 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. xxx. 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.
4. ID.; LABOR RELATIONS; CONFIDENTIAL EMPLOYEES; EXCLUDED
FROM RANK AND FILE BARGAINING UNIT. 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 Stevedore Union, we
ruled that: Put another way, the confidential employee does not share in the
same community of interests that might otherwise make him eligible to join
his rank and file co-workers, precisely because of a conflict in those interest.
Thus, in Metrolab Industries vs. Roldan-Confesor, We ruled: ...that the
Secretarys 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.
5. ID.; ID.; CONTRACTING OUT OF WORK IS A PROPRIETARY RIGHT OF
THE EMPLOYER IN THE EXERCISE OF AN INHERENT MANAGEMENT
PREROGATIVE. 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,(where we recognized that
contracting out of work is a propriety right of the employer in the exercise of
an inherent management prerogative) the issue we see is whether the
Secretarys consultation requirement is reasonable or unduly restrictive of the
companys 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.
6. ID.; ID.; THE SECRETARY OF LABOR ACTED IN EXCESS OF ITS
JURISDICTION WHEN HE ORDERED THE INCLUSION OF BENEFITS,
TERMS AND CONDITIONS THAT THE LAW AND THE PARTIES DID NOT
INTEND TO BE REFLECTED IN THE CBA. 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 Secretarys disputed orders should
accordingly be modified.

DECISION
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 Secretarys 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, 1995 [2] and formed
a CBA negotiating panel for the purpose. On November 10, 1995, MEWA
submitted its proposal[3] 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 Petition [4] 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 Order [5] 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.

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- MEWAs demand for upgrading is denied; the companys 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 to cash at his retirement or separation.

Vacation Leave - MEWAs demand for upgrading denied & the companys 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 MEWAs 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 - unions demand is granted. If birthday falls on the employees

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 every year of service
to be received by the employee after serving the Company for 5 years.

Christmas Bonus and Special Christmas Grant- MEWAs demand of one month
salary as Christmas Bonus and two months salary as Special Christmas Grant is
granted and to be incorporated in the new CBA.

Midyear Bonus- one months pay to be included in the CBA.

Anniversary Bonus - unions demand is denied.

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 retirees dependents is denied

f. Monthly pension of P3,000.00 for each retiree is denied.

g. Death benefit for retirees beneficiaries is denied.

Optional retirement - unions 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- unions 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
employees 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.

Employees 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.

Meal and Lodging Allowance- shall be increased effective December 1, 1995 as

follows:

Breakfast - from P25.00 to P35.00

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.

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 lunch and transportation allowance.

c. The collector shall be entitled 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. Collectors 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.

Political Demands:

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 employ by reason of expansion,
reorganization or as a result of operational exigencies.

b. Union recognition and security -

i. The union shall be recognized by the Company as sole and

exclusive bargaining representative of the rank-and-file
employees included in the bargaining unit. The Company shall
agree to meet only with Union officers and its authorized
representatives on all matters involving the Union and all issues
arising from the implementation and interpretation of the new
CBA.

ii. The union shall meet with the newly regularized employees for a
period not to exceed four (4) hours, on company time, to acquaint
the new regular employees of the rights, duties and benefits of
Union membership.
 iii. The right of all rank-and-file employees to join the union shall be
recognized in accordance with the maintenance of membership
principle as a form of union security.

c. Transfer of assignment and job security-

i. No transfer of an employee from one position to another shall be

made if motivated by considerations of sex, race, creed, political
and religious belief, seniority or union activity.

ii. If the transfer is due to the reorganization or decentralization, the

distance from the employees residence shall be considered
unless the transfer is accepted by the employee. If the transfer is
extremely necessary, the transfer shall be made within the offices
in the same district.

iii. Personnel hired through agencies or contractors to perform the

work done by covered employees shall not exceed one month. If
extension is necessary, the union shall be informed. But the
Company shall not permanently contract out regular or permanent
positions that are necessary in the normal operation of the
Company.

d. Check off Union Dues- where the union increases its dues as
approved by the Board of Directors, the Company shall check off
such increase from the salaries of union members after the union
submits check off authorizations signed by majority of the
members. The Company shall honor only those individual
authorizations signed by the majority of the union members and
collectively submitted by the union to the Companys Salary
Administration.

e. Payroll Reinstatement- shall be in accordance with Article 223, p. 3 of

the Labor Code.

f. Union Representation in Committees- the union is allowed to

participate in policy formulation and in the decision-making process
on matters affecting their rights and welfare, particularly in the
Uniform Committee, the Safety Committee and other committees
that may be formed in the future.

Signing Bonus- P4,000.00 per member of the bargaining unit for the conclusion
of the CBA

Existing benefits already granted by the Company but which are not expressly or
impliedly repealed in the new agreement shall remain subsisting and shall be
included in the new agreement to be signed by the parties effective December 1,
1995.

On August 30, 1996, MERALCO filed a motion for reconsideration [7] alleging
that the Secretary of Labor committed grave abuse of discretion amounting to
lack or excess of jurisdiction:

1. in awarding to MEWA a package that would cost at least P1.142 billion, a

package that is grossly excessive and exorbitant, would not be affordable to
MERALCO and would imperil its viability as a public utility affected with
national interest.

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 MERALCOs 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 its proposal to institute a
Code of Discipline for its members and the unions 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 employees 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 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 MERALCOs
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 Unions and the employees 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 employees written
consent, shall be made if motivated by considerations of sex, 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 authorizations submitted
by the union shall be honored by the Company.

With respect to special assessments, attorneys fees, negotiation fees or any

other extraordinary fees, individual authorizations 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 P2,200.00 for 1997;

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 Secretarys
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 unions position is anchored on two premises:
First, no reviewable abuse of discretion could have attended the Secretarys
arbitral award because the Secretary complied with constitutional norms in
rendering the dispute award. The union posits that the yardstick for comparison
and for the determination of the validity of the Secretarys 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
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 Secretarys 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 Secretarys 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 Labors 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 Labors arbitral award is
not limited to a determination of grave abuse in the manner of the secretarys
exercise of his statutory powers. This Court is entitled to, and must - in the
exercise of its judicial power - review the substance of the Secretarys 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 Secretarys 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 Labors 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 laymans 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 Secretarys actions have been
reasonable in light of the parties positions and the evidence they presented.
MEWAs 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 Labors 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
unions caveat on how to handle a Secretary of Labors arbitral award.
But at the same time, we also recognize the possibility that abuse of
discretion may attend the exercise of the Secretarys 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 parties. [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 Secretarys 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
Companys 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.

xxxxxxxxx

An overriding aim is to estimate the amount that is left with the Company after
the awarded wages and benefits and the companys 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 Companys 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] (Underscoring 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 MERALCOs 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 was 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
unions 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 computations. While the union claimed that
its cited figure is based on MERALCOs 10-year income stream, [25] no data or
computation of this 10-year stream appear in the record.
 While the Secretary is not expected to accept the company-offered figures
wholesale in determining a wage award, we find it a grave abuse of discretion to
completely disregard data that is based on actual and undisputed record of
financial performance in favor of the third-hand and unfounded claims the
Secretary eventually relied upon. At the very least, the Secretary should have
properly justified his disregard of the company figures. The Secretary should
have also reasonably insured that the figure that served as the starting point for
his computation had some substantial basis.
Both parties extensely discussed the factors that the decision maker should
consider in making a wage award. While We do not seek to enumerate in this
decision the factors that should affect wage determination, we must emphasize
that a collective bargaining dispute such as this one 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. To our mind, the best way in
approaching this task holistically is to consider the available objective facts,
including, where applicable, factors such as the bargaining history of the
company, the trends and amounts of arbitrated and agreed wage awards and the
companys previous CBAs, and industry trends in general. As a rule, affordability
or capacity to pay should be taken into account but cannot be the sole yardstick
in determining the wage award, especially in a public utility like MERALCO. In
considering a public utility, the decision maker must always take into account the
public interest aspects of the case; MERALCOs income and the amount of
money available for operating expenses - including labor costs - are subject to
State regulation. We must also keep in mind that high operating costs will
certainly and eventually be passed on to the consuming public as MERALCO has
bluntly warned in its pleadings.
We take note of the middle ground approach employed by the Secretary in
this case which we do not necessarily find to be the best method of resolving a
wage dispute. Merely finding the midway point between the demands of the
company 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 afford. It may lead to the danger too that neither of the parties will
engage in principled bargaining; the company may keep its position artificially low
while the union presents an artificially high position, on the fear that a Solomonic
solution cannot be avoided. Thus, rather than encourage agreement, a middle
ground approach instead promotes a play safe attitude that leads to more
deadlocks than to successfully negotiated CBAs.
After considering the various factors the parties cited, we believe that the
interests of both labor and management are best served by a wage increase
of P1,900.00 per month for the first year and another P1,900.00 per month for
the second year of the two-year CBA term. Our reason for this is that these
increases sufficiently protects the interest of the worker as they are roughly 15%
of the monthly average salary of P11,600.00.[26] They likewise sufficiently
consider the employers costs and its overall wage structure, while at the same
time, being within the range that will not disrupt the wage trends in Philippine
industries.
The records shows that MERALCO, throughout its long years of existence,
was never remiss in its obligation towards its employees. In fact, as a
manifestation of its strong commitment to the promotion of the welfare and well-
being of its employees, it has consistently improved their compensation
package. For instance, MERALCO has granted salary increases [27] through the
collective bargaining agreement the amount of which since 1980 for both rank-and-
file and supervisory employees were as follows:
AMOUNT OF CBA INCREASES DIFFERENCE
CBA COVERA RANK-AND- SUPERVISORY AMOUNT PERCENT
GE FILE
1980 230.00 342.50 112.50 48.91%
1981 210.00 322.50 112.50 53.57
1982 200.00 312.50 112.50 56.25
TOTAL 640.00 977.50 337.50 52.73
1983 320.00 432.50 112.50 35.16
1984 350.00 462.50 112.50 32.14
1985 370.00 482.50 112.50 30.41
TOTAL 1,040.00 1,377.50 337.50 32.45
1986 860.00 972.50 112.50 13.08
1987 640.00 752.50 112.50 17.58
1988 600.00 712.50 112.50 18.75
TOTAL 2,100.00 2,437.50 337.50 16.07
1989 1,100.00 1,212.50 112.50 10.23
1990 1,200.00 1,312.50 112.50 9.38
1991 1,300.00 1,412.50 112.50 8.65
TOTAL 3,600.00 3,937.50 337.50 9.38
1992 1,400.00 1,742.50 342.50 24.46
1993 1,350.00 1,682.50 332.50 24.63
1994 1,150.00 1,442.50 292.50 25.43
TOTAL 3,900.00 4,867.50 967.50 24.81
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 Secretarys 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 Secretarys 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 13 th 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 month salary. The use of Christmas bonus title stopped after
1989. In 1990, what was given was a cash gift of months salary. The grants
thereafter bore different titles and were for varying amounts. Significantly, the
Company explained the reason for the 1995 bonuses and this explanation was
not substantially contradicted by the Union.

What comes out from all these is that while the Company has consistently given
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.

xxxxxxxxx

The Company is not therefore correct in its position that there is not 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 MERALCOs 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 consideration[30] as when the giving of
such bonus has been the companys 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 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 the 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 employees existing benefits. [34]
We can not, however, affirm the Secretarys 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 Secretarys
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 funds 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 trustees 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 Secretarys 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
reason why MERALCO should not now bargain on these benefits. Thus, we
agree with the Secretarys ruling:

x x x 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. xxx.[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 specifics 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-Rate 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 Secretarys 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 Secretarys 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.
We find no compelling reason to deviate from the Secretarys 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 MERALCOs 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 demand 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 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 Secretarys 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 Secretarys 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 Secretarys 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 Secretarys 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.
 We shall now resolve the non-economic issues.
1. SCOPE OF THE BARGAINING UNIT
The Secretarys 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 if disregards the rule We have established on the exclusion
of confidential employee 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 Secretarys 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.

xxxxxxxxx

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:

x x x. when we decreed that all rank and file employees shall join the Union, we
were actually decreeing the incorporation of a closed shop form 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 MERALCOs 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 Secretarys first disputed order; and that
despite the parties clear acceptance of the Secretarys 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 Secretarys 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 Bersamina,[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 Secretarys consultation requirement
is reasonable or unduly restrictive of the companys 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 of Labor Order No.
10, May 30, 1997, Sections. 1-25).
Given these realities, we recognize that a balance already exist 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 Secretarys 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 Secretarys 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:

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
Codes 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
Companys 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 Companys business horizons. The unions 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 MERALCOs 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
Secretarys order granted is that the Union be allowed to participate in policy
formulation and decision-making process on matters affecting the Union
members right, 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 Secretarys ruling in both the assailed Orders
that-

All other benefits being enjoyed by the companys 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 employers 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 CBAs 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
Secretarys disputed orders should accordingly be modified.
6. RETROACTIVITY OF THE CBA
Finally, MERALCO also assails the Secretarys 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 disputes.
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. Lukes Medical Center, Inc. vs. Torres.[48] MEWA
also contends that if the arbitral award takes effect on the date of the Secretary
Labors ruling on the parties motion for reconsideration (i.e., on 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]
Article 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

x x x [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 provisions 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. x x x.

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 the status 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 Labors 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 portions of the Secretary of Labors order 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.
SO ORDERED.
Davide, Jr., C.J. (Chairman), Melo, Kapunan, and Pardo, JJ., concur.

Manila Electric Company vs. Quisumbing, 326 SCRA 172 [2000]

SPECIAL FIRST DIVISION

 [G.R. No. 127598. February 22, 2000]

MANILA ELECTRIC COMPANY, petitioner, vs. Hon. Secretary of Labor

Leonardo Quisumbing and Meralco Employees and Workers Association
(MEWA), respondents.

RESOLUTION

YNARES_SANTIAGO, J.:

In the Decision promulgated on January 27, 1999, the Court disposed of the case
as follows:

"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 Labors 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 respondents resolutions include the following:

January 27, 1999 decision Secretarys resolution

Wages -P1,900.00 for 1995-96 P2,200.00

Xmas bonus -modified to one month 2 months

Retirees -remanded to the Secretary granted

Loan to coops -denied granted

GHSIP, HMP

and Housing loans -granted up to P60,000.00 granted

Signing bonus -denied granted

Union leave -40 days (typo error) 30 days

High voltage/pole -not apply to those who are members of a team

 not exposed to the risk

Collectors -no need for cash bond, no

need to reduce quota and MAPL

CBU -exclude confidential employees include

Union security -maintenance of membership closed shop

Contracting out -no need to consult union consult first

All benefits -existing terms and conditions all terms

Retroactivity -Dec 28, 1996-Dec 27, 199(9) from Dec 1, 1995

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 supervisors union (FLAMES[2]) 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.

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
presented for consideration of the Court. Nonetheless, certain matters will be
considered herein, particularly those involving the amount of wages and the
retroactivity of the Collective Bargaining Agreement (CBA) arbitral awards.

Petitioner warns that if the wage increase of P2,200.00 per month as ordered by
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. The Court cannot be threatened with such a misleading argument. An
increase in 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 petitioners 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 can not 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 petitioners own allegations, its actual total net income for 1996
was P5.1 billion.[8] An estimate by the All Asia financial analyst stated that
petitioners 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 Secretarys 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 Courts 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. [12]Besides, 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 Lukes.[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 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 petitioners 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.
Lukes doctrine and ruled that:

"In St. Lukes 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 Secretarys 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 shal! 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 petitioners 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 petitioners recognition that the CBA
award covers the said period. Earlier, petitioners 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 petitioners 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 unions 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
employees 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. On the contrary, it is the government that has the obligation
to render financial assistance to cooperatives and the Cooperative Code does
not make it an obligation of the employer or any private individual. [22]

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.

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 to say that the employer is allowed to contract out services for six months or
more. However, a line must be drawn between management prerogatives
regarding business operations per se and those which affect the rights of
employees, and in 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 labor-management relationship and enlighten the
workers concerning their rights.[23] Hiring of workers is within the employers
inherent freedom to regulate and 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 cannot be denied the faculty of
promoting efficiency and attaining economy by a 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 agencies. While there should
be mutual consultation, eventually deference is to be paid to what management
decides.[25] Contracting out of services is an exercise of business judgment or
management prerogative.[26] Absent proof that management acted in a malicious
or arbitrary manner, the Court will not interfere with the exercise of judgment by
an employer.[27] As mentioned in the January 27, 1999 Decision, the law already
sufficiently regulates this matter.[28] Jurisprudence also provides adequate
limitations, such that the employer 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 or arbitrary actions.[29] These are matters that may be
categorically determined only when an actual suit on the matter arises.

WHEREFORE, the motion for reconsideration is partially granted and the

assailed Decision is modified as follows: (1) the arbitral award shall retroact from
December 1, 1995 to November 30, 1997; and (2) the award of wage is
increased from the original amount of One Thousand Nine Hundred Pesos
(P1,900.00) to 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 employees during the pendency of this case assuming such
advances had actually been distributed to them. The assailed Decision is
AFFIRMED in all other respects.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Melo, Kapunan, and Pardo, JJ., concur.

[1]
Decision promulgated January 27, 1999, G. R. No. 127598 penned by Justice
Antonio Martinez (now retired) with Chief Justice Hilario Davide, Jr. and Justices
Jose Melo, Santiago Kapunan and Bernardo Pardo, concurring.
[2]
First Line Association of Meralco Supervisory Employees.
[3]
Motion for Leave to Intervene and to treat this as Movants Intervention filed by
FLAMES, p. 4; Rollo, p. 2476.
[4]
Solicitor-Generals Manifestation and Motion dated August 10, 1999, p. 2; Rollo,
p. 2506.
[5]
Rollo, p. 2495.
[6]
20 Am. Jur. 819.
[7]
20 Am. Jr. 819-820.
[8]
Petitioners Comment to Motions for Reconsideration and Motion for
Intervention, p. 6; Rollo, p. 2514.
[9]
See the January 27, 1999 Decision.
[10]
Manila Electric Company v. Quisumbing, 302 SCRA 173, 196 (1999).
[11]
Article 1700, New Civil Code (NCC).
[12]
Article 1701, NCC.
[13]
See National Federation of Labor Unions v. NLRC, 202 SCRA 346 (1991).
[14]
Pier 8 Arrastre and Stevedoring Services, Inc. v. Roldan-Confesor, (2nd Div),
311 Phil. 311 penned by Justice Puno with Chief Justice Narvasa (ret.) and
Justices Bidin (ret.), Regalado (ret.) and Mendoza, concurring, p. 329.
[15]
192 SCRA 414 (1990).
[16]
St. Lukes Medical Center v. Torres, (3rd Div), 223 SCRA 779 (1993), penned
by Justice Melo with Justices Feliciano (ret.), Bidin (ret.), Davide (now Chief
Justice) and Romero (ret.), concurring, pp. 792-793.
[17]
In Mindanao Terminal and Brokerage Service, Inc. v. Confesor, (2nd Div), 338
Phil. 671 penned by Justice Mendoza with Justices Regalado (ret.), Romero,
(ret.), Puno and Torres (ret.), concurring, p. 679.
[18]
Article 253-A, Labor Code, as amended..
[19]
Mindanao Terminal and Brokerage Service, Inc. v. Confesor, 338 Phil. 671.
[20]
Rollo, p. 2347.
[21]
Annex "C" of the Petition.
[22]
See Section 2, R.A. No. 6838 (Cooperative Code of the Philippines) which
provides: "It is the declared policy of the State to foster the creation and growth of
cooperative as a practical vehicle for promoting self-reliance and harnessing
people power towards the attainment of economic development and social
justice. The State shall encourage the private sector to undertake the actual
formation of cooperatives and shall create an atmosphere that is conducive to
the organizational growth and development of the cooperatives.

Towards this end, the Government and all its branches, subsidiaries,
instrumentalities, and agencies shall ensure the provision of technical
guidelines, financial assistance, and other services to enable said cooperative to
development into viable and responsive economic enterprises and thereby bring
about a strong cooperative movement that is free from any conditions that might
infringe upon the autonomy or organizational integrity of cooperatives.
[23]
Philippine Airlines v. NLRC, 225 SCRA 259 (1993).
[24]
Tierra International Construction Corporation v. NLRC, 256 SCRA 36 (1996);
Business Day Information Systems v. NLRC, 221 SCRA 9 (1993); Philtread
Tire v. NLRC, 218 SCRA 805 (1993); San Miguel Corporation v. Ubaldo, 218
SCRA 293 (1993); San Miguel Brewery Sales Force Union v. Ople, 170 SCRA 25
(1989).
[25]
Shell Oil Workers Union v. Shell Company of the Philippines, Ltd., 39 SCRA
276 (1971).
[26]
De Ocampo v. NLRC, 213 SCRA 652 (1992).
[27]
Asian Alcohol Corporation v. NLRC, G.R. No. 131108, March 25, 1999 cited in
Serrano v. NLRC, G.R. No. 117040, January 27, 2000.
[28]
See also Metrolab Industries v. Roldan-Confesor, 254 SCRA 182 (1996).
[29]
Manila Electric Company v. Quisumbing, 302 SCRA 173, 196 (1999) citing De
Ocampo v. NLRC, 213 SCRA 652 (1992).