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G.R. No.

211145

SAMAHAN NG MANGGAGAWA SA HANJIN SHIPYARD rep. by its President, ALFIE


ALIPIO, Petitioner
vs.
BUREAU OF LABOR RELATIONS, HANJIN HEAVY INDUSTRIES AND CONSTRUCTION CO., LTD.
(HHIC-PIDL.),, Respondents

DECISION

mendoza, J.:

The right to self-organization is not limited to unionism. Workers may also form or join an association for
mutual aid and protection and for other legitimate purposes.

This is a petition for review on certiorari seeking to reverse and set aside the July 4, 2013 Decision1 and
the January 28, 2014 Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 123397, which
reversed the November 28, 2011 Resolution3 of the Bureau of Labor Relations (BLR) and reinstated the
April 20, 2010 Decision 4 of the Department of Labor and Employment (DOLE) Regional Director,
cancelling the registration of Samahan ng Manggagawa sa Hanjin Shipyard (Samahan) as a worker's
association under Article 243 (now Article 249) of the Labor Code.

The Facts

On February 16, 2010, Samahan, through its authorized representative, Alfie F. Alipio, filed an application
for registration 5 of its name "Samahan ng Mga Manggagawa sa Hanjin Shipyard" with the DOLE.
Attached to the application were the list of names of the association's officers and members, signatures of
the attendees of the February 7, 2010 meeting, copies of their Constitution and By-laws. The application
stated that the association had a total of 120 members.

On February 26, 2010, the DOLE Regional Office No. 3, City of San Fernando, Pampanga (DOLE-
Pampanga), issued the corresponding certificate of registration6 in favor of Samahan.

On March 15, 2010, respondent Hanjin Heavy Industries and Construction Co., Ltd. Philippines (Hanjin),
with offices at Greenbeach 1, Renondo Peninsula, Sitio Agustin, Barangay Cawag, Subic Bay Freeport
Zone, filed a petition7 with DOLE-Pampanga praying for the cancellation of registration of Samahan' s
association on the ground that its members did not fall under any of the types of workers enumerated in
the second sentence of Article 243 (now 249).

Hanjin opined that only ambulant, intermittent, itinerant, rural workers, self-employed, and those without
definite employers may form a workers' association. It further posited that one third (1/3) of the members
of the association had definite employers and the continued existence and registration of the association
would prejudice the company's goodwill.

On March 18, 2010, Hanjin filed a supplemental petition,8 adding the alternative ground that Samahan
committed a misrepresentation in connection with the list of members and/or voters who took part in the
ratification of their constitution and by-laws in its application for registration. Hanjin claimed that Samahan
made it appear that its members were all qualified to become members of the workers' association.

On March 26, 2010, DOLE-Pampanga called for a conference, wherein Samahan requested for a 10-day
period to file a responsive pleading. No pleading, however, was submitted. Instead, Samahan filed a
motion to dismiss on April 14, 2010.9

The Ruling of the DOLE Regional Director

On April 20, 2010, DOLE Regional Director Ernesto Bihis ruled in favor of Hanjin. He found that the
preamble, as stated in the Constitution and By-Laws of Samahan, was an admission on its part that all of
its members were employees of Hanjin, to wit:

KAMI, ang mga Manggagawa sa HANJIN Shipyard (SAMAHAN) ay naglalayong na isulong ang
pagpapabuti ng kondisyon sa paggawa at katiyakan sa hanapbuhay sa pamamagitan ng patuloy na
pagpapaunlad ng kasanayan ng para sa mga kasapi nito. Naniniwala na sa pamamagitan ng aming mga
angking lakas, kaalaman at kasanayan ay aming maitataguyod at makapag-aambag sa kaunlaran ng
isang lipunan. Na mararating at makakamit ang antas ng pagkilala, pagdakila at pagpapahalaga sa mga
tulad naming mga manggagawa.

XXX10

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The same claim was made by Samahan in its motion to dismiss, but it failed to adduce evidence that the
remaining 63 members were also employees of Hanjin. Its admission bolstered Hanjin's claim that
Samahan committed misrepresentation in its application for registration as it made an express
representation that all of its members were employees of the former. Having a definite employer, these 57
members should have formed a labor union for collective bargaining. 11 The dispositive portion of the
decision of the Dole Regional Director, reads:

WHEREFORE, premises considered, the petition is hereby GRANTED. Consequently, the Certificate of
Registration as Legitimate Workers Association (LWA) issued to the SAMAHAN NG MGA
MANGGAGAWA SA HANJIN SHIPYARD (SAMAHAN) with Registration Numbers R0300-1002-WA-009
dated February 26, 2010 is hereby CANCELLED, and said association is dropped from the roster of labor
organizations of this Office.

SO DECIDED.12

The Ruling of the Bureau of Labor Relations

Aggrieved, Samahan filed an appeal13 before the BLR, arguing that Hanjin had no right to petition for the
cancellation of its registration. Samahan pointed out that the words "Hanjin Shipyard," as used in its
application for registration, referred to a workplace and not as employer or company. It explained that
when a shipyard was put up in Subic, Zambales, it became known as Hanjin Shipyard. Further, the
remaining 63 members signed the Sama-Samang Pagpapatunay which stated that they were either
working or had worked at Hanjin. Thus, the alleged misrepresentation committed by Samahan had no leg
to stand on.14

In its Comment to the Appeal,15 Hanjin averred that it was a party-ininterest. It reiterated that Samahan
committed misrepresentation in its application for registration before DOLE Pampanga. While Samahan
insisted that the remaining 63 members were either working, or had at least worked in Hanjin, only 10
attested to such fact, thus, leaving its 53 members without any workplace to claim.

On September 6, 2010, the BLR granted Samahan's appeal and reversed the ruling of the Regional
Director. It stated that the law clearly afforded the right to self-organization to all workers including those
without definite employers.16 As an expression of the right to self-organization, industrial, commercial and
self-employed workers could form a workers' association if they so desired but subject to the limitation
that it was only for mutual aid and protection.17 Nowhere could it be found that to form a workers'
association was prohibited or that the exercise of a workers' right to self-organization was limited to
collective bargaining.18

The BLR was of the opinion that there was no misrepresentation on the part of Samahan. The
phrase, "KAMI, ang mga Manggagawa sa Hanjin Shipyard," if translated, would be: "We, the workers at
Hanjin Shipyard." The use of the preposition "at" instead of "of' would indicate that "Hanjin Shipyard" was
intended to describe a place.19 Should Hanjin feel that the use of its name had affected the goodwill of the
company, the remedy was not to seek the cancellation of the association's registration. At most, the use
by Samahan of the name "Hanjin Shipyard" would only warrant a change in the name of the
association.20 Thus, the dispositive portion of the BLR decision reads:

WHEREFORE, the appeal is hereby GRANTED. The Order of DOLE Region III Director Ernesto C. Bihis
dated 20 April 2010 is REVERSED and SET ASIDE.

Accordingly, Samahan ng mga Manggagawa sa Hanjin Shipyard shall remain in the roster of legitimate
workers' association.21

On October 14, 2010, Hanjin filed its motion for reconsideration.22

In its Resolution,23 dated November 28, 2011, the BLR affirmed its September 6, 2010 Decision, but
directed Samahan to remove the words "Hanjin Shipyard" from its name. The BLR explained that the
Labor Code had no provision on the use of trade or business name in the naming of a worker's
association, such matters being governed by the Corporation Code. According to the BLR, the most
equitable relief that would strike a balance between the contending interests of Samahan and Hanjin was
to direct Samahan to drop the name "Hanjin Shipyard" without delisting it from the roster of legitimate
labor organizations. The fallo reads:

WHEREFORE, premises considered, our Decision dated 6 September 2010 is hereby AFFIRMED with a
DIRECTIVE for SAMAHAN to remove "HANJIN SHIPYARD" from its name.

SO RESOLVED.24

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Unsatisfied, Samahan filed a petition for certiorari25 under Rule 65 before the CA, docketed as CA-G.R.
SP No. 123397.

In its March 21, 2012 Resolution,26 the CA dismissed the petition because of Samahan's failure to file a
motion for reconsideration of the assailed November 28, 2011 Resolution.

On April 17, 2012, Samahan filed its motion for reconsideration27 and on July 18, 2012, Hanjin filed its
comment28 to oppose the same. On October 22, 2012, the CA issued a resolution granting Samahan's
motion for reconsideration and reinstating the petition. Hanjin was directed to file a comment five (5) days
from receipt of notice.29

On December 12, 2012, Hanjin filed its comment on the petition,30 arguing that to require Samahan to
change its name was not tantamount to interfering with the workers' right to self-organization.31 Thus, it
prayed, among others, for the dismissalof the petition for Samahan's failure to file the required motion for
reconsideration.32

On January 17, 2013, Samahan filed its reply.33

On March 22, 2013, Hanjin filed its memorandum.34

The Ruling of the Court of Appeals

On July 4, 2013, the CA rendered its decision, holding that the registration of Samahan as a legitimate
workers' association was contrary to the provisions of Article 243 of the Labor Code. 35 It stressed that
only 57 out of the 120 members were actually working in Hanjin while the phrase in the preamble of
Samahan's Constitution and By-laws, "KAMI, ang mga Manggagawa sa Hanjin Shipyard," created an
impression that all its members were employees of HHIC. Such unqualified manifestation which was used
in its application for registration, was a clear proof of misrepresentation which warranted the cancellation
of Samahan' s registration.

It also stated that the members of Samahan could not register it as a legitimate worker's association
because the place where Hanjin's industry was located was not a rural area. Neither was there any
evidence to show that the members of the association were ambulant, intermittent or itinerant workers.36

At any rate, the CA was of the view that dropping the words "Hanjin Shipyard" from the association name
would not prejudice or impair its rightto self-organization because it could adopt other appropriate names.
The dispositive portion reads:

WHEREFORE, the petition is DISMISSED and the BLR's directive, ordering that the words "Hanjin
Shipyard" be removed from petitioner association's name, is AFFIRMED. The Decision dated April 20,
2010 of the DOLE Regional Director in Case No. Ro300-1003-CP-001, which ordered the cancellation of
petitioner association's registration is REINSTATED.

SO ORDERED.37

Hence, this petition, raising the following

ISSUES

I. THE COURT OF APPEALS SEfilOUSLY ERRED IN FINDING THAT SAMAHAN CANNOT FORM A
WORKERS' ASSOCIATION OF EMPLOYEES IN HANJIN AND INSTEAD SHOULD HA VE FORMED A
UNION, HENCE THEIR REGISTRATION AS A WORKERS' ASSOCIATION SHOULD BE CANCELLED.

II. THE COURT OF APPEALS SERIOUSLY ERRED IN ORDERING THE REMOVAL/DELETION OF


THE WORD "HANJIN" IN THE NAME OF THE UNION BY REASON OF THE COMPANY'S PROPERTY
RIGHT OVER THE COMP ANY NAME "HANJIN."38

Samahan argues that the right to form a workers' association is not exclusive to intermittent, ambulant
and itinerant workers. While the Labor Code allows the workers "to form, join or assist labor organizations
of their own choosing" for the purpose of collective bargaining, it does not prohibit them from forming a
labor organization simply for purposes of mutual aid and protection. All members of Samahan have one
common place of work, Hanjin Shipyard. Thus, there is no reason why they cannot use "Hanjin Shipyard"
in their name.39

Hanjin counters that Samahan failed to adduce sufficient basis that all its members were employees of
Hanjin or its legitimate contractors, and that the use of the name "Hanjin Shipyard" would create an
impression that all its members were employess of HHIC.40

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Samahan reiterates its stand that workers with a definite employer can organize any association for
purposes of mutual aid and protection. Inherent in the workers' right to self-organization is its right to
name its own organization. Samahan referred "Hanjin Shipyard" as their common place of work.
Therefore, they may adopt the same in their association's name.41

The Court's Ruling

The petition is partly meritorious.

Right to self-organization includes


right to form a union, workers '
association and labor management
councils

More often than not, the right to self-organization connotes unionism. Workers, however, can also form
and join a workers' association as well as labor-management councils (LMC). Expressed in the highest
law of the land is the right of all workers to self-organization. Section 3, Article XIII of the 1987
Constitution states:

Section 3. The State shall afford full protection to labor, local and overseas, organized and unorganized,
and promote full employment and equality of employment opportunities for all. It shall guarantee the rights
of all workers to self-organization, collective bargaining and negotiations, and peaceful concerted
activities, including the right to strike in accordance with law. xxx [Emphasis Supplied]

And Section 8, Article III of the 1987 Constitution also states:

Section 8. The right of the people, including those employed in the public and private sectors, to form
unions, associations, or societies for purposes not contrary to law shall not be abridged.

In relation thereto, Article 3 of the Labor Code provides:

Article 3. Declaration of basic policy. The State shall afford protection to labor, promote full employment,
ensure equal work opportunities regardless of sex, race or creed and regulate the relations between
workers and employers. The State shall assure the rights of workers to self-organization, collective
bargaining, security of tenure, and just and humane conditions of work.

[Emphasis Supplied]

As Article 246 (now 252) of the Labor Code provides, the right to self-organization includes the right to
form, join or assist labor organizations fer the purpose of collective bargaining through representatives of
their own choosing and to engage in lawful concerted activities for the same purpose for their mutual aid
and protection. This is in line with the policy of the State to foster the free and voluntary organization of a
strong and united labor movement as well as to make sure that workers participate in policy and decision-
making processes affecting their rights, duties and welfare. 42

The right to form a union or association or to self-organization comprehends two notions, to wit: (a) the
liberty or freedom, that is, the absence of restraint which guarantees that the employee may act for
himself without being prevented by law; and (b) the power, by virtue of which an employee may, as he
pleases, join or refrain from joining an association.43

In view of the revered right of every worker to self-organization, the law expressly allows and even
encourages the formation of labor organizations. A labor organization is defined as "any union or
association o[ employees which exists in whole or in part for the purpose of collective bargaining or of
dealing with employers concerning terms and conditions of employment." 44 A labor organization has two
broad rights: (1) to bargain collectively and (2) to deal with the employer concerning terms and conditions
of employment. To bargain collectively is a right given to a union once it registers itself with the DOLE.
Dealing with the employer, on the other hand, is a generic description of interaction between employer
and employees concerning grievances, wages, work hours and other terms and conditions of
employment, even if the employees' group is not registered with the DOLE. 45

A union refers to any labor organization in the private sector organized for collective bargaining and for
other legitimate purpose,46 while a workers' association is an organization of workers formed for the
mutual aid and protection of its members or for any legitimate purpose other than

collective bargaining.47

Many associations or groups of employees, or even combinations of only several persons, may qualify as
a labor organization yet fall short of constituting a labor union. While every labor union is a labor

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organization, not every labor organization is a labor union. The difference is one of organization,
composition and operation.48

Collective bargaining is just one of the forms of employee participation. Despite so much interest in and
the promotion of collective bargaining, it is incorrect to say that it is the device and no other, which
secures industrial democracy. It is equally misleading to say that collective bargaining is the end-goal of
employee representation. Rather, the real aim is employee participation in whatever form it may appear,
bargaining or no bargaining, union or no union.49 Any labor organization which may or may not be a union
may deal with the employer. This explains why a workers' association or organization does not always
have to be a labor union and why employer-employee collective interactions are not always collective
bargaining.50

To further strengthen employee participation, Article 255 (now 261) 51 of the Labor Code mandates that
workers shall have the right to participate in policy and decision-making processes of the establishment
where they are employed insofar as said processes will directly affect their rights, benefits and welfare.
For this purpose, workers and employers may form LMCs.

A cursory reading of the law demonstrates that a common element between unionism and the formation
of LMCs is the existence of an employer-employee relationship. Where neither party is an employer nor
an employee of the other, no duty to bargain collectively would exist. 52 In the same manner, expressed in
Article 255 (now 261) is the requirement that such workers be employed in the establishment before they
can participate in policy and decision making processes.

In contrast, the existence of employer-employee relationship is not mandatory in the formation of workers'
association. What the law simply requires is that the members of the workers' association, at the very
least, share the same interest. The very definition of a workers' association speaks of "mutual aid and
protection."

Right to choose whether to form or


join a union or workers' association
belongs to workers themselves

In the case at bench, the Court cannot sanction the opinion of the CA that Samahan should have formed
a union for purposes of collective bargaining instead of a workers' association because the choice
belonged to it. The right to form or join a labor organization necessarily includes the right to refuse or
refrain from exercising the said right. It is self-evident that just as no one should be denied the exercise of
a right granted by law, so also, no one should be compelled to exercise such a conferred right. 53 Also
inherent in the right to self-organization is the right to choose whether to form a union for purposes of
collective bargaining or a workers' association for purposes of providing mutual aid and protection.

The right to self-organization, however, is subject to certain limitations as provided by law. For instance,
the Labor Code specifically disallows managerial employees from joining, assisting or forming any labor
union. Meanwhile, supervisory employees, while eligible for membership in labor organizations, are
proscribed from joining the collective bargaining unit of the rank and file employees.54 Even government
employees have the right to self-organization. It is not, however, regarded as existing or available for
purposes of collective bargaining, but simply for the furtherance and protection of their interests. 55

Hanjin posits that the members of Samahan have definite employers, hence, they should have formed a
union instead of a workers' association. The Court disagrees. There is no provision in the Labor Code that
states that employees with definite employers may form, join or assist unions only.

The Court cannot subscribe either to Hanjin's position that Samahan's members cannot form the
association because they are not covered by the second sentence of Article 243 (now 249), to wit:

Article 243. Coverage and employees' right to selforganization. All persons employed in commercial,
industrial and agricultural enterprises and in religious, charitable, medical, or educational institutions,
whether operating for profit or not, shall have the right to self-organization and to form, join, or assist labor
organizations of their own choosing for purposes of collective bargaining. Ambulant, intermittent and
itinerant workers, selfemployed people, rural workers and those without any definite employers may form
labor organizations for their mutual aid and protection. (As amended by Batas Pambansa Bilang 70, May
1, 1980)

[Emphasis Supplied]

Further, Article 243 should be read together with Rule 2 of Department Order (D. 0.) No. 40-03, Series of
2003, which provides:

RULE II

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COVERAGE OF THE RIGHT TO SELF-ORGANIZATION

Section 1. Policy. - It is the policy of the State to promote the free and responsible exercise of the right to
self-organization through the establishment of a simplified mechanism for the speedy registration of labor
unions and workers associations, determination of representation status and resolution of inter/intra-union
and other related labor relations disputes. Only legitimate or registered labor unions shall have the right to
represent their members for collective bargaining and other purposes. Workers' associations shall have
the right to represent their members for purposes other than collective bargaining.

Section 2. Who may join labor unions and workers' associations. - All persons employed in commercial,
industrial and agricultural enterprises, including employees of government owned or controlled
corporations without original charters established under the Corporation Code, as well as employees of
religious, charitable, medical or educational institutions whether operating for profit or not, shall have the
right to self-organization and to form, join or assist labor unions for purposes of collective bargaining:
provided, however, that supervisory employees shall not be eligible for membership in a labor union of
the rank-and-file employees but may form, join or assist separate labor unions of their own. Managerial
employees shall not be eligible to form, join or assist any labor unions for purposes of collective
bargaining. Alien employees with valid working permits issued by the Department may exercise the right
to self-organization and join or assist labor unions for purposes of collective bargaining if they are
nationals of a country which grants the same or similar rights to Filipino workers, as certified by the
Department of Foreign Affairs.

For purposes of this section, any employee, whether employed for a definite period or not, shall beginning
on the first day of his/her service, be eligible for membership in any labor organization.

All other workers, including ambulant, intermittent and other workers, the self-employed, rural workers
and those without any definite employers may form labor organizations for their mutual aid and protection
and other legitimate purposes except collective bargaining.

[Emphases Supplied]

Clearly, there is nothing in the foregoing implementing rules which provides that workers, with definite
employers, cannot form or join a workers' association for mutual aid and protection. Section 2 thereof
even broadens the coverage of workers who can form or join a workers' association. Thus, the Court
agrees with Samahan's argument that the right to form a workers' association is not exclusive to
ambulant, intermittent and itinerant workers. The option to form or join a union or a workers' association
lies with the workers themselves, and whether they have definite employers or not.

No misrepresentation on the part


of Samahan to warrant cancellation
of registration

In this case, Samahan's registration was cancelled not because its members were prohibited from
forming a workers' association but because they allegedly committed misrepresentation for using the
phrase, "KAMI, ang mga Manggagawa sa HANJIN Shipyard."

Misrepresentation, as a ground for the cancellation of registration of a labor organization, is committed "in
connection with the adoption, or ratification of the constitution and by-laws or amendments thereto, the
minutes of ratification, the list of members who took part in the ratification of the constitution and by-laws
or amendments thereto, and those in connection with the election of officers, minutes of the election of
officers, and the list of voters, xxx."56

In Takata Corporation v. Bureau of Relations,57 the DOLE Regional Director granted the petition for the
cancellation of certificate of registration of Samahang Lakas Manggagawa sa Takata (Salamat) after
finding that the employees who attended the organizational meeting fell short of the 20% union
registration requirement. The BLR, however, reversed the ruling of the DOLE Regional Director, stating
that petitioner Takata Corporation (Takata) failed to prove deliberate and malicious misrepresentation on
the part of respondent Salamat. Although Takata claimed that in the list of members, there was an
employee whose name appeared twice and another was merely a project employee, such facts were not
considered misrepresentations in the absence of showing that the respondent deliberately did so for the
purpose of increasing their union membership. The Court ruled in favor of Salamat.

In S.S. Ventures International v. S.S. Ventures Labor Union,58 the petition for cancellation of certificate of
registration was denied. The Court wrote:

If the union's application is infected by falsification and like serious irregularities, especially those
appearing on the face of the application and its attachments, a union should be denied recognition as
a legitimate labor organization. Prescinding from these considerations, the issuance to the Union of

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Certificate of Registration No. R0300-oo-02-UR-0003 necessarily implies that its application for
registration and the supporting documents thereof are prima facie free from any vitiating irregularities.
Another factor which militates against the veracity of the allegations in the Sinumpaang Petisyon is the
lack of particularities on how, when and where respondent union perpetrated the alleged fraud on
each member. Such details are crucial for in the proceedings for cancellation of union registration
on the ground of fraud or misrepresentation, what needs to be established is that the specific act or
omission of the union deprived the complaining employees-members of their right to choose.

[Emphases Supplied]

Based on the foregoing, the Court concludes that misrepresentation, to be a ground for the cancellation of
the certificate of registration, must be done maliciously and deliberately. Further, the mistakes appearing
in the application or attachments must be grave or refer to significant matters. The details as to how the
alleged fraud was committed must also be indubitably shown.

The records of this case reveal no deliberate or malicious intent to commit misrepresentation on the part
of Samahan.1âwphi1 The use of such words "KAMI, ang mga Manggagawa sa HANJIN Shipyard" in the
preamble of the constitution and by-laws did not constitute misrepresentation so as to warrant the
cancellation of Samahan's certificate of registration. Hanjin failed to indicate how this phrase constitutes a
malicious and deliberate misrepresentation. Neither was there any showing that the alleged
misrepresentation was serious in character. Misrepresentation is a devious charge that cannot simply be
entertained by mere surmises and conjectures.

Even granting arguendo that Samahan' s members misrepresented themselves as employees or workers
of Hanjin, said misrepresentation does not relate to the adoption or ratification of its constitution and by-
laws or to the election of its officers.

Removal of the word "Hanjin Shipyard"


from the association 's name, however,
does not infringe on Samahan 's right to
self-organization

Nevertheless, the Court agrees with the BLR that "Hanjin Shipyard" must be removed in the name of the
association. A legitimate workers' association refers to an association of workers organized for mutual aid
and protection of its members or for any legitimate purpose other than collective bargaining registered
with the DOLE.59Having been granted a certificate of registration, Samahan's association is now
recognized by law as a legitimate workers' association.

According to Samahan, inherent in the workers' right to selforganization is its right to name its own
organization. It seems to equate the dropping of words "Hanjin Shipyard" from its name as a restraint in
its exercise of the right to self-organization. Hanjin, on the other hand, invokes that "Hanjin Shipyard" is a
registered trade name and, thus, it is within their right to prohibit its use.

As there is no provision under our labor laws which speak of the use of name by a workers' association,
the Court refers to the Corporation Code, which governs the names of juridical persons. Section 18
thereof provides:

No corporate name may be allowed by the Securities and Exchange Commission if the proposed name is
identical or deceptively or confusingly similar to that of any existing corporation or to any other name
already protected by law or is patently deceptive, confusing or contrary to existing laws. When a change
in the corporate name is approved, the Commission shall issue an amended certificate of incorporation
under the amended name.

[Emphases Supplied]

The policy underlying the prohibition in Section 18 against the registration of a corporate name which is
"identical or deceptively or confusingly similar" to that of any existing corporation or which is "patently
deceptive" or "patently confusing" or "contrary to existing laws," is the avoidance of fraud upon the public
which would have occasion to deal with the entity concerned, the evasion of legal obligations and duties,
and the reduction of difficulties of administration and supervision over corporations. 60

For the same reason, it would be misleading for the members of Samahan to use "Hanjin Shipyard" in its
name as it could give the wrong impression that all of its members are employed by Hanjin.

Further, Section 9, Rule IV of D.O. No. 40-03, Series of 2003 explicitly states:

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The change of name of a labor organization shall not affect its legal personality. All the rights and
obligations of a labor organization under its old name shall continue to be exercised by the labor
organization under its new name.

Thus, in the directive of the BLR removing the words "Hanjin Shipyard," no abridgement of Samahan's
right to self-organization was committed.

WHEREFORE, the petition is PARTIALLY GRANTED. The July 4, 2013 Decision and the January 28,
2014 Resolution of the Court of Appeals are hereby REVERSED and SET ASIDE. The September 6,
2010 Resolution of the Bureau of Labor Relations, as modified by its November 28, 2011 Resolution,
is REINSTATED. SO ORDERED.

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G.R. No. 111262 September 19, 1996

SAN MIGUEL CORPORATION EMPLOYEES UNION-PTGWO, represented by its President


RAYMUNDO HIPOLITO, JR., petitioner,
vs.
HON. MA. NIEVES D. CONFESOR, Secretary of Labor, Dept. of Labor & Employment, SAN MIGUEL
CORPORATION, MAGNOLIA CORPORATION (Formerly, Magnolia Plant) and SAN MIGUEL
FOODS, INC. (Formerly, B-Meg Plant), respondents.

KAPUNAN, J.:

This is a petition for certiorari assailing the Order of the Secretary of Labor rendered on February
15, 1993 involving a labor dispute at San Miguel Corporation.

The facts are as follows:

On June 28, 1990, petitioner-union San Miguel Corporation Employees Union — PTGWO
entered into a Collective Bargaining Agreement (CBA) with private respondent San Miguel
Corporation (SMC) to take effect upon the expiration of the previous CBA or on June 30, 1989.

This CBA provided, among others, that:

ARTICLE XIV

DURATION OF AGREEMENT

Sec. 1. This Agreement which shall be binding upon the parties hereto and their
respective successors-in-interest, shall become effective and shall remain in force and
effect until June 30, 1992.

Sec. 2. In accordance with Article 253-A of the Labor Code as amended, the term of this
Agreement insofar as the representation aspect is concerned, shall be for five (5) years
from July 1, 1989 to June 30, 1994. Hence, the freedom period for purposes of such
representation shall be sixty (60) days prior to June 30, 1994.

Sec. 3. Sixty (60) days prior to June 30, 1992 either party may initiate negotiations of all
provisions of this Agreement, except insofar as the representation aspect is concerned. If
no agreement is reached in such negotiations, this Agreement shall nevertheless remain
in force up to the time a subsequent agreement is reached by the parties. 1

In keeping with their vision and long term strategy for business expansion, SMC management
informed its employees in a letter dated August 13, 1991 2 that the company which was
composed of four operating divisions namely: (1) Beer, (2) Packaging, (3) Feeds and Livestocks,
(4) Magnolia and Agri-business would undergo a restructuring. 3

Effective October 1, 1991, Magnolia and Feeds and Livestock Division were spun-off and became
two separate and distinct corporations: Magnolia Corporation (Magnolia) and San Miguel Foods,
Inc. (SMFI). Notwithstanding the spin-offs, the CBA remained in force and effect.

After June 30, 1992, the CBA was renegotiated in accordance with the terms of the CBA and
Article 253-A of the Labor Code. Negotiations started sometime in July, 1992 with the two parties
submitting their respective proposals and counterproposals.

During the negotiations, the petitioner-union insisted that the bargaining unit of SMC should still
include the employees of the spun-off corporations: Magnolia and SMFI; and that the
renegotiated terms of the CBA shall be effective only for the remaining period of two years or until
June 30, 1994.

SMC, on the other hand, contended that the members/employees who had moved to Magnolia
and SMFI, automatically ceased to be part of the bargaining unit at the SMC. Furthermore, the
CBA should be effective for three years in accordance with Art. 253-A of the Labor Code.

Unable to agree on these issues with respect to the bargaining unit and duration of the CBA,
petitioner-union declared a deadlock on September 29, 1990.

On October 2, 1992, a Notice of Strike was filed against SMC.

9|Page
In order to avert a strike, SMC requested the National Conciliation and Mediation Board (NCMB)
to conduct preventive mediation. No settlement was arrived at despite several meetings held
between the parties.

On November 3, 1992, a strike vote was conducted which resulted in a "yes vote" in favor of a
strike.

On November 4, 1992, private respondents SMC, Magnolia and SMFI filed a petition with the
Secretary of Labor praying that the latter assume jurisdiction over the labor dispute in a vital
industry.

As prayed for, the Secretary of Labor assumed jurisdiction over the labor dispute on November
10, 1992. 4Several conciliation meetings were held but still no agreement/settlement was arrived
at by both parties.

After the parties submitted their respective position papers, the Secretary of Labor issued the
assailed Order on February 15, 1993 directing, among others, that the renegotiated terms of the
CBA shall be effective for the period of three (3) years from June 30, 1992; and that such CBA
shall cover only the employees of SMC and not of Magnolia and SMFI.

Dissatisfied, petitioner-union now comes to this Court questioning this Order of the Secretary of
Labor.

Subsequently, on March 30, 1995, 5 petitioner-union filed a Motion for Issuance of a Temporary
Restraining Order or Writ of Preliminary Injunction to enjoin the holding of the certification
elections in the different companies, maintaining that the employees of Magnolia and SMFI fall
within the bargaining unit of SMC.

On March 29, 1995, the Court issued a resolution granting the temporary restraining order prayed
for. 6

Meanwhile, an urgent motion for leave to intervene 7 in the case was filed by the Samahan ng
Malayang Manggagawa-San Miguel Corporation-Federation of Free Workers (SMM-SMC-FFW)
through its authorized representative, Elmer S. Armando, alleging that it is one of the contending
parties adversely affected by the temporary restraining order.

The Intervenor cited the case of Daniel S.L. Borbon v. Hon. Bienvenido B. Laguesma, 8 G.R. No.
101766, March 5, 1993, where the Court recognized the separation of the employees of Magnolia
from the SMC bargaining unit. It then prayed for the lifting of the temporary restraining order.

Likewise, Efren Carreon, Acting President of the SMCEU-PTGWO, filed a petition for the
withdrawal/dismissal of the petition considering that the temporary restraining order jeopardized
the employees' right to conclude a new CBA. At the same time, he challenged the legal
personality of Mr. Raymundo Hipolito, Jr. to represent the Union as its president when the latter
was already officially dismissed from the company on October 4, 1994.

Amidst all these pleadings, the following primordial issues arise:

1) Whether or not the duration of the renegotiated terms of the CBA is to be effective for three
years of for only two years; and

2) Whether or not the bargaining unit of SMC includes also the employees of the Magnolia and
SMFI.

Petitioner-union contends that the duration for the non-representation provisions of the CBA
should be coterminous with the term of the bargaining agency which in effect shall be for the
remaining two years of the current CBA, citing a previous decision of the Secretary of Labor on
December 14, 1992 in the matter of the labor dispute at Philippine Refining Company.

However, the Secretary of Labor, in her questioned Order of February 15, 1993 ruled that the
renegotiated terms of the CBA at SMC should run for a period of three (3) years.

We agree with the Secretary of Labor.

Pertinent to the first issue is Art. 253-A of the Labor Code as amended which reads:

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

10 | P a g e
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.
(Emphasis supplied.)

Article 253-A is a new provision. This was incorporated by Section 21 of Republic Act No. 6715
(the Herrera-Veloso Law) which took effect on March 21, 1989. This new provision states that the
CBA has a term of five (5) years instead of three years, before the amendment of the law as far
as the representation aspect is concerned. All other provisions of the CBA shall be negotiated not
later than three (3) years after its execution. The "representation aspect" refers to the identity and
majority status of the union that negotiated the CBA as the exclusive bargaining representative of
the appropriate bargaining unit concerned. "All other provisions" simply refers to the rest of the
CBA, economic as well as non-economic provisions, except representation. 10

As the Secretary of Labor herself observed in the instant case, the law is clear and definite on the
duration of the CBA insofar as the representation aspect is concerned, but is quite ambiguous
with the terms of the other provisions of the CBA. It is a cardinal principle of statutory construction
that the Court must ascertain the legislative intent for the purpose of giving effect to any statute.
The history of the times and state of the things existing when the act was framed or adopted must
be followed and the conditions of the things at the time of the enactment of the law should be
considered to determine the legislative intent. 11 We look into the discussions leading to the
passage of the law:

THE CHAIRMAN (REP. VELASCO): . . .the CBA, insofar as the economic provisions are
concerned . . .

THE CHAIRMAN (SEN. HERRERA): Maximum of three years?

THE CHAIRMAN (SEN. VELOSO): Maximum of three years.

THE CHAIRMAN (SEN. HERRERA): Present practice?

THE CHAIRMAN (REP. VELOSO): In other words, after three years pwede nang
magnegotiate in the CBA for the remaining two years.

THE CHAIRMAN (REP. HERRERA): You can negotiate for one year, two years or three
years but assuming three years which, I think, that's the likelihood. . .

THE CHAIRMAN (REP. VELOSO): Yes.

THE CHAIRMAN (SEN. HERRERA): Three years, the new union, assuming there will be
a change of agent, at least he has one year to administer and to adjust, to develop
rapport with the management. Yan ang importante.

You know, for us na nagne-negotiate, ang hazard talaga sa negotiation, when we


negotiate with somebody na hindi natin kilala, then, we are governed by our biases na ito
ay destroyer ng Labor; ang mga employer, ito bayaran ko lang ito okay na.

'Yan ang nangyayari, but let us give that allowance for the one year to let them know.

Actually, ang thrust natin ay industrial peace, and there can be no industrial peace if you
encourage union to fight each other. 'Yan ang problema. 12

xxx xxx xxx

HON. ISIDRO: Madali iyan, kasi these two periods that are mentioned in the CBA seem
to provide some doubts later on in the implementation. Sabi kasi rito, insofar as
representation issue is concerned, seven years and lifetime. . .

11 | P a g e
HON. CHAIRMAN HERRERA: Five years.

HON. ISIDRO: Five years, all the others three years.

HON. CHAIRMAN HERRERA: No. Ang three years duon sa terms and conditions, not
later than three years.

HON. ISIDRO: Not later than three years, so within three years you have to make a new
CBA.

HON. CHAIRMAN HERRERA: Yes.

HON. ISIDRO: That is again for purposes of renewing the terms, three years na naman
iyan — then, seven years. . .

HON. CHAIRMAN HERRERA: Not later than three years.

HON. ISIDRO: Assuming that they usually follow the period — three years nang three
years, but under this law with respect to representation — five years, ano? Now, after
three years, nagkaroon ng bagong terms, tapos na iyong term, renewed na iyong terms,
ang karapatan noon sa representation issue mayroon pang two years left.

HON. CHAIRMAN HERRERA: One year na lang because six years nang lahat, three
plus three.

HON. ISIDRO: Hindi, two years pa rin ang natitira, eh. Three years pa lang ang
natatapos. So, another CBA was formed and this CBA mayroon na naman siyang
bagong five years with respect to representation issue.

HON. CHAIRMAN HERRERA: Hindi. Hindi na. Ganito iyan. Iyong terms and conditions
for three years.

HON. ISIDRO: Yes.

HON. CHAIRMAN HERRERA: One the third year you can start negotiating to change the
terms and conditions.

HON. ISIDRO: Yes.

HON. CHAIRMAN HERRERA: Assuming you will follow the practice . . .

HON. ISIDRO: Oo.

HON. CHAIRMAN HERRERA: But on the fifth year, ang representation status now can
be questioned, so baka puwedeng magkaroon ng certification election. If the incumbent
union loses, then the new union administers the contract for one year to give him time to
know his counterpart — the employer, before he can negotiate for a new term. Iyan ang
advantage.

HON. ISIDRO: Kasi, when the CBA has only a three-year lifetime with respect to the
terms and conditions and then, so you have to renew that in three years — you renew for
another three years, mayroon na naman another five years iyong ano . . .

HON. ANIAG: Hindi, ang natitira duon sa representation two years na lang.

HON. CHAIRMAN HERRERA: Two years na lang sa representation.

HON. ANIAG: So that if they changed the union, iyong last year . . .

HON. CHAIRMAN HERRERA: Iyon lang, that you have to administer the contract. Then,
voluntary arbitration na kayo and then mayroon ka nang probisyon "retroact on the date
of the expiry date". Pagnatalo ang incumbent unyon, mag-aassume ang new union,
administer the contract. As far as the term and condition, for one year, and that will give
him time and the employer to know each other.

HON. JABAR: Boy, let us be realistic. I think if a new union wins a certification election, it
would not want to administer a CBA which has not been negotiated by the union itself.

12 | P a g e
HON. CHAIRMAN HERRERA: That is not true, Hon. This is true because what is
happening now in the country is that the term ng contract natin, duon din mage-expire
ang representation. Iyon ang nangyari. That is where you have the gulo. Ganoon ang
nangyari. So, ang nangyari diyan, pag-mayroon certification election, expire ang contract,
ano ang usual issue — company union. I can you (sic) give you more what the incumbent
union is giving. So ang mangyayari diyan, pag-negotiate mo hardline na agad.

HON. CHAIRMAN VELOSO : Mon, for four years?

HON. ISIDRO: Ang tingin ko lang dito, iyong distinction between the terms and the
representation aspect — why do we have to distinguish between three and five? What's
wrong with having a uniform expiration period?

HON. CHAIRMAN HERRERA: Five years.

HON. ISIDRO: Puro three years.

HON. CHAIRMAN HERRERA: That is what we are trying to avoid because ang reality
diyan, Mart, pagpasok mo sa kumpanya, mag-ne-negotiate ka ng six months, that's the
average, aabot pa minsan ng one year. Pagktapos ng negotiation mo, signing kayo.
There will be an allowed period of one year. Third year na, uumpisahan naman ang
organizations, papasok na ang ibang unyon because the reality in Trade Union
committee, they organize, we organize. So, actually, you have only industrial peace for
one year, effective industrial peace. That is what we are trying to change. Otherwise, we
will continue to discourage the investors and the union will never grow because every
other year it has to use its money for the certification election. Ang grabe pang practice
diyan, mag-a-advance ang federation for three years union dues para panggastos lang
sa certification election. That is what we are trying to avoid.

HON. JABAR: Although there are unions which really get advances.

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 . . .

xxx xxx xxx

HON CHAIRMAN VELOSO. (continuing) . . . in other words, the longer the period of
effectivity of the CBA, the better for industrial peace.

HON. CHAIRMAN HERRERA: representation status.

HON. CHAIRMAN VELOSO: Only on —

HON. CHAIRMAN HERRERA: — the representations.

HON. CHAIRMAN VELOSO: But on the economic issues.

HON. CHAIRMAN HERRERA: You have to review that. The parties will have to review
that.

HON. CHAIRMAN VELOSO: At least on second year.

HON. CHAIRMAN HERRERA: Not later than 3 years, ang karamihan ng mga mag-
negotiate when the companyis (interrupted) 13

From the aforesaid discussions, the legislators were more inclined to have the period of effectivity
for three (3) years insofar as the economic as well as non-economic provisions are concerned,
except representation.

Obviously, the framers of the law wanted to maintain industrial peace and stability by having both
management and labor work harmoniously together without any disturbance. Thus, no outside
union can enter the establishment within five (5) years and challenge the status of the incumbent
union as the exclusive bargaining agent. Likewise, the terms and conditions of employment
(economic and non-economic) can not be questioned by the employers or employees during the
period of effectivity of the CBA. The CBA is a contract between the parties and the parties must

13 | P a g e
respect the terms and conditions of the agreement. 14Notably, the framers of the law did not give
a fixed term as to the effectivity of the terms and conditions of employment. It can be gleaned
from their discussions that it was left to the parties to fix the period.

In the instant case, it is not difficult to determine the period of effectivity for the non-representation
provisions of the CBA. Taking it from the history of their CBAs, SMC intended to have the terms
of the CBA effective for three (3) years reckoned from the expiration of the old or previous CBA
which was on June 30, 1989, as it provides:

Sec. 1. This Agreement which shall be binding upon the parties hereto and their
respective successors-in-interest, shall become effective and shall remain in force and
effect until June 30, 1992.

The argument that the PRC case is applicable is indeed misplaced. We quote with favor the
Order of the Secretary of Labor in the light of SMC's peculiar situation as compared with PRC's
company situation.

It is true that in the Philippine Refining Company case (OS-AJ-0031-91) (sic), Labor
Dispute at Philippine Refining Company), we ruled that the term of the renegotiated
provisions of the CBA should coincide with the remaining term of the agency. In doing so,
we placed premium on the fact that PRC has only two (2) unions and no other union had
yet executed a renewed term of 3 years. Nonetheless, in ruling for a shortened term, we
were guided by our considered perception that the said term would improve, rather than
ruin, the general welfare of both the workers and the company. It is equally true that once
the economic provisions of the CBA expire, the residual representative status of the
union is effective for only 2 more years. However, if circumstances warrant that the
contract duration which it is soliciting from the company for the benefit of the workers,
shall be a little bit longer than its lifespan, then this Office cannot stand in the way of a
more ideal situation. We must not lose sight of the fact that the primordial purpose of a
collective contract is to promote industrial harmony and stability in the terms and
conditions of employment. To our mind, this objective cannot be achieved without giving
due consideration to the peculiarities and unique characteristics of the employer. In the
case at bar, there is no dispute that the mother corporation (SMC) spun-off two of its
divisions and thereby gave birth to two (2) other entities now known as Magnolia
Corporation and San Miguel Foods, Inc. In order to effect a smooth transition, the
companies concerned continued to recognize the existing unions as the bargaining
agents of their respective bargaining units. In the meantime, the other unions in these
companies eventually concluded their CBA negotiations on the remaining term and all of
them agreed on a 3-year cycle. Notably, the following CBAs were forged incorporating a
term of 3-years on the renegotiated provisions, to wit:

1. SMC — daily-paid employees union (IBM)

2. SMFI — monthly-paid employees and daily-paid employees at the Cabuyao Plant.

There is a direct link between the voluntary recognition by the company of the continuing
representative status of the unions after the aforementioned spin-offs and the stand of
the company for a 3-year renegotiated cycle when the economic provisions of the
existing CBAs expired, i.e., the maintain stability and avoid confusion when the umbilical
cord of the two divisions were severed from their parent. These two cannot be considered
independently of each other for they were intended to reinforce one another. Precisely,
the company conceded to face the same union notwithstanding the spin-offs in order to
preserve industrial peace during the infancy of the two corporations. If the union would
insist on a shorter renegotiated term, then all the advantages gained by both parties in
this regard, would have gone to naught. With this in mind, this office feels that it will
betray its mandate should we order the parties to execute a 2-year renegotiated term for
then chaos and confusion, rather than tranquillity, would be the order of the day. Worse,
there is a strong likelihood that such a ruling might spawn discontent and possible mass
actions against the company coming from the other unions who had already agreed to a
3-year renegotiated terms. If this happens, the purpose of this Office's intervention into
the parties' controversy would have been defeated. 15

The issue as to the term of the non-representation provisions of the CBA need not belabored
especially when we take note of the Memorandum of the Secretary of Labor dated February 24,
1994 which was mentioned in the Resolution of Undersecretary Bienvenido Laguesma on
January 16, 1995 in the certification election case involving the SMC employees. 16 In said
memorandum, the Secretary of Labor had occasion to clarify the term of the renegotiated terms
of the CBA vis-a-vis the term of the bargaining agent, to wit:

14 | P a g e
As a matter of policy the parties are encourages (sic) to enter into a renegotiated CBA
with a term which would coincide (sic) with the aforesaid five (5) year term of the
bargaining representative.

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 5-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.

Thus, we do not find any grave abuse of discretion on the part of the Secretary of Labor in ruling
that the effectivity of the renegotiated terms of the CBA shall be for three (3) years.

With respect to the second issue, there is, likewise, no merit in petitioner-union's assertion that
the employees of Magnolia and SMFI should still be considered part of the bargaining unit of
SMC.

Magnolia and SMFI were spun-off to operate as distinct companies on October 1, 1991.
Management saw the need for these transformations in keeping with its vision and long term
strategy as it explained in its letter addressed to the employees dated August 13, 1991:

. . . As early as 1986, we announced the decentralization program and spoke of the need
for structures that can react fast to competition, a changing environment, shorter product
life cycles and shifts in consumer preference. We further stated in the 1987 Annual
Report to Stockholders that San Miguel's businesses will be more autonomous and self
sufficient so as to better acquire and master new technologies, cope with a labor force
with different expertises and expectations, and master and satisfy the changing needs of
our customers and end-consumers. As subsidiaries, Magnolia and FLD will gain better
industry focus and flexibility, greater awareness of operating results, and speedier, more
responsive decision making.

xxx xxx xxx

We only have to look at the experience of Coca-Cola Bottlers Philippines, Inc., since this
company was organized about ten years ago, to see the benefits that arise from
restructuring a division of San Miguel into a more competitive organization. As a stand-
alone enterprise, CCBPI engineered a dramatic turnaround and has sustained its sales
and market share leadership ever since.

We are confident that history will repeat itself, and the transformation of Magnolia and
FLD will be successful as that of CCBPI. 17

Undeniably, the transformation of the companies was a management prerogative and business
judgment which the courts can not look into unless it is contrary to law, public policy or morals.
Neither can we impute any bad faith on the part of SMC so as to justify the application of the
doctrine of piercing the corporate veil. 18Ever mindful of the employees' interests, management
has assured the concerned employees that they will be absorbed by the new corporations without
loss of tenure and retaining their present pay and benefits according to the existing CBAs. 19 They
were advised that upon the expiration of the CBAs, new agreements will be negotiated between
the management of the new corporations and the bargaining representatives of the employees
concerned. As a result of the spin-offs:

1. Each of the companies are run by, supervised and controlled by different management
teams including separate human resource/personnel managers.

2. Each Company enforces its own administrative and operational rules and policies and
are not dependent on each other in their operations.

3. Each entity maintains separate financial statements and are audited separately from
each other. 20

Indubitably, therefore, Magnolia and SMFI became distinct entities with separate juridical
personalities. Thus, they can not belong to a single bargaining unit as held in the case
of Diatagon Labor Federation Local 110 of the ULGWP v. Ople. 21 We elucidate:

15 | P a g e
The fact that their businesses are related and that the 236 employees of the Georgia
Pacific International Corporation were originally employees of Lianga Bay Logging Co.,
Inc. is not a justification for disregarding their separate personalities. Hence, the 236
employees, who are now attached to Georgia Pacific International Corporation, should
not be allowed to vote in the certification election at the Lianga Bay Logging Co., Inc.
They should vote at a separate certification election to determine the collective
bargaining representative of the employees of Georgia Pacific International Corporation.

Petition-union's attempt to include the employees of Magnolia and SMFI in the SMC bargaining
unit so as to have a bigger mass base of employees has, therefore, no more valid ground.

Moreover, in determining an appropriate bargaining unit, the test of grouping is mutuality or


commonality of interests. The employees sought to be represented by the collective bargaining
agent must have substantial mutual interests in terms of employment and working conditions as
evinced by the type of work they performed. 22 Considering the spin-offs, the companies would
consequently have their respective and distinctive concerns in terms of the nature of work,
wages, hours of work and other conditions of employment. Interests of employees in the different
companies perforce differ. SMC is engaged in the business of the beer manufacturing. Magnolia
is involved in the manufacturing and processing of diary products 23 while SMFI is involved in the
production of feeds and the processing of chicken. 24 The nature of their products and scales of
business may require different skills which must necessarily be commensurated by different
compensation packages. The different companies may have different volumes of work and
different working conditions. For such reason, the employees of the different companies see the
need to group themselves together and organize themselves into distinctive and different groups.
It would then be best to have separate bargaining units for the different companies where the
employees can bargain separately according to their needs and according to their own working
conditions.

We reiterate what we have explained in the case of University of the Philippines v. Ferrer-
Calleja 25 that:

[T]here are various factors which must be satisfied and considered in determining the
proper constituency of a bargaining unit. No one particular factor is itself decisive of the
determination. The weight accorded to any particular factor varies in accordance with the
particular question or questions that may arise in a given case. What are these factors?
Rothenberg mentions a good number, but the most pertinent to our case are: (1) will of
the employees (Globe Doctrine); (2) affinity and unit of employees' interest, such as
substantial similarity of work and duties, or similarity of compensation and working
conditions; (3) prior collective bargaining history; and (4) employment status, such as
temporary, seasonal and probationary employees. . . .

xxx xxx xxx

An enlightening appraisal of the problem of defining an appropriate bargaining unit is


given in the 10th Annual Report of the National Labor Relations Board wherein it is
emphasized that the factors which said board may consider and weigh in fixing
appropriate units are: the history, extent and type of organization of employees; the
history of their collective bargaining; the history, extent and type of organization of
employees in other plants of the same employer, or other employers in the same
industry; the skill, wages, work, and working conditions of the employees; the desires of
the employees; the eligibility of the employees for membership in the union or unions
involved; and the relationship between the unit or units proposed and the employer's
organization, management, and operation . . .

. . . In said report, it is likewise emphasized that the basic test in determining the
appropriate bargaining unit is that a unit, to be appropriate, must affect a grouping of
employees who have substantial, mutual interests in wages, hours, working conditions
and other subjects of collective bargaining (citing Smith on Labor Laws, 316-317;
Francisco, Labor Laws, 162). . .

Finally, we take note of the fact that the separate interests of the employees of Magnolia and
SMFI from those of SMC has been recognized in the case of Daniel Borbon v. Laguesma. 26 We
quote:

Even assuming in gratia argumenti that at the time of the election they were regular
employees of San Miguel, nonetheless, these workers are no longer connected with San
Miguel Corporation in any manner because Magnolia has ceased to be a division of San
Miguel Corporation and has been formed into a separate corporation with a personality of

16 | P a g e
its own (p. 305, Rollo). This development, which was brought to our attention by private
respondents, necessarily renders moot and academic any further discourse on the
propriety of the elections which petitioners impugn via the recourse (p. 319, Rollo).

In view of all the foregoing, we do not find any grave abuse of discretion on the part of the
Secretary of Labor in rendering the assailed Order.

WHEREFORE, the petition is DISMISSED for lack of merit. The Temporary Restraining Order
issued on March 29, 1995 is lifted.

SO ORDERED.

17 | P a g e
[G.R. No. 81883. September 23, 1992.]

KNITJOY MANUFACTURING, INC., Petitioner, v. PURA FERRER-CALLEJA, Director of Bureau of


Labor Relations, and KNITJOY MONTHLY EMPLOYEES UNION, Respondents.

[G.R. No. 82111. September 23, 1992.]

CONFEDERATION OF FILIPINO WORKERS (CFW), Petitioner, v. DIRECTOR PURA FERRER-


CALLEJA and KNITJOY MONTHLY EMPLOYEES UNION (KMEU), Respondents.

V.E. Del Rosario & Associates for petitioner in G.R. No. 81883.

Rogelio R. Udarbe for petitioner in G.R. No. 82111.

Banzuela, Flores, Miralles, Raneses, Sy, Taquio and Associates for Private Respondent.

SYLLABUS

1. LABOR AND SOCIAL LEGISLATION; LABOR CODE; LABOR RELATIONS; ONE COMPANY-ONE
UNION POLICY; EXCEPTION. — The suggested bias of the Labor Code in favor of the one company-
one union policy, anchored on the greater mutual benefits which the parties could derive, especially in the
case of employees whose bargaining strength could undeniably be enhanced by their unity and solidarity
but diminished by their disunity, division and dissension, is not without exceptions. The present Article
245 of the Labor Code expressly allows supervisory employees who are not performing managerial
functions to join, assist or form their separate union but bars them from membership in a labor
organization of the rank-and-file employees. Even Section 2(c), Rule V, Book V of the Implementing
Rules and Regulations of the Labor Code, which seeks to implement the policy, also recognizes
exceptions. The usual exception, of course, is where the employer unit has to give way to the other units
like the craft unit, plant unit, or a subdivision thereof, the recognition of these exceptions takes into
account the policy to assure employees of the fullest freedom in exercising their rights. Otherwise stated,
the one company-one union policy must yield to the right of the employees to form unions or associations
for purposes not contrary to law, to self-organization and to enter into collective bargaining negotiations,
among others, which the Constitution guarantees.

2. CONSTITUTIONAL LAW; BILL OF RIGHTS; RIGHT TO FROM UNION OR ASSOCIATIONS; SCOPE.


— The right to form a union or association or to self-organization comprehends two (2) broad notions, to
wit: (a) the liberty or freedom, i.e., the absence of restraint which guarantees that the employee may act
for himself without being prevented by law, and (b) the power, by virtue of which an employee may, as he
pleases, join or refrain from joining an association. (Victoriano v. Elizalde Rope Workers’ Union, 59 SCRA
54).

3. LABOR AND SOCIAL LEGISLATION; LABOR CODE; LABOR RELATIONS; ONE COMPANY-ONE
UNION POLICY; NOT APPLICABLE WHERE EXISTING UNION COVERED ONLY ONE CLASS OF
EMPLOYEES; CASE AT BAR. — in the bargaining history of KNITJOY, the CBA has been consistently
limited to the regular rank-and-file employees paid on a daily or piece-rate basis. On the other hand, the
rank-and-file employees paid on a monthly basis were never included within its scope. Respondent
KMEU’s membership is limited to the latter class of employees, KMEU does not seek to dislodge CFW as
the exclusive bargaining representative for the former. The records further disclose that in the certification
solicited by TUPAS and during the elections which followed thereafter, resulting in the certification of
CFW as the exclusive bargaining representative, the monthly-paid employees were expressly excluded.
Thus, the negotiations between CFW and KNITJOY following such a certification could only logically refer
to the rank-and-file employees paid on a daily or piece-rate basis. Clearly therefore, KNITJOY and CFW
recognize that insofar as the monthly-paid employees are concerned, the latter’s constituting a separate
bargaining unit with the appropriate union as sole bargaining representative, can neither be prevented nor
avoided without infringing on these employees’ rights to form a union and to enter into collective
bargaining negotiations. Stated differently, KNITJOY and CFW recognize the fact that the existing
bargaining unit in the former is not — and has never been — the employer unit. Given this historical and
factual setting, KMEU had the unquestioned and undisputed right to seek certification as the exclusive
bargaining representative for the monthly-paid rank-and-file employees; both KNITJOY and CFW cannot
block the same on the basis of this Court’s declaration in Bulletin Publishing Corp. v. Hon. Sanchez 15
and General Rubber and Footwear Corp. v. Bureau of Labor Relations (155 SCRA 283 [1987]) regarding
the one-company-one union concept.

18 | P a g e
4. ID.; ID.; ID.; CERTIFICATION ELECTION; RESULTS THEREOF CONFINED ONLY TO THE GROUP
IT REPRESENTS; CBA ENTERED DOES NOT BAR HOLDING OF ANOTHER CERTIFICATION
ELECTION FOR THE OTHER GROUP; CASE AT BAR. — Considering that (a) the TUPAS solicited
certification election was strictly confined to the rank-and-file employees who are paid on a daily or piece-
rate basis, (b) the results of the election must also necessarily confine the certified union’s representation
to the group it represents and (c) the issue of the plight of the monthly-paid employees was still pending,
KNITJOY and CFW clearly acted with palpable bad faith and malice in including within the scope of the
new CBA these monthly-paid employees. Thus was effected a conspiracy to defeat and suppress the
right of the KMEU and its members to bargain collectively and negotiate for themselves, to impose upon
the latter a contract the negotiation for which they were not even given notice of, consulted or allowed to
participate in, and to oust from the BLR the pending appeal on the certification issue. In the latter case,
KNITJOY and CFW are guilty of contumacious conduct. It goes without saying then that the new CBA
cannot validly include in its scope or coverage the monthly-paid rank-and-file employees of KNITJOY. It
does not bar the holding of a certification election to determine their sole bargaining agent, and the
negotiation for and the execution of a subsequent CBA between KNITJOY and the eventual winner in
said election (Section 4, Rule V, Book V of the Rules Implementing the Labor Code).

DAVIDE, JR., J.:

These petitions have a common origin and raise identical issues. They were ordered consolidated on 23
November 1988.

In G.R. No. 81883, the 1 December 1987 Decision of respondent Director of the Bureau of Labor
Relations in BLR Case No. A-10-315-87, which reversed the Order of Med-Arbiter-Designate Rolando S.
dela Cruz dated 4 September 1987 and ordered the holding of a certification election among the regular
rank-and-file monthly-paid employees of Knitjoy Manufacturing, Inc. (KNITJOY), is assailed by the latter.

The Med-Arbiter’s order dismissed the petition of private respondent Knitjoy Monthly Employees Union
(KMEU) for such certification election and directed the parties "to work out (sic) towards the formation of a
single union in the company."cralaw virtua1aw library

The antecedent material operative facts in these petitions are as follows:chanrob1es virtual 1aw library

Petitioner KNITJOY had a collective bargaining agreement (CBA) with the Federation of Filipino Workers
(FFW). The bargaining unit covered only the regular rank-and-file employees of KNITJOY paid on a daily
or piece-rate basis. It did not include regular rank-and-file office and production employees paid on a
monthly basis. The CBA expired on 15 June 1987. Prior to its expiration, the FFW was split into two (2)
factions — the Johnny Tan and the Aranzamendez factions. The latter eventually became the
Confederation of Filipino Workers (CFW), herein petitioner in G.R. No. 82111.

Also prior to the expiration of the CBA, the Trade Union of the Philippines and Allied Services (TUPAS)
filed a petition for the holding of a certification election among KNITJOY’s regular rank-and-file employees
paid on a daily and piece-rate basis. Excluded were the regular rank-and-file employees paid on a
monthly basis. In the certification election conducted on 10 June 1987, CFW emerged as the winner;
thereafter, negotiations for a new CBA between CFW and KNITJOY
commenced.chanroblesvirtualawlibrary

On 24 June 1987, during the pendency of the said negotiations, private respondent KMEU filed a petition
for certification election among KNITJOY’s regular rank-and-file monthly-paid employees with Regional
Office No. IV of the Department of Labor and Employment (DOLE) which docketed the same as R-04-
OD-M-6-75-87. The Knitjoy Monthly Employees Association and Confederation of Citizens Labor Union
(KMEA-CCLU), another union existing in the said company, and petitioner CFW intervened therein.

The petition was dismissed in the Order of 4 September 1987 of Med-Arbiter Rolando S. de la Cruz, the
dispositive portion of which reads:jgc:chanrobles.com.ph

"WHEREFORE, premises considered, the petition is hereby Dismissed, but the parties are instructed to
work out (sic) towards the formation of a single union in the company." 1

KMEU filed a motion to reconsider this order, which was treated as an appeal by the Bureau of Labor
Relations (BLR).

On 1 December 1987, public respondent Pura Ferrer-Calleja. Director of the BLR, handed down a
Decision 2 reversing the order of Med-Arbiter de la Cruz. The dispositive portion of the Decision

19 | P a g e
reads:jgc:chanrobles.com.ph

"WHEREFORE, premises considered, the Appeal of Knitjoy Monthly Employees is hereby granted
subject to the exclusion of the monthly paid employees who are deemed managerial.

Let, therefore, the certification election proceed without delay, with the following as choices:chanrob1es
virtual 1aw library

1. Knitjoy Monthly Employees Union (KMEU); and

2. No Union.

The company’s latest payroll shall be the basis in determining the list of eligible voters.

SO ORDERED."cralaw virtua1aw library

Respondent Director brushed aside KNITJOY’s arguments that the monthly-paid employees have the
same working incentives as their counterparts, the daily-paid workers; that the existing collective
bargaining agent (CFW) is willing to include the monthly-paid employees, and that out of the 212 monthly-
paid employees, 116 qualify as managerial employees while the rest who are holding confidential or
technical positions should likewise be excluded. In finding for KMEU, said Director declared
that:jgc:chanrobles.com.ph

"As pointed out by the Supreme Court in the similar case of General Rubber and Footwear Corporation v.
Bureau of Labor Relations, Et Al., G.R. No. 74262, it is perhaps unusual for management to have to deal
with two (2) collective bargaining unions but there is no one to blame except management for creating the
situation it is in. From the beginning of the existence of the CBA, management had sought to
indiscriminately suppress the members of the petitioners’ right (sic) to self-organization. Respondents’
argument that the incumbent collective bargaining agent is willing to accommodate herein petitioner is of
no moment since the option now rests upon the petitioner as to whether or not they desire to join the
existing collective bargaining agent or remain as separate (sic) union." 3

KNITJOY and CFW separately moved to reconsider the said decision alleging, as principal underpinning
therefor, the conclusion and signing between them, allegedly on 27 November 1987 — before the
rendition of the challenged decision — of a CBA which includes in its coverage the monthly-paid rank-
and-file employees. It is averred that said CBA has rendered the case moot and academic; moreover, to
remove the monthly-paid employees from their present bargaining unit would lead to the fragmentation
thereof, contrary to existing labor policies favoring larger units.chanrobles virtual lawlibrary

In her Decision of 8 February 1988, respondent Director denied for lack of merit the motion for
reconsideration on the principal ground that although the monthly-paid rank-and-file employees were
allegedly included within the scope of the new CBA, they are not barred from forming a separate
bargaining unit considering that: (a) since the petition for certification election was filed as early as 24
June 1987, there already existed a pending. representation issue when KNITJOY and CFW commenced
negotiations for a new CBA; nevertheless, KMEU was not brought into the said negotiations and was
therefore not a privy to the CBA; (b) members of KMEU did not participate in the ratification of the CBA;
contrary to KNITJOY s claim that the same was unanimously ratified by the members of the bargaining
unit, the CBA failed to mention even one monthly-paid employee who participated in the ratification
process, and (c) while it is true that the policy of the DOLE is to favor a one company-one union scenario
which finds basis in Section 2, Rule V, Book V of the Rules Implementing the Labor Code, there are,
nonetheless, some exceptions thereto, as where the bargaining history requires the formation of another
bargaining unit. Besides, such a policy must yield to an employee’s Constitutional right to form unions
which includes the freedom to join a union of one’s choice. 4

The new CBA, which KMEU claims to have been signed on 12 December 1987, and not on 27 November
1987 as both KNITJOY and CFW boldly assert, defines the bargaining unit covered as
follows:jgc:chanrobles.com.ph

"SECTION 2. The bargaining unit covered by this Agreement consists of all regular and permanent rank-
and-file employees of the COMPANY employed in its production plants and paid on a daily or piece-rate
basis and regular, rank-and-file monthly paid office employees, excluding managerial, supervisory,
casual, temporary and probationary employees, and security guards." 5

Unfazed by their defeat before the BLR, KNITJOY and CFW separately filed the instant petitions. The
former imputes upon respondent Director grave abuse of discretion in holding that (a) the scope of the
bargaining unit agreed upon in the new CBA does not bind KMEU because it is not a party thereto, (b) the
acceptance by all the members of KMEU of all benefits of the CBA did not constitute an overt act of
ratification and (c) the CBA was concluded on 12 December 1987 and not on 27 November 1987. It

20 | P a g e
further contends that respondent Director contumaciously violated the one company-one union policy of
the Labor Code and disregarded the ruling of this Court in Bulletin Publishing Corp. v. Hon. Sanchez, 6
reiterated in part in General Rubber and Footwear Corp. v. Bureau of Labor Relations. 7 Upon the other
hand, CFW contends that respondent Director committed grave abuse of discretion in (a) allowing the
creation of a unit separate from the existing bargaining unit defined in the new CBA thus abetting the
proliferation of unions, (b) disregarding the CBA provisions which consider the CFW as the sole and
exclusive bargaining agent of all rank-and-file employees and (c) excluding CFW from the choices of
unions to be voted upon. 8

On 24 August 1988, 9 this Court gave due course to the petition in G.R. No. 81883 after both the public
and private respondents filed their separate comments and the petitioner filed its consolidated reply
thereto. 10

On 23 November 1988, G.R. No. 82111 was consolidated with G.R. No. 81883 and the petitioner in the
former was ordered to file a consolidated reply to the separate comments of both respondents. 11

The principal issues raised in these petitions are:chanrob1es virtual 1aw library

1. Whether or not petitioner KNITJOY’s monthly-paid regular rank-and-file employees can constitute an
appropriate bargaining unit separate and distinct from the existing unit composed of daily or piece-rate
paid regular rank-and-file employees, and

2. Whether or not the inclusion in the coverage of the new CBA between KNITJOY and CFW of the
monthly-paid rank-and-file employees bars the holding of a certification election among the said monthly
paid employees.

We decide for the respondents.

1. The suggested bias of the Labor Code in favor of the one company-one union policy, anchored on the
greater mutual benefits which the parties could derive, especially in the case of employees whose
bargaining strength could undeniably be enhanced by their unity and solidarity but diminished by their
disunity, division and dissension, is not without exceptions.

The present Article 245 of the Labor Code expressly allows supervisory employees who are not
performing managerial functions to join, assist or form their separate union but bars them from
membership in a labor organization of the rank-and-file employees. It reads:jgc:chanrobles.com.ph

"ARTICLE 245. Ineligibility of managerial employees to join any labor organization; right of supervisory
employees. — Managerial employees are not eligible to join, assist or form any labor organization.
Supervisory employees shall not be eligible for membership in a labor organization of the rank-and-file
employees but may join, assist or form separate labor organizations of their own."cralaw virtua1aw library

This provision obviously allows more than one union in a company.

Even Section 2(c), Rule V, Book V of the Implementing Rules and Regulations of the Labor Code, which
seeks to implement the policy, also recognizes exceptions. It reads:chanrobles virtual lawlibrary

"SECTION 2. Who may file. — Any legitimate labor organization or the employer, when requested to
bargain collectively, may file the petition.

The petition, when filed by a legitimate labor organization shall contain, among others:chanrob1es virtual
1aw library

x x x

(c) description of the bargaining unit which shall be the employer unit unless circumstances otherwise
require; . . . ." (Emphasis supplied)

The usual exception, of course, is where the employer unit has to give way to the other units like the craft
unit, plant unit, or a subdivision thereof, the recognition of these exceptions takes into account the policy
to assure employees of the fullest freedom in exercising their rights. 12 Otherwise stated, the one
company-one union policy must yield to the right of the employees to form unions or associations for
purposes not contrary to law, to self-organization and to enter into collective bargaining negotiations,
among others, which the Constitution guarantees. 13

The right to form a union or association or to self-organization comprehends two (2) broad notions, to wit:

21 | P a g e
(a) the liberty or freedom, i.e., the absence of restraint which guarantees that the employee may act for
himself without being prevented by law, and (b) the power, by virtue of which an employee may, as he
pleases, join or refrain from joining an association. In Victoriano v. Elizalde Rope Workers’ Union, 14 this
Court stated:jgc:chanrobles.com.ph

". . . Notwithstanding the different theories propounded by the different schools of jurisprudence regarding
the nature and contents of a ‘right’, it can be safely said that whatever theory one subscribes to, a right
comprehends at least two broad notions, namely: first, liberty or freedom, i.e., the absence of legal
restraint, whereby an employee may act for himself without being prevented by law; and second, power,
whereby an employee may, as he pleases, join or refrain from joining an association. It is, therefore, the
employee who should decide for himself whether he should join or not an association, and should he
choose to join, he himself makes up his mind as to which association he would join; and even after he
has joined, he still retains the liberty and the power to leave and cancel his membership with said
organization at any time [Pagkakaisa Samahang Manggagawa ng San Miguel Brewery v. Enriquez, Et
Al., 108 Phil., 1010, 1019]. It is clear, therefore, that the right to join a union includes the right to abstain
from joining any union [Abo, Et. Al. v. PHILAME (KG) Employees Union, Et Al., L-19912, January 30,
1965, 13 SCRA 120, 123, quoting Rothenberg, Labor Relations]. Inasmuch as what both the Constitution
and the Industrial Peace Act have recognized, and guaranteed to the employee, is the ‘right’ to join
associations of his choice, it would be absurd to say that the law also imposes, in the same breath, upon
the employee the duty to join associations. The law does not enjoin an employee to sign up with any
association."cralaw virtua1aw library

Furthermore, it is not denied that in the bargaining history of KNITJOY, the CBA has been consistently
limited to the regular rank-and-file employees paid on a daily or piece-rate basis. On the other hand, the
rank-and-file employees paid on a monthly basis were never included within its scope. Respondent
KMEU’s membership is limited to the latter class of employees, KMEU does not seek to dislodge CFW as
the exclusive bargaining representative for the former. The records further disclose that in the certification
solicited by TUPAS and during the elections which followed thereafter, resulting in the certification of
CFW as the exclusive bargaining representative, the monthly-paid employees were expressly excluded.
Thus, the negotiations between CFW and KNITJOY following such a certification could only logically refer
to the rank-and-file employees paid on a daily or piece-rate basis. Clearly therefore, KNITJOY and CFW
recognize that insofar as the monthly-paid employees are concerned, the latter’s constituting a separate
bargaining unit with the appropriate union as sole bargaining representative, can neither be prevented nor
avoided without infringing on these employees’ rights to form a union and to enter into collective
bargaining negotiations. Stated differently, KNITJOY and CFW recognize the fact that the existing
bargaining unit in the former is not — and has never been — the employer unit. Given this historical and
factual setting, KMEU had the unquestioned and undisputed right to seek certification as the exclusive
bargaining representative for the monthly-paid rank-and-file employees; both KNITJOY and CFW cannot
block the same on the basis of this Court’s declaration in Bulletin Publishing Corp. v. Hon. Sanchez 15
and General Rubber and Footwear Corp. v. Bureau of Labor Relations 16 regarding the one company-
one union concept. Petitioners have obviously misread these cases. In the first, We stated that" [t]he crux
of the dispute . . . is whether or not supervisors in petitioner company therein may, for purposes of
collective bargaining, form a union separate and distinct from the existing union organized by the rank-
and-file employees of the same company," 17 and ruled that the members of the Bulletin Supervisory
Union, wholly composed of supervisors, are not qualified to form a union of their own under the law and
rules then existing, considering that" [a] perusal of the job descriptions corresponding to the private
respondents as outlined in the petition, clearly reveals the private respondents to be managers,
purchasing officers, personnel officers, property officers, supervisors, cashiers, heads of various sections
and the like. The nature of their duties gives rise to the irresistible conclusion that most of the herein
private respondents are performing managerial functions;" 18 hence, under Article 246 19 of the Labor
Code, they cannot form, join and assist labor organizations. It should be stressed that the statement
therein that supervisors "who do not assume any managerial function may join or assist an existing rank-
and-file union or if none exists, to join or assist in the formation of such rank-and-file organization" 20 is
no longer legally feasible under existing laws. As earlier noted, the present Article 245 of the Labor Code
allows supervisory employees who are not exercising managerial functions to join, assist or form separate
labor organizations of their own but prohibits them from joining a labor organization composed of the
rank-and-file employees.chanrobles lawlibrary : rednad

The second case on the other hand, demolishes the stand of KNITJOY and CFW for, as correctly
contended by the respondents, it in fact recognizes an exception to the one company-one union concept.
Thus:jgc:chanrobles.com.ph

"Perhaps it is unusual for the petitioner to have to deal with two (2) collective bargaining unions but there
is no one to blame except petitioner itself for creating the situation it is in. From the beginning of the
existence in 1963 of a bargaining unit for the employees up to the present, petitioner had sought to
indiscriminately suppress the members of the private respondent’s right (sic) to self-organization provided
for by law. Petitioner, in justification of its action, maintained that the exclusion of the members of the
private respondent from the bargaining union of the rank-and-file or from forming their own union was

22 | P a g e
agreed upon by petitioner corporation with the previous bargaining representatives . . . Such posture has
no leg to stand on. It has not been shown that private respondent was privy to this agreement. And even
if it were so, it can never bind subsequent federations and unions particularly private respondent-union
because it is a curtailment of the right to self-organization guaranteed by the labor laws. However, to
prevent any difficulty and to avoid confusion to all concerned and, more importantly, to fulfill the policy of
the New Labor Code as well as to be consistent with Our ruling in the Bulletin case, supra, the monthly-
paid rank-and-file employees should be allowed to join the union of the daily-paid-rank-and-file
employees of petitioner so that they can also avail of the CBA benefits or to form their own rank-and-file
union, without prejudice to the certification election that has been ordered." 21 (Emphasis supplied)

2. Regardless of the date when the new CBA was executed - whether on 27 November 1987 as
contended by KNITJOY and CFW or 12 December 1967 as claimed by the respondents — the fact
remains that it was executed before the resolution of KMEU’s petition for certification election among the
monthly paid employees became final. This Court, however, sustains the respondents’ claim for indeed if
it was executed by the parties on 27 November 1987, both KNITJOY and CFW would have immediately
filed the appropriate pleading with the BLR informing it of such execution and moving for the dismissal of
the appeal on the ground that it has been rendered moot and academic. Moreover, public respondent’s
finding on this point is supported by substantial evidence, thus:jgc:chanrobles.com.ph

"The parties could not have signed the said CBA on 27 November 1987, contrary to their allegation,
because from 4:00 - 10:00 p.m. on the same day, 27 November 1987, the parties still attended a
conciliation conference before Assistant Director Maximo L. Lim of the NCR (see Annex "F" of
respondent’s Supplemental Motion for Reconsideration) and agreed in principle on nine (9) items or
provisions to be included in said CBA. Said minutes do not state that these nine items are the remaining
unresolved issues in the negotiation of the CBA." 22 It was only in their motion for the reconsideration of
public respondent’s decision of 1 December 1987 that the existence of the new CBA was made
known.chanrobles virtualawlibrary chanrobles.com:chanrobles.com.ph

Considering that (a) the TUPAS solicited certification election was strictly confined to the rank-and-file
employees who are paid on a daily or piece-rate basis, (b) the results of the election must also
necessarily confine the certified union’s representation to the group it represents and (c) the issue of the
plight of the monthly-paid employees was still pending, KNITJOY and CFW clearly acted with palpable
bad faith and malice in including within the scope of the new CBA these monthly-paid employees. Thus
was effected a conspiracy to defeat and suppress the right of the KMEU and its members to bargain
collectively and negotiate for themselves, to impose upon the latter a contract the negotiation for which
they were not even given notice of, consulted or allowed to participate in, and to oust from the BLR the
pending appeal on the certification issue. In the latter case, KNITJOY and CFW are guilty of
contumacious conduct. It goes without saying then that the new CBA cannot validly include in its scope or
coverage the monthly-paid rank-and-file employees of KNITJOY. It does not bar the holding of a
certification election to determine their sole bargaining agent, and the negotiation for and the execution of
a subsequent CBA between KNITJOY and the eventual winner in said election. Section 4, Rule V, Book V
of the Rules Implementing the Labor Code expressly provides:jgc:chanrobles.com.ph

"SECTION 4. Effects of early agreements. — The representation case shall not, however, be adversely
affected by a collective bargaining agreement registered before or during the last 60 days of a subsisting
agreement or during the pendency of the representation case." (Emphasis supplied)

The public respondent then committed no abuse of discretion ordering a certification election among the
monthly-paid rank-and-file employees, except managerial employees, of KNITJOY. The choice however,
should not be, as correctly contended by CFW, limited to merely (a) KMEU and (b) no union. The records
disclose that the intervenors in the petition for certification are the KMEA-CCLU and CFW. They should
be included as among the choices in the certification election.cralawnad

WHEREFORE, the instant petitions are DISMISSED. However, the challenged decision of public
respondent of 1 December 1987 is modified to include in the choices for the certification election
petitioner Confederation of Filipino Workers (CFW) and the Knitjoy Monthly Employees Association and
Confederation of Citizens Labor Unions (KMEU-CCLU).

Costs against petitioners.

SO ORDERED.

23 | P a g e
G.R. No. 160352 July 23, 2008

REPUBLIC OF THE PHILIPPINES, represented by Department of Labor and Employment


(DOLE), Petitioner,
vs.
KAWASHIMA TEXTILE MFG., PHILIPPINES, INC., Respondent.

DECISION

AUSTRIA-MARTINEZ, J.:

The Republic of the Philippines assails by way of Petition for Review on Certiorari under Rule 45 of the
Rules of Court, the December 13, 2002 Decision1 of the Court of Appeals (CA), which reversed the
August 18, 2000 Decision2 of the Department of Labor and Employment (DOLE), and reinstated the May
17, 2000 Order3 of Med-Arbiter Anastacio L. Bactin, dismissing the petition of Kawashima Free Workers
Union-PTGWO Local Chapter No. 803 (KFWU) for the conduct of a certification election in Kawashima
Textile Mfg. Phils., Inc. (respondent); and the October 7, 2003 CA Resolution 4 which denied the motion
for reconsideration.

The relevant facts are of record.

On January 24, 2000, KFWU filed with DOLE Regional Office No. IV, a Petition for Certification Election
to be conducted in the bargaining unit composed of 145 rank-and-file employees of
respondent.5 Attached to its petition are a Certificate of Creation of Local/Chapter 6 issued on January 19,
2000 by DOLE Regional Office No. IV, stating that it [KFWU] submitted to said office a Charter Certificate
issued to it by the national federation Phil. Transport & General Workers Organization (PTGWO), and a
Report of Creation of Local/Chapter.7

Respondent filed a Motion to Dismiss8 the petition on the ground that KFWU did not acquire any legal
personality because its membership of mixed rank-and-file and supervisory employees violated Article
245 of the Labor Code, and its failure to submit its books of account contravened the ruling of the Court
in Progressive Development Corporation v. Secretary, Department of Labor and Employment. 9

In an Order dated May 17, 2000, Med-Arbiter Bactin found KFWU’s legal personality defective and
dismissed its petition for certification election, thus:

We scrutinize the facts and evidences presented by the parties and arrived at a decision that at least two
(2) members of [KFWU], namely: Dany I. Fernandez and Jesus R. Quinto, Jr. are supervisory employees,
having a number of personnel under them. Being supervisory employees, they are prohibited under
Article 245 of the Labor Code, as amended, to join the union of the rank and file employees. Dany I.
Fernandez and Jesus R. Quinto, Jr., Chief Engineers of the Maintenance and Manufacturing Department,
respectively, act as foremen to the line engineers, mechanics and other non-skilled workers and
responsible [for] the preparation and organization of maintenance shop fabrication and schedules,
inventory and control of materials and supplies and tasked to implement training plans on line engineers
and evaluate the performance of their subordinates. The above-stated actual functions of Dany I.
Fernandez and Jesus R. Quinto, Jr. are clear manifestation that they are supervisory employees.

xxxx

Since petitioner’s members are mixture of rank and file and supervisory employees, petitioner
union, at this point [in] time, has not attained the status of a legitimate labor organization.
Petitioner should first exclude the supervisory employees from it membership before it can attain
the status of a legitimate labor organization. The above judgment is supported by the decision of the
Supreme Court in the Toyota Case10 wherein the High Tribunal ruled:

"As respondent union’s membership list contains the names of at least twenty seven (27) supervisory
employees in Level Five Positions, the union could not prior to purging itself of its supervisory employee
members, attain the status of a legitimate labor organization. Not being one, it cannot possess the
requisite personality to file a petition for certification election." (Underscoring omitted.)

xxxx

Furthermore, the commingling of rank and file and supervisory employees in one (1) bargaining unit
cannot be cured in the exclusion-inclusion proceedings [at] the pre-election conference. The above ruling
is supported by the Decision of the Supreme Court in Dunlop Slazenger (Phils.), Inc. vs. Honorable
Secretary of Labor and Employment, et al., G.R. No. 131248 dated December 11, 1998 11 x x x.

xxxx

24 | P a g e
WHEREFORE, premises considered, the petition for certification election is hereby dismissed for lack of
requisite legal status of petitioner to file this instant petition.

SO ORDERED.12 (Emphasis supplied)

On the basis of the aforecited decision, respondent filed with DOLE Regional Office No. IV a Petition for
Cancellation of Charter/Union Registration of KFWU,13 the final outcome of which, unfortunately, cannot
be ascertained from the records.

Meanwhile, KFWU appealed14 to the DOLE which issued a Decision on August 18, 2000, the dispositive
portion of which reads:

WHEREFORE, the appeal is GRANTED. The Order dated 17 May 2000 of the Med-Arbiter is
REVERSED and SET ASIDE. Accordingly, let the entire records of the case be remanded to the office of
origin for the immediate conduct of certification election, subject to the usual pre-election conference,
among the rank-and-file employees of Kawashima Textile Manufacturing Philippines, Inc. with the
following choices:

1. Kawashima Free Workers Union-PTGWO Local Chapter No. 803; and

2. No union.

Pursuant to Rule XI, Section 11.1 of the New Implementing Rules, the employer is hereby directed to
submit to the office of origin the certified list of current employees in the bargaining unit for the last three
months prior to the issuance of this decision.

SO DECIDED.15

The DOLE held that Med-Arbiter Bactin's reliance on the decisions of the Court in Toyota Motor
Philippines Corporation v. Toyota Motor Philippines Corporation Labor Union 16 and Dunlop Slazenger,
Inc. v. Secretary of Labor and Employment17 was misplaced, for while Article 245 declares supervisory
employees ineligible for membership in a labor organization for rank-and-file employees, the provision did
not state the effect of such prohibited membership on the legitimacy of the labor organization and its right
to file for certification election. Neither was such mixed membership a ground for cancellation of its
registration. Section 11, Paragraph II, Rule XI of Department Order No. 9 "provides for the dismissal of a
petition for certification election based on lack of legal personality of a labor organization only on the
following grounds: (1) [KFWU] is not listed by the Regional Office or the Bureau of Labor Relations in its
registry of legitimate labor organizations; or (2) [KFWU's] legal personality has been revoked or canceled
with finality."18 The DOLE noted that neither ground existed; on the contrary, KFWU's legal personality
was well-established, for it held a certificate of creation and had been listed in the registry of legitimate
labor organizations.

As to the failure of KFWU to file its books of account, the DOLE held that such omission was not a ground
for revocation of union registration or dismissal of petition for certification election, for under Section 1,
Rule VI of Department Order No. 9, a local or chapter like KFWU was no longer required to file its books
of account.19

Respondent filed a Motion for Reconsideration20 but the DOLE denied the same in its September 28,
2000 Resolution.21

However, on appeal by respondent, the CA rendered the December 13, 2002 Decision assailed herein,
reversing the August 18, 2000 DOLE Decision, thus:

Since respondent union clearly consists of both rank and file and supervisory employees, it
cannot qualify as a legitimate labor organization imbued with the requisite personality to file a
petition for certification election. This infirmity in union membership cannot be corrected in the
inclusion-exclusion proceedings during the pre-election conference.

Finally, contrary to the pronouncement of public respondent, the application of the doctrine enunciated
in Toyota Motor Philippines Corporation vs. Toyota Motor Philippines Corporation Labor Union was not
construed in a way that effectively denies the fundamental right of respondent union to organize and seek
bargaining representation x x x.

For ignoring jurisprudential precepts on the matter, the Court finds that the Undersecretary of Labor,
acting under the authority of the Secretary of Labor, acted with grave abuse of discretion amounting to
lack or excess of jurisdiction.

25 | P a g e
WHEREFORE, premises considered, the Petition is hereby GRANTED. The Decision dated 18 August
2000 of the Undersecretary of Labor, acting under the authority of the Secretary, is hereby REVERSED
and SET ASIDE. The Order dated 17 May 2000 of the Med-Arbiter dismissing the petition for certification
election filed by Kawashima Free Workers Union-PTGWO Local Chapter No. 803 is REINSTATED.

SO ORDERED.22 (Emphasis supplied)

KFWU filed a Motion for Reconsideration23 but the CA denied it.

The Republic of the Philippines (petitioner) filed the present petition to seek closure on two issues:

First, whether a mixed membership of rank-and-file and supervisory employees in a union is a ground for
the dismissal of a petition for certification election in view of the amendment brought about by D.O. 9,
series of 1997, which deleted the phraseology in the old rule that "[t]he appropriate bargaining unit of the
rank-and-file employee shall not include the supervisory employees and/or security guards;" and

Second, whether the legitimacy of a duly registered labor organization can be collaterally attacked in a
petition for a certification election through a motion to dismiss filed by an employer such as Kawashima
Textile Manufacturing Phils., Inc.24

The petition is imbued with merit.

The key to the closure that petitioner seeks could have been Republic Act (R.A.) No. 9481. 25 Sections 8
and 9 thereof provide:

Section 8. Article 245 of the Labor Code is hereby amended to read as follows:

"Art. 245. Ineligibility of Managerial Employees to Join any Labor Organization; Right of Supervisory
Employees. - Managerial employees are not eligible to join, assist or form any labor organization.
Supervisory employees shall not be eligible for membership in the collective bargaining unit of the rank-
and-file employees but may join, assist or form separate collective bargaining units and/or legitimate labor
organizations of their own. The rank and file union and the supervisors' union operating within the same
establishment may join the same federation or national union."

Section 9. A new provision, Article 245-A is inserted into the Labor Code to read as follows:

"Art. 245-A. Effect of Inclusion as Members of Employees Outside the Bargaining Unit. - The inclusion
as union members of employees outside the bargaining unit shall not be a ground for the
cancellation of the registration of the union. Said employees are automatically deemed removed
from the list of membership of said union." (Emphasis supplied)

Moreover, under Section 4, a pending petition for cancellation of registration

will not hinder a legitimate labor organization from initiating a certification election, viz:

Sec. 4. A new provision is hereby inserted into the Labor Code as Article 238-A to read as follows:

"Art. 238-A. Effect of a Petition for Cancellation of Registration. - A petition for cancellation of union
registration shall not suspend the proceedings for certification election nor shall it prevent the
filing of a petition for certification election.

In case of cancellation, nothing herein shall restrict the right of the union to seek just and equitable
remedies in the appropriate courts." (Emphasis supplied)

Furthermore, under Section 12 of R.A. No. 9481, employers have no personality to interfere with or thwart
a petition for certification election filed by a legitimate labor organization, to wit:

Sec. 12. A new provision, Article 258-A is hereby inserted into the Labor Code to read as follows:

"Art. 258-A. Employer as Bystander. - In all cases, whether the petition for certification election is filed by
an employer or a legitimate labor organization, the employer shall not be considered a party thereto
with a concomitant right to oppose a petition for certification election. The employer's
participation in such proceedings shall be limited to: (1) being notified or informed of petitions of
such nature; and (2) submitting the list of employees during the pre-election conference should
the Med-Arbiter act favorably on the petition." (Emphasis supplied)

However, R.A. No. 9481 took effect only on June 14, 2007;26 hence, it applies only to labor
representation cases filed on or after said date.27 As the petition for certification election subject matter of

26 | P a g e
the present petition was filed by KFWU on January 24, 2000, 28 R.A. No. 9481 cannot apply to it. There
may have been curative labor legislations29that were given retrospective effect,30 but not the aforecited
provisions of R.A. No. 9481, for otherwise, substantive rights and interests already vested would be
impaired in the process.31

Instead, the law and rules in force at the time of the filing by KFWU of the petition for certification election
on January 24, 2000 are R.A. No. 6715,32 amending Book V of Presidential Decree (P.D.) No. 442 (Labor
Code),33 as amended, and the Rules and Regulations Implementing R.A. No. 6715,34 as amended by
Department Order No. 9, series of 1997.35

It is within the parameters of R.A. No. 6715 and the Implementing Rules that the Court will now resolve
the two issues raised by petitioner.

If there is one constant precept in our labor laws – be it Commonwealth Act No. 213 (1936),36 R.A. No.
875 (1953),37 P.D. No. 442 (1974), Executive Order (E.O.) No. 111 (1986)38 or R.A. No. 6715 (1989) - it is
that only a legitimate labor organization may exercise the right to be certified as the exclusive
representative of all the employees in an appropriate collective bargaining unit for purposes of collective
bargaining.39 What has varied over the years has been the degree of enforcement of this precept, as
reflected in the shifting scope of administrative and judicial scrutiny of the composition of a labor
organization before it is allowed to exercise the right of representation.

One area of contention has been the composition of the membership of a labor organization, specifically
whether there is a mingling of supervisory and rank-and-file employees and how such questioned
mingling affects its legitimacy.

It was in R.A. No. 875, under Section 3, that such questioned mingling was first prohibited,40 to wit:

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

Nothing in R.A. No. 875, however, tells of how the questioned mingling can affect the legitimacy of the
labor organization. Under Section 15, the only instance when a labor organization loses its legitimacy is
when it violates its duty to bargain collectively; but there is no word on whether such mingling would also
result in loss of legitimacy. Thus, when the issue of whether the membership of two supervisory
employees impairs the legitimacy of a rank-and-file labor organization came before the Court En Banc in
Lopez v. Chronicle Publication Employees Association,41 the majority pronounced:

It may be observed that nothing is said of the effect of such ineligibility upon the union itself or on the
status of the other qualified members thereof should such prohibition be disregarded. Considering that
the law is specific where it intends to divest a legitimate labor union of any of the rights and privileges
granted to it by law, the absence of any provision on the effect of the disqualification of one of its
organizers upon the legality of the union, may be construed to confine the effect of such ineligibility only
upon the membership of the supervisor. In other words, the invalidity of membership of one of the
organizers does not make the union illegal, where the requirements of the law for the organization thereof
are, nevertheless, satisfied and met.42 (Emphasis supplied)

Then the Labor Code was enacted in 1974 without reproducing Sec. 3 of R.A. No. 875. The provision in
the Labor Code closest to Sec. 3 is Article 290,43 which is deafeningly silent on the prohibition against
supervisory employees mingling with rank-and-file employees in one labor organization. Even the
Omnibus Rules Implementing Book V of the Labor Code44 (Omnibus Rules) merely provides in Section
11, Rule II, thus:

Sec. 11. Supervisory unions and unions of security guards to cease operation. – All existing supervisory
unions and unions of security guards shall, upon the effectivity of the Code, cease to operate as such and
their registration certificates shall be deemed automatically cancelled. However, existing collective
agreements with such unions, the life of which extends beyond the date of effectivity of the Code shall be
respected until their expiry date insofar as the economic benefits granted therein are concerned.

Members of supervisory unions who do not fall within the definition of managerial employees shall
become eligible to join or assist the rank and file organization. The determination of who are managerial
employees and who are not shall be the subject of negotiation between representatives of supervisory
union and the employer. If no agreement s reached between the parties, either or both of them ma bring
the issue to the nearest Regional Office for determination. (Emphasis supplied)

27 | P a g e
The obvious repeal of the last clause of Sec. 3, R.A. No. 875 prompted the Court to declare in Bulletin v.
Sanchez45that supervisory employees who do not fall under the category of managerial employees may
join or assist in the formation of a labor organization for rank-and-file employees, but they may not form
their own labor organization.

While amending certain provisions of Book V of the Labor Code, E.O. No. 111 and its implementing
rules46continued to recognize the right of supervisory employees, who do not fall under the category of
managerial employees, to join a rank-and-file labor organization.47

Effective 1989, R.A. No. 6715 restored the prohibition against the questioned mingling in one labor
organization, viz:

Sec. 18. Article 245 of the same Code, as amended, is hereby further amended to read as follows

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

Unfortunately, just like R.A. No. 875, R.A. No. 6715 omitted specifying the exact effect any violation of the
prohibition would bring about on the legitimacy of a labor organization.

It was the Rules and Regulations Implementing R.A. No. 6715 (1989 Amended Omnibus Rules) which
supplied the deficiency by introducing the following amendment to Rule II (Registration of Unions):

Sec. 1. Who may join unions. – x x x Supervisory employees and security guards shall not be eligible for
membership in a labor organization of the rank-and-file employees but may join, assist or form separate
labor organizations of their own; Provided, that those supervisory employees who are included in an
existing rank-and-file bargaining unit, upon the effectivity of Republic Act No. 6715, shall remain in that
unit x x x. (Emphasis supplied)

and Rule V (Representation Cases and Internal-Union Conflicts) of the Omnibus Rules, viz:

Sec. 1. Where to file. – A petition for certification election may be filed with the Regional Office which has
jurisdiction over the principal office of the employer. The petition shall be in writing and under oath.

Sec. 2. Who may file. – Any legitimate labor organization or the employer, when requested to bargain
collectively, may file the petition.

The petition, when filed by a legitimate labor organization, shall contain, among others:

xxxx

(c) description of the bargaining unit which shall be the employer unit unless circumstances otherwise
require; and provided further, that the appropriate bargaining unit of the rank-and-file employees shall not
include supervisory employees and/or security guards. (Emphasis supplied)

By that provision, any questioned mingling will prevent an otherwise legitimate and duly registered labor
organization from exercising its right to file a petition for certification election.

Thus, when the issue of the effect of mingling was brought to the fore in Toyota, 48 the Court, citing Article
245 of the Labor Code, as amended by R.A. No. 6715, held:

Clearly, based on this provision, a labor organization composed of both rank-and-file and supervisory
employees is no labor organization at all. It cannot, for any guise or purpose, be a legitimate labor
organization. Not being one, an organization which carries a mixture of rank-and-file and
supervisory employees cannot possess any of the rights of a legitimate labor organization,
including the right to file a petition for certification election for the purpose of collective
bargaining. It becomes necessary, therefore, anterior to the granting of an order allowing a certification
election, to inquire into the composition of any labor organization whenever the status of the labor
organization is challenged on the basis of Article 245 of the Labor Code.

xxxx

In the case at bar, as respondent union's membership list contains the names of at least twenty-seven
(27) supervisory employees in Level Five positions, the union could not, prior to purging itself of its
supervisory employee members, attain the status of a legitimate labor organization. Not being one, it
cannot possess the requisite personality to file a petition for certification election.49 (Emphasis supplied)

28 | P a g e
In Dunlop,50 in which the labor organization that filed a petition for certification election was one for
supervisory employees, but in which the membership included rank-and-file employees, the Court
reiterated that such labor organization had no legal right to file a certification election to represent a
bargaining unit composed of supervisors for as long as it counted rank-and-file employees among its
members.51

It should be emphasized that the petitions for certification election involved in Toyota and Dunlop were
filed on November 26, 1992 and September 15, 1995, respectively; hence, the 1989 Rules was applied in
both cases.

But then, on June 21, 1997, the 1989 Amended Omnibus Rules was further amended by Department
Order No. 9, series of 1997 (1997 Amended Omnibus Rules). Specifically, the requirement under Sec.
2(c) of the 1989 Amended Omnibus Rules - that the petition for certification election indicate that the
bargaining unit of rank-and-file employees has not been mingled with supervisory employees - was
removed. Instead, what the 1997 Amended Omnibus Rules requires is a plain description of the
bargaining unit, thus:

Rule XI
Certification Elections

xxxx

Sec. 4. Forms and contents of petition. - The petition shall be in writing and under oath and shall contain,
among others, the following: x x x (c) The description of the bargaining unit. 52

In Pagpalain Haulers, Inc. v. Trajano,53 the Court had occasion to uphold the validity of the 1997
Amended Omnibus Rules, although the specific provision involved therein was only Sec. 1, Rule VI, to
wit:

Sec. 1. Chartering and creation of a local/chapter.- A duly registered federation or national union may
directly create a local/chapter by submitting to the Regional Office or to the Bureau two (2) copies of the
following: a) a charter certificate issued by the federation or national union indicating the creation or
establishment of the local/chapter; (b) the names of the local/chapter’s officers, their addresses, and the
principal office of the local/chapter; and (c) the local/ chapter’s constitution and by-laws; provided that
where the local/chapter’s constitution and by-laws is the same as that of the federation or national union,
this fact shall be indicated accordingly.

All the foregoing supporting requirements shall be certified under oath by the Secretary or the Treasurer
of the local/chapter and attested to by its President.

which does not require that, for its creation and registration, a local or chapter submit a list of its
members.

Then came Tagaytay Highlands Int’l. Golf Club, Inc. v. Tagaytay Highlands Employees Union-
PGTWO54 in which the core issue was whether mingling affects the legitimacy of a labor organization and
its right to file a petition for certification election. This time, given the altered legal milieu, the Court
abandoned the view in Toyota and Dunlop and reverted to its pronouncement in Lopez that while there is
a prohibition against the mingling of supervisory and rank-and-file employees in one labor organization,
the Labor Code does not provide for the effects thereof. 55 Thus, the Court held that after a labor
organization has been registered, it may exercise all the rights and privileges of a legitimate labor
organization. Any mingling between supervisory and rank-and-file employees in its membership cannot
affect its legitimacy for that is not among the grounds for cancellation of its registration, unless such
mingling was brought about by misrepresentation, false statement or fraud under Article 239 of the Labor
Code.56

In San Miguel Corp. (Mandaue Packaging Products Plants) v. Mandaue Packing Products Plants-San
Miguel Packaging Products-San Miguel Corp. Monthlies Rank-and-File Union-FFW,57 the Court explained
that since the 1997 Amended Omnibus Rules does not require a local or chapter to provide a list of its
members, it would be improper for the DOLE to deny recognition to said local or chapter on account of
any question pertaining to its individual members.58

More to the point is Air Philippines Corporation v. Bureau of Labor Relations,59 which involved a petition
for cancellation of union registration filed by the employer in 1999 against a rank-and-file labor
organization on the ground of mixed membership:60 the Court therein reiterated its ruling in Tagaytay
Highlands that the inclusion in a union of disqualified employees is not among the grounds for
cancellation, unless such inclusion is due to misrepresentation, false statement or fraud under the
circumstances enumerated in Sections (a) and (c) of Article 239 of the Labor Code. 61lavvphil

29 | P a g e
All said, while the latest issuance is R.A. No. 9481, the 1997 Amended Omnibus Rules, as interpreted by
the Court in Tagaytay Highlands, San Miguel and Air Philippines, had already set the tone for it. Toyota
and Dunlop no longer hold sway in the present altered state of the law and the rules.

Consequently, the Court reverses the ruling of the CA and reinstates that of the DOLE granting the
petition for certification election of KFWU.

Now to the second issue of whether an employer like respondent may collaterally attack the legitimacy of
a labor organization by filing a motion to dismiss the latter’s petition for certification election.

Except when it is requested to bargain collectively,62 an employer is a mere bystander to any petition for
certification election; such proceeding is non-adversarial and merely investigative, for the purpose thereof
is to determine which organization will represent the employees in their collective bargaining with the
employer.63 The choice of their representative is the exclusive concern of the employees; the employer
cannot have any partisan interest therein; it cannot interfere with, much less oppose, the process by filing
a motion to dismiss or an appeal from it;64 not even a mere allegation that some employees participating
in a petition for certification election are actually managerial employees will lend an employer legal
personality to block the certification election.65 The employer's only

right in the proceeding is to be notified or informed thereof.66

The amendments to the Labor Code and its implementing rules have buttressed that policy even more.

WHEREFORE, the petition is GRANTED. The December 13, 2002 Decision and October 7, 2003
Resolution of the Court of Appeals and the May 17, 2000 Order of Med-Arbiter Anastacio L. Bactin
are REVERSED and SET ASIDE,while the August 18, 2000 Decision and September 28, 2000
Resolution of the Department of Labor and Employment are REINSTATED.

No costs.

SO ORDERED.

30 | P a g e
G.R. No. 77395 November 29, 1988

BELYCA CORPORATION, petitioner,


vs.
DIR. PURA FERRER CALLEJA, LABOR RELATIONS, MANILA, MINISTRY OF LABOR AND
EMPLOYMENT; MED-ARBITER, RODOLFO S. MILADO, MINISTRY OF LABOR AND EMPLOYMENT,
REGIONAL OFFICE NO. 10 AND ASSOCIATED LABOR UNION (ALU-TUCP), MINDANAO
REGIONAL OFFICE, CAGAYAN DE ORO CITY, respondents.

Soriano and Arana Law Offices for petitioner.

The Solicitor General for public respondent.

Francisco D. Alas for respondent Associated Labor Unions-TUCP.

PARAS, J.:

This is a petition for certiorari and prohibition with preliminary injunction seeking to annul or to set aside
the resolution of the Bureau of Labor Relations dated November 24, 1986 and denying the appeal, and
the Bureau's resolution dated January 13, 1987 denying petitioner's motion for reconsideration.

The dispositive portion of the questioned resolution dated November 24, 1986 (Rollo, p. 4) reads as
follows:

WHEREFORE, in view of all the foregoing considerations, the Order is affirmed and the
appeal therefrom denied.

Let, therefore, the pertinent records of the case be remanded to the office of origin for the
immediate conduct of the certification election.

The dispositive portion of the resolution dated January 13, 1987 (Rollo, p. 92) reads, as follows:

WHEREFORE, the Motion for Reconsideration filed by respondent Belyca Corporation


(Livestock Agro-Division) is hereby dismissed for lack of merit and the Bureau's
Resolution dated 24 November 1986 is affirmed. Accordingly, let the records of this case
be immediately forwarded to the Office of origin for the holding of the certification
elections.

No further motion shall hereafter be entertained.

The antecedents of the case are as follows:

On June 3, 1986, private respondent Associated Labor Union (ALU)-TUCP, a legitimate labor
organization duly registered with the Ministry of Labor and Employment under Registration Certificate No.
783-IP, filed with the Regional Office No. 10, Ministry of Labor and Employment at Cagayan de Oro City,
a petition for direct certification as the sole and exclusive bargaining agent of all the rank and file
employees/workers of Belyca Corporation (Livestock and Agro-Division), a duly organized, registered and
existing corporation engaged in the business of poultry raising, piggery and planting of agricultural crops
such as corn, coffee and various vegetables, employing approximately 205 rank and file
employees/workers, the collective bargaining unit sought in the petition, or in case of doubt of the union's
majority representation, for the issuance of an order authorizing the immediate holding of a certification
election (Rollo, p. 18). Although the case was scheduled for hearing at least three times, no amicable
settlement was reached by the parties. During the scheduled hearing of July 31, 1986 they, however,
agreed to submit simultaneously their respective position papers on or before August 11, 1986 (rollo. p.
62).

Petitioner ALU-TUCP, private respondent herein, in its petition and position paper alleged, among others,
(1) that there is no existing collective bargaining agreement between the respondent employer, petitioner
herein, and any other existing legitimate labor unions; (2) that there had neither been a certification
election conducted in the proposed bargaining unit within the last twelve (12) months prior to the filing of
the petition nor a contending union requesting for certification as the. sole and exclusive bargaining
representative in the proposed bargaining unit; (3) that more than a majority of respondent employer's
rank-and-file employees/workers in the proposed bargaining unit or one hundred thirty-eight (138) as of
the date of the filing of the petition, have signed membership with the ALU-TUCP and have expressed
their written consent and authorization to the filing of the petition; (4) that in response to petitioner union's
two letters to the proprietor/ General Manager of respondent employer, dated April 21, 1986 and May 8, 1

31 | P a g e
986, requesting for direct recognition as the sole and exclusive bargaining agent of the rank-and-file
workers, respondent employer has locked out 119 of its rank-and-file employees in the said bargaining
unit and had dismissed earlier the local union president, vice-president and three other active members of
the local unions for which an unfair labor practice case was filed by petitioner union against respondent
employer last July 2, 1986 before the NLRC in Cagayan de Oro City (Rollo, pp. 18; 263).<äre||anº•1àw>

Respondent employer, on the other hand, alleged in its position paper, among others, (1) that due to the
nature of its business, very few of its employees are permanent, the overwhelming majority of which are
seasonal and casual and regular employees; (2) that of the total 138 rank-and-file employees who
authorized, signed and supported the filing of the petition (a) 14 were no longer working as of June 3,
1986 (b) 4 resigned after June, 1986 (c) 6 withdrew their membership from petitioner union (d) 5 were
retrenched on June 23, 1986 (e) 12 were dismissed due to malicious insubordination and destruction of
property and (f) 100 simply abandoned their work or stopped working; (3) that the 128 incumbent
employees or workers of the livestock section were merely transferred from the agricultural section as
replacement for those who have either been dismissed, retrenched or resigned; and (4) that the statutory
requirement for holding a certification election has not been complied with by the union (Rollo, p. 26).

The Labor Arbiter granted the certification election sought for by petitioner union in his order dated August
18, 1986 (Rollo, p. 62).

On February 4, 1987, respondent employer Belyca Corporation, appealed the order of the Labor Arbiter
to the Bureau of Labor Relations in Manila (Rollo, p. 67) which denied the appeal (Rollo, p. 80) and the
motion for reconsideration (Rollo, p. 92). Thus, the instant petition received in this Court by mail on
February 20, 1987 (Rollo, p. 3).

In the resolution of March 4, 1987, the Second Division of this Court required respondent Union to
comment on the petition and issued a temporary restraining order (,Rollo, p. 95).

Respondent union filed its comment on March 30, 1987 (Rollo, p. 190); public respondents filed its
comment on April 8, 1987 (Rollo, p. 218).

On May 4, 1987, the Court resolved to give due course to the petition and to require the parties to submit
their respective memoranda within twenty (20) days from notice (Rollo, p. 225).

The Office of the Solicitor General manifested on June 11, 1987 that it is adopting the comment for public
respondents as its memorandum (Rollo, p. 226); memorandum for respondent ALU was filed on June 30,
1987 (Rollo, p. 231); and memorandum for petitioner, on July 30, 1987 (Rollo, p. 435).

The issues raised in this petition are:

WHETHER OR NOT THE PROPOSED BARGAINING UNIT IS AN APPROPRIATE


BARGAINING UNIT.

II

WHETHER OR NOT THE STATUTORY REQUIREMENT OF 30% (NOW 20%) OF THE


EMPLOYEES IN THE PROPOSED BARGAINING UNIT, ASKING FOR A
CERTIFICATION ELECTION HAD BEEN STRICTLY COMPLIED WITH.

In the instant case, respondent ALU seeks direct certification as the sole and exclusive bargaining agent
of all the rank-and-file workers of the livestock and agro division of petitioner BELYCA Corporation (Rollo,
p. 232), engaged in piggery, poultry raising and the planting of agricultural crops such as corn, coffee and
various vegetables (Rollo, p. 26). But petitioner contends that the bargaining unit must include all the
workers in its integrated business concerns ranging from piggery, poultry, to supermarts and cinemas so
as not to split an otherwise single bargaining unit into fragmented bargaining units (Rollo, p.
435).<äre||anº•1àw>

The Labor Code does not specifically define what constitutes an appropriate collective bargaining unit.
Article 256 of the Code provides:

Art. 256. Exclusive bargaining representative.—The labor organization


designated or selected by the majority of the employees in an
appropriate collective bargaining unit shall be exclusive representative of
the employees in such unit for the purpose of collective bargaining.
However, an individual employee or group of employee shall have the
right at any time to present grievances to their employer.

32 | P a g e
According to Rothenberg, a proper bargaining unit maybe said to be a group of employees of a given
employer, comprised of all or less than all of the entire body of employees, which the collective interests
of all the employees, consistent with equity to the employer, indicate to be best suited to serve reciprocal
rights and duties of the parties under the collective bargaining provisions of the law (Rothenberg in Labor
Relations, p. 482).

This Court has already taken cognizance of the crucial issue of determining the proper constituency of a
collective bargaining unit.

Among the factors considered in Democratic Labor Association v. Cebu Stevedoring Co. Inc. (103 Phil
1103 [1958]) are: "(1) will of employees (Glove Doctrine); (2) affinity and unity of employee's interest,
such as substantial similarity of work and duties or similarity of compensation and working conditions; (3)
prior collective bargaining history; and (4) employment status, such as temporary, seasonal and
probationary employees".

Under the circumstances of that case, the Court stressed the importance of the fourth factor and
sustained the trial court's conclusion that two separate bargaining units should be formed in dealing with
respondent company, one consisting of regular and permanent employees and another consisting of
casual laborers or stevedores. Otherwise stated, temporary employees should be treated separately from
permanent employees. But more importantly, this Court laid down the test of proper grouping, which is
community and mutuality of interest.

Thus, in a later case, (Alhambra Cigar and Cigarette Manufacturing Co. et al. v. Alhambra Employees'
Association 107 Phil. 28 [1960]) where the employment status was not at issue but the nature of work of
the employees concerned; the Court stressed the importance of the second factor otherwise known as
the substantial-mutual-interest test and found no reason to disturb the finding of the lower Court that the
employees in the administrative, sales and dispensary departments perform work which has nothing to do
with production and maintenance, unlike those in the raw leaf, cigar, cigarette and packing and
engineering and garage departments and therefore community of interest which justifies the format or
existence as a separate appropriate collective bargaining unit.

Still later in PLASLU v. CIR et al. (110 Phil. 180 [1960]) where the employment status of the employees
concerned was again challenged, the Court reiterating the rulings, both in Democratic Labor Association
v. Cebu Stevedoring Co. Inc. supra and Alhambra Cigar and Cigarette Co. et al. v. Alhambra Employees'
Association (supra) held that among the factors to be considered are: employment status of the
employees to be affected, that is the positions and categories of work to which they belong, and the unity
of employees' interest such as substantial similarity of work and duties.

In any event, whether importance is focused on the employment status or the mutuality of interest of the
employees concerned "the basic test of an asserted bargaining unit's acceptability is whether or not it is
fundamentally the combination which will best assure to all employees the exercise of their collective
bargaining rights (Democratic Labor Association v. Cebu Stevedoring Co. Inc. supra)

Hence, still later following the substantial-mutual interest test, the Court ruled that there is a substantial
difference between the work performed by musicians and that of other persons who participate in the
production of a film which suffice to show that they constitute a proper bargaining unit. (LVN Pictures, Inc.
v. Philippine Musicians Guild, 1 SCRA 132 [1961]).

Coming back to the case at bar, it is beyond question that the employees of the livestock and agro
division of petitioner corporation perform work entirely different from those performed by employees in the
supermarts and cinema. Among others, the noted difference are: their working conditions, hours of work,
rates of pay, including the categories of their positions and employment status. As stated by petitioner
corporation in its position paper, due to the nature of the business in which its livestock-agro division is
engaged very few of its employees in the division are permanent, the overwhelming majority of which are
seasonal and casual and not regular employees (Rollo, p. 26). Definitely, they have very little in common
with the employees of the supermarts and cinemas. To lump all the employees of petitioner in its
integrated business concerns cannot result in an efficacious bargaining unit comprised of constituents
enjoying a community or mutuality of interest. Undeniably, the rank and file employees of the livestock-
agro division fully constitute a bargaining unit that satisfies both requirements of classification according
to employment status and of the substantial similarity of work and duties which will ultimately assure its
members the exercise of their collective bargaining rights.

II

It is undisputed that petitioner BELYCA Corporation (Livestock and Agro Division) employs more or less
two hundred five (205) rank-and-file employees and workers. It has no existing duly certified collective
bargaining agreement with any legitimate labor organization. There has not been any certification election
conducted in the proposed bargaining unit within the last twelve (12) months prior to the filing of the

33 | P a g e
petition for direct certification and/or certification election with the Ministry of Labor and Employment, and
there is no contending union requesting for certification as the sole and exclusive bargaining
representative in the proposed bargaining unit.

The records show that on the filing of the petition for certification and/or certification election on June 3,
1986; 124 employees or workers which are more than a majority of the rank-and-file employees or
workers in the proposed bargaining unit had signed membership with respondent ALU-TUCP and had
expressed their written consent and authorization to the filing of the petition. Thus, the Labor Arbiter
ordered the certification election on August 18, 1986 on a finding that 30% of the statutory requirement
under Art. 258 of the Labor Code has been met.

But, petitioner corporation contends that after June 3, 1986 four (4) employees resigned; six (6)
subsequently withdrew their membership; five (5) were retrenched; twelve (12) were dismissed for
illegally and unlawfully barricading the entrance to petitioner's farm; and one hundred (100) simply
abandoned their work.

Petitioner's claim was however belied by the Memorandum of its personnel officer to the 119 employees
dated July 28, 1986 showing that the employees were on strike, which was confirmed by the finding of the
Bureau of Labor Relations to the effect that they went on strike on July 24, 1986 (Rollo, p. 419). Earlier
the local union president, Warrencio Maputi; the Vice-president, Gilbert Redoblado and three other active
members of the union Carmen Saguing, Roberto Romolo and Iluminada Bonio were dismissed and a
complaint for unfair labor practice, illegal dismissal etc. was filed by the Union in their behalf on July 2,
1986 before the NLRC of Cagayan de Oro City (Rollo, p. 415).<äre||anº•1àw> The complaint was
amended on August 20, 1986 for respondent Union to represent Warrencio Maputi and 137 others
against petitioner corporation and Bello Casanova President and General Manager for unfair labor
practice, illegal dismissal, illegal lockout, etc. (Rollo, p. 416).

Under Art. 257 of the Labor Code once the statutory requirement is met, the Director of Labor Relations
has no choice but to call a certification election (Atlas Free Workers Union AFWU PSSLU Local v. Noriel,
104 SCRA 565 [1981]; Vismico Industrial Workers Association (VIWA) v. Noriel, 131 SCRA 569 [1984]) It
becomes in the language of the New Labor Code "Mandatory for the Bureau to conduct a certification
election for the purpose of determining the representative of the employees in the appropriate bargaining
unit and certify the winner as the exclusive bargaining representative of all employees in the unit."
(Federacion Obrera de la Industria Tabaquera y Otros Trabajadores de Filipinas v. Noriel, 72 SCRA 24
[1976]; Kapisanan Ng Mga Manggagawa v. Noriel, 77 SCRA 414 [1977]); more so when there is no
existing collective bargaining agreement. (Samahang Manggagawa Ng Pacific Mills, Inc. v. Noriel, 134
SCRA 152 [1985]); and there has not been a certification election in the company for the past three years
(PLUM Federation of Industrial and Agrarian Workers v. Noriel, 119 SCRA 299 [1982]) as in the instant
case.

It is significant to note that 124 employees out of the 205 employees of the Belyca Corporation have
expressed their written consent to the certification election or more than a majority of the rank and file
employees and workers; much more than the required 30% and over and above the present requirement
of 20% by Executive Order No. 111 issued on December 24, 1980 and applicable only to unorganized
establishments under Art. 257, of the Labor Code, to which the BELYCA Corporation belong (Ass. Trade
Unions (ATU) v. Trajano, G.R. No. 75321, June 20, 1988).) More than that, any doubt cast on the
authenticity of signatures to the petition for holding a certification election cannot be a bar to its being
granted (Filipino Metals Corp. v. Ople 107 SCRA 211 [1981]). Even doubts as to the required 30% being
met warrant holding of the certification election (PLUM Federation of Industrial and Agrarian Workers v.
Noriel, 119 SCRA 299 [1982]). In fact, once the required percentage requirement has been reached, the
employees' withdrawal from union membership taking place after the filing of the petition for certification
election will not affect said petition. On the contrary, the presumption arises that the withdrawal was not
free but was procured through duress, coercion or for a valuable consideration (La Suerte Cigar and
Cigarette Factory v. Director of the Bureau of Labor Relations, 123 SCRA 679 [1983]). Hence, the
subsequent disaffiliation of the six (6) employees from the union will not be counted against or deducted
from the previous number who had signed up for certification elections Vismico Industrial Workers
Association (VIWA) v. Noriel 131 SCRA 569 [1984]).<äre||anº•1àw> Similarly, until a decision, final in
character, has been issued declaring the strike illegal and the mass dismissal or retrenchment valid, the
strikers cannot be denied participation in the certification election notwithstanding, the vigorous
condemnation of the strike and the fact that the picketing were attended by violence. Under the foregoing
circumstances, it does not necessarily follow that the strikers in question are no longer entitled to
participate in the certification election on the theory that they have automatically lost their jobs. (Barrera v.
CIR, 107 SCRA 596 [1981]). For obvious reasons, the duty of the employer to bargain collectively is
nullified if the purpose of the dismissal of the union members is to defeat the union in the consent
requirement for certification election. (Samahang Manggagawa Ng Via Mare v. Noriel, 98 SCRA 507
[1980]). As stressed by this Court, the holding of a certification election is a statutory policy that should
not be circumvented. (George and Peter Lines Inc. v. Associated Labor Unions (ALU), 134 SCRA 82
[1986]).

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Finally, as a general rule, a certification election is the sole concern of the workers. The only exception is
where the employer has to file a petition for certification election pursuant to Art. 259 of the Labor Code
because the latter was requested to bargain collectively. But thereafter the role of the employer in the
certification process ceases. The employer becomes merely a bystander (Trade Union of the Phil. and
Allied Services (TUPAS) v. Trajano, 120 SCRA 64 [1983]).

There is no showing that the instant case falls under the above mentioned exception. However, it will be
noted that petitioner corporation from the outset has actively participated and consistently taken the
position of adversary in the petition for direct certification as the sole and exclusive bargaining
representative and/or certification election filed by respondent Associated Labor Unions (ALU)-TUCP to
the extent of filing this petition for certiorari in this Court. Considering that a petition for certification
election is not a litigation but a mere investigation of a non-adversary character to determining the
bargaining unit to represent the employees (LVN Pictures, Inc. v. Philippine Musicians Guild, supra;
Bulakena Restaurant & Caterer v. Court of Industrial Relations, 45 SCRA 88 [1972]; George Peter Lines,
Inc. v. Associated Labor Union, 134 SCRA 82 [1986]; Tanduay Distillery Labor Union v. NLRC, 149
SCRA 470 [1987]), and its only purpose is to give the employees true representation in their collective
bargaining with an employer (Confederation of Citizens Labor Unions CCLU v. Noriel, 116 SCRA 694
[1982]), there appears to be no reason for the employer's objection to the formation of subject union,
much less for the filing of the petition for a certification election.

PREMISES CONSIDERED, (a) the petition is DISMISSED for lack of merit (b) resolution of the Bureau of
Labor Relations dated Nov. 24, 1986 is AFFIRMED; and the temporary restraining order issued by the
Court on March 4, 1987 is LIFTED permanently.

SO ORDERED.

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G.R. No. 164301 August 10, 2010

BANK OF THE PHILIPPINE ISLANDS, Petitioner,


vs.
BPI EMPLOYEES UNION-DAVAO CHAPTER-FEDERATION OF UNIONS IN BPI
UNIBANK, Respondent.

DECISION

LEONARDO-DE CASTRO, J.:

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

At the outset, we should call to mind the spirit and the letter of the Labor Code provisions on union
security clauses, specifically Article 248 (e), which states, "x x x Nothing in this Code or in any other
law shall stop the parties from requiring membership in a recognized collective bargaining agent as a
condition for employment, except those employees who are already members of another union at the
time of the signing of the collective bargaining agreement."1 This case which involves the application of a
collective bargaining agreement with a union shop clause should be resolved principally from the
standpoint of the clear provisions of our labor laws, and the express terms of the CBA in question, and
not by inference from the general consequence of the merger of corporations under the Corporation
Code, which obviously does not deal with and, therefore, is silent on the terms and conditions of
employment in corporations or juridical entities.

This issue must be resolved NOW, instead of postponing it to a future time when the CBA is renegotiated
as suggested by the Honorable Justice Arturo D. Brion because the same issue may still be resurrected
in the renegotiation if the absorbed employees insist on their privileged status of being exempt from any
union shop clause or any variant thereof.

We find it significant to note that it is only the employer, Bank of the Philippine Islands (BPI), that brought
the case up to this Court via the instant petition for review; while the employees actually involved in the
case did not pursue the same relief, but had instead chosen in effect to acquiesce to the decision of the
Court of Appeals which effectively required them to comply with the union shop clause under the existing
CBA at the time of the merger of BPI with Far East Bank and Trust Company (FEBTC), which decision
had already become final and executory as to the aforesaid employees. By not appealing the decision of
the Court of Appeals, the aforesaid employees are bound by the said Court of Appeals’ decision to join
BPI’s 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 Decision4 dated November 23, 2001 of Voluntary Arbitrator Rosalina Letrondo-
Montejo, in CA-G.R. SP No. 70445, entitled BPI Employees Union-Davao Chapter-Federation of Unions
in BPI Unibank v. Bank of the Philippine Islands, et al.

The antecedent facts are as follows:

On March 23, 2000, the Bangko Sentral ng Pilipinas approved the Articles of Merger executed on
January 20, 2000 by and between BPI, herein petitioner, and FEBTC.5 This Article and Plan of Merger
was approved by the Securities and Exchange Commission on April 7, 2000. 6

Pursuant to the Article and Plan of Merger, all the assets and liabilities of FEBTC were transferred to and
absorbed by BPI as the surviving corporation. FEBTC employees, including those in its different branches
across the country, were hired by petitioner as its own employees, with their status and tenure recognized
and salaries and benefits maintained.

Respondent BPI Employees Union-Davao Chapter - Federation of Unions in BPI Unibank (hereinafter the
"Union," for brevity) is the exclusive bargaining agent of BPI’s 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

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

ARTICLE I

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

Section 2. Exclusions

Section 3. Additional Exclusions

Section 4. Copy of Contract

ARTICLE II

Section 1. Maintenance of Membership – All employees within the bargaining unit who are members of
the Union on the date of the effectivity of this Agreement as well as employees within the bargaining unit
who subsequently join or become members of the Union during the lifetime of this Agreement shall as a
condition of their continued employment with the Bank, maintain their membership in the Union in good
standing.

Section 2. Union Shop - New employees falling within the bargaining unit as defined in Article I of this
Agreement, who may hereafter be regularly employed by the Bank shall, within thirty (30) days after
they become regular employees, join the Union as a condition of their continued employment. It is
understood that membership in good standing in the Union is a condition of their continued employment
with the Bank.8 (Emphases supplied.)

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

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

After two months of management inaction on the request, respondent Union informed petitioner BPI of its
decision to refer the issue of the implementation of the Union Shop Clause of the CBA to the Grievance
Committee. However, the issue remained unresolved at this level and so it was subsequently submitted
for voluntary arbitration by the parties.11

Voluntary Arbitrator Rosalina Letrondo-Montejo, in a Decision12 dated November 23, 2001, ruled in favor
of petitioner BPI’s 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 Arbitrator’s 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 petitioner’s 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

37 | P a g e
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 arbitrator’s 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, petitioner’s present recourse, raising the following issues:

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

II

WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT THE
VOLUNTARY ARBITRATOR’S 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.)

38 | P a g e
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 Court’s 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-à-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

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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 Bank’s 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, BPI’s 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

40 | P a g e
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 FEBTC’s 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 FEBTC’s 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 individual’s 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 FEBTC’s
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," BPI’s assumed liability to these employees pursuant to the merger is FEBTC’s liability to
them in terms of separation pay,29retirement pay30 or other benefits that may be due them depending on
the circumstances.

Legal Consequences of Mergers

Although not binding on this Court, American jurisprudence on the consequences of voluntary mergers on
the right to employment and seniority rights is persuasive and illuminating. We quote the following
pertinent discussion from the American Law Reports:

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

In Carver v Brien (1942) 315 Ill App 643, 43 NE2d 597, the shop work of three formerly separate railroad
corporations, which had previously operated separate facilities, was consolidated in the shops of one of
the roads. Displaced employees of the other two roads were given preference for the new jobs created in
the shops of the railroad which took over the work. A controversy arose between the employees as to
whether the displaced employees were entitled to carry with them to the new jobs the seniority rights they
had accumulated with their prior employers, that is, whether the rosters of the three corporations, for

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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 absorbedor 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
corporation’s 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 latter’s rights and obligations, it is duty-bound to absorb the
dissolved corporation’s 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 corporation’s
employees to retain, in accordance with the surviving corporation’s 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 Brion’s theory that in a merger situation the surviving corporation
should be compelled to absorb the dissolved corporation’s employees as a legal consequence of the
merger and as a social justice consideration, it bears to emphasize his dissent also recognizes that the

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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 BPI’s 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 FEBTC’s
employment of these absorbed employees, BPI’s employment of these absorbed employees was not
under exactly the same terms and conditions as stated in the latter’s 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 petitioner’s 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, petitioner’s 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 Carpio’s 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.

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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 SEC’s 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
SEC’s 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

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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 BPI’s 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.

Petitioner’s 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
CBA’s 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 CBU’s 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 Constitution’s 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 union’s certificate of registration with the Bureau of Labor Relations. 37

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Plainly, the restrictive interpretation of the union shop clause would place the certified union’s 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 Carpio’s 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 BPI’s 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 employee’s permanent and regular employment status in itself does not
necessarily exempt him from the coverage of a union shop clause.

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

A closed-shop agreement has been considered as one form of union security whereby only union
members can be hired and workers must remain union members as a condition of continued
employment. The requirement for employees or workers to become members of a union as a condition for
employment redounds to the benefit and advantage of said employees because by holding out to loyal
members a promise of employment in the closed-shop the union wields group solidarity. In fact, it is said
that "the closed-shop contract is the most prized achievement of unionism."

xxxx

This Court had categorically held in the case of Freeman Shirt Manufacturing Co., Inc., et al. vs. Court of
Industrial Relations, et al., G.R. No. L-16561, Jan. 28, 1961, that the closed-shop proviso of a collective
bargaining agreement entered into between an employer and a duly authorized labor union is applicable
not only to the employees or laborers that are employed after the collective bargaining agreement had
been entered into but also to old employees who are not members of any labor union at the time the said
collective bargaining agreement was entered into. In other words, if an employee or laborer is already a
member of a labor union different from the union that entered into a collective bargaining agreement with
the employer providing for a closed-shop, said employee or worker cannot be obliged to become a
member of that union which had entered into a collective bargaining agreement with the employer as a
condition for his continued employment. (Emphasis and underscoring supplied.)

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

Contrary to the assertion in the dissent of Justice Carpio, Juat has not been overturned by Victoriano v.
Elizalde Rope Workers’ Union40 nor by Reyes v. Trajano.41 The factual milieus of these three cases are
vastly different.

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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
Carpio’s 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 Carpio’s dissent on this point are likewise inapplicable. Basa v.
Federacion Obrera de la Industria Tabaquera y Otros Trabajadores de Filipinas, 44 Anucension v. National
Labor Union,45 and Gonzales v. Central Azucarera de Tarlac Labor Union46 all involved members of the
INK. In line with Victoriano, these cases upheld the INK members’ claimed exemption from the union
security clause on religious grounds. In the present case, the former FEBTC employees never claimed
any religious grounds for their exemption from the Union Shop Clause. As for Philips Industrial
Development, Inc. v. National Labor Relations Corporation 47 and Knitjoy Manufacturing, Inc. v. Ferrer-
Calleja,48 the employees who were exempted from joining the respondent union or who were excluded
from participating in the certification election were found to be not members of the bargaining unit
represented by respondent union and were free to form/join their own union. In the case at bar, it is
undisputed that the former FEBTC employees were part of the bargaining unit that the Union
represented. Thus, the rulings in Philips and Knitjoy have no relevance to the issues at hand.

Time and again, this Court has ruled that the individual employee’s right not to join a union may be validly
restricted by a union security clause in a CBA49 and such union security clause is not a violation of the
employee’s constitutional right to freedom of association.50

It is unsurprising that significant provisions on labor protection of the 1987 Constitution are found in Article
XIII on Social Justice. The constitutional guarantee given the right to form unions 51 and the State policy to
promote unionism52 have social justice considerations. In People’s Industrial and Commercial Employees
and Workers Organization v. People’s 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."

47 | P a g e
The rationale for upholding the validity of union shop clauses in a CBA, even if they impinge upon the
individual employee’s right or freedom of association, is not to protect the union for the union’s 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 employee’s eligibility to apply for retirement if qualified under the law,
the existing retirement plan, or the CBA as the case may be.

In sum, this Court finds it reasonable and just to conclude that the Union Shop Clause of the CBA covers
the former FEBTC employees who were hired/employed by BPI during the effectivity of the CBA in a
manner which petitioner describes as "absorption." A contrary appreciation of the facts of this case would,
undoubtedly, lead to an inequitable and very volatile labor situation which this Court has consistently
ruled against.1avvphi1

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

A final point in relation to procedural due process, the Court is not unmindful that the former FEBTC
employees’ refusal to join the union and BPI’s 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.

48 | P a g e
G.R. No. 84433 June 2, 1992

ALEXANDER REYES, ALBERTO M. NERA, EDGARDO M. GECA, and 138 others, petitioners,
vs.
CRESENCIANO B. TRAJANO, as Officer-in-Charge, Bureau of Labor Relations, Med. Arbiter
PATERNO ADAP, and TRI-UNION EMPLOYEES UNION, et al., respondent.

NARVASA, C.J.:

The officer-in-charge of the Bureau of Labor Relations (Hon. Cresenciano Trajano) sustained the denial
by the Med Arbiter of the right to vote of one hundred forty-one (141) members of the "Iglesia ni Kristo"
(INK), all employed in the same company, at a certification election at which two (2) labor organizations
were contesting the right to be the exclusive representative of the employees in the bargaining unit. That
denial is assailed as having been done with grave abuse of discretion in the special civil action
of certiorari at bar, commenced by the INK members adversely affected thereby.

The certification election was authorized to be conducted by the Bureau of Labor Relations among the
employees of Tri-Union Industries Corporation on October 20, 1987. The competing unions were Tri-
Union Employees Union-Organized Labor Association in Line Industries and Agriculture (TUEU-OLALIA),
and Trade Union of the Philippines and Allied Services (TUPAS). Of the 348 workers initially deemed to
be qualified voters, only 240 actually took part in the election, conducted under the provision of the
Bureau of Labor Relations. Among the 240 employees who cast their votes were 141 members of the
INK.

The ballots provided for three (3) choices. They provided for votes to be cast, of course, for either of the
two (2) contending labor organizations, (a) TUPAS and (b) TUEU-OLALIA; and, conformably with
established rule and practice, 1 for (c) a third choice: "NO UNION."

The final tally of the votes showed the following results:

TUPAS 1

TUEU-OLALIA 95

NO UNION 1

SPOILED 1

CHALLENGED 141

The challenged votes were those cast by the 141 INK members. They were segregated and
excluded from the final count in virtue of an agreement between the competing unions, reached
at the pre-election conference, that the INK members should not be allowed to vote "because
they are not members of any union and refused to participate in the previous certification
elections."

The INK employees promptly made known their protest to the exclusion of their votes. They filed f a
petition to cancel the election alleging that it "was not fair" and the result thereof did "not reflect the true
sentiments of the majority of the employees." TUEU-OLALIA opposed the petition. It contended that the
petitioners "do not have legal personality to protest the results of the election," because "they are not
members of either contending unit, but . . . of the INK" which prohibits its followers, on religious grounds,
from joining or forming any labor organization . . . ."

The Med-Arbiter saw no merit in the INK employees 1 petition. By Order dated December 21, 1987, he
certified the TUEU-OLALIA as the sole and exclusive bargaining agent of the rank-and-file employees. In
that Order he decided the fact that "religious belief was (being) utilized to render meaningless the rights of
the non-members of the Iglesia ni Kristo to exercise the rights to be represented by a labor organization
as the bargaining agent," and declared the petitioners as "not possessed of any legal personality to
institute this present cause of action" since they were not parties to the petition for certification election.

The petitioners brought the matter up on appeal to the Bureau of Labor Relations. There they argued that
the Med-Arbiter had "practically disenfranchised petitioners who had an overwhelming majority," and "the
TUEU-OLALIA certified union cannot be legally said to have been the result of a valid election where at
least fifty-one percent of all eligible voters in the appropriate bargaining unit shall have cast their votes."
Assistant Labor Secretary Cresenciano B. Trajano, then Officer-in-Charge of the Bureau of Labor
Relations, denied the appeal in his Decision of July 22, 1988. He opined that the petitioners are "bereft of

49 | P a g e
legal personality to protest their alleged disenfrachisement" since they "are not constituted into a duly
organized labor union, hence, not one of the unions which vied for certification as sole and exclusive
bargaining representative." He also pointed out that the petitioners "did not participate in previous
certification elections in the company for the reason that their religious beliefs do not allow them to form,
join or assist labor organizations."

It is this Decision of July 22, 1988 that the petitioners would have this Court annul and set aside in the
present special civil action of certiorari.

The Solicitor General having expressed concurrence with the position taken by the petitioners, public
respondent NLRC was consequently required to file, and did thereafter file, its own comment on the
petition. In that comment it insists that "if the workers who are members of the Iglesia ni Kristo in the
exercise of their religious belief opted not to join any labor organization as a consequence of which they
themselves can not have a bargaining representative, then the right to be representative by a bargaining
agent should not be denied to other members of the bargaining unit."

Guaranteed to all employees or workers is the "right to self-organization and to form, join, or assist labor
organizations of their own choosing for purposes of collective bargaining." This is made plain by no less
than three provisions of the Labor Code of the Philippines. 2 Article 243 of the Code provides as follows: 3

ART. 243. Coverage and employees right to self-organization. — All persons employed in
commercial, industrial and agricultural enterprises and in religious, charitable, medical, or
educational institutions whether operating for profit or not, shall have the right to self-
organization and to form, join, or assist labor organizations of their own choosing for
purposes or collective bargaining. Ambulant, intermittent and itinerant workers, self-
employed people, rural workers and those without any definite employers may form labor
organizations for their mutual aid and protection.

Article 248 (a) declares it to be an unfair labor practice for an employer, among others, to "interfere with,
restrain or coerce employees in the exercise of their right to self-organization." Similarly, Article 249 (a)
makes it an unfair labor practice for a labor organization to "restrain or coerce employees in the exercise
of their rights to self-organization . . . "

The same legal proposition is set out in the Omnibus Rules Implementing the Labor Code, as amended,
as might be expected Section 1, Rule II (Registration of Unions), Book V (Labor Relations) of the
Omnibus Rules provides as follows; 4

Sec. 1. Who may join unions; exception. — All persons employed in commercial,
industrial and agricultural enterprises, including employees of government corporations
established under the Corporation Code as well as employees of religious, medical or
educational institutions, whether operating for profit or not, except managerial employees,
shall have the right to self-organization and to form, join or assist labor organizations for
purposes of collective bargaining. Ambulant, intermittent and without any definite
employers people, rural workers and those without any definite employers may form labor
organizations for their mutual aid and protection.

xxx xxx xxx

The right of self-organization includes the right to organize or affiliate with a labor union or determine
which of two or more unions in an establishment to join, and to engage in concerted activities with co-
workers for purposes of collective bargaining through representatives of their own choosing, or for their
mutual aid and protection, i.e., the protection, promotion, or enhancement of their rights and interests. 5

Logically, the right NOT to join, affiliate with, or assist any union, and to disaffiliate or resign from a labor
organization, is subsumed in the right to join, affiliate with, or assist any union, and to maintain
membership therein. The right to form or join a labor organization necessarily includes the right to refuse
or refrain from exercising said right. It is self-evident that just as no one should be denied the exercise of
a right granted by law, so also, no one should be compelled to exercise such a conferred right. The fact
that a person has opted to acquire membership in a labor union does not preclude his subsequently
opting to renounce such membership. 6

As early as 1974 this Court had occasion to expatiate on these self-evident propositions in Victoriano v.
Elizalde Rope Workers' Union, et al., 7 viz.:

. . .What the Constitution and Industrial Peace Act recognize and guarantee is the "right"
to form or join associations. Notwithstanding the different theories propounded by the
different schools of jurisprudence regarding the nature and contents of a "right," it can be
safely said that whatever theory one subscribes to, a right comprehends at least two

50 | P a g e
broad notions, namely: first, liberty or freedom, i.e., the absence of legal restraint,
whereby an employee may act for himself being prevented by law; second, power,
whereby an employee may, as he pleases, join or refrain from joining an association. It is
therefore the employee who should decide for himself whether he should join or not an
association; and should he choose to join; and even after he has joined, he still retains
the liberty and the power to leave and cancel his membership with said organization at
any time (Pagkakaisa Samahang Manggagawa ng San Miguel Brewery vs. Enriquez, et
al., 108 Phil. 1010, 1019). It is clear, therefore, that the right to join a union includes the
right to abstain from joining any union (Abo, et al. vs. PHILAME [KG] Employees Union,
et al., L-19912, January 20, 1965, 13 SCRA 120, 123, quoting Rothenberg, Labor
Relations). Inasmuch as what both the Constitution and the Industrial Peace Act have
recognized, the guaranteed to the employee, is the "right" to join associations of his
choice, it would be absurd to say that the law also imposes, in the same breath, upon the
employee the duty to join associations. The law does not enjoin an employee to sign up
with any association.

The right to refuse to join or be represented by any labor organization is recognized not only by law but
also in the rules drawn up for implementation thereof. The original Rules on Certification promulgated by
the defunct Court of Industrial Relations required that the ballots to be used at a certification election to
determine which of two or more competing labor unions would represent the employees in the
appropriate bargaining unit should contain, aside from the names of each union, an alternative choice of
the employee voting, to the effect that he desires not to which of two or more competing labor unions
would represent the employees in the appropriate bargaining unit should contain, aside from the names
of each union, an alternative choice of the employee voting, to the effect that he desires not to be
represented by any union. 8 And where only one union was involved, the ballots were required to state
the question — "Do you desire to be represented by said union?" — as regards which the employees
voting would mark an appropriate square, one indicating the answer, "Yes" the other, "No."

To be sure, the present implementing rules no longer explicitly impose the requirement that the ballots at
a certification election include a choice for "NO UNION" Section 8 (rule VI, Book V of the Omnibus Rules)
entitled "Marketing and canvassing of votes," pertinently provides that:

. . . (a) The voter must write a cross (X) or a check (/) in the square opposite the union of
his choice. If only one union is involved, the voter shall make his cross or check in the
square indicating "YES" or "NO."

xxx xxx xxx

Withal, neither the quoted provision nor any other in the Omnibus Implementing Rules expressly bars the
inclusion of the choice of "NO UNION" in the ballots. Indeed it is doubtful if the employee's alternative
right NOT to form, join or assist any labor organization or withdraw or resign from one may be validly
eliminated and he be consequently coerced to vote for one or another of the competing unions and be
represented by one of them. Besides, the statement in the quoted provision that "(i)f only one union is
involved, the voter shall make his cross or check in the square indicating "YES" or "NO," is quite clear
acknowledgment of the alternative possibility that the "NO" votes may outnumber the "YES" votes —
indicating that the majority of the employees in the company do not wish to be represented by any union
— in which case, no union can represent the employees in collective bargaining. And whether the
prevailing "NO" votes are inspired by considerations of religious belief or discipline or not is beside the
point, and may not be inquired into at all.

The purpose of a certification election is precisely the ascertainment of the wishes of the majority of the
employees in the appropriate bargaining unit: to be or not to be represented by a labor organization, and
in the affirmative case, by which particular labor organization. If the results of the election should disclose
that the majority of the workers do not wish to be represented by any union, then their wishes must be
respected, and no union may properly be certified as the exclusive representative of the workers in the
bargaining unit in dealing with the employer regarding wages, hours and other terms and conditions of
employment. The minority employees — who wish to have a union represent them in collective
bargaining — can do nothing but wait for another suitable occasion to petition for a certification election
and hope that the results will be different. They may not and should not be permitted, however, to impose
their will on the majority — who do not desire to have a union certified as the exclusive workers' benefit in
the bargaining unit — upon the plea that they, the minority workers, are being denied the right of self-
organization and collective bargaining. As repeatedly stated, the right of self-organization embraces not
only the right to form, join or assist labor organizations, but the concomitant, converse right NOT to form,
join or assist any labor union.

That the INK employees, as employees in the same bargaining unit in the true sense of the term, do have
the right of self-organization, is also in truth beyond question, as well as the fact that when they voted that

51 | P a g e
the employees in their bargaining unit should be represented by "NO UNION," they were simply
exercising that right of self-organization, albeit in its negative aspect.

The respondents' argument that the petitioners are disqualified to vote because they "are not constituted
into a duly organized labor union" — "but members of the INK which prohibits its followers, on religious
grounds, from joining or forming any labor organization" — and "hence, not one of the unions which vied
for certification as sole and exclusive bargaining representative," is specious. Neither law, administrative
rule nor jurisprudence requires that only employees affiliated with any labor organization may take part in
a certification election. On the contrary, the plainly discernible intendment of the law is to grant the right to
vote to all bona fide employees in the bargaining unit, whether they are members of a labor organization
or not. As held in Airtime Specialists, Inc. v. Ferrer-Calleja: 9

In a certification election all rank-and-file employees in the appropriate bargaining unit are
entitled to vote. This principle is clearly stated in Art. 255 of the Labor Code which states
that the "labor organization designated or selected by the majority of the employees in an
appropriate bargaining unit shall be the exclusive representative of the employees in
such unit for the purpose of collective bargaining." Collective bargaining covers all
aspects of the employment relation and the resultant CBA negotiated by the certified
union binds all employees in the bargaining unit. Hence, all rank-and-file employees,
probationary or permanent, have a substantial interest in the selection of the bargaining
representative. The Code makes no distinction as to their employment for certification
election. The law refers to "all" the employees in the bargaining unit. All they need to be
eligible to support the petition is to belong to the "bargaining unit".

Neither does the contention that petitioners should be denied the right to vote because they "did not
participate in previous certification elections in the company for the reason that their religious beliefs do
not allow them to form, join or assist labor organizations," persuade acceptance. No law, administrative
rule or precedent prescribes forfeiture of the right to vote by reason of neglect to exercise the right in past
certification elections. In denying the petitioners' right to vote upon these egregiously fallacious grounds,
the public respondents exercised their discretion whimsically, capriciously and oppressively and gravely
abused the same.

WHEREFORE, the petition for certiorari is GRANTED; the Decision of the then Officer-in-Charge of the
Bureau of Labor Relations dated December 21, 1987 (affirming the Order of the Med-Arbiter dated July
22, 1988) is ANNULLED and SET ASIDE; and the petitioners are DECLARED to have legally exercised
their right to vote, and their ballots should be canvassed and, if validly and properly made out, counted
and tallied for the choices written therein. Costs against private respondents.

SO ORDERED.

52 | P a g e
G.R. No. 181531 July 31, 2009

NATIONAL UNION OF WORKERS IN HOTELS, RESTAURANTS AND ALLIED INDUSTRIES- MANILA


PAVILION HOTEL CHAPTER, Petitioner,
vs.
SECRETARY OF LABOR AND EMPLOYMENT, BUREAU OF LABOR RELATIONS, HOLIDAY INN
MANILA PAVILION HOTEL LABOR UNION AND ACESITE PHILIPPINES HOTEL
CORPORATION, Respondents.

DECISION

CARPIO MORALES, J.:

National Union of Workers in Hotels, Restaurants and Allied Industries – Manila Pavilion Hotel Chapter
(NUWHRAIN-MPHC), herein petitioner, seeks the reversal of the Court of Appeals November 8, 2007
Decision1 and of the Secretary of Labor and Employment’s January 25, 2008 Resolution 2 in OS-A-9-52-
05 which affirmed the Med-Arbiter’s Resolutions dated January 22, 20073 and March 22, 2007.4

A certification election was conducted on June 16, 2006 among the rank-and-file employees of
respondent Holiday Inn Manila Pavilion Hotel (the Hotel) with the following results:

EMPLOYEES IN VOTERS’ LIST = 353

TOTAL VOTES CAST = 346

NUWHRAIN-MPHC = 151

HIMPHLU = 169

NO UNION = 1

SPOILED = 3

SEGREGATED = 22

In view of the significant number of segregated votes, contending unions, petitioner, NUHWHRAIN-
MPHC, and respondent Holiday Inn Manila Pavillion Hotel Labor Union (HIMPHLU), referred the case
back to Med-Arbiter Ma. Simonette Calabocal to decide which among those votes would be opened and
tallied. Eleven (11) votes were initially segregated because they were cast by dismissed employees,
albeit the legality of their dismissal was still pending before the Court of Appeals. Six other votes were
segregated because the employees who cast them were already occupying supervisory positions at the
time of the election. Still five other votes were segregated on the ground that they were cast
by probationary employees and, pursuant to the existing Collective Bargaining Agreement (CBA), such
employees cannot vote. It bears noting early on, however, that the vote of one Jose Gatbonton
(Gatbonton), a probationary employee, was counted.

By Order of August 22, 2006, Med-Arbiter Calabocal ruled for the opening of 17 out of the 22 segregated
votes, specially those cast by the 11 dismissed employees and those cast by the six supposedly
supervisory employees of the Hotel.

Petitioner, which garnered 151 votes, appealed to the Secretary of Labor and Employment (SOLE),
arguing that the votes of the probationary employees should have been opened considering that
probationary employee Gatbonton’s vote was tallied. And petitioner averred that respondent HIMPHLU,
which garnered 169 votes, should not be immediately certified as the bargaining agent, as the opening of
the 17 segregated ballots would push the number of valid votes cast to 338 (151 + 169 + 1 + 17), hence,
the 169 votes which HIMPHLU garnered would be one vote short of the majority which would then
become 169.

By the assailed Resolution of January 22, 2007, the Secretary of Labor and Employment (SOLE), through
then Acting Secretary Luzviminda Padilla, affirmed the Med-Arbiter’s Order. It held that pursuant to
Section 5, Rule IX of the Omnibus Rules Implementing the Labor Code on exclusion and inclusion of
voters in a certification election, the probationary employees cannot vote, as at the time the Med-Arbiter

53 | P a g e
issued on August 9, 2005 the Order granting the petition for the conduct of the certification election, the
six probationary employees were not yet hired, hence, they could not vote.

The SOLE further held that, with respect to the votes cast by the 11 dismissed employees, they could be
considered since their dismissal was still pending appeal.

As to the votes cast by the six alleged supervisory employees, the SOLE held that their votes should be
counted since their promotion took effect months after the issuance of the above-said August 9, 2005
Order of the Med-Arbiter, hence, they were still considered as rank-and-file.

Respecting Gatbonton’s vote, the SOLE ruled that the same could be the basis to include the votes of the
other probationary employees, as the records show that during the pre-election conferences, there was
no disagreement as to his inclusion in the voters’ list, and neither was it timely challenged when he voted
on election day, hence, the Election Officer could not then segregate his vote.

The SOLE further ruled that even if the 17 votes of the dismissed and supervisory employees were to be
counted and presumed to be in favor of petitioner, still, the same would not suffice to overturn the 169
votes garnered by HIMPHLU.

In fine, the SOLE concluded that the certification of HIMPHLU as the exclusive bargaining agent was
proper.

Petitioner’s motion for reconsideration having been denied by the SOLE by Resolution of March 22, 2007,
it appealed to the Court of Appeals.

By the assailed Decision promulgated on November 8, 2007, the appellate court affirmed the ruling of the
SOLE. It held that, contrary to petitioner’s assertion, the ruling in Airtime Specialist, Inc. v. Ferrer
Calleja5 stating that in a certification election, all rank-and-file employees in the appropriate bargaining
unit, whether probationary or permanent, are entitled to vote, is inapplicable to the case at bar. For, the
appellate court continued, the six probationary employees were not yet employed by the Hotel at the time
the August 9, 2005 Order granting the certification election was issued. It thus held that Airtime Specialist
applies only to situations wherein the probationary employees were already employed as of the date of
filing of the petition for certification election.

Respecting Gatbonton’s vote, the appellate court upheld the SOLE’s finding that since it was not properly
challenged, its inclusion could no longer be questioned, nor could it be made the basis to include the
votes of the six probationary employees.

The appellate court brushed aside petitioner’s contention that the opening of the 17 segregated votes
would materially affect the results of the election as there would be the likelihood of a run-off election in
the event none of the contending unions receive a majority of the valid votes cast. It held that the
"majority" contemplated in deciding which of the unions in a certification election is the winner refers to
the majority of valid votes cast, not the simple majority of votes cast, hence, the SOLE was correct in
ruling that even if the 17 votes were in favor of petitioner, it would still be insufficient to overturn the
results of the certification election.

Petitioner’s motion for reconsideration having been denied by Resolution of January 25, 2008, the
present recourse was filed.

Petitioner’s contentions may be summarized as follows:

1. Inclusion of Jose Gatbonton’s vote but excluding the vote of the six other probationary
employees violated the principle of equal protection and is not in accord with the ruling in Airtime
Specialists, Inc. v. Ferrer-Calleja;

2. The time of reckoning for purposes of determining when the probationary employees can be
allowed to vote is not August 9, 2005 – the date of issuance by Med-Arbiter Calabocal of the
Order granting the conduct of certification elections, but March 10, 2006 – the date the SOLE
Order affirmed the Med-Arbiter’s Order.

3. Even if the votes of the six probationary employees were included, still, HIMPHLU could not be
considered as having obtained a majority of the valid votes cast as the opening of the 17 ballots
would increase the number of valid votes from 321 to 338, hence, for HIMPHLU to be certified as
the exclusive bargaining agent, it should have garnered at least 170, not 169, votes.

Petitioner justifies its not challenging Gatbonton’s vote because it was precisely its position that
probationary employees should be allowed to vote. It thus avers that justice and equity dictate that since

54 | P a g e
Gatbonton’s vote was counted, then the votes of the 6 other probationary employees should likewise be
included in the tally.

Petitioner goes on to posit that the word "order" in Section 5, Rule 9 of Department Order No. 40-03
reading "[A]ll employees who are members of the appropriate bargaining unit sought to be represented by
the petitioner at the time of the issuance of the order granting the conduct of certification election shall be
allowed to vote" refers to an order which has already become final and executory, in this case the March
10, 2002 Order of the SOLE.

Petitioner thus concludes that if March 10, 2006 is the reckoning date for the determination of the
eligibility of workers, then all the segregated votes cast by the probationary employees should be opened
and counted, they having already been working at the Hotel on such date.

Respecting the certification of HIMPHLU as the exclusive bargaining agent, petitioner argues that the
same was not proper for if the 17 votes would be counted as valid, then the total number of votes cast
would have been 338, not 321, hence, the majority would be 170; as such, the votes garnered by
HIMPHLU is one vote short of the majority for it to be certified as the exclusive bargaining agent.

The relevant issues for resolution then are first, whether employees on probationary status at the time of
the certification elections should be allowed to vote, and second, whether HIMPHLU was able to obtain
the required majority for it to be certified as the exclusive bargaining agent.

On the first issue, the Court rules in the affirmative.

The inclusion of Gatbonton’s vote was proper not because it was not questioned but because
probationary employees have the right to vote in a certification election. The votes of the six other
probationary employees should thus also have been counted. As Airtime Specialists, Inc. v. Ferrer-Calleja
holds:

In a certification election, all rank and file employees in the appropriate bargaining unit, whether
probationary or permanent are entitled to vote. This principle is clearly stated in Art. 255 of the Labor
Code which states that the "labor organization designated or selected by the majority of the employees in
an appropriate bargaining unit shall be the exclusive representative of the employees in such unit for
purposes of collective bargaining." Collective bargaining covers all aspects of the employment relation
and the resultant CBA negotiated by the certified union binds all employees in the bargaining unit. Hence,
all rank and file employees, probationary or permanent, have a substantial interest in the selection of the
bargaining representative. The Code makes no distinction as to their employment status as basis for
eligibility in supporting the petition for certification election. The law refers to "all" the employees in the
bargaining unit. All they need to be eligible to support the petition is to belong to the "bargaining unit."
(Emphasis supplied)

Rule II, Sec. 2 of Department Order No. 40-03, series of 2003, which amended Rule XI of the Omnibus
Rules Implementing the Labor Code, provides:

Rule II

Section 2. Who may join labor unions and workers' associations. - All persons employed in commercial,
industrial and agricultural enterprises, including employees of government owned or controlled
corporations without original charters established under the Corporation Code, as well as employees of
religious, charitable, medical or educational institutions whether operating for profit or not, shall have the
right to self-organization and to form, join or assist labor unions for purposes of collective bargaining:
provided, however, that supervisory employees shall not be eligible for membership in a labor union of
the rank-and-file employees but may form, join or assist separate labor unions of their own. Managerial
employees shall not be eligible to form, join or assist any labor unions for purposes of collective
bargaining. Alien employees with valid working permits issued by the Department may exercise the right
to self-organization and join or assist labor unions for purposes of collective bargaining if they are
nationals of a country which grants the same or similar rights to Filipino workers, as certified by the
Department of Foreign Affairs.

For purposes of this section, any employee, whether employed for a definite period or not, shall beginning
on the first day of his/her service, be eligible for membership in any labor organization.

All other workers, including ambulant, intermittent and other workers, the self-employed, rural workers
and those without any definite employers may form labor organizations for their mutual aid and protection
and other legitimate purposes except collective bargaining. (Emphasis supplied)

55 | P a g e
The provision in the CBA disqualifying probationary employees from voting cannot override the
Constitutionally-protected right of workers to self-organization, as well as the provisions of the Labor
Code and its Implementing Rules on certification elections and jurisprudence thereon.

A law is read into, and forms part of, a contract. Provisions in a contract are valid only if they are not
contrary to law, morals, good customs, public order or public policy.6

Rule XI, Sec. 5 of D.O. 40-03, on which the SOLE and the appellate court rely to support their position
that probationary employees hired after the issuance of the Order granting the petition for the conduct of
certification election must be excluded, should not be read in isolation and must be harmonized with the
other provisions of D.O. Rule XI, Sec. 5 of D.O. 40-03, viz:

Rule XI

xxxx

Section 5. Qualification of voters; inclusion-exclusion. - All employees who are members of the
appropriate bargaining unit sought to be represented by the petitioner at the time of the issuance of the
order granting the conduct of a certification election shall be eligible to vote. An employee who has been
dismissed from work but has contested the legality of the dismissal in a forum of appropriate jurisdiction at
the time of the issuance of the order for the conduct of a certification election shall be considered a
qualified voter, unless his/her dismissal was declared valid in a final judgment at the time of the conduct
of the certification election. (Emphasis supplied)

xxxx

Section 13. Order/Decision on the petition. - Within ten (10) days from the date of the last hearing, the
Med-Arbiter shall issue a formal order granting the petition or a decision denying the same. In organized
establishments, however, no order or decision shall be issued by the Med-Arbiter during the freedom
period.

The order granting the conduct of a certification election shall state the following:

(a) the name of the employer or establishment;

(b) the description of the bargaining unit;

(c) a statement that none of the grounds for dismissal enumerated in the succeeding paragraph
exists;

(d) the names of contending labor unions which shall appear as follows: petitioner union/s in the
order in which their petitions were filed, forced intervenor, and no union; and

(e) a directive upon the employer and the contending union(s) to submit within ten (10) days from
receipt of the order, the certified list of employees in the bargaining unit, or where necessary, the
payrolls covering the members of the bargaining unit for the last three (3) months prior to the
issuance of the order. (Emphasis supplied)

xxxx

Section 21. Decision of the Secretary. - The Secretary shall have fifteen (15) days from receipt of the
entire records of the petition within which to decide the appeal. The filing of the memorandum of appeal
from the order or decision of the Med-Arbiter stays the holding of any certification election.

The decision of the Secretary shall become final and executory after ten (10) days from receipt thereof by
the parties. No motion for reconsideration of the decision shall be entertained. (Emphasis supplied)

In light of the immediately-quoted provisions, and prescinding from the principle that all employees are,
from the first day of their employment, eligible for membership in a labor organization, it is evident that
the period of reckoning indetermining who shall be included in the list of eligible voters is, in cases where
a timely appeal has been filed fromthe Order of the Med-
Arbiter, the date when the Order of the Secretary of Labor and Employment,
whether affirmingor denying the appeal, becomes final and executory.

The filing of an appeal to the SOLE from the Med-Arbiter’s Order stays its execution, in accordance with
Sec. 21, and rationally, the Med-Arbiter cannot direct the employer to furnish him/her with the list of
eligible voters pending the resolution of the appeal.

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During the pendency of the appeal, the employer may hire additional employees. To exclude the
employees hired after the issuance of the Med-Arbiter’s Order but before the appeal has been resolved
would violate the guarantee that every employee has the right to be part of a labor organization from the
first day of their service.

In the present case, records show that the probationary employees, including Gatbonton, were included
in the list of employees in the bargaining unit submitted by the Hotel on May 25, 2006 in compliance with
the directive of the Med-Arbiter after the appeal and subsequent motion for reconsideration have been
denied by the SOLE, rendering the Med-Arbiter’s August 22, 2005 Order final and executory 10 days after
the March 22, 2007 Resolution (denying the motion for reconsideration of the January 22 Order denying
the appeal), and rightly so. Because, for purposes of self-organization, those employees are, in light of
the discussion above, deemed eligible to vote.

A certification election is the process of determining the sole and exclusive bargaining agent of the
employees in an appropriate bargaining unit for purposes of collective bargaining. Collective bargaining,
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. 7

The significance of an employee’s right to vote in a certification election cannot thus be overemphasized.
For he has considerable interest in the determination of who shall represent him in negotiating the terms
and conditions of his employment.

Even if the Implementing Rules gives the SOLE 20 days to decide the appeal from the Order of the Med-
Arbiter, experience shows that it sometimes takes months to be resolved. To rule then that only those
employees hired as of the date of the issuance of the Med-Arbiter’s Order are qualified to vote would
effectively disenfranchise employees hired during the pendency of the appeal. More importantly,
reckoning the date of the issuance of the Med-Arbiter’s Order as the cut-off date would render inutile the
remedy of appeal to the SOLE.1avvph!1

But while the Court rules that the votes of all the probationary employees should be included, under the
particular circumstances of this case and the period of time which it took for the appeal to be decided, the
votes of the six supervisory employees must be excluded because at the time the certification elections
was conducted, they had ceased to be part of the rank and file, their promotion having taken effect two
months before the election.

As to whether HIMPHLU should be certified as the exclusive bargaining agent, the Court rules in the
negative. It is well-settled that under the so-called "double majority rule," for there to be a valid
certification election, majority of the bargaining unit must have voted AND the winning union must have
garnered majority of the valid votes cast.

Prescinding from the Court’s ruling that all the probationary employees’ votes should be deemed valid
votes while that of the supervisory employees should be excluded, it follows that the number of valid
votes cast would increase – from 321 to 337. Under Art. 256 of the Labor Code, the union obtaining the
majority of the valid votes cast by the eligible voters shall be certified as the sole and exclusive bargaining
agent of all the workers in the appropriate bargaining unit. This majority is 50% + 1. Hence, 50% of 337 is
168.5 + 1 or at least 170.

HIMPHLU obtained 169 while petitioner received 151 votes. Clearly, HIMPHLU was not able to obtain a
majority vote. The position of both the SOLE and the appellate court that the opening of the 17
segregated ballots will not materially affect the outcome of the certification election as for, so they
contend, even if such member were all in favor of petitioner, still, HIMPHLU would win, is thus untenable.

It bears reiteration that the true importance of ascertaining the number of valid votes cast is for it to serve
as basis for computing the required majority, and not just to determine which union won the elections.
The opening of the segregated but valid votes has thus become material. To be sure, the conduct of a
certification election has a two-fold objective: to determine the appropriate bargaining unit and to
ascertain the majority representation of the bargaining representative, if the employees desire to be
represented at all by anyone. It is not simply the determination of who between two or more contending
unions won, but whether it effectively ascertains the will of the members of the bargaining unit as to
whether they want to be represented and which union they want to represent them.

Having declared that no choice in the certification election conducted obtained the required majority, it
follows that a run-off election must be held to determine which between HIMPHLU and petitioner should
represent the rank-and-file employees.

A run-off election refers to an election between the labor unions receiving the two (2) highest number of
votes in a certification or consent election with three (3) or more choices, where such a certified or
consent election results in none of the three (3) or more choices receiving the majority of the valid votes

57 | P a g e
cast; provided that the total number of votes for all contending unions is at least fifty percent (50%) of the
number of votes cast.8 With 346 votes cast, 337 of which are now deemed valid and HIMPHLU having
only garnered 169 and petitioner having obtained 151 and the choice "NO UNION" receiving 1 vote, then
the holding of a run-off election between HIMPHLU and petitioner is in order.

WHEREFORE, the petition is GRANTED. The Decision dated November 8, 2007 and Resolution dated
January 25, 2008 of the Court of Appeals affirming the Resolutions dated January 22, 2007 and March
22, 2007, respectively, of the Secretary of Labor and Employment in OS-A-9-52-05 are ANNULLED and
SET ASIDE.

The Department of Labor and Employment-Bureau of Labor Relations is DIRECTED to cause the holding
of a run-off election between petitioner, National Union of Workers in Hotels, Restaurants and Allied
Industries-Manila Pavilion Hotel Chapter (NUWHRAIN-MPC), and respondent Holiday Inn Manila Pavilion
Hotel Labor Union (HIMPHLU).

SO ORDERED.

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G.R. No. 161305 February 9, 2007

MILAGROS PANUNCILLO, Petitioner,


vs.
CAP PHILIPPINES, INC., Respondent.

DECISION

CARPIO MORALES, J.:

Assailed via Petition for Review1 are the Decision dated May 16, 20032 and Resolution dated November
17, 20033of the Court of Appeals in CA-G.R. SP No. 74665 which declared valid the dismissal of Milagros
Panuncillo (petitioner) by CAP Philippines, Inc. (respondent).

Petitioner was hired on August 28, 1980 as Office Senior Clerk by respondent. At the time of her
questioned separation from respondent on April 23, 1999, she was receiving a monthly salary of
₱16,180.60.

In order to secure the education of her son, petitioner procured an educational plan (the plan) from
respondent which she had fully paid but which she later sold to Josefina Pernes (Josefina) for ₱37,000.
Before the actual transfer of the plan could be effected, however, petitioner pledged it for ₱50,000 to John
Chua who, however, sold it to Benito Bonghanoy. Bonghanoy in turn sold the plan to Gaudioso R. Uy for
₱60,000.

Having gotten wind of the transactions subsequent to her purchase of the plan, Josefina, by letter of
February 10, 1999,4 informed respondent that petitioner had "swindled" her but that she was willing to
settle the case amicably as long as petitioner pay the amount involved and the interest. She expressed
her appreciation "if [respondent] could help her in anyway."

Acting on Josefina’s letter, the Integrated Internal Audit Operations (IIAO) of respondent required
petitioner to explain in writing why the plan had not been transferred to Josefina and was instead sold to
another. Complying, petitioner proffered the following explanation:

Because of extreme need of money, I was constrained to sell my CAP plan of my son to J. Pernes last
July, 1996, in the amount of Thirty Seven Thousand Pesos (P37,000.) The plan was not transferred right
away because of lacking requirement on the part of the buyer (birth certificate). The birth certificate came
a month later. While waiting for the birth certificate, again because of extreme need of money, I was
tempted to pawned [sic] the plan, believing I can redeemed [sic] it later when the birth certificate will
come.

Last year, I was already pressured by J. Pernes for the transfer of the plan. But before hand, she already
knew the present situation. I was trying to find means to redeemed [sic] the plan but to no avail. I cannot
borrow anymore from my creditors because of outstanding loans which remains unpaid. As of the
present, I am heavily debtladen and I don’t know where to run.

I can’t blame the person whom I pawned the plan if he had sold it. I can’t redeemed [sic] it anymore.
Everybody needs money and besides, I have given them my papers.

I admit, I had defrauded Ms. J. Pernes, but I didn’t do it intentionally. At first, I believe I can redeem
the plan hoping I can still borrow from somebody.

With my more than 18 years stay with the company, I don’t have the intention of ruining my image as well
as the company’s. I think I am just a victim of circumstances.5 (Emphasis and underscoring supplied)

A show-cause memorandum 6 dated February 23, 1999 was thereupon sent to petitioner, giving her 48
hours from receipt thereof to explain why she should not be disciplinarily dealt with. Petitioner did not
comply, however.

The IIAO of respondent thus conducted an investigation on the matter. By Memorandum of April 5,
1999,7 the IIAO recommended that, among other things, administrative action should be taken against
petitioner for violating Section 8.4 of respondent’s Code of Discipline reading:

Committing or dealing any act or conniving with co-employees or anybody to defraud the company or
customer/sales associates.

In the same memorandum, the IIAO reported other matters bearing on petitioner’s duties as an employee,
to wit:

59 | P a g e
OTHERS:

We also received a copy of demand letter of a certain Evelia Casquejo addressed to Ms. Panuncillo
requiring the latter to pay the amount of P54,870.00 for the supposed transfer of the lapsed plan of
Subscriber Corazon Lintag with SFA # 25-67-40-01-00392. Ms. Panuncillo received the payment of
P25,000.00 and P29,870.00 on July 17, 1997 and July 18, 1997 respectively (Exhibits L&M).

Ms. Panuncillo verbally admitted that she was the one who sold the plan to Ms. Casquejo but with the
authorization from Ms. Lintag. However, the transfer was not effected because she had misappropriated a
portion of the moneyuntil the plan was terminated. Ms. Casquejo, however, did not file a complaint
because Ms. Panuncillo executed a Special Power of Attorney authorizing the former to receive P68,000
of Ms. Panuncillo’s retirement pay (Exhibit N).8(Emphasis in the original; underscoring supplied))

On April 7, 1999, another show-cause memorandum was sent to petitioner by Renato M. Daquiz
(Daquiz), First Vice President of respondent, giving her another 48 hours to explain why she should not
be disciplinarily dealt with in connection with the complaints of Josefina and Evelia Casquejo (Evelia).
Complying with the directive, petitioner, by letter of April 10, 1999, on top of reiterating her admission of
having "defrauded" Josefina, admitted having received from Evelia the payment for a lapsed plan, thus:

With regards to [Evelia’s] case, yes its [sic] true I had received the payment but it was accordingly given
to the owner or Subscriber Ms. C. Lintag. The plan was not transferred because it was already forfeited
and we, Ms. Lintag, [Evelia] and I already made settlement of the case.

I think I have violated Sec. 8.4 of the company’s Code of Discipline. I admit it is my wrongdoing. I
was only forced to do this because of extreme needs to pay for my debts. I am open for whatever
disciplinary action that will be sanctioned againts [sic] me. I hope it is not termination from my
job. How can I pay for obligations if that will happen to me.

As for [Josefina], I have the greatest desire to pay for my indebtedness but my capability at the moment is
nil. (space) I have been planning to retire early just to pay my obligations. That is why I had written to you
last year inquiring tax exemption when retiring. I have been with the company for almost 19 years already
and I never intend [sic] to smear its name as well as mine. I was only forced by circumstances. Although it
hurts to leave CAP, I will be retiring on April 30, 1999.

x x x x9 (Emphasis and underscoring supplied)

Respondent thereupon terminated the services of petitioner by Memorandum dated April 20, 1999. 10

Petitioner sought reconsideration of her dismissal, by letter of April 23, 1999 addressed to Daquiz,
imploring as follows:

. . . Please consider my retirement letter I sent to you. I would like to avail [of] the retirement benefit of the
company. The proceeds of my retirement could help me pay some of my obligations as well as the needs
of my family. My husband is jobless and I am the breadwinner of the family. If I will be terminated, I don’t
know what will happen to us.

Sir, I am enclosing the affidavit of Ms. Evelia Casquejo proving that we have already settled the case.

x x x x11 (Underscoring supplied)1awphi1.net

Pending resolution of petitioner’s motion for reconsideration, respondent received a letter dated April 28,
199912from one Gwendolyn N. Dinoro (Gwendolyn) who informed that she had been paying her "quarterly
dues" through petitioner but found out that none had been remitted to respondent, on account of which
she (Gwendolyn) was being penalized with interest charges.

Acting on petitioner’s motion for reconsideration, Daquiz, by letter-memorandum of May 5, 1999, denied
the same in this wise:

A review of your case was made per your request, and we note that it was not just a single case but
multiple cases, that of Ms. Casquejo, Ms. Pernes, and newly reported Ms. Dinoro. Furthermore, the
cases happened way back in July 1996 and 1997, and were just discovered recently. In addition, the
misappropriation of money/or act to defraud the company or customer was deliberate and intentional.
There were several payments received – over a period of time. While you plead for your retirement
benefit to help you pay some of your obligations, as well as the need of your family (your husband being
jobless and being the breadwinner), these thoughts should have crossed your mind before you committed
the violations rather than now. To allow you to retire with benefits, is to tolerate and encourage others to
do the same in the future, as it will be a precedent that will surely be invoked in similar situations in the
future, as it will be a precedent that will surely be invoked in similar situations in the future. It is also unfair

60 | P a g e
to others who do their jobs faithfully and honestly. If we let you have your way, it will appear that we
let you scot-free and even reward you with retirement – someone who deliberately violated trust
and confidence of the company and customers.

Premises considered, the decision to terminate your services for cause stays and the request for
reconsideration is denied.

x x x x13 (Emphasis and underscoring supplied)

Petitioner thus filed a complaint14 for illegal dismissal, 13th month pay, service incentive leave pay,
damages and attorney’s fees against respondent.

The Labor Arbiter, while finding that the dismissal was for a valid cause, found the same too harsh. He
thus ordered the reinstatement of petitioner to a position one rank lower than her previous position, and
disposed as follows:

WHEREFORE, the foregoing considered, judgement [sic] is hereby rendered directing the respondent to
pay complainant’s 13th Month pay and Service Incentive Leave Pay for 1999 in proportionate amount
computed as follows:

13th Month Pay

January 1, 1999 to April 1, 1999

= 3 months

= P16,180.60/12 mos. x 3 mos. P4,045.14

Service Incentive Leave

= P16,180.60/26 days

=P622.30 per day x 5 days/12 months. 777.87

TOTAL --------------------------------P4,823.01

Plus P482.30 ten (10%) Attorney’s Fees or a total aggregate amount of PESOS: FIVE THOUSAND
THREE HUNDRED FIVE & 31/100 (P5,305.31).

Respondent is likewise, directed to reinstate the complainant to a position one rank lower without
backwages.15(Underscoring supplied)

On appeal, the National Labor Relations Commission (NLRC), by Decision of October 29, 2001, reversed
that of the Labor Arbiter, it finding that petitioner’s dismissal was illegal and
accordingly ordering her reinstatement to her former position. Thus it disposed:

WHEREFORE, the Decision in the main case dated February 18, 2000 of the Labor Arbiter declaring the
dismissal of the complainant valid, and his Order dated June 26, 2000 declaring the Motion to Declare
Respondent-appellant in Contempt as prematurely filed and ordering the issuance of an alias writ of
execution are hereby SET ASIDE, and a new one is rendered DECLARING the dismissal of the
complainant illegal, and ORDERING the respondent, CAP PHILIPPINES, INCORPORATED, the
following:

1. to reinstate the complainant MILAGROS B. PANUNCILLO to her former position without loss of
seniority rights and with full backwages from the date her compensation was withheld from her on
April 20, 1999 until her actual reinstatement;

2. to pay to the same complainant P4,045.14 as 13th month pay, and P777.89 as service
incentive leave pay;

3. to pay to the same complainant moral damages of FIFTY THOUSAND PESOS (P50,000.00),
and exemplary damages of another FIFTY THOUSAND PESOS (P50,000.00);

4. to pay attorney’s fees equivalent to ten percent (10%) of the total award exclusive of moral and
exemplary damages.

61 | P a g e
Further, the complainant’s Motion to Declare Respondent in Contempt dated May 3, 2000 is denied and
rendered moot by virtue of this Decision.

All other claims are dismissed for lack of merit.16 (Underscoring supplied)

In so deciding, the NLRC held that the transaction between petitioner and Josefina was private in
character and, therefore, respondent did not suffer any damage, hence, it was error to apply Section 8.4
of respondent’s Code of Discipline.

Respondent challenged the NLRC Decision before the appellate court via Petition for Certiorari. 17 By
Decision of May 16, 2003,18 the appellate court reversed the NLRC Decision and held that the dismissal
was valid and that respondent complied with the procedural requirements of due process before
petitioner’s services were terminated.

Hence, the present petition, petitioner faulting the appellate court

x x x IN REVIEWING THE FINDINGS OF FACT OF THE LABOR ARBITER AND THE NATIONAL
LABOR RELATIONS COMMISSION THAT RESPONDENT CAP PHILIPPINES, INC., HAS NOT BEEN
DEFRAUDED NOR DAMAGED IN THE TRANSACTION/S ENTERED INTO BY PETITIONER
RELATING TO HER FULLY PAID EDUCATIONAL PLAN.

II

x x x IN HOLDING THAT RESPONDENT CAP PHILIPPINES, INC. IS THE INSURER OF PETITIONER’S


FULLY PAID EDUCATIONAL PLAN UNDER THE INSURANCE CODE.

III

x x x IN HOLDING THAT PETITIONER WAS DULY AFFORDED DUE PROCESS BEFORE


DISMISSAL[,]

and maintaining that she

IV

x x x IS ENTITLED TO HER FULL BACKWAGES FROM THE DATE HER COMPENSATION WAS
WITHHELD FROM HER ON APRIL 20, 1999 PURSUANT TO THE DECISION OF THE NLRC
REINSTATING HER TO HER PREVIOUS POSITION WITH FULL BACKWAGES AND SETTING ASIDE
THE DECISION OF THE LABOR ARBITER REINSTATING HER TO A POSITION NEXT LOWER IN
RANK, UNTIL THE REVERSAL OF THE NLRC DECISION BY THE HONORABLE COURT OF
APPEALS.19 (Emphasis and underscoring supplied)

The petition is not meritorious.

Whether respondent did not suffer any damage resulting from the transactions entered into by petitioner,
particularly that with Josefina, is immaterial. As Lopez v. National Labor Relations Commission instructs:

That the [employer] suffered no damage resulting from the acts of [the employee] is inconsequential.
In Glaxo Wellcome Philippines, Inc. v. Nagkakaisang Empleyado ng Wellcome-DFA (NEW-DFA), we held
that deliberate disregard or disobedience of company rules could not be countenanced, and any
justification that the disobedient employee might put forth would be deemed inconsequential. The lack of
resulting damage was unimportant, because "the heart of the charge is the crooked and anarchic attitude
of the employee towards his employer. Damage aggravates the charge but its absence does not mitigate
nor negate the employee’s liability." x x x20 (Italics in the original; underscoring supplied)

The transaction with Josefina aside, there was this case of misappropriation by petitioner of the amounts
given to her by Evelia representing payment for the lapsed plan of Corazon Lintag. While a settlement of
the case between the two may have eventually been forged, that did not obliterate the misappropriation
committed by petitioner against a client of respondent.

Additionally, there was still another complaint lodged before respondent by Gwendolyn against petitioner
for failure to remit the cash payments she had made to her, a complaint she was apprised of but on which
she was silent.

In fine, by petitioner’s repeated violation of Section 8.4 of respondent’s Code of Discipline, she violated
the trust and confidence of respondent and its customers. To allow her to continue with her employment

62 | P a g e
puts respondent under the risk of being embroiled in unnecessary lawsuits from customers similarly
situated as Josefina, et al. Clearly, respondent exercised its management prerogative when it dismissed
petitioner.

. . . [T]ime and again, this Court has upheld a company’s management prerogatives so long as they are
exercised in good faith for the advancement of the employer’s interest and not for the purpose of
defeating or circumventing the rights of the employees under special laws or under valid agreements.

Deliberate disregard or disobedience of rules by the employees cannot be countenanced. Whatever


maybe the justification behind the violations is immaterial at this point, because the fact still remains that
an infraction of the company rules has been committed.

Under the Labor Code, the employer may terminate an employment on the ground
of serious misconduct or willful disobedience by the employee of the lawful orders of his employer or
representative in connection with his work. Infractions of company rules and regulations have been
declared to belong to this category and thus are valid causes for termination of employment by the
employer.

xxxx

The employer cannot be compelled to continue the employment of a person who was found guilty of
maliciously committing acts which are detrimental to his interests. It will be highly prejudicial to the
interests of the employer to impose on him the charges that warranted his dismissal from employment.
Indeed, it will demoralize the rank and file if the undeserving, if not undesirable, remain in the service. It
may encourage him to do even worse and will render a mockery of the rules of discipline that employees
are required to observe. This Court was more emphatic in holding that in protecting the rights of the
laborer, it cannot authorize the oppression or self-destruction of the employer.21 x x x (Underscoring
supplied)

Petitioner nevertheless argues that she was not afforded due process before her dismissal as she was
merely required to answer a show-cause memorandum dated April 7, 1999 and there was no actual
investigation conducted in which she could have been heard.

Before terminating the services of an employee, the law requires two written notices: (1) one to apprise
him of the particular acts or omissions for which his dismissal is sought; and (2) the other to inform him of
his employer’s decision to dismiss him. As to the requirement of a hearing, the essence of due process
lies in an opportunity to be heard, and not always and indispensably in an actual hearing.22

When respondent received the letter-complaint of Josefina, petitioner was directed to comment and
explain her side thereon. She did comply, by letter of February 22, 1999 wherein she admitted that she
"had defrauded Ms. J. Pernes, but [that she] didn’t do it intentionally."

Respondent subsequently sent petitioner a show-cause memorandum giving her 48 hours from receipt
why she should not be disciplinarily sanctioned. Despite the 48-hour deadline, nothing was heard from
her until April 10, 1999 when she complied with the second show-cause memorandum dated April 7,
1999.

On April 20, 1999, petitioner was informed of the termination of her services to which she filed a motion
for reconsideration.

There can thus be no doubt that petitioner was given ample opportunity to explain her side.
Parenthetically, when an employee admits the acts complained of, as in petitioner’s case, no formal
hearing is even necessary.23

Finally, petitioner argues that even if the order of reinstatement of the NLRC was reversed on appeal, it is
still obligatory on the part of an employer to reinstate and pay the wages of a dismissed employee during
the period of appeal, citing Roquero v. Philippine Airlines, 24 the third paragraph of Article 22325 of the
Labor Code, and the last paragraph of Section 16,26 Rule V of the then 1990 New Rules of Procedure of
the NLRC.

Petitioner adds that respondent made "clever moves to frustrate [her] from enjoying the reinstatement
aspect of the decision starting from that of the Labor Arbiter (although to a next lower rank), [to that] of the
NLRC to her previous position without loss of seniority rights until it was caught up by the decision of the
Honorable Court of Appeals reversing the decision of the NLRC and declaring the dismissal of petitioner
as based on valid grounds."

Respondent, on the other hand, maintains that Roquero and the legal provisions cited by petitioner are
not applicable as they speak of reinstatement on order of the Labor Arbiter and not of the NLRC.

63 | P a g e
The Labor Arbiter ordered the reinstatement of petitioner to a lower position. The third paragraph of
Article 223 of the Labor Code is clear, however – the employee, who is ordered reinstated, must be
accepted back to work under the same terms and conditions prevailing prior to his dismissal or
separation.

Petitioner’s being demoted to a position one rank lower than her original position is certainly not in
accordance with the said third paragraph provision of Article 223. Besides, the provision contemplates a
finding that the employee was illegally dismissed or there was no just cause for her dismissal. As priorly
stated, in petitioner’s case, the Labor Arbiter found that there was just cause for her dismissal, but that
dismissal was too harsh, hence, his order for her reinstatement to a lower position.

The order to reinstate is incompatible with a finding that the dismissal is for a valid cause. Thus this Court
declared in Colgate Palmolive Philippines, Inc. v. Ople:

The order of the respondent Minister to reinstate the employees despite a clear finding of guilt on their
part is not in conformity with law. Reinstatement is simply incompatible with a finding of guilt. Where
the totality of the evidence was sufficient to warrant the dismissal of the employees the law warrants their
dismissal without making any distinction between a first offender and a habitual delinquent. Under the
law, respondent Minister is duly mandated to equally protect and respect not only the labor or workers’
side but also the management and/or employers’ side. The law, in protecting the rights of the laborer,
authorizes neither oppression nor self-destruction of the employer. x x x As stated by Us in the case of
San Miguel Brewery vs. National Labor Union, "an employer cannot legally be compelled to continue with
the employment of a person who admittedly was guilty of misfeasance or malfeasance towards his
employer, and whose continuance in the service of the latter is patently inimical to his
interest."27 (Emphasis and underscoring supplied)

The NLRC was thus correct when it ruled that it was erroneous for the Labor Arbiter to order the
reinstatement of petitioner, even to a position one rank lower than that which she formerly held.28

Now, on petitioner’s argument that, following the third paragraph of Article 223 of the Labor Code, the
order of the NLRC to reinstate her and to pay her wages was immediately executory even while the case
was on appeal before the higher courts: The third paragraph of Article 223 of the Labor Code directs that
– "the decision of the LaborArbiter reinstating a dismissed or separated employee, insofar as the
reinstatement aspect is concerned, shall immediately be executory, even pending appeal."

In Roquero, the Labor Arbiter upheld the dismissal of Roquero, along with another employee, albeit he
found both the two and employer Philippine Airlines (PAL) at fault. The Labor Arbiter thus ordered the
payment of separation pay and attorney’s fees to the complainant. No order for reinstatement was issued
by the Labor Arbiter, precisely because the dismissal was upheld.

On appeal, the NLRC ruled in favor of Roquero and his co-complainant as it also found PAL guilty of
instigation. The NLRC thus ordered the reinstatement of Roquero and his co-complainant to their former
positions, but without backwages.

PAL appealed the NLRC decision via Petition for Review before this Court. Roquero and his co-
complainant did not. They instead filed before the Labor Arbiter a Motion for Execution of the NLRC order
for their reinstatement which the Labor Arbiter granted.

Acting on PAL’s Petition for Review, this Court referred it to the Court of Appeals pursuant to St. Martin
Funeral Home v. NLRC.29

The appellate court reversed the NLRC decision and ordered the reinstatement of the decision of the
Labor Arbiter but only insofar as it upheld the dismissal of Roquero.

Back to this Court on Roquero’s Petition for Review, the following material issues were raised:

xxxx

2. Can the executory nature of the decision, more so the reinstatement aspect of a labor tribunal’s
order be halted by a petition having been filed in higher courts without any restraining order or
preliminary injunction having been ordered in the meantime?

3. Would the employer who refused to reinstate an employee despite a writ duly issued be held
liable to pay the salary of the subject employee from the time that he was ordered reinstated up to
the time that the reversed decision was handed down? 30

Resolving these issues, this Court held in Roquero:

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Article 223 (3rd paragraph) of the Labor Code as amended by Section 12 of Republic Act No. 6715, and
Section 2 of the NLRC Interim Rules on Appeals under RA No. 6715, Amending the Labor Code, provide
that an order of reinstatement by the Labor Arbiter is immediately executory even pending appeal. The
rationale of the law has been explained in Aris (Phil.) Inc. vs. NLRC:

"In authorizing execution pending appeal of the reinstatement aspect of a decision of the Labor Arbiter
reinstating a dismissed or separated employee, the law itself has laid down a compassionate policy
which, once more, vivifies and enhances the provisions of the 1987 Constitution on labor and the working
man.

xxxx

These duties and responsibilities of the State are imposed not so much to express sympathy for the
workingman as to forcefully and meaningfully underscore labor as a primary social and economic force,
which the Constitution also expressly affirms with equal intensity. Labor is an indispensable partner for
the nation’s progress and stability.

xxxx

The order of reinstatement is immediately executory. The unjustified refusal of the employer to reinstate a
dismissed employee entitles him to payment of his salaries effective from the time the employer failed to
reinstate him despite the issuance of a writ of execution. Unless there is a restraining order issued, it is
ministerial upon the Labor Arbiter to implement the order of reinstatement. In the case at bar, no
restraining order was granted. Thus, it was mandatory on PAL to actually reinstate Roquero or reinstate
him in the payroll. Having failed to do so, PAL must pay Roquero the salary he is entitled to, as if he was
reinstated, from the time of the decision of the NLRC until the finality of the decision of this Court.

We reiterate the rule that technicalities have no room in labor cases where the Rules of Court are applied
only in a suppletory manner and only to effectuate the objectives of the Labor Code and not to defeat
them. Hence, even if the order of reinstatement of the Labor Arbiter is reversed on appeal, it is obligatory
on the part of the employer to reinstate and pay the wages of the dismissed employee during the period
of appeal until reversal by the higher court. On the other hand, if the employee has been reinstated during
the appeal period and such reinstatement order is reversed with finality, the employee is not required to
reimburse whatever salary he received for he is entitled to such, more so if he actually rendered services
during the period.31 (Italics in the original, emphasis and underscoring supplied)

In the present case, since the NLRC found petitioner’s dismissal illegal and ordered her reinstatement,
following the provision of the sixth paragraph of Article 223, viz:

The [National Labor Relations] Commission shall decide all cases within twenty (20) calendar days from
receipt of the answer of the appellee. The decision of the Commission shall be final and executory after
ten (10) calendar days from receipt thereof by the parties. (Emphasis and underscoring supplied),

the NLRC decision became "final and executory after ten calendar days from receipt of the decision by
the parties" for reinstatement.

In view, however, of Article 224 of the Labor Code which provides:

ART. 224. Execution of decisions, orders or awards. – (a) The Secretary of Labor and Employment or any
Regional Director, the Commission or any Labor Arbiter, or med-arbiter or voluntary arbitrator may, motu
proprio or on motion of any interested party, issue a writ of execution on a judgment within five (5)
years from the date it becomes final and executory, requiring a sheriff or a duly deputized officer to
execute or enforce final decisions, orders or awards of the Secretary of Labor and Employment or
regional director, the Commission, the Labor Arbiter or med-arbiter, or voluntary arbitrators. In any case, it
shall be the duty of the responsible officer to separately furnish immediately the counsels of record and
the parties with copies of said decisions, orders or awards. Failure to comply with the duty prescribed
herein shall subject such responsible officer to appropriate administrative sanctions.

x x x x (Emphasis and underscoring supplied),

there was still a need for the issuance of a writ of execution of the NLRC decision.

Unlike then the order for reinstatement of a Labor Arbiter which is self-executory, that of the NLRC is not.
There is still a need for the issuance of a writ of execution. Thus this Court held in Pioneer Texturizing
Corp. v. NLRC:32

x x x The provision of Article 223 is clear that an award [by the Labor Arbiter] for reinstatement shall
be immediately executory even pending appeal and the posting of a bond by the employer shall not stay

65 | P a g e
the execution for reinstatement. The legislative intent is quite obvious, i.e., to make an award of
reinstatement immediately enforceable, even pending appeal. To require the application for and issuance
of a writ of execution as prerequisites for the execution of a reinstatement award would certainly betray
and run counter to the very object and intent of Article 223, i.e., the immediate execution of a
reinstatement order. The reason is simple. An application for a writ of execution and its issuance could be
delayed for numerous reasons. A mere continuance or postponement of a scheduled hearing, for
instance, or an inaction on the part of the Labor Arbiter or the NLRC could easily delay the issuance of
the writ thereby setting at naught the strict mandate and noble purpose envisioned by Article 223. In other
words, if the requirements of Article 224 [including the issuance of a writ of execution] were to govern, as
we so declared in Maranaw, then the executory nature of a reinstatement order or award contemplated by
Article 223 will be unduly circumscribed and rendered ineffectual. In enacting the law, the legislature is
presumed to have ordained a valid and sensible law, one which operates no further than may be
necessary to achieve its specific purpose. Statutes, as a rule, are to be construed in the light of the
purpose to be achieved and the evil sought to be remedied. x x x In introducing a new rule on the
reinstatement aspect of a labor decision under Republic Act No. 6715, Congress should not be
considered to be indulging in mere semantic exercise. On appeal, however, the appellate tribunal
concerned may enjoin or suspend the reinstatement order in the exercise of its sound discretion.33(Italics
in the original, emphasis and underscoring supplied)

If a Labor Arbiter does not issue a writ of execution of the NLRC order for the reinstatement of an
employee even if there is no restraining order, he could probably be merely observing judicial courtesy,
which is advisable "if there is a strong probability that the issues before the higher court would be
rendered moot and moribund as a result of the continuation of the proceedings in the lower court." 34 In
such a case, it is as if a temporary restraining order was issued, the effect of which Zamboanga City
Water District v. Buhat explains:

The issuance of the temporary restraining order … did not nullify the rights of private respondents to their
reinstatement and to collect their wages during the period of the effectivity of the order but
merely suspended the implementation thereof pending the determination of the validity of the NLRC
resolutions subject of the petition. Naturally, a finding of this Court that private respondents
were not entitled to reinstatement would mean that they had no right to collect any back wages. On the
other hand, where the Court affirmed the decision of the NLRC and recognized the right of private
respondents to reinstatement,… private respondents are entitled to the wages accruing during the
effectivity of the temporary restraining order.35 (Emphasis and underscoring supplied)

While Zamboanga was decided prior to St. Martin Funeral and, therefore, the NLRC decisions were at the
time passed upon by this Court to the exclusion of the appellate court, it is still applicable.

Since this Court is now affirming the challenged decision of the Court of Appeals finding that petitioner
was validly dismissed and accordingly reversing the NLRC Decision that petitioner was illegally dismissed
and should be reinstated, petitioner is not entitled to collect any backwages from the time the NLRC
decision became final and executory up to the time the Court of Appeals reversed said decision.

It does not appear that a writ of execution was issued for the implementation of the NLRC order for
reinstatement. Had one been issued, respondent would have been obliged to reinstate petitioner and pay
her salary until the said order of the NLRC for her reinstatement was reversed by the Court of Appeals,
and following Roquero, petitioner would not have been obliged to reimburse respondent for whatever
salary she received in the interim.

In sum, while under the sixth paragraph of Article 223 of the Labor Code, the decision of the NLRC
becomes final and executory after the lapse of ten calendar days from receipt thereof by the parties, the
adverse party is not precluded from assailing it via Petition for Certiorari under Rule 65 before the Court
of Appeals and then to this Court via a Petition for Review under Rule 45. If during the pendency of the
review no order is issued by the courts enjoining the execution of a decision of the Labor Arbiter or NLRC
which is favorable to an employee, the Labor Arbiter or the NLRC must exercise extreme prudence and
observe judicial courtesy when the circumstances so warrant if we are to heed the injunction of the Court
in Philippine Geothermal, Inc v. NLRC:

While it is true that compassion and human consideration should guide the disposition of cases involving
termination of employment since it affects one’s source or means of livelihood, it should not be
overlooked that the benefits accorded to labor do not include compelling an employer to retain the
services of an employee who has been shown to be a gross liability to the employer. The law in protecting
the rights of the employees authorizes neither oppression nor self-destruction of the employer. It should
be made clear that when the law tilts the scale of justice in favor of labor, it is but a recognition of the
inherent economic inequality between labor and management. The intent is to balance the scale of
justice; to put the two parties on relatively equal positions. There may be cases where the circumstances
warrant favoring labor over the interests of management but never should the scale be so tilted if the

66 | P a g e
result is an injustice to the employer. Justitia nemini neganda est (Justice is to be denied to
none).36 (Italics in the original; emphasis and underscoring supplied)

WHEREFORE, the petition is DENIED. The assailed Court of Appeals Decision dated May 16, 2003 and
Resolution dated November 17, 2003 are AFFIRMED.

SO ORDERED.

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G.R. No. 160828 August 9, 2010

PICOP RESOURCES, INCORPORATED (PRI), Petitioner,


vs.
ANACLETO L. TAÑECA, GEREMIAS S. TATO, JAIME N. CAMPOS, MARTINIANO A. MAGAYON,
JOSEPH B. BALGOA, MANUEL G. ABUCAY, MOISES M. ALBARAN, MARGARITO G. ALICANTE,
JERRY ROMEO T. AVILA, LORENZO D. CANON, RAUL P. DUERO, DANILO Y. ILAN, MANUEL M.
MATURAN, JR., LUISITO R. POPERA, CLEMENTINO C. QUIMAN, ROBERTO Q. SILOT, CHARLITO
D. SINDAY, REMBERT B. SUZON ALLAN J. TRIMIDAL, and NAMAPRI-SPFL, Respondents.

DECISION

PERALTA, J.:

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking the reversal of the
Decision1dated July 25, 2003 and Resolution2 dated October 23, 2003 of the Court of Appeals in CA-G.R.
SP No. 71760, setting aside the Resolutions dated October 8, 2001 3 and April 29, 20024 of the National
Labor Relations Commission in NLRC CA No. M-006309-2001 and reinstating the Decision5 dated March
16, 2001 of the Labor Arbiter.

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

On February 13, 2001, respondents Anacleto Tañeca, Loreto Uriarte, Joseph Balgoa, Jaime Campos,
Geremias Tato, Martiniano Magayon, Manuel Abucay and fourteen (14) others filed a Complaint for unfair
labor practice, illegal dismissal and money claims against petitioner PICOP Resources, Incorporated
(PRI), Wilfredo Fuentes (in his capacity as PRI's Vice President/Resident Manager), Atty. Romero Boniel
(in his capacity as PRI's Manager of Legal/Labor), Southern Philippines Federation of Labor (SPFL), Atty.
Wilbur T. Fuentes (in his capacity as Secretary General of SPFL), Pascasio Trugillo (in his capacity as
Local President of Nagkahiusang Mamumuo sa PICOP Resources, Inc.- SPFL [NAMAPRI-SPFL]) and
Atty. Proculo Fuentes, Jr.6 (in his capacity as National President of SPFL).

Respondents were regular rank-and-file employees of PRI and bona fide members of Nagkahiusang
Mamumuo saPRI Southern Philippines Federation of Labor (NAMAPRI-SPFL), which is the collective
bargaining agent for the rank-and-file employees of petitioner PRI.

PRI has a collective bargaining agreement (CBA) with NAMAPRI-SPFL for a period of five (5) years from
May 22, 1995 until May 22, 2000.

The CBA contained the following union security provisions:

Article II- Union Security and Check-Off

Section 6. Maintenance of membership.

6.1 All employees within the appropriate bargaining unit who are members of the UNION at
the time of the signing of this AGREEMENT shall, as a condition of continued employment
by the COMPANY, maintain their membership in the UNION in good standing during the
effectivity of this AGREEMENT.

6.2 Any employee who may hereinafter be employed to occupy a position covered by the
bargaining unit shall be advised by the COMPANY that they are required to file an application for
membership with the UNION within thirty (30) days from the date his appointment shall have
been made regular.

6.3 The COMPANY, upon the written request of the UNION and after compliance with the
requirements of the New Labor Code, shall give notice of termination of services of any
employee who shall fail to fulfill the condition provided in Section 6.1 and 6.2 of this
Article, but it assumes no obligation to discharge any employee if it has reasonable grounds to
believe either that membership in the UNION was not available to the employee on the same
terms and conditions generally applicable to other members, or that membership was denied or
terminated for reasons other than voluntary resignation or non-payment of regular union dues.
Separation under the Section is understood to be for cause, consequently, the dismissed
employee is not entitled to separation benefits provided under the New Labor Code and in this
AGREEMENT."7

On May 16, 2000, Atty. Proculo P. Fuentes (Atty. Fuentes) sent a letter to the management of PRI
demanding the termination of employees who allegedly campaigned for, supported and signed the
Petition for Certification Election of the Federation of Free Workers Union (FFW) during the effectivity of

68 | P a g e
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 one’s disloyalty would have been the explicit resignation or withdrawal of
membership from the Union accompanied by an advice to management to discontinue union dues and
check-off deductions. They insisted that mere affixation of signature on such authorization to file a petition
for certification election was not per se an act of disloyalty. They claimed that while it may be true that
they signed the said authorization before the start of the freedom period, the petition of FFW was only
filed with the DOLE on May 18, 2000, or 58 days after the start of the freedom period.

Respondents maintained that their acts of signing the authorization signifying support to the filing of a
Petition for Certification Election of FFW was merely prompted by their desire to have a certification
election among the rank-and-file employees of PRI with hopes of a CBA negotiation in due time; and not
to cause the downfall of NAMAPRI-SPFL.

Furthermore, respondents contended that there was lack of procedural due process. Both the letter dated
May 16, 2000 of Atty. Fuentes and the follow-up letter dated May 23, 2000 of Trujillo addressed to PRI
did not mention their names. Respondents stressed that NAMAPRI-SPFL merely requested PRI to
investigate union members who supported the Petition for Certification Election of FFW. Respondents
claimed that they should have been summoned individually, confronted with the accusation and
investigated accordingly and from where the Union may base its findings of disloyalty and, thereafter,
recommend to management the termination for causes.1avvphi1

Respondents, likewise, argued that at the time NAMAPRI-SPFL demanded their termination, it was no
longer the bargaining representative of the rank-and-file workers of PRI, because the CBA had already
expired on May 22, 2000. Hence, there could be no justification in PRI’s act of dismissing respondents
due to acts of disloyalty.

Respondents asserted that the act of PRI, Wilfredo Fuentes and Atty. Boniel in giving in to the wishes of
the Union in discharging them on the ground of disloyalty to the Union amounted to interference with,
restraint or coercion of respondents’ exercise of their right to self-organization. The act indirectly required
petitioners to support and maintain their membership with NAMAPRI-SPFL as a condition for their
continued employment. The acts of NAMAPRI-SPFL, Atty. Fuentes and Trujillo amounted to actual

69 | P a g e
restraint and coercion of the petitioners in the exercise of their rights to self-organization and constituted
acts of unfair labor practice.

In a Decision8 dated March 16, 2001, the Labor Arbiter declared the respondents’ dismissal to be illegal
and ordered PRI to reinstate respondents to their former or equivalent positions without loss of seniority
rights and to jointly and solidarily pay their backwages. The dispositive portion of which reads:

WHEREFORE, premises considered, judgment is hereby entered:

1. Declaring complainants’ dismissal illegal; and

2. Ordering respondents Picop Resources Inc. (PRI) and NAMAPRI-SPFL to reinstate


complainants to their former or equivalent positions without loss of seniority rights and to jointly
and solidarily pay their backwages in the total amount of ₱420,339.30 as shown in the said
Annex "A" plus damages in the amount of ₱10,000.00 each, or a total of ₱210,000.00 and
attorney’s fees equivalent to 10% of the total monetary award.

SO ORDERED.9

PRI and NAMAPRI-SPFL appealed to the National Labor Relations Commission (NLRC), which reversed
the decision of the Labor Arbiter; thus, declaring the dismissal of respondents from employment as legal.

Respondents filed a motion for reconsideration, but it was denied on April 29, 2001 for lack of merit.

Unsatisfied, respondents filed a petition for certiorari under Rule 65 before the Court of Appeals and
sought the nullification of the Resolution of the NLRC dated October 8, 2001 which reversed the Decision
dated March 16. 2001 of Labor Arbiter and the Resolution dated April 29, 2002, which denied
respondent’s motion for reconsideration.

On July 25, 2003, the Court of Appeals reversed and set aside the assailed Resolutions of the NLRC and
reinstated the Decision dated March 16, 2001 of the Labor Arbiter.

Thus, before this Court, PRI, as petitioner, raised the following issues:

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.

70 | P a g e
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.

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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.1avvphi

Time and again, we have ruled that we adhere to the policy of enhancing the welfare of the workers. Their
freedom to choose who should be their bargaining representative is of paramount importance. The fact
that there already exists a bargaining representative in the unit concerned is of no moment as long as the
petition for certification election was filed within the freedom period. What is imperative is that by such a
petition for certification election the employees are given the opportunity to make known of who shall
have the right to represent them thereafter. Not only some, but all of them should have the right to do so.
What is equally important is that everyone be given a democratic space in the bargaining unit
concerned.24

We will emphasize anew that the power to dismiss is a normal prerogative of the employer. This,
however, is not without limitations. The employer is bound to exercise caution in terminating the services
of his employees especially so when it is made upon the request of a labor union pursuant to the
Collective Bargaining Agreement. Dismissals must not be arbitrary and capricious. Due process must be
observed in dismissing an employee, because it affects not only his position but also his means of

72 | P a g e
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
attorney’s fees equivalent to 10% of the total monetary award.26

WHEREFORE, the petition is DENIED. The Decision dated July 25, 2003 and the Resolution dated
October 23, 2003 of the Court of Appeals in CA-G.R. SP No. 71760, which set aside the Resolutions
dated October 8, 2001 and April 29, 2002 of the National Labor Relations Commission in NLRC CA No.
M-006309-2001, are AFFIRMED accordingly. Respondents are hereby awarded full backwages and other
allowances, without qualifications and diminutions, computed from the time they were illegally dismissed
up to the time they are actually reinstated. Let this case be remanded to the Labor Arbiter for proper
computation of the full backwages due respondents, in accordance with Article 279 of the Labor Code, as
expeditiously as possible.

SO ORDERED.

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G.R. No. 169717 March 16, 2011

SAMAHANG MANGGAGAWA SA CHARTER CHEMICAL SOLIDARITY OF UNIONS IN THE


PHILIPPINES FOR EMPOWERMENT AND REFORMS (SMCC-SUPER), ZACARRIAS JERRY
VICTORIO-Union President,Petitioner,
vs.
CHARTER CHEMICAL and COATING CORPORATION, Respondent.

DECISION

DEL CASTILLO, J.:

The right to file a petition for certification election is accorded to a labor organization provided that it
complies with the requirements of law for proper registration. The inclusion of supervisory employees in a
labor organization seeking to represent the bargaining unit of rank-and-file employees does not divest it of
its status as a legitimate labor organization. We apply these principles to this case.

This Petition for Review on Certiorari seeks to reverse and set aside the Court of Appeal’s March 15,
2005 Decision1 in CA-G.R. SP No. 58203, which annulled and set aside the January 13, 2000
Decision2 of the Department of Labor and Employment (DOLE) in OS-A-6-53-99 (NCR-OD-M-9902-019)
and the September 16, 2005 Resolution3 denying petitioner union’s motion for reconsideration.

Factual Antecedents

On February 19, 1999, Samahang Manggagawa sa Charter Chemical Solidarity of Unions in the
Philippines for Empowerment and Reforms (petitioner union) filed a petition for certification election
among the regular rank-and-file employees of Charter Chemical and Coating Corporation (respondent
company) with the Mediation Arbitration Unit of the DOLE, National Capital Region.

On April 14, 1999, respondent company filed an Answer with Motion to Dismiss 4 on the ground that
petitioner union is not a legitimate labor organization because of (1) failure to comply with the
documentation requirements set by law, and (2) the inclusion of supervisory employees within petitioner
union.5

Med-Arbiter’s Ruling

On April 30, 1999, Med-Arbiter Tomas F. Falconitin issued a Decision6 dismissing the petition for
certification election. The Med-Arbiter ruled that petitioner union is not a legitimate labor organization
because the Charter Certificate, "Sama-samang Pahayag ng Pagsapi at Authorization," and "Listahan ng
mga Dumalo sa Pangkalahatang Pulong at mga Sumang-ayon at Nagratipika sa Saligang Batas" were
not executed under oath and certified by the union secretary and attested to by the union president as
required by Section 235 of the Labor Code 7 in relation to Section 1, Rule VI of Department Order (D.O.)
No. 9, series of 1997. The union registration was, thus, fatally defective.

The Med-Arbiter further held that the list of membership of petitioner union consisted of 12 batchman, mill
operator and leadman who performed supervisory functions. Under Article 245 of the Labor Code, said
supervisory employees are prohibited from joining petitioner union which seeks to represent the rank-and-
file employees of respondent company.

As a result, not being a legitimate labor organization, petitioner union has no right to file a petition for
certification election for the purpose of collective bargaining.

Department of Labor and Employment’s Ruling

On July 16, 1999, the DOLE initially issued a Decision 8 in favor of respondent company dismissing
petitioner union’s appeal on the ground that the latter’s petition for certification election was filed out of
time. Although the DOLE ruled, contrary to the findings of the Med-Arbiter, that the charter certificate
need not be verified and that there was no independent evidence presented to establish respondent
company’s claim that some members of petitioner union were holding supervisory positions, the DOLE
sustained the dismissal of the petition for certification after it took judicial notice that another
union, i.e., Pinag-isang Lakas Manggagawa sa Charter Chemical and Coating Corporation, previously
filed a petition for certification election on January 16, 1998. The Decision granting the said petition
became final and executory on September 16, 1998 and was remanded for immediate implementation.
Under Section 7, Rule XI of D.O. No. 9, series of 1997, a motion for intervention involving a certification
election in an unorganized establishment should be filed prior to the finality of the decision calling for a
certification election. Considering that petitioner union filed its petition only on February 14, 1999, the
same was filed out of time.

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On motion for reconsideration, however, the DOLE reversed its earlier ruling. In its January 13, 2000
Decision, the DOLE found that a review of the records indicates that no certification election was
previously conducted in respondent company. On the contrary, the prior certification election filed by
Pinag-isang Lakas Manggagawa sa Charter Chemical and Coating Corporation was, likewise, denied by
the Med-Arbiter and, on appeal, was dismissed by the DOLE for being filed out of time. Hence, there was
no obstacle to the grant of petitioner union’s petition for certification election, viz:

WHEREFORE, the motion for reconsideration is hereby GRANTED and the decision of this Office dated
16 July 1999 is MODIFIED to allow the certification election among the regular rank-and-file employees of
Charter Chemical and Coating Corporation with the following choices:

1. Samahang Manggagawa sa Charter Chemical-Solidarity of Unions in the Philippines for


Empowerment and Reform (SMCC-SUPER); and

2. No Union.

Let the records of this case be remanded to the Regional Office of origin for the immediate conduct of a
certification election, subject to the usual pre-election conference.

SO DECIDED.9

Court of Appeal’s Ruling

On March 15, 2005, the CA promulgated the assailed Decision, viz:

WHEREFORE, the petition is hereby GRANTED. The assailed Decision and Resolution dated January
13, 2000 and February 17, 2000 are hereby [ANNULLED] and SET ASIDE.

SO ORDERED.10

In nullifying the decision of the DOLE, the appellate court gave credence to the findings of the Med-
Arbiter that petitioner union failed to comply with the documentation requirements under the Labor Code.
It, likewise, upheld the Med-Arbiter’s finding that petitioner union consisted of both rank-and-file and
supervisory employees. Moreover, the CA held that the issues as to the legitimacy of petitioner union may
be attacked collaterally in a petition for certification election and the infirmity in the membership of
petitioner union cannot be remedied through the exclusion-inclusion proceedings in a pre-election
conference pursuant to the ruling in Toyota Motor Philippines v. Toyota Motor Philippines Corporation
Labor Union.11 Thus, considering that petitioner union is not a legitimate labor organization, it has no legal
right to file a petition for certification election.

Issues

Whether x x x the Honorable Court of Appeals committed grave abuse of discretion tantamount to lack of
jurisdiction in granting the respondent [company’s] petition for certiorari (CA G.R. No. SP No. 58203) in
spite of the fact that the issues subject of the respondent company[’s] petition was already settled with
finality and barred from being re-litigated.

II

Whether x x x the Honorable Court of Appeals committed grave abuse of discretion tantamount to lack of
jurisdiction in holding that the alleged mixture of rank-and-file and supervisory employee[s] of petitioner
[union’s] membership is [a] ground for the cancellation of petitioner [union’s] legal personality and
dismissal of [the] petition for certification election.

III

Whether x x x the Honorable Court of Appeals committed grave abuse of discretion tantamount to lack of
jurisdiction in holding that the alleged failure to certify under oath the local charter certificate issued by its
mother federation and list of the union membership attending the organizational meeting [is a ground] for
the cancellation of petitioner [union’s] legal personality as a labor organization and for the dismissal of the
petition for certification election.12

Petitioner Union’s Arguments

Petitioner union claims that the litigation of the issue as to its legal personality to file the subject petition
for certification election is barred by the July 16, 1999 Decision of the DOLE. In this decision, the DOLE

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ruled that petitioner union complied with all the documentation requirements and that there was no
independent evidence presented to prove an illegal mixture of supervisory and rank-and-file employees in
petitioner union. After the promulgation of this Decision, respondent company did not move for
reconsideration, thus, this issue must be deemed settled.

Petitioner union further argues that the lack of verification of its charter certificate and the alleged illegal
composition of its membership are not grounds for the dismissal of a petition for certification election
under Section 11, Rule XI of D.O. No. 9, series of 1997, as amended, nor are they grounds for the
cancellation of a union’s registration under Section 3, Rule VIII of said issuance. It contends that what is
required to be certified under oath by the local union’s secretary or treasurer and attested to by the local
union’s president are limited to the union’s constitution and by-laws, statement of the set of officers, and
the books of accounts.

Finally, the legal personality of petitioner union cannot be collaterally attacked but may be questioned
only in an independent petition for cancellation pursuant to Section 5, Rule V, Book IV of the Rules to
Implement the Labor Code and the doctrine enunciated in Tagaytay Highlands International Golf Club
Incoprorated v. Tagaytay Highlands Empoyees Union-PTGWO.13

Respondent Company’s Arguments

Respondent company asserts that it cannot be precluded from challenging the July 16, 1999 Decision of
the DOLE. The said decision did not attain finality because the DOLE subsequently reversed its earlier
ruling and, from this decision, respondent company timely filed its motion for reconsideration.

On the issue of lack of verification of the charter certificate, respondent company notes that Article 235 of
the Labor Code and Section 1, Rule VI of the Implementing Rules of Book V, as amended by D.O. No. 9,
series of 1997, expressly requires that the charter certificate be certified under oath.

It also contends that petitioner union is not a legitimate labor organization because its composition is a
mixture of supervisory and rank-and-file employees in violation of Article 245 of the Labor Code.
Respondent company maintains that the ruling in Toyota Motor Philippines vs. Toyota Motor Philippines
Labor Union14 continues to be good case law. Thus, the illegal composition of petitioner union nullifies its
legal personality to file the subject petition for certification election and its legal personality may be
collaterally attacked in the proceedings for a petition for certification election as was done here.

Our Ruling

The petition is meritorious.

The issue as to the legal personality of petitioner union is not barred by the July 16, 1999 Decision of the
DOLE.

A review of the records indicates that the issue as to petitioner union’s legal personality has been timely
and consistently raised by respondent company before the Med-Arbiter, DOLE, CA and now this Court. In
its July 16, 1999 Decision, the DOLE found that petitioner union complied with the documentation
requirements of the Labor Code and that the evidence was insufficient to establish that there was an
illegal mixture of supervisory and rank-and-file employees in its membership. Nonetheless, the petition for
certification election was dismissed on the ground that another union had previously filed a petition for
certification election seeking to represent the same bargaining unit in respondent company.

Upon motion for reconsideration by petitioner union on January 13, 2000, the DOLE reversed its previous
ruling. It upheld the right of petitioner union to file the subject petition for certification election because its
previous decision was based on a mistaken appreciation of facts.15 From this adverse decision,
respondent company timely moved for reconsideration by reiterating its previous arguments before the
Med-Arbiter that petitioner union has no legal personality to file the subject petition for certification
election.

The July 16, 1999 Decision of the DOLE, therefore, never attained finality because the parties timely
moved for reconsideration. The issue then as to the legal personality of petitioner union to file the
certification election was properly raised before the DOLE, the appellate court and now this Court.

The charter certificate need not be certified under oath by the local union’s secretary or treasurer and
attested to by its president.

Preliminarily, we must note that Congress enacted Republic Act (R.A.) No. 9481 16 which took effect on
June 14, 2007.17 This law introduced substantial amendments to the Labor Code. However, since the
operative facts in this case occurred in 1999, we shall decide the issues under the pertinent legal

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provisions then in force (i.e., R.A. No. 6715,18 amending Book V of the Labor Code, and the rules and
regulations19 implementing R.A. No. 6715, as amended by D.O. No. 9, 20

series of 1997) pursuant to our ruling in Republic v. Kawashima Textile Mfg., Philippines, Inc.21

In the main, the CA ruled that petitioner union failed to comply with the requisite documents for
registration under Article 235 of the Labor Code and its implementing rules. It agreed with the Med-Arbiter
that the Charter Certificate, Sama-samang Pahayag ng Pagsapi at Authorization, and Listahan ng mga
Dumalo sa Pangkalahatang Pulong at mga Sumang-ayon at Nagratipika sa Saligang Batas were not
executed under oath. Thus, petitioner union cannot be accorded the status of a legitimate labor
organization.

We disagree.

The then prevailing Section 1, Rule VI of the Implementing Rules of Book V, as amended by D.O. No. 9,
series of 1997, provides:

Section 1. Chartering and creation of a local chapter — A duly registered federation or national union may
directly create a local/chapter by submitting to the Regional Office or to the Bureau two (2) copies of the
following:

(a) A charter certificate issued by the federation or national union indicating the creation or
establishment of the local/chapter;

(b) The names of the local/chapter’s officers, their addresses, and the principal office of the
local/chapter; and

(c) The local/chapter’s constitution and by-laws provided that where the local/chapter’s
constitution and by-laws [are] the same as [those] of the federation or national union, this fact
shall be indicated accordingly.

All the foregoing supporting requirements shall be certified under oath by the Secretary or the Treasurer
of the local/chapter and attested to by its President.

As readily seen, the Sama-samang Pahayag ng Pagsapi at Authorization and Listahan ng mga Dumalo
sa Pangkalahatang Pulong at mga Sumang-ayon at Nagratipika sa Saligang Batas are not among the
documents that need to be submitted to the Regional Office or Bureau of Labor Relations in order to
register a labor organization. As to the charter certificate, the above-quoted rule indicates that it should be
executed under oath. Petitioner union concedes and the records confirm that its charter certificate was
not executed under oath. However, in San Miguel Corporation (Mandaue Packaging Products Plants) v.
Mandaue Packing Products Plants-San Miguel Corporation Monthlies Rank-and-File Union-FFW (MPPP-
SMPP-SMAMRFU-FFW),22 which was decided under the auspices of D.O. No. 9, Series of 1997, we
ruled –

In San Miguel Foods-Cebu B-Meg Feed Plant v. Hon. Laguesma, 331 Phil. 356 (1996), the Court ruled
that it was not necessary for the charter certificate to be certified and attested by the local/chapter
officers. Id. While this ruling was based on the interpretation of the previous Implementing Rules
provisions which were supplanted by the 1997 amendments, we believe that the same doctrine
obtains in this case. Considering that the charter certificate is prepared and issued by the national union
and not the local/chapter, it does not make sense to have the local/chapter’s officers x x x certify or
attest to a document which they had no hand in the preparation of.23 (Emphasis supplied)

In accordance with this ruling, petitioner union’s charter certificate need not be executed under oath.
Consequently, it validly acquired the status of a legitimate labor organization upon submission of (1) its
charter certificate,24 (2) the names of its officers, their addresses, and its principal office, 25 and (3) its
constitution and by-laws26— the last two requirements having been executed under oath by the proper
union officials as borne out by the records.

The mixture of rank-and-file and supervisory employees in petitioner union does not nullify its legal
personality as a legitimate labor organization.

The CA found that petitioner union has for its membership both rank-and-file and supervisory employees.
However, petitioner union sought to represent the bargaining unit consisting of rank-and-file employees.
Under Article 24527 of the Labor Code, supervisory employees are not eligible for membership in a labor
organization of rank-and-file employees. Thus, the appellate court ruled that petitioner union cannot be
considered a legitimate labor organization pursuant to Toyota Motor Philippines v. Toyota Motor
Philippines Corporation Labor Union28 (hereinafter Toyota).

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Preliminarily, we note that petitioner union questions the factual findings of the Med-Arbiter, as upheld by
the appellate court, that 12 of its members, consisting of batchman, mill operator and leadman, are
supervisory employees. However, petitioner union failed to present any rebuttal evidence in the
proceedings below after respondent company submitted in evidence the job descriptions 29 of the
aforesaid employees. The job descriptions indicate that the aforesaid employees exercise
recommendatory managerial actions which are not merely routinary but require the use of independent
judgment, hence, falling within the definition of supervisory employees under Article 212(m) 30 of the Labor
Code. For this reason, we are constrained to agree with the Med-Arbiter, as upheld by the appellate
court, that petitioner union consisted of both rank-and-file and supervisory employees.

Nonetheless, the inclusion of the aforesaid supervisory employees in petitioner union does not divest it of
its status as a legitimate labor organization. The appellate court’s reliance on Toyota is misplaced in view
of this Court’s subsequent ruling in Republic v. Kawashima Textile Mfg., Philippines,
Inc.31 (hereinafter Kawashima). In Kawashima, we explained at length how and why the Toyota doctrine
no longer holds sway under the altered state of the law and rules applicable to this case, viz:

R.A. No. 6715 omitted specifying the exact effect any violation of the prohibition [on the co-
mingling of supervisory and rank-and-file employees] would bring about on the legitimacy of a
labor organization.

It was the Rules and Regulations Implementing R.A. No. 6715 (1989 Amended Omnibus Rules) which
supplied the deficiency by introducing the following amendment to Rule II (Registration of Unions):

"Sec. 1. Who may join unions. - x x x Supervisory employees and security guards shall not be
eligible for membership in a labor organization of the rank-and-file employees but may join, assist
or form separate labor organizations of their own; Provided, that those supervisory employees who
are included in an existing rank-and-file bargaining unit, upon the effectivity of Republic Act No. 6715,
shall remain in that unit x x x. (Emphasis supplied) and Rule V (Representation Cases and Internal-Union
Conflicts) of the Omnibus Rules, viz:

"Sec. 1. Where to file. - A petition for certification election may be filed with the Regional Office which has
jurisdiction over the principal office of the employer. The petition shall be in writing and under oath.

Sec. 2. Who may file. - Any legitimate labor organization or the employer, when requested to bargain
collectively, may file the petition.

The petition, when filed by a legitimate labor organization, shall contain, among others:

xxxx

(c) description of the bargaining unit which shall be the employer unit unless circumstances
otherwise require; and provided further, that the appropriate bargaining unit of the rank-and-file
employees shall not include supervisory employees and/or security guards. (Emphasis supplied)

By that provision, any questioned mingling will prevent an otherwise legitimate and duly registered labor
organization from exercising its right to file a petition for certification election.

Thus, when the issue of the effect of mingling was brought to the fore in Toyota, the Court, citing Article
245 of the Labor Code, as amended by R.A. No. 6715, held:

"Clearly, based on this provision, a labor organization composed of both rank-and-file and supervisory
employees is no labor organization at all. It cannot, for any guise or purpose, be a legitimate labor
organization. Not being one, an organization which carries a mixture of rank-and-file and
supervisory employees cannot possess any of the rights of a legitimate labor organization,
including the right to file a petition for certification election for the purpose of collective
bargaining. It becomes necessary, therefore, anterior to the granting of an order allowing a
certification election, to inquire into the composition of any labor organization whenever the
status of the labor organization is challenged on the basis of Article 245 of the Labor Code.

xxxx

In the case at bar, as respondent union's membership list contains the names of at least twenty-seven
(27) supervisory employees in Level Five positions, the union could not, prior to purging itself of its
supervisory employee members, attain the status of a legitimate labor organization. Not being one, it
cannot possess the requisite personality to file a petition for certification election." (Emphasis supplied)

In Dunlop, in which the labor organization that filed a petition for certification election was one for
supervisory employees, but in which the membership included rank-and-file employees, the Court

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reiterated that such labor organization had no legal right to file a certification election to represent a
bargaining unit composed of supervisors for as long as it counted rank-and-file employees among its
members.

It should be emphasized that the petitions for certification election involved in Toyota and Dunlop were
filed on November 26, 1992 and September 15, 1995, respectively; hence, the 1989 Rules was applied in
both cases.

But then, on June 21, 1997, the 1989 Amended Omnibus Rules was further amended by Department
Order No. 9, series of 1997 (1997 Amended Omnibus Rules). Specifically, the requirement under Sec.
2(c) of the 1989 Amended Omnibus Rules – that the petition for certification election indicate that the
bargaining unit of rank-and-file employees has not been mingled with supervisory employees – was
removed. Instead, what the 1997 Amended Omnibus Rules requires is a plain description of the
bargaining unit, thus:

Rule XI
Certification Elections

xxxx

Sec. 4. Forms and contents of petition. - The petition shall be in writing and under oath and shall contain,
among others, the following: x x x (c) The description of the bargaining unit.

In Pagpalain Haulers, Inc. v. Trajano, the Court had occasion to uphold the validity of the 1997 Amended
Omnibus Rules, although the specific provision involved therein was only Sec. 1, Rule VI, to wit:

"Section. 1. Chartering and creation of a local/chapter.- A duly registered federation or national union may
directly create a local/chapter by submitting to the Regional Office or to the Bureau two (2) copies of the
following: a) a charter certificate issued by the federation or national union indicating the creation or
establishment of the local/chapter; (b) the names of the local/chapter's officers, their addresses, and the
principal office of the local/chapter; and (c) the local/ chapter's constitution and by-laws; provided that
where the local/chapter's constitution and by-laws is the same as that of the federation or national union,
this fact shall be indicated accordingly.

All the foregoing supporting requirements shall be certified under oath by the Secretary or the Treasurer
of the local/chapter and attested to by its President."

which does not require that, for its creation and registration, a local or chapter submit a list of its
members.

Then came Tagaytay Highlands Int'l. Golf Club, Inc. v. Tagaytay Highlands Employees Union-PGTWO in
which the core issue was whether mingling affects the legitimacy of a labor organization and its right to
file a petition for certification election. This time, given the altered legal milieu, the Court abandoned the
view in Toyota and Dunlopand reverted to its pronouncement in Lopez that while there is a prohibition
against the mingling of supervisory and rank-and-file employees in one labor organization, the Labor
Code does not provide for the effects thereof. Thus, the Court held that after a labor organization has
been registered, it may exercise all the rights and privileges of a legitimate labor organization. Any
mingling between supervisory and rank-and-file employees in its membership cannot affect its legitimacy
for that is not among the grounds for cancellation of its registration, unless such mingling was brought
about by misrepresentation, false statement or fraud under Article 239 of the Labor Code.

In San Miguel Corp. (Mandaue Packaging Products Plants) v. Mandaue Packing Products Plants-San
Miguel Packaging Products-San Miguel Corp. Monthlies Rank-and-File Union-FFW, the Court explained
that since the 1997 Amended Omnibus Rules does not require a local or chapter to provide a list of its
members, it would be improper for the DOLE to deny recognition to said local or chapter on account of
any question pertaining to its individual members.

More to the point is Air Philippines Corporation v. Bureau of Labor Relations, which involved a petition for
cancellation of union registration filed by the employer in 1999 against a rank-and-file labor organization
on the ground of mixed membership: the Court therein reiterated its ruling in Tagaytay Highlands that the
inclusion in a union of disqualified employees is not among the grounds for cancellation, unless such
inclusion is due to misrepresentation, false statement or fraud under the circumstances enumerated in
Sections (a) and (c) of Article 239 of the Labor Code.

All said, while the latest issuance is R.A. No. 9481, the 1997 Amended Omnibus Rules, as interpreted by
the Court in Tagaytay Highlands, San Miguel and Air Philippines, had already set the tone for
it. Toyota and Dunlop no longer hold sway in the present altered state of the law and the
rules.32 [Underline supplied]

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The applicable law and rules in the instant case are the same as those in Kawashima because the
present petition for certification election was filed in 1999 when D.O. No. 9, series of 1997, was still in
effect. Hence, Kawashimaapplies with equal force here. As a result, petitioner union was not divested of
its status as a legitimate labor organization even if some of its members were supervisory employees; it
had the right to file the subject petition for certification election.

The legal personality of petitioner union cannot be collaterally attacked by respondent company in the
certification election proceedings.

Petitioner union correctly argues that its legal personality cannot be collaterally attacked in the
certification election proceedings. As we explained in Kawashima:

Except when it is requested to bargain collectively, an employer is a mere bystander to any petition for
certification election; such proceeding is non-adversarial and merely investigative, for the purpose thereof
is to determine which organization will represent the employees in their collective bargaining with the
employer. The choice of their representative is the exclusive concern of the employees; the employer
cannot have any partisan interest therein; it cannot interfere with, much less oppose, the process by filing
a motion to dismiss or an appeal from it; not even a mere allegation that some employees participating in
a petition for certification election are actually managerial employees will lend an employer legal
personality to block the certification election. The employer's only right in the proceeding is to be notified
or informed thereof.

The amendments to the Labor Code and its implementing rules have buttressed that policy even more. 33

WHEREFORE, the petition is GRANTED. The March 15, 2005 Decision and September 16, 2005
Resolution of the Court of Appeals in CA-G.R. SP No. 58203 are REVERSED and SET ASIDE. The
January 13, 2000 Decision of the Department of Labor and Employment in OS-A-6-53-99 (NCR-OD-M-
9902-019) is REINSTATED.

No pronouncement as to costs.

SO ORDERED.

80 | P a g e
G.R. No. 165381 February 9, 2011

NELSON A. CULILI, Petitioner,


vs.
EASTERN TELECOMMUNICATIONS PHILIPPINES, INC., SALVADOR HIZON (President and Chief
Executive Officer), EMILIANO JURADO (Chairman of the Board), VIRGILIO GARCIA (Vice
President) and STELLA GARCIA (Assistant Vice President), Respondents.

DECISION

LEONARDO-DE CASTRO, J.:

Before Us is a petition for review on certiorari1 of the February 5, 2004 Decision2 and September 13, 2004
Resolution3 of the Court of Appeals in CA-G.R. SP No. 75001, wherein the Court of Appeals set aside the
March 1, 2002 Decision4 and September 24, 2002 Resolution5 of the National Labor Relations
Commission (NLRC), which affirmed the Labor Arbiter’s Decision6 dated April 30, 2001.

Respondent Eastern Telecommunications Philippines, Inc. (ETPI) is a telecommunications company


engaged mainly in the business of establishing commercial telecommunications systems and leasing of
international datalines or circuits that pass through the international gateway facility (IGF). 7 The other
respondents are ETPI’s officers: Salvador Hizon, President and Chief Executive Officer; Emiliano Jurado,
Chairman of the Board; Virgilio Garcia, Vice President; and Stella Garcia, Assistant Vice President.

Petitioner Nelson A. Culili (Culili) was employed by ETPI as a Technician in its Field Operations
Department on January 27, 1981. On December 12, 1996, Culili was promoted to Senior Technician in
the Customer Premises Equipment Management Unit of the Service Quality Department and his basic
salary was increased.8

As a telecommunications company and an authorized IGF operator, ETPI was required, under Republic
Act. No. 7925 and Executive Order No. 109, to establish landlines in Metro Manila and certain
provinces.9 However, due to interconnection problems with the Philippine Long Distance Telephone
Company (PLDT), poor subscription and cancellation of subscriptions, and other business difficulties,
ETPI was forced to halt its roll out of one hundred twenty-nine thousand (129,000) landlines already
allocated to a number of its employees.10

In 1998, due to business troubles and losses, ETPI was compelled to implement a Right-Sizing Program
which consisted of two phases: the first phase involved the reduction of ETPI’s workforce to only those
employees that were necessary and which ETPI could sustain; the second phase entailed a company-
wide reorganization which would result in the transfer, merger, absorption or abolition of certain
departments of ETPI.11

As part of the first phase, ETPI, on December 10, 1998, offered to its employees who had rendered at
least fifteen years of service, the Special Retirement Program, which consisted of the option to voluntarily
retire at an earlier age and a retirement package equivalent to two and a half (2½) months’ salary for
every year of service.12 This offer was initially rejected by the Eastern Telecommunications Employees’
Union (ETEU), ETPI’s duly recognized bargaining agent, which threatened to stage a strike. ETPI
explained to ETEU the exact details of the Right-Sizing Program and the Special Retirement Program
and after consultations with ETEU’s members, ETEU agreed to the implementation of both
programs.13 Thus, on February 8, 1999, ETPI re-offered the Special Retirement Program and the
corresponding retirement package to the one hundred two (102) employees who qualified for the
program.14 Of all the employees who qualified to avail of the program, only Culili rejected the offer. 15

After the successful implementation of the first phase of the Right-Sizing Program, ETPI, on March 1,
1999 proceeded with the second phase which necessitated the abolition, transfer and merger of a
number of ETPI’s departments.16

Among the departments abolished was the Service Quality Department. The functions of the Customer
Premises Equipment Management Unit, Culili’s unit, were absorbed by the Business and Consumer
Accounts Department. The abolition of the Service Quality Department rendered the specialized functions
of a Senior Technician unnecessary. As a result, Culili’s position was abolished due to redundancy and
his functions were absorbed by Andre Andrada, another employee already with the Business and
Consumer Accounts Department.17

On March 5, 1999, Culili discovered that his name was omitted in ETPI’s New Table of Organization.
Culili, along with three of his co-employees who were similarly situated, wrote their union president to
protest such omission.18

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In a letter dated March 8, 1999, ETPI, through its Assistant Vice President Stella Garcia, informed Culili of
his termination from employment effective April 8, 1999. The letter reads:

March 8, 1999

To: N. Culili

Thru: S. Dobbin/G. Ebue

From: AVP-HRD

------------------------------------------------------------------------------------------

As you are aware, the current economic crisis has adversely affected our operations and undermined our
earlier plans to put in place major work programs and activities. Because of this, we have to implement a
Rightsizing Program in order to cut administrative/operating costs and to avoid losses. In line with this
program, your employment with the company shall terminate effective at the close of business hours on
April 08, 1999. However, to give you ample time to look for other employment, provided you have amply
turned over your pending work and settled your accountabilities, you are no longer required to report to
work starting tomorrow. You will be considered on paid leave until April 08, 1999.

You will likewise be paid separation pay in compliance with legal requirements (see attached), as well as
other benefits accruing to you under the law, and the CBA. We take this opportunity to thank you for your
services and wish you well in your future endeavors.

(Signed)
Stella J. Garcia19

This letter was similar to the memo shown to Culili by the union president weeks before Culili was
dismissed. The memo was dated December 7, 1998, and was advising him of his dismissal effective
January 4, 1999 due to the Right-Sizing Program ETPI was going to implement to cut costs and avoid
losses.20

Culili alleged that neither he nor the Department of Labor and Employment (DOLE) were formally notified
of his termination. Culili claimed that he only found out about it sometime in March 1999 when Vice
President Virgilio Garcia handed him a copy of the March 8, 1999 letter, after he was barred from entering
ETPI’s premises by its armed security personnel when he tried to report for work. 21 Culili believed that
ETPI had already decided to dismiss him even prior to the March 8, 1999 letter as evidenced by the
December 7, 1998 version of that letter. Moreover, Culili asserted that ETPI had contracted out the
services he used to perform to a labor-only contractor which not only proved that his functions had not
become unnecessary, but which also violated their Collective Bargaining Agreement (CBA) and the Labor
Code. Aside from these, Culili also alleged that he was discriminated against when ETPI offered some of
his co-employees an additional benefit in the form of motorcycles to induce them to avail of the Special
Retirement Program, while he was not.22

ETPI denied singling Culili out for termination. ETPI claimed that while it is true that they offered the
Special Retirement Package to reduce their workforce to a sustainable level, this was only the first phase
of the Right-Sizing Program to which ETEU agreed. The second phase intended to simplify and
streamline the functions of the departments and employees of ETPI. The abolition of Culili’s department -
the Service Quality Department - and the absorption of its functions by the Business and Consumer
Accounts Department were in line with the program’s goals as the Business and Consumer Accounts
Department was more economical and versatile and it was flexible enough to handle the limited functions
of the Service Quality Department. ETPI averred that since Culili did not avail of the Special Retirement
Program and his position was subsequently declared redundant, it had no choice but to terminate
Culili.23 Culili, however, continued to report for work. ETPI said that because there was no more work for
Culili, it was constrained to serve a final notice of termination 24 to Culili, which Culili ignored. ETPI alleged
that Culili informed his superiors that he would agree to his termination if ETPI would give him certain
special work tools in addition to the benefits he was already offered. ETPI claimed that Culili’s counter-
offer was unacceptable as the work tools Culili wanted were worth almost a million pesos. Thus, on March
26, 1999, ETPI tendered to Culili his final pay check of Eight Hundred Fifty-Nine Thousand Thirty-Three
and 99/100 Pesos (₱859,033.99) consisting of his basic salary, leaves, 13th month pay and separation
pay.25 ETPI claimed that Culili refused to accept his termination and continued to report for work. 26 ETPI
denied hiring outside contractors to perform Culili’s work and denied offering added incentives to its
employees to induce them to retire early. ETPI also explained that the December 7, 1998 letter was never
given to Culili in an official capacity. ETPI claimed that it really needed to reduce its workforce at that time
and that it had to prepare several letters in advance in the event that none of the employees avail of the
Special Retirement Program. However, ETPI decided to wait for a favorable response from its employees
regarding the Special Retirement Program instead of terminating them. 27

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On February 8, 2000, Culili filed a complaint against ETPI and its officers for illegal dismissal, unfair labor
practice, and money claims before the Labor Arbiter.

On April 30, 2001, the Labor Arbiter rendered a decision finding ETPI guilty of illegal dismissal and unfair
labor practice, to wit:

WHEREFORE, decision is hereby rendered declaring the dismissal of complainant Nelson A. Culili illegal
for having been made through an arbitrary and malicious declaration of redundancy of his position and for
having been done without due process for failure of the respondent to give complainant and the DOLE
written notice of such termination prior to the effectivity thereof.

In view of the foregoing, respondents Eastern Telecommunications Philippines and the individual
respondents are hereby found guilty of unfair labor practice/discrimination and illegal dismissal and
ordered to pay complainant backwages and such other benefits due him if he were not illegally dismissed,
including moral and exemplary damages and 10% attorney’s fees. Complainant likewise is to be
reinstated to his former position or to a substantially equivalent position in accordance with the pertinent
provisions of the Labor Code as interpreted in the case of Pioneer texturing [Pioneer Texturizing Corp. v.
National Labor Relations Commission], G.R. No. 11865[1], 16 October 1997. Hence, Complainant must
be paid the total amount of TWO MILLION SEVEN HUNDRED FORTY[-]FOUR THOUSAND THREE
[HUNDRED] SEVENTY[-] NINE and 41/100 (₱2,744,379.41), computed as follows:

I. Backwages (from 16 March 1999 to 16 March 2001)

a. Basic Salary (₱29,030 x 24 mos.) ₱696,720.96

b. 13th Month Pay (₱692,720.96/12) 58,060.88

c. Leave Benefits

1. Vacation Leave (30 days/annum) ₱1,116.54 x 60 days 66,992.40

2. Sick Leave (30 days/annum) ₱1,116.54 x 60 days 66,992.40

3. Birthday Leave (1 day/annum) ₱1,116.54 x 2 days 2,233.08

Rice and Meal Subsidy 16 March – 31 July 1999


(₱1,750 x 4.5 mos. = ₱7,875.00)

01 August 1991 – 31 July 2000


d.
(₱1,850 x 12 mos = ₱22,200.00)

01 August 2000 – 16 March 2001


44,700.00
(₱1,950 x 7.5 mos. = ₱14,625.00)

e. Uniform Allowance

14,000.00

₱7,000/annum x 2 years

₱949,699.72

II. Damages

a. Moral………… ₱500,000.00

83 | P a g e
b. Exemplary…… ₱250,000.00

III. Attorney’s Fees (10% of award) 94,969.97

GRAND TOTAL: ₱2,744,379.4128

The Labor Arbiter believed Culili’s claim that ETPI intended to dismiss him even before his position was
declared redundant. He found the December 7, 1998 letter to be a telling sign of this intention. The Labor
Arbiter held that a reading of the termination letter shows that the ground ETPI was actually invoking was
retrenchment and not redundancy, but ETPI stuck to redundancy because it was easier to prove than
retrenchment. He also did not believe that Culili’s functions were as limited as ETPI made it appear to be,
and held that ETPI failed to present any reasonable criteria to justify the declaration of Culili’s position as
redundant. On the issue of unfair labor practice, the Labor Arbiter agreed that the contracting out of
Culili’s functions to non-union members violated Culili’s rights as a union member. Moreover, the Labor
Arbiter said that ETPI was not able to dispute Culili’s claims of discrimination and subcontracting, hence,
ETPI was guilty of unfair labor practice.

On appeal, the NLRC affirmed the Labor Arbiter’s decision but modified the amount of moral and
exemplary damages awarded, viz:

WHEREFORE, the Decision appealed from is AFFIRMED granting complainant the money claims prayed
for including full backwages, allowances and other benefits or their monetary equivalent computed from
the time of his illegal dismissal on 16 March 1999 up to his actual reinstatement except the award of
moral and exemplary damages which is modified to ₱200,000.00 for moral and ₱100,000.00 for
exemplary damages. For this purpose, this case is REMANDED to the Labor Arbiter for computation of
backwages and other monetary awards to complainant.29

ETPI filed a Petition for Certiorari under Rule 65 of the Rules of Civil Procedure before the Court of
Appeals on the ground of grave abuse of discretion. ETPI prayed that a Temporary Restraining Order be
issued against the NLRC from implementing its decision and that the NLRC decision and resolution be
set aside.

The Court of Appeals, on February 5, 2004, partially granted ETPI’s petition. The dispositive portion of the
decision reads as follows:

WHEREFORE, all the foregoing considered, the petition is PARTIALLY GRANTED. The assailed
Decision of public respondent National Labor Relations Commission is MODIFIED in that petitioner
Eastern Telecommunications Philippines Inc. (ETPI) is hereby ORDERED to pay respondent Nelson Culili
full backwages from the time his salaries were not paid until the finality of this Decision plus separation
pay in an amount equivalent to one (1) month salary for every year of service. The awards for moral and
exemplary damages are DELETED. The Writ of Execution issued by the Labor Arbiter dated September
8, 2003 is DISSOLVED.30

The Court of Appeals found that Culili’s position was validly abolished due to redundancy. The Court of
Appeals said that ETPI had been very candid with its employees in implementing its Right-Sizing
Program, and that it was highly unlikely that ETPI would effect a company-wide reorganization simply for
the purpose of getting rid of Culili. The Court of Appeals also held that ETPI cannot be held guilty of unfair
labor practice as mere contracting out of services being performed by union members does not per
se amount to unfair labor practice unless it interferes with the employees’ right to self-organization. The
Court of Appeals further held that ETPI’s officers cannot be held liable absent a showing of bad faith or
malice. However, the Court of Appeals found that ETPI failed to observe the standards of due process as
required by our laws when it failed to properly notify both Culili and the DOLE of Culili’s termination. The
Court of Appeals maintained its position in its September 13, 2004 Resolution when it denied Culili’s
Motion for Reconsideration and Urgent Motion to Reinstate the Writ of Execution issued by the Labor
Arbiter, and ETPI’s Motion for Partial Reconsideration.

Culili is now before this Court praying for the reversal of the Court of Appeals’ decision and the
reinstatement of the NLRC’s decision based on the following grounds:

84 | P a g e
THE COURT OF APPEALS DECIDED A QUESTION OF SUBSTANCE NOT IN ACCORD WITH THE
APPLICABLE LAW AND JURISPRUDENCE WHEN IT REVERSED THE DECISIONS OF THE NLRC
AND THE LABOR ARBITER HOLDING THE DISMISSAL OF PETITIONER ILLEGAL IN THAT:

A. CONTRARY TO THE FINDINGS OF THE COURT OF APPEALS, RESPONDENTS’


CHARACTERIZATION OF PETITIONER’S POSITION AS REDUNDANT WAS TAINTED BY BAD FAITH.

B. THERE WAS NO ADEQUATE JUSTIFICATION TO DECLARE PETITIONER’S POSITION AS


REDUNDANT.

II

THE COURT OF APPEALS DECIDED A QUESTION OF SUBSTANCE NOT IN ACCORD WITH LAW
AND JURISPRUDENCE IN FINDING THAT NO UNFAIR LABOR PRACTICE ACTS WERE COMMITTED
AGAINST THE PETITIONER.

III

THE COURT OF APPEALS DECIDED A QUESTION OF SUBSTANCE NOT IN ACCORD WITH LAW
AND JURISPRUDENCE IN DELETING THE AWARD OF MORAL AND EXEMPLARY DAMAGES AND
ATTORNEY’S FEES IN FAVOR OF PETITIONER AND IN DISSOLVING THE WRIT OF EXECUTION
DATED 8 SEPTEMBER 2003 ISSUED BY THE LABOR ARBITER.

IV

THE COURT OF APPEALS DECIDED A QUESTION OF SUBSTANCE NOT IN ACCORD WITH LAW
AND JURISPRUDENCE IN ABSOLVING THE INDIVIDUAL RESPONDENTS OF PERSONAL LIABILITY.

CONTRARY TO APPLICABLE LAW AND JURISPRUDENCE, THE COURT OF APPEALS, IN A


CERTIORARI PROCEEDING, REVIEWED THE FACTUAL FINDINGS OF THE NLRC WHICH
AFFIRMED THAT OF THE LABOR ARBITER AND, THEREAFTER, ISSUED A WRIT OF CERTIORARI
REVERSING THE DECISIONS OF THE NLRC AND THE LABOR ARBITER EVEN IN THE ABSENCE
OF GRAVE ABUSE OF DISCRETION.31

Procedural Issue: Court of Appeals'


Power to Review Facts in a Petition
For Certiorari under Rule 65

Culili argued that the Court of Appeals acted in contravention of applicable law and jurisprudence when it
reexamined the facts in this case and reversed the factual findings of the Labor Arbiter and the NLRC in a
special civil action for certiorari.

This Court has already confirmed the power of the Court of Appeals, even on a Petition
for Certiorari under Rule 65,32 to review the evidence on record, when necessary, to resolve factual
issues:

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. 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. 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. 33

While it is true that factual findings made by quasi-judicial and administrative tribunals, if supported by
substantial evidence, are accorded great respect and even finality by the courts, this general rule admits
of exceptions. When there is a showing that a palpable and demonstrable mistake that needs rectification
has been committed34 or when the factual findings were arrived at arbitrarily or in disregard of the
evidence on record, these findings may be examined by the courts. 35

85 | P a g e
In the case at bench, the Court of Appeals found itself unable to completely sustain the findings of the
NLRC thus, it was compelled to review the facts and evidence and not limit itself to the issue of grave
abuse of discretion.

With the conflicting findings of facts by the tribunals below now before us, it behooves this Court to make
an independent evaluation of the facts in this case.

Main Issue: Legality of Dismissal

Culili asserted that he was illegally dismissed because there was no valid cause to terminate his
employment. He claimed that ETPI failed to prove that his position had become redundant and that ETPI
was indeed incurring losses. Culili further alleged that his functions as a Senior Technician could not be
considered a superfluity because his tasks were crucial and critical to ETPI’s business.

Under our laws, an employee may be terminated for reasons involving measures taken by the employer
due to business necessities. Article 283 of the Labor Code provides:

Art. 283. Closure of establishment and reduction of personnel. - The employer may also terminate the
employment of any employee due to the installation of labor saving devices, redundancy, retrenchment to
prevent losses or the closing or cessation of operation of the establishment or undertaking unless the
closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the
workers and the Department of Labor and Employment at least one (1) month before the intended date
thereof. In case of termination due to the installation of labor-saving devices or redundancy, the worker
affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at
least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent
losses and in cases of closures or cessation of operations of establishment or undertaking not due to
serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay
or at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six
(6) months shall be considered one (1) whole year.

There is redundancy when the service capability of the workforce is greater than what is reasonably
required to meet the demands of the business enterprise. A position becomes redundant when it is
rendered superfluous by any number of factors such as over-hiring of workers, decrease in volume of
business, or dropping a particular product line or service activity previously manufactured or undertaken
by the enterprise.36

This Court has been consistent in holding that the determination of whether or not an employee’s services
are still needed or sustainable properly belongs to the employer. Provided there is no violation of law or a
showing that the employer was prompted by an arbitrary or malicious act, the soundness or wisdom of
this exercise of business judgment is not subject to the discretionary review of the Labor Arbiter and the
NLRC.37

However, an employer cannot simply declare that it has become overmanned and dismiss its employees
without producing adequate proof to sustain its claim of redundancy. 38 Among the requisites of a valid
redundancy program are: (1) the good faith of the employer in abolishing the redundant position; and (2)
fair and reasonable criteria in ascertaining what positions are to be declared redundant, 39 such as but not
limited to: preferred status, efficiency, and seniority. 40

This Court also held that the following evidence may be proffered to substantiate redundancy: the new
staffing pattern, feasibility studies/ proposal on the viability of the newly created positions, job description
and the approval by the management of the restructuring.41

In the case at bar, ETPI was upfront with its employees about its plan to implement a Right-Sizing
Program. Even in the face of initial opposition from and rejection of the said program by ETEU, ETPI
patiently negotiated with ETEU’s officers to make them understand ETPI’s business dilemma and its need
to reduce its workforce and streamline its organization. This evidently rules out bad faith on the part of
ETPI.

In deciding which positions to retain and which to abolish, ETPI chose on the basis of efficiency,
economy, versatility and flexibility. It needed to reduce its workforce to a sustainable level while
maintaining functions necessary to keep it operating. The records show that ETPI had sufficiently
established not only its need to reduce its workforce and streamline its organization, but also the
existence of redundancy in the position of a Senior Technician. ETPI explained how it failed to meet its
business targets and the factors that caused this, and how this necessitated it to reduce its workforce and
streamline its organization. ETPI also submitted its old and new tables of organization and sufficiently
described how limited the functions of the abolished position of a Senior Technician were and how it
decided on whom to absorb these functions.

86 | P a g e
In his affidavit dated April 10, 2000,42 Mr. Arnel D. Reyel, the Head of both the Business Services
Department and the Finance Department of ETPI, described how ETPI went about in reorganizing its
departments. Mr. Reyel said that in the course of ETPI’s reorganization, new departments were created,
some were transferred, and two were abolished. Among the departments abolished was the Service
Quality Department. Mr. Reyel said that ETPI felt that the functions of the Service Quality Department,
which catered to both corporate and small and medium-sized clients, overlapped and were too large for a
single department, thus, the functions of this department were split and simplified into two smaller but
more focused and efficient departments. In arriving at the decision to abolish the position of Senior
Technician, Mr. Reyel explained:

11.3. Thus, in accordance with the reorganization of the different departments of ETPI, the Service
Quality Department was abolished and its functions were absorbed by the Business and Consumer
Accounts Department and the Corporate and Major Accounts Department.

11.4. With the abolition and resulting simplification of the Service Quality Department, one of the units
thereunder, the Customer Premises Equipment Maintenance ("CPEM") unit was transferred to the
Business and Consumer Accounts Department. Since the Business and Consumer Accounts Department
had to remain economical and focused yet versatile enough to meet all the needs of its small and medium
sized clients, it was decided that, in the judgment of ETPI management, the specialized functions of a
Senior Technician in the CPEM unit whose sole function was essentially the repair and servicing of
ETPI’s telecommunications equipment was no longer needed since the Business and Consumer
[Accounts] Department had to remain economical and focused yet versatile enough to meet all the
multifarious needs of its small and medium sized clients.

11.5. The business reason for the abolition of the position of Senior Technician was because in ETPI’s
judgment, what was needed in the Business and Consumer Accounts Department was a versatile, yet
economical position with functions which were not limited to the mere repair and servicing of
telecommunications equipment. It was determined that what was called for was a position that could also
perform varying functions such as the actual installation of telecommunications products for medium and
small scale clients, handle telecommunications equipment inventory monitoring, evaluation of
telecommunications equipment purchased and the preparation of reports on the daily and monthly
activation of telecommunications equipment by these small and medium scale clients.

11.6. Thus, for the foregoing reasons, ETPI decided that the position of Senior Technician was to be
abolished due to redundancy. The functions of a Senior Technician was to be abolished due to
redundancy. The functions of a Senior Technician would then be absorbed by an employee assigned to
the Business and Consumer Accounts Department who was already performing the functions of actual
installation of telecommunications products in the field and handling telecommunications equipment
inventory monitoring, evaluation of telecommunications equipment purchased and the preparation of
reports on the daily and monthly activation of telecommunications equipment. This employee would then
simply add to his many other functions the duty of repairing and servicing telecommunications equipment
which had been previously performed by a Senior Technician. 43

In the new table of organization that the management approved, one hundred twelve (112) employees
were redeployed and nine (9) positions were declared redundant. 44 It is inconceivable that ETPI would
effect a company-wide reorganization of this scale for the mere purpose of singling out Culili and
terminating him. If Culili’s position were indeed indispensable to ETPI, then it would be absurd for ETPI,
which was then trying to save its operations, to abolish that one position which it needed the most.
Contrary to Culili’s assertions that ETPI could not do away with his functions as long as it is in the
telecommunications industry, ETPI did not abolish the functions performed by Culili as a Senior
Technician. What ETPI did was to abolish the position itself for being too specialized and limited. The
functions of that position were then added to another employee whose functions were broad enough to
absorb the tasks of a Senior Technician.

Culili maintains that ETPI had already decided to dismiss him even before the second phase of the Right-
Sizing Program was implemented as evidenced by the December 7, 1998 letter.

The December 7, 1998 termination letter signed by ETPI’s AVP Stella Garcia hardly suffices to prove bad
faith on the part of the company. The fact remains that the said letter was never officially transmitted and
Culili was not terminated at the end of the first phase of ETPI’s Right-Sizing Program. ETPI had given an
adequate explanation for the existence of the letter and considering that it had been transparent with its
employees, through their union ETEU, so much so that ETPI even gave ETEU this unofficial letter, there
is no reason to speculate and attach malice to such act. That Culili would be subsequently terminated
during the second phase of the Right-Sizing Program is not evidence of undue discrimination or "singling
out" since not only Culili’s position, but his entire unit was abolished and absorbed by another
department.

Unfair Labor Practice

87 | P a g e
Culili also alleged that ETPI is guilty of unfair labor practice for violating Article 248(c) and (e) of the Labor
Code, to wit:

Art. 248. Unfair labor practices of employers. - It shall be unlawful for an employer to commit any of
the following unfair labor practice:

xxxx

c. To contract out services or functions being performed by union members when such will interfere with,
restrain or coerce employees in the exercise of their rights to self-organization;

xxxx

e. To discriminate in regard to wages, hours of work, and other terms and conditions of employment in
order to encourage or discourage membership in any labor organization. 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. Employees of an appropriate collective
bargaining unit who are not members of the recognized collective bargaining agent may be assessed a
reasonable fee equivalent to the dues and other fees paid by members of the recognized collective
bargaining agent, if such non-union members accept the benefits under the collective agreement:
Provided, that the individual authorization required under Article 242, paragraph (o) of this Code shall not
apply to the non-members of the recognized collective bargaining agent.

Culili asserted that ETPI is guilty of unfair labor practice because his functions were sourced out to labor-
only contractors and he was discriminated against when his co-employees were treated differently when
they were each offered an additional motorcycle to induce them to avail of the Special Retirement
Program. ETPI denied hiring outside contractors and averred that the motorcycles were not given to his
co-employees but were purchased by them pursuant to their Collective Bargaining Agreement, which
allowed a retiring employee to purchase the motorcycle he was assigned during his employment.

The concept of unfair labor practice is provided in Article 247 of the Labor Code which states:

Article 247. Concept of unfair labor practice and procedure for prosecution thereof. -- Unfair labor
practices violate the constitutional right of workers and employees to self-organization, are inimical to the
legitimate interest of both labor and management, including their right to bargain collectively and
otherwise deal with each other in an atmosphere of freedom and mutual respect, disrupt industrial peace
and hinder the promotion of healthy and stable labor-management relations.

In the past, we have ruled that "unfair labor practice refers to ‘acts that violate the workers' right to
organize.’ The prohibited acts are related to the workers' right to self-organization and to the observance
of a CBA."45 We have likewise declared that "there should be no dispute that all the prohibited acts
constituting unfair labor practice in essence relate to the workers' right to self-organization."46 Thus, an
employer may only be held liable for unfair labor practice if it can be shown that his acts affect in
whatever manner the right of his employees to self-organize.47

There is no showing that ETPI, in implementing its Right-Sizing Program, was motivated by ill will, bad
faith or malice, or that it was aimed at interfering with its employees’ right to self-organize. In fact, ETPI
negotiated and consulted with ETEU before implementing its Right-Sizing Program.

Both the Labor Arbiter and the NLRC found ETPI guilty of unfair labor practice because of its failure to
dispute Culili’s allegations.

According to jurisprudence, "basic is the principle that good faith is presumed and he who alleges bad
faith has the duty to prove the same."48 By imputing bad faith to the actuations of ETPI, Culili has the
burden of proof to present substantial evidence to support the allegation of unfair labor practice. Culili
failed to discharge this burden and his bare allegations deserve no credit.

Observance of Procedural Due Process

Although the Court finds Culili’s dismissal was for a lawful cause and not an act of unfair labor practice,
ETPI, however, was remiss in its duty to observe procedural due process in effecting the termination of
Culili.

We have previously held that "there are two aspects which characterize the concept of due process under
the Labor Code: one is substantive — whether the termination of employment was based on the provision
of the Labor Code or in accordance with the prevailing jurisprudence; the other is procedural — the
manner in which the dismissal was effected."49

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Section 2(d), Rule I, Book VI of the Rules Implementing the Labor Code provides:

(d) In all cases of termination of employment, the following standards of due process shall be
substantially observed:

xxxx

For termination of employment as defined in Article 283 of the Labor Code, the requirement of due
process shall be deemed complied with upon service of a written notice to the employee and the
appropriate Regional Office of the Department of Labor and Employment at least thirty days before
effectivity of the termination, specifying the ground or grounds for termination.

In Mayon Hotel & Restaurant v. Adana,50 we observed:

The requirement of law mandating the giving of notices was intended not only to enable the employees to
look for another employment and therefore ease the impact of the loss of their jobs and the corresponding
income, but more importantly, to give the Department of Labor and Employment (DOLE) the opportunity
to ascertain the verity of the alleged authorized cause of termination. 51

ETPI does not deny its failure to provide DOLE with a written notice regarding Culili’s termination. It,
however, insists that it has complied with the requirement to serve a written notice to Culili as evidenced
by his admission of having received it and forwarding it to his union president.

In Serrano v. National Labor Relations Commission,52 we noted that "a job is more than the salary that it
carries." There is a psychological effect or a stigma in immediately finding one’s self laid off from
work.53 This is exactly why our labor laws have provided for mandating procedural due process clauses.
Our laws, while recognizing the right of employers to terminate employees it cannot sustain, also
recognize the employee’s right to be properly informed of the impending severance of his ties with the
company he is working for. In the case at bar, ETPI, in effecting Culili’s termination, simply asked one of
its guards to serve the required written notice on Culili. Culili, on one hand, claims in his petition that this
was handed to him by ETPI’s vice president, but previously testified before the Labor Arbiter that this was
left on his table.54 Regardless of how this notice was served on Culili, this Court believes that ETPI failed
to properly notify Culili about his termination. Aside from the manner the written notice was served, a
reading of that notice shows that ETPI failed to properly inform Culili of the grounds for his termination.

The Court of Appeals, in finding that Culili was not afforded procedural due process, held that Culili’s
dismissal was ineffectual, and required ETPI to pay Culili full backwages in accordance with our decision
in Serrano v. National Labor Relations Commission.55 Over the years, this Court has had the opportunity
to reexamine the sanctions imposed upon employers who fail to comply with the procedural due process
requirements in terminating its employees. In Agabon v. National Labor Relations Commission,56 this
Court reverted back to the doctrine in Wenphil Corporation v. National Labor Relations Commission 57 and
held that where the dismissal is due to a just or authorized cause, but without observance of the due
process requirements, the dismissal may be upheld but the employer must pay an indemnity to the
employee. The sanctions to be imposed however, must be stiffer than those imposed in Wenphil to
achieve a result fair to both the employers and the employees.58

In Jaka Food Processing Corporation v. Pacot,59 this Court, taking a cue from Agabon, held that since
there is a clear-cut distinction between a dismissal due to a just cause and a dismissal due to an
authorized cause, the legal implications for employers who fail to comply with the notice requirements
must also be treated differently:

Accordingly, it is wise to hold that: (1) if the dismissal is based on a just cause under Article 282 but the
employer failed to comply with the notice requirement, the sanction to be imposed upon him should be
tempered because the dismissal process was, in effect, initiated by an act imputable to the employee;
and (2) if the dismissal is based on an authorized cause under Article 283 but the employer failed to
comply with the notice requirement, the sanction should be stiffer because the dismissal process was
initiated by the employer's exercise of his management prerogative.60

Hence, since it has been established that Culili’s termination was due to an authorized cause and cannot
be considered unfair labor practice on the part of ETPI, his dismissal is valid. However, in view of ETPI’s
failure to comply with the notice requirements under the Labor Code, Culili is entitled to nominal damages
in addition to his separation pay.1avvphi1

Personal Liability of ETPI’s Officers


And Award of Damages

Culili asserts that the individual respondents, Salvador Hizon, Emiliano Jurado, Virgilio Garcia, and Stella
Garcia, as ETPI’s officers, should be held personally liable for the acts of ETPI which were tainted with

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bad faith and arbitrariness. Furthermore, Culili insists that he is entitled to damages because of the
sufferings he had to endure and the malicious manner he was terminated.

As a general rule, a corporate officer cannot be held liable for acts done in his official capacity because a
corporation, by legal fiction, has a personality separate and distinct from its officers, stockholders, and
members. To pierce this fictional veil, it must be shown that the corporate personality was used to
perpetuate fraud or an illegal act, or to evade an existing obligation, or to confuse a legitimate issue. In
illegal dismissal cases, corporate officers may be held solidarily liable with the corporation if the
termination was done with malice or bad faith. 61

In illegal dismissal cases, moral damages are awarded only where the dismissal was attended by bad
faith or fraud, or constituted an act oppressive to labor, or was done in a manner contrary to morals, good
customs or public policy.62 Exemplary damages may avail if the dismissal was effected in a wanton,
oppressive or malevolent manner to warrant an award for exemplary damages.63

It is our considered view that Culili has failed to prove that his dismissal was orchestrated by the
individual respondents herein for the mere purpose of getting rid of him. In fact, most of them have not
even dealt with Culili personally. Moreover, it has been established that his termination was for an
authorized cause, and that there was no bad faith on the part of ETPI in implementing its Right-Sizing
Program, which involved abolishing certain positions and departments for redundancy. It is not enough
that ETPI failed to comply with the due process requirements to warrant an award of damages, there
being no showing that the company’s and its officers’ acts were attended with bad faith or were done
oppressively.

WHEREFORE, the instant petition is DENIED and the assailed February 5, 2004 Decision and
September 13, 2004 Resolution of the Court of Appeals in CA-G.R. SP No. 75001 are AFFIRMED with
the MODIFICATION that petitioner Nelson A. Culili’s dismissal is declared valid but respondent Eastern
Telecommunications Philippines, Inc. is ordered to pay petitioner Nelson A. Culili the amount of Fifty
Thousand Pesos (₱50,000.00) representing nominal damages for non-compliance with statutory due
process, in addition to the mandatory separation pay required under Article 283 of the Labor Code.

SO ORDERED.

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G.R. No. 146206 August 1, 2011

SAN MIGUEL FOODS, INCORPORATED, Petitioner,


vs.
SAN MIGUEL CORPORATION SUPERVISORS and EXEMPT UNION, Respondent.

PERALTA, J.:

The issues in the present case, relating to the inclusion of employees in supervisor levels 3 and 4 and the
exempt employees in the proposed bargaining unit, thereby allowing their participation in the certification
election; the application of the "community or mutuality of interests" test; and the determination of the
employees who belong to the category of confidential employees, are not novel.

In G.R. No. 110399, entitled San Miguel Corporation Supervisors and Exempt Union v. Laguesma,1 the
Court held that even if they handle confidential data regarding technical and internal business operations,
supervisory employees 3 and 4 and the exempt employees of petitioner San Miguel Foods, Inc. (SMFI)
are not to be considered confidential employees, because the same do not pertain to labor relations,
particularly, negotiation and settlement of grievances. Consequently, they were allowed to form an
appropriate bargaining unit for the purpose of collective bargaining. The Court also declared that the
employees belonging to the three different plants of San Miguel Corporation Magnolia Poultry Products
Plants in Cabuyao, San Fernando, and Otis, having "community or mutuality of interests," constitute a
single bargaining unit. They perform work of the same nature, receive the same wages and
compensation, and most importantly, share a common stake in concerted activities. It was immaterial that
the three plants have different locations as they did not impede the operations of a single bargaining
representative.2

Pursuant to the Court's decision in G.R. No. 110399, the Department of Labor and Employment –
National Capital Region (DOLE-NCR) conducted pre-election conferences.3 However, there was a
discrepancy in the list of eligible voters, i.e., petitioner submitted a list of 23 employees for the San
Fernando plant and 33 for the Cabuyao plant, while respondent listed 60 and 82, respectively.4

On August 31, 1998, Med-Arbiter Agatha Ann L. Daquigan issued an Order 5 directing Election Officer
Cynthia Tolentino to proceed with the conduct of certification election in accordance with Section 2, Rule
XII of Department Order No. 9.

On September 30, 1998, a certification election was conducted and it yielded the following results, 6 thus:

Cabuyao San Fernando Total


Plant Plant

Yes 23 23 46

No 0 0 0

Spoiled 2 0 2

Segregated 41 35 76

Total Votes Cast 66 58 124

On the date of the election, September 30, 1998, petitioner filed the Omnibus Objections and Challenge
to Voters,7questioning the eligibility to vote by some of its employees on the grounds that some
employees do not belong to the bargaining unit which respondent seeks to represent or that there is no
existence of employer-employee relationship with petitioner. Specifically, it argued that certain employees
should not be allowed to vote as they are: (1) confidential employees; (2) employees assigned to the live
chicken operations, which are not covered by the bargaining unit; (3) employees whose job grade is level
4, but are performing managerial work and scheduled to be promoted; (4) employees who belong to the
Barrio Ugong plant; (5) non-SMFI employees; and (6) employees who are members of other unions.

On October 21, 1998, the Med-Arbiter issued an Order directing respondent to submit proof showing that
the employees in the submitted list are covered by the original petition for certification election and belong
to the bargaining unit it seeks to represent and, likewise, directing petitioner to substantiate the
allegations contained in its Omnibus Objections and Challenge to Voters. 8

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In compliance thereto, respondent averred that (1) the bargaining unit contemplated in the original petition
is the Poultry Division of San Miguel Corporation, now known as San Miguel Foods, Inc.; (2) it covered
the operations in Calamba, Laguna, Cavite, and Batangas and its home base is either in Cabuyao,
Laguna or San Fernando, Pampanga; and (3) it submitted individual and separate declarations of the
employees whose votes were challenged in the election.9

Adding the results to the number of votes canvassed during the September 30, 1998 certification election,
the final tally showed that: number of eligible voters – 149; number of valid votes cast – 121; number of
spoiled ballots - 3; total number of votes cast – 124, with 118 (i.e., 46 + 72 = 118 ) "Yes" votes and 3 "No"
votes.10

The Med-Arbiter issued the Resolution11 dated February 17, 1999 directing the parties to appear before
the Election Officer of the Labor Relations Division on March 9, 1999, 10:00 a.m., for the opening of the
segregated ballots. Thereafter, on April 12, 1999, the segregated ballots were opened, showing that out
of the 76 segregated

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

Based on the results, the Med-Arbiter issued the Order13 dated April 13, 1999, stating that since the "Yes"
vote received 97% of the valid votes cast, respondent is certified to be the exclusive bargaining agent of
the supervisors and exempt employees of petitioner's Magnolia Poultry Products Plants in Cabuyao, San
Fernando, and Otis.

On appeal, the then Acting DOLE Undersecretary, in the Resolution14 dated July 30, 1999, in OS-A-2-70-
91 (NCR-OD-M-9010-017), affirmed the Order dated April 13, 1999, with modification that George C.
Matias, Alma Maria M. Lozano, Joannabel T. Delos Reyes, and Marilyn G. Pajaron be excluded from the
bargaining unit which respondent seeks to represent. She opined that the challenged voters should be
excluded from the bargaining unit, because Matias and Lozano are members of Magnolia Poultry
Processing Plants Monthly Employees Union, while Delos Reyes and Pajaron are employees of San
Miguel Corporation, which is a separate and distinct entity from petitioner.

Petitioner’s Partial Motion for Reconsideration15 dated August 14, 1999 was denied by the then Acting
DOLE Undersecretary in the Order16 dated August 27, 1999.

In the Decision17 dated April 28, 2000, in CA-G.R. SP No. 55510, entitled San Miguel Foods, Inc. v. The
Honorable Office of the Secretary of Labor, Bureau of Labor Relations, and San Miguel Corporation
Supervisors and Exempt Union, the Court of Appeals (CA) affirmed with modification the Resolution
dated July 30, 1999 of the DOLE Undersecretary, stating that those holding the positions of Human
Resource Assistant and Personnel Assistant are excluded from the bargaining unit.

Petitioner’s Motion for Partial Reconsideration18 dated May 23, 2000 was denied by the CA in the
Resolution19dated November 28, 2000.

Hence, petitioner filed this present petition raising the following issues:

I.WHETHER THE COURT OF APPEALS DEPARTED FROM JURISPRUDENCE WHEN IT


EXPANDED THE SCOPE OF THE BARGAINING UNIT DEFINED BY THIS COURT'S RULING
IN G.R. NO. 110399.

II.WHETHER THE COURT OF APPEALS DEPARTED FROM JURISPRUDENCE -


SPECIFICALLY, THIS COURT'S DEFINITION OF A "CONFIDENTIAL EMPLOYEE" - WHEN IT
RULED FOR THE INCLUSION OF THE "PAYROLL MASTER" POSITION IN THE BARGAINING
UNIT.

III.WHETHER THIS PETITION IS A "REHASH" OR A "RESURRECTION" OF THE ISSUES


RAISED IN G.R. NO. 110399, AS ARGUED BY PRIVATE RESPONDENT.

Petitioner contends that with the Court's ruling in G.R. No. 11039920 identifying the specific employees
who can participate in the certification election, i.e., the supervisors (levels 1 to 4) and exempt employees
of San Miguel Poultry Products Plants in Cabuyao, San Fernando, and Otis, the CA erred in expanding
the scope of the bargaining unit so as to include employees who do not belong to or who are not based in
its Cabuyao or San Fernando plants. It also alleges that the employees of the Cabuyao, San Fernando,
and Otis plants of petitioner’s predecessor, San Miguel Corporation, as stated in G.R. No. 110399, were
engaged in "dressed" chicken processing, i.e., handling and packaging of chicken meat, while the new
bargaining unit, as defined by the CA in the present case, includes employees engaged in "live" chicken
operations, i.e., those who breed chicks and grow chickens.

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Respondent counters that petitioner’s proposed exclusion of certain employees from the bargaining unit
was a rehashed issue which was already settled in G.R. No. 110399. It maintains that the issue of union
membership coverage should no longer be raised as a certification election already took place on
September 30, 1998, wherein respondent won with 97% votes.

Petitioner’s contentions are erroneous. In G.R. No. 110399, the Court explained that the employees of
San Miguel Corporation Magnolia Poultry Products Plants of Cabuyao, San Fernando, and Otis constitute
a single bargaining unit, which is not contrary to the one-company, one-union policy. An appropriate
bargaining unit is defined as a group of employees of a given employer, comprised of all or less than all of
the entire body of employees, which the collective interest of all the employees, consistent with equity to
the employer, indicate to be best suited to serve the reciprocal rights and duties of the parties under the
collective bargaining provisions of the law. 21

In National Association of Free Trade Unions v. Mainit Lumber Development Company Workers Union –
United Lumber and General Workers of the Phils,22 the Court, taking into account the "community or
mutuality of interests" test, ordered the formation of a single bargaining unit consisting of the Sawmill
Division in Butuan City and the Logging Division in Zapanta Valley, Kitcharao, Agusan [Del] Norte of the
Mainit Lumber Development Company. It held that while the existence of a bargaining history is a factor
that may be reckoned with in determining the appropriate bargaining unit, the same is not decisive or
conclusive. Other factors must be considered. The test of grouping is community or mutuality of interest.
This is so because the basic test of an asserted bargaining unit’s acceptability is whether or not it is
fundamentally the combination which will best assure to all employees the exercise of their collective
bargaining rights.23 Certainly, there is a mutuality of interest among the employees of the Sawmill Division
and the Logging Division. Their functions mesh with one another. One group needs the other in the same
way that the company needs them both. There may be differences as to the nature of their individual
assignments, but the distinctions are not enough to warrant the formation of a separate bargaining unit.24

Thus, applying the ruling to the present case, the Court affirms the finding of the CA that there should be
only one bargaining unit for

the employees in Cabuyao, San Fernando, and Otis 25 of Magnolia Poultry Products Plant involved in
"dressed" chicken processing and Magnolia Poultry Farms engaged in "live" chicken operations. Certain
factors, such as specific line of work, working conditions, location of work, mode of compensation, and
other relevant conditions do not affect or impede their commonality of interest. Although they seem
separate and distinct from each other, the specific tasks of each division are actually interrelated and
there exists mutuality of interests which warrants the formation of a single bargaining unit.

Petitioner asserts that the CA erred in not excluding the position of Payroll Master in the definition of a
confidential employee and, thus, prays that the said position and all other positions with access to salary
and compensation data be excluded from the bargaining unit.

This argument must fail. Confidential employees are defined as those who (1) assist or act in a
confidential capacity, in regard (2) to persons who formulate, determine, and effectuate management
policies in the field of labor relations.26 The two criteria are cumulative, and both must be met if an
employee is to be considered a confidential employee - that is, the confidential relationship must exist
between the employee and his supervisor, and the supervisor must handle the prescribed responsibilities
relating to labor relations. The exclusion from bargaining units of employees who, in the normal course of
their duties, become aware of management policies relating to labor relations is a principal objective
sought to be accomplished by the "confidential employee rule."27

A confidential employee is one entrusted with confidence on delicate, or with the custody, handling or
care and protection of the employer’s property.28 Confidential employees, such as accounting personnel,
should be excluded from the bargaining unit, as their access to confidential information may become the
source of undue advantage.29However, such fact does not apply to the position of Payroll Master and the
whole gamut of employees who, as perceived by petitioner, has access to salary and compensation data.
The CA correctly held that the position of Payroll Master does not involve dealing with confidential labor
relations information in the course of the performance of his functions. Since the nature of his work does
not pertain to company rules and regulations and confidential labor relations, it follows that he cannot be
excluded from the subject bargaining unit.

Corollarily, although Article 24530 of the Labor Code limits the ineligibility to join, form and assist any labor
organization to managerial employees, jurisprudence has extended this prohibition to

confidential employees or those who by reason of their positions or nature of work are required to assist
or act in a fiduciary manner to managerial employees and, hence, are likewise privy to sensitive and
highly confidential records.31 Confidential employees are thus excluded from the rank-and-file bargaining
unit. The rationale for their separate category and disqualification to join any labor organization is similar
to the inhibition for managerial employees, because if allowed to be affiliated with a union, the latter might

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not be assured of their loyalty in view of evident conflict of interests and the union can also become
company-denominated with the presence of managerial employees in the union membership. 32 Having
access to confidential information, confidential employees may also become the source of undue
advantage. Said employees may act as a spy or spies of either party to a collective bargaining
agreement.331avvphi1

In this regard, the CA correctly ruled that the positions of Human Resource Assistant and Personnel
Assistant belong to the category of confidential employees and, hence, are excluded from the bargaining
unit, considering their respective positions and job descriptions. As Human Resource Assistant,34 the
scope of one’s work necessarily involves labor relations, recruitment and selection of employees, access
to employees' personal files and compensation package, and human resource management. As regards
a Personnel Assistant,35 one's work includes the recording of minutes for management during collective
bargaining negotiations, assistance to management during grievance meetings and administrative
investigations, and securing legal advice for labor issues from the petitioner’s team of lawyers, and
implementation of company programs. Therefore, in the discharge of their functions, both gain access to
vital labor relations information which outrightly disqualifies them from union membership.

The proceedings for certification election are quasi-judicial in nature and, therefore, decisions rendered in
such proceedings can attain finality.36 Applying the doctrine of res judicata, the issue in the

present case pertaining to the coverage of the employees who would constitute the bargaining unit is now
a foregone conclusion.

It bears stressing that a certification election is the sole concern of the workers; hence, an employer lacks
the personality to dispute the same. The general rule is that an employer has no standing to question the
process of certification election, since this is the sole concern of the workers. 37 Law and policy demand
that employers take a strict, hands-off stance in certification elections. The bargaining representative of
employees should be chosen free from any extraneous influence of management. A labor bargaining
representative, to be effective, must owe its loyalty to the employees alone and to no other. 38 The only
exception is where the employer itself has to file the petition pursuant to Article 258 39 of the Labor Code
because of a request to bargain collectively.40

With the foregoing disquisition, the Court writes finis to the issues raised so as to forestall future suits of
similar nature.

WHEREFORE, the petition is DENIED. The Decision dated April 28, 2000 and Resolution dated
November 28, 2000 of the Court of Appeals, in CA-G.R. SP No. 55510, which affirmed with modification
the Resolutions dated July 30, 1999 and August 27, 1999 of the Secretary of Labor, are AFFIRMED.

SO ORDERED.

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G.R. No. 115949 March 16, 2000

EVANGELINE J. GABRIEL, TERESITA C. LUALHATI, EVELYN SIA, RODOLFO EUGENIO, ISAGANI


MAKISIG, and DEMETRIO SALAS, petitioners,
vs.
THE HONORABLE SECRETARY OF LABOR AND EMPLOYMENT and SIMEON SARMIENTO,
JESUS CARLOS MARTINEZ III, ALBERT NAPIAL, MARVIN ALMACIN, ROGELIO MATEO, GLENN
SIAPNO, EMILIANO CUETO, SALOME ATIENZA, NORMA V. GO, JUDITH DUDANG, MONINA
DIZON, EUSEBIO ROMERO, ISAGANI MORALES, ELISEO BUENAVENTURA, CLEMENTE
AGCAMARAN, CARMELITA NOLASCO, JOVITA FERI, LULU ACOSTA, CAROL LAZARO, NIDA
ARRIZA, ROMAN BERNARDO, DOMINGO B. MACALDO, EUGENE PIDLAOAN, MA. SOCORRO T.
ANGOB, JOSEPHINE ALVAREZ, LOURDES FERRER, JACQUILINE BAQUIRAN, GRACIA R.
ESCUADRO, KRISTINA HERNANDEZ, LOURDES IBEAS, MACARIO GARCIA, BILLY TECSON,
ALEX RECTO III, LEBRUDO, JOSE RICAFORTE, RODOLFO MORADA, TERESA AMADO, ROSITA
TRINIDAD, JEANETTE ONG, VICTORINO LAS-AY, RANIEL DAYAO OSCAR SANTOS, CRISTINA
SALAVER, VICTORIA ARINO, A.H. SAJO, MICHAEL BIETE, RED RP, GLORIA JUAT, ETHELINDA
CASILAN, FAMER DIPASUPIL, MA. HIDELISA POMER, MA. CHARLOTTE TAWATAO, GRACE
REYES, ERNIE COLINA, ZENAIDA MENDOZA, PAULITA ADORABLE, BERNARDO MADUMBA,
NESTOR NAVARRO, EASTER YAP, ALMA LIM, FELISA YU, TIMOTEO GANASTRA, REVELITA
CARTAJENAS, ANGELITO CABUAL, ROBERTA TAN, DOMINADOR TAPO, GRACE LIM GADIANE
JEMIE, CHRISTHDY DAUD, BENEDICTO ACOSTA, JESUSA ACOSTA, MA. AVELINA ARYAP,
EVELYN BENITEZ, ESTERITA CHU, EVANGELINE CHU, BETTY CINCO, RICARDO CONNEJO,
MANULITO EVALO, FRANCIS LEONIDA, GREGORIO NOBLEZA, RODOLFO RIVERAL, ELSA SIA,
CLARA SUGBO, EDGARDO TABAO, MANUEL VELOSO, MARLYN YU, ABSALON BUENA,
WILFREDO PUERTO, FLORENTINA PINGOL, MARILOU DAR, FE MORALES, MALEN BELLO,
LORENA TAMAYO, CESAR LIM, PAUL BALTAZAR, ALFREDO GAYAGAS, DUMAGUETE
EMPLOYEES, CEBU EMPLOYEES, OZAMIZ EMPLOYEES, TACLOBAN EMPLOYEES AND ALL
OTHER SOLID BANK UNION MEMBERS, respondents.

QUISUMBING, J.:

Before us is a special civil action for certiorari seeking to reverse partially the Order1 of public respondent
dated June 3, 1994, in Case No. OS-MA-A-8-170-92, which ruled that the workers through their union
should be made to shoulder the expenses incurred for the professional services of a lawyer in connection
with the collective bargaining negotiations and that the reimbursement for the deductions from the
workers should be charged to the union's general fund or account.

The records show the following factual antecedents:

Petitioners comprise the Executive Board of the SolidBank Union, the duly recognized collective
bargaining agent for the rank and file employees of Solid Bank Corporation. Private respondents are
members of said union.

Sometime in October 1991, the union's Executive Board decided to retain anew the service of Atty.
Ignacio P. Lacsina (now deceased) as union counsel in connection with the negotiations for a new
Collective Bargaining Agreement (CBA). Accordingly, on October 19, 1991, the board called a general
membership meeting for the purpose. At the said meeting, the majority of all union members approved
and signed a resolution confirming the decision of the executive board to engage the services of Atty.
Lacsina as union counsel.

As approved, the resolution provided that ten percent (10%) of the total economic benefits that may be
secured through the negotiations be given to Atty. Lacsina as attorney's fees. It also contained an
authorization for SolidBank Corporation to check-off said attorney's fees from the first lump sum payment
of benefits to the employees under the new CBA and to turn over said amount to Atty. Lacsina and/or his
duly authorized representative.2

The new CBA was signed on February 21, 1992. The bank then, on request of the union, made payroll
deductions for attorney's fees from the CBA benefits paid to the union members in accordance with the
abovementioned resolution.

On October 2, 1992, private respondents instituted a complaint against the petitioners and the union
counsel before the Department of Labor and Employment (DOLE) for illegal deduction of attorney's fees
as well as for quantification of the benefits in the 1992 CBA. 3 Petitioners, in response, moved for the
dismissal of the complaint citing litis pendentia, forum shopping and failure to state a cause of action as
their grounds.4

On April 22, 1993, Med-Arbiter Paterno Adap of the DOLE-NCR issued the following Order:

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WHEREFORE, premises considered, the Respondents Union Officers and Counsel are hereby
directed to immediately return or refund to the Complainants the illegally deducted amount of
attorney's fees from the package of benefits due herein complainants under the aforesaid new
CBA.

Furthermore, Complainants are directed to pay five percent (5%) of the total amount to be
refunded or returned by the Respondent Union Officers and Counsel to them in favor of Atty.
Armando D. Morales, as attorney's fees, in accordance with Section II, Rule VIII of Book II (sic) of
the Omnibus Rules Implementing the Labor Code.5

On appeal, the Secretary of Labor rendered a Resolution6 dated December 27, 1993, stating:

WHEREFORE, the appeal of respondents Evangeline Gabriel, et. al., is hereby partially granted
and the Order of the Med-Arbiter dated 22 April 1993 is hereby modified as follows: (1) that the
ordered refund shall be limited to those union members who have not signified their conformity to
the check-off of attorney's fees; and (2) the directive on the payment of 5% attorney's fees should
be deleted for lack of basis.

SO ORDERED.7

On Motion for Reconsideration, public respondent affirmed the said Order with modification that the
union's counsel be dropped as a party litigant and that the workers through their union should be made to
shoulder the expenses incurred for the attorney's services. Accordingly, the reimbursement should be
charged to the union's general fund/account.8

Hence, the present petition seeking to partially annul the above-cited order of the public respondent for
being allegedly tainted with grave abuse of discretion amounting to lack of jurisdiction.

The sole issue for consideration is, did the public respondent act with grave abuse of discretion in issuing
the challenged order?

Petitioners argue that the General Membership Resolution authorizing the bank to check-off attorney's fee
from the first lump sum payment of the legal benefits to the employees under the new CBA satisfies the
legal requirements for such assessment.9 Private respondents, on the other hand, claim that the check-off
provision in question is illegal because it was never submitted for approval at a general membership
meeting called for the purpose and that it failed to meet the formalities mandated by the Labor Code. 10

In check-off, the employer, on agreement with the Union, or on prior authorization from employees,
deducts union dues or agency fees from the latter's wages and remits them directly to the union. 11 It
assures continuous funding; for the labor organization. As this Court has acknowledged, the system of
check-off is primarily for the benefit of the union and only indirectly for the individual employees. 12

The pertinent legal provisions on check-offs are found in Article 222 (b) and Article 241 (o) of the Labor
Code.

Art. 222 (b) states:

No attorney's fees, negotiation fees or similar charges of any kind arising from any collective
bargaining negotiations or conclusions 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 unions 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. (Emphasis ours)

Art. 241 (o) provides:

Other than for mandatory activities under the Code, no special assessment, 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.
(Emphasis ours).

Art. 241 has three (3) requisites for the validity of the special assessment for union's incidental expenses,
attorney's fees and representation expenses. These are: 1) authorization by a written resolution of the
majority of all the members at the general membership meeting called for the purpose; (2) secretary's
record of the minutes of the meeting; and (3) individual written authorization for check off duly signed by
the employees concerned.

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Clearly, attorney's fees may not be deducted or checked off from any amount due to an employee without
his written consent.

After a thorough review of the records, we find that the General Membership Resolution of October 19,
1991 of the SolidBank Union did not satisfy the requirements laid down by law and jurisprudence for the
validity of the ten percent (10%) special assessment for union's incidental expenses, attorney's fees and
representation expenses. There were no individual written check off authorizations by the employees
concerned and so the assessment cannot be legally deducted by their employer.

Even as early as February 1990, in the case of Palacol vs. Ferrer-Calleja 13 we said that the express
consent of employees 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. In Stellar Industrial
Services, Inc. vs. NLRC 14 we reiterated that a written individual authorization duly signed by the
employee concerned is a condition sine qua non for such deduction.

These pronouncements are also in accord with the recent ruling of this Court in the case of ABS-CBN
Supervisors Employees Union Members vs. ABS-CBN Broadcasting Corporation, et. al., 15 which
provides:

Premises studiedly considered, we are of the irresistible conclusion and, so find that the ruling
in BPIEU-ALU vs. NLRC that (1) the prohibition against attorney's fees in Article 222, paragraph
(b) of the Labor Code applies only when the payment of attorney's fees is effected through forced
contributions from the workers; and (2) that no deduction must be take from the workers who did
not sign the check-off authorization, applies to the case under consideration. (Emphasis ours.)

We likewise ruled in Bank of the Philippine Islands Employees Union-Association Labor Union (BPIEU-
ALU) vs. NLRC, 16

. . . the afore-cited provision (Article 222 (b) of the Labor Code) as prohibiting the payment of
attorney's fees only when it is effected through forced contributions from workers from their own
funds as distinguished from the union funds. The purpose of the provision is to prevent imposition
on the workers of the duty to individually contribute their respective shares in the fee to be paid
the attorney for his services on behalf of the union in its negotiations with management. The
obligation to pay the attorney's fees belongs to the union and cannot be shunted to the workers
as their direct responsibility. Neither the lawyer nor the union itself may require the individual
worker to assume the obligation to pay attorney's fees from their own pockets. So categorical is
this intent that the law makes it clear that any agreement to the contrary shall be null and void ab
initio. (Emphasis ours.)1âwphi1

From all the foregoing, we are of the considered view that public respondent did not act with grave abuse
of discretion in ruling that the workers through their union should be made to shoulder the expenses
incurred for the services of a lawyer. And accordingly the reimbursement should be charged to the union's
general fund or account. No deduction can be made from the salaries of the concerned employees other
than those mandated by law.

WHEREFORE, the petition is DENIED. The assailed Order dated June 3, 1994, of respondent Secretary
of Labor signed by Undersecretary Bienvenido E. Laguesma is AFFIRMED. No pronouncement as to
costs.1âwphi1.nêt

SO ORDERED.

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G.R. No. 162025 August 3, 2010

TUNAY NA PAGKAKAISA NG MANGGAGAWA SA ASIA BREWERY, Petitioner,


vs.
ASIA BREWERY, INC., Respondent.

DECISION

VILLARAMA, JR., J.:

For resolution is an appeal by certiorari filed by petitioner under Rule 45 of the 1997 Rules of Civil
Procedure, as amended, assailing the Decision1 dated November 22, 2002 and Resolution2 dated
January 28, 2004 rendered by the Court of Appeals (CA) in CA-G.R. SP No. 55578, granting the petition
of respondent company and reversing the Voluntary Arbitrator’s Decision3 dated October 14, 1999.

The facts are:

Respondent Asia Brewery, Inc. (ABI) is engaged in the manufacture, sale and distribution of beer,
shandy, bottled water and glass products. ABI entered into a Collective Bargaining Agreement
(CBA),4 effective for five (5) years from August 1, 1997 to July 31, 2002, with Bisig at Lakas ng mga
Manggagawa sa Asia-Independent (BLMA-INDEPENDENT), the exclusive bargaining representative of
ABI’s rank-and-file employees. On October 3, 2000, ABI and BLMA-INDEPENDENT signed a
renegotiated CBA effective from August 1, 2000 to 31 July 2003. 5

Article I of the CBA defined the scope of the bargaining unit, as follows:

Section 1. Recognition. The COMPANY recognizes the UNION as the sole and exclusive bargaining
representative of all the regular rank-and-file daily paid employees within the scope of the appropriate
bargaining unit with respect to rates of pay, hours of work and other terms and conditions of employment.
The UNION shall not represent or accept for membership employees outside the scope of the bargaining
unit herein defined.

Section 2. Bargaining Unit. The bargaining unit shall be comprised of all regular rank-and-file daily-paid
employees of the COMPANY. However, the following jobs/positions as herein defined shall be excluded
from the bargaining unit, to wit:

1. Managers

2. Assistant Managers

3. Section Heads

4. Supervisors

5. Superintendents

6. Confidential and Executive Secretaries

7. Personnel, Accounting and Marketing Staff

8. Communications Personnel

9. Probationary Employees

10. Security and Fire Brigade Personnel

11. Monthly Employees

12. Purchasing and Quality Control Staff6 [emphasis supplied.]

Subsequently, a dispute arose when ABI’s management stopped deducting union dues from eighty-one
(81) employees, believing that their membership in BLMA-INDEPENDENT violated the CBA. Eighteen
(18) of these affected employees are QA Sampling Inspectors/Inspectresses and Machine Gauge
Technician who formed part of the Quality Control Staff. Twenty (20) checkers are assigned at the
Materials Department of the Administration Division, Full Goods Department of the Brewery Division and
Packaging Division. The rest are secretaries/clerks directly under their respective division managers. 7

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BLMA-INDEPENDENT claimed that ABI’s actions restrained the employees’ right to self-organization and
brought the matter to the grievance machinery. As the parties failed to amicably settle the controversy,
BLMA-INDEPENDENT lodged a complaint before the National Conciliation and Mediation Board (NCMB).
The parties eventually agreed to submit the case for arbitration to resolve the issue of "[w]hether or not
there is restraint to employees in the exercise of their right to self-organization."8

In his Decision, Voluntary Arbitrator Bienvenido Devera sustained the BLMA-INDEPENDENT after finding
that the records submitted by ABI showed that the positions of the subject employees qualify under the
rank-and-file category because their functions are merely routinary and clerical. He noted that the
positions occupied by the checkers and secretaries/clerks in the different divisions are not managerial or
supervisory, as evident from the duties and responsibilities assigned to them. With respect to QA
Sampling Inspectors/Inspectresses and Machine Gauge Technician, he ruled that ABI failed to establish
with sufficient clarity their basic functions as to consider them Quality Control Staff who were excluded
from the coverage of the CBA. Accordingly, the subject employees were declared eligible for inclusion
within the bargaining unit represented by BLMA-INDEPENDENT.9

On appeal, the CA reversed the Voluntary Arbitrator, ruling that:

WHEREFORE, foregoing premises considered, the questioned decision of the Honorable Voluntary
Arbitrator Bienvenido De Vera is hereby REVERSED and SET ASIDE, and A NEW ONE ENTERED
DECLARING THAT:

a) the 81 employees are excluded from and are not eligible for inclusion in the bargaining unit as
defined in Section 2, Article I of the CBA;

b) the 81 employees cannot validly become members of respondent and/or if already members,
that their membership is violative of the CBA and that they should disaffiliate from respondent;
and

c) petitioner has not committed any act that restrained or tended to restrain its employees in the
exercise of their right to self-organization.

NO COSTS.

SO ORDERED.10

BLMA-INDEPENDENT filed a motion for reconsideration. In the meantime, a certification election was
held on August 10, 2002 wherein petitioner Tunay na Pagkakaisa ng Manggagawa sa Asia (TPMA) won.
As the incumbent bargaining representative of ABI’s rank-and-file employees claiming interest in the
outcome of the case, petitioner filed with the CA an omnibus motion for reconsideration of the decision
and intervention, with attached petition signed by the union officers. 11 Both motions were denied by the
CA.12

The petition is anchored on the following grounds:

(1)

THE COURT OF APPEALS ERRED IN RULING THAT THE 81 EMPLOYEES ARE EXCLUDED FROM
AND ARE NOT ELIGIBLE FOR INCLUSION IN THE BARGAINING UNIT AS DEFINED IN SECTION 2,
ARTICLE 1 OF THE CBA[;]

(2)

THE COURT OF APPEALS ERRED IN HOLDING THAT THE 81 EMPLOYEES CANNOT VALIDLY
BECOME UNION MEMBERS, THAT THEIR MEMBERSHIP IS VIOLATIVE OF THE CBA AND THAT
THEY SHOULD DISAFFILIATE FROM RESPONDENT;

(3)

THE COURT OF APPEALS SERIOUSLY ERRED IN HOLDING THAT PETITIONER (NOW PRIVATE
RESPONDENT) HAS NOT COMMITTED ANY ACT THAT RESTRAINED OR TENDED TO RESTRAIN
ITS EMPLOYEES IN THE EXERCISE OF THEIR RIGHT TO SELF-ORGANIZATION.13

Although Article 245 of the Labor Code limits the ineligibility to join, form and assist any labor organization
to managerial employees, jurisprudence has extended this prohibition to confidential employees or those
who by reason of their positions or nature of work are required to assist or act in a fiduciary manner to
managerial employees and hence, are likewise privy to sensitive and highly confidential
records.14 Confidential employees are thus excluded from the rank-and-file bargaining unit. The rationale

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for their separate category and disqualification to join any labor organization is similar to the inhibition for
managerial employees because if allowed to be affiliated with a Union, the latter might not be assured of
their loyalty in view of evident conflict of interests and the Union can also become company-denominated
with the presence of managerial employees in the Union membership. 15Having access to confidential
information, confidential employees may also become the source of undue advantage. Said employees
may act as a spy or spies of either party to a collective bargaining agreement. 16

In Philips Industrial Development, Inc. v. NLRC,17 this Court held that petitioner’s "division secretaries, all
Staff of General Management, Personnel and Industrial Relations Department, Secretaries of Audit, EDP
and Financial Systems" are confidential employees not included within the rank-and-file bargaining
unit.18 Earlier, in Pier 8 Arrastre & Stevedoring Services, Inc. v. Roldan-Confesor,19 we declared that legal
secretaries who are tasked with, among others, the typing of legal documents, memoranda and
correspondence, the keeping of records and files, the giving of and receiving notices, and such other
duties as required by the legal personnel of the corporation, fall under the category of confidential
employees and hence excluded from the bargaining unit composed of rank-and-file employees.20

Also considered having access to "vital labor information" are the executive secretaries of the General
Manager and the executive secretaries of the Quality Assurance Manager, Product Development
Manager, Finance Director, Management System Manager, Human Resources Manager, Marketing
Director, Engineering Manager, Materials Manager and Production Manager.21

In the present case, the CBA expressly excluded "Confidential and Executive Secretaries" from the rank-
and-file bargaining unit, for which reason ABI seeks their disaffiliation from petitioner. Petitioner, however,
maintains that except for Daisy Laloon, Evelyn Mabilangan and Lennie Saguan who had been promoted
to monthly paid positions, the following secretaries/clerks are deemed included among the rank-and-file
employees of ABI:22

NAME DEPARTMENT IMMEDIATE SUPERIOR

C1 ADMIN DIVISION

1. Angeles, Cristina C. Transportation Mr. Melito K. Tan

2. Barraquio, Carina P. Transportation Mr. Melito K. Tan

3. Cabalo, Marivic B. Transportation Mr. Melito K. Tan

4. Fameronag, Leodigario C. Transportation Mr. Melito K. Tan

1. Abalos, Andrea A. Materials Mr. Andres G. Co

2. Algire, Juvy L. Materials Mr. Andres G. Co

3. Anoñuevo, Shirley P. Materials Mr. Andres G. Co

4. Aviso, Rosita S. Materials Mr. Andres G. Co

5. Barachina, Pauline C. Materials Mr. Andres G. Co

6. Briones, Catalina P. Materials Mr. Andres G. Co

7. Caralipio, Juanita P. Materials Mr. Andres G. Co

8. Elmido, Ma. Rebecca S. Materials Mr. Andres G. Co

9. Giron, Laura P. Materials Mr. Andres G. Co

10. Mane, Edna A. Materials Mr. Andres G. Co

xxxx

C2 BREWERY DIVISION

1. Laloon, Daisy S. Brewhouse Mr. William Tan

100 | P a g e
1. Arabit, Myrna F. Bottling Production Mr. Julius Palmares

2. Burgos, Adelaida D. Bottling Production Mr. Julius Palmares

3. Menil, Emmanuel S. Bottling Production Mr. Julius Palmares

4. Nevalga, Marcelo G. Bottling Production Mr. Julius Palmares

1. Mapola, Ma. Esraliza T. Bottling Maintenance Mr. Ernesto Ang

2. Velez, Carmelito A. Bottling Maintenance Mr. Ernesto Ang

1. Bordamonte, Rhumela D. Bottled Water Mr. Faustino Tetonche

2. Deauna, Edna R. Bottled Water Mr. Faustino Tetonche

3. Punongbayan, Marylou F. Bottled Water Mr. Faustino Tetonche

4. Saguan, Lennie Y. Bottled Water Mr. Faustino Tetonche

1. Alcoran, Simeon A. Full Goods Mr. Tsoi Wah Tung

2. Cervantes, Ma. Sherley Y. Full Goods Mr. Tsoi Wah Tung

3. Diongco, Ma. Teresa M. Full Goods Mr. Tsoi Wah Tung

4. Mabilangan, Evelyn M. Full Goods Mr. Tsoi Wah Tung

5. Rivera, Aurora M. Full Goods Mr. Tsoi Wah Tung

6. Salandanan, Nancy G. Full Goods Mr. Tsoi Wah Tung

1. Magbag, Ma. Corazon C. Tank Farm/ Mr. Manuel Yu Liat

Cella Services

1. Capiroso, Francisca A. Quality Assurance Ms. Regina Mirasol

1. Alconaba, Elvira C. Engineering Mr. Clemente Wong

2. Bustillo, Bernardita E. Electrical Mr. Jorge Villarosa

3. Catindig, Ruel A. Civil Works Mr. Roger Giron

4. Sison, Claudia B. Utilities Mr. Venancio Alconaba

xxxx

C3 PACKAGING DIVISION

1. Alvarez, Ma. Luningning L. GP Administration Ms. Susan Bella

2. Cañiza, Alma A. GP Technical Mr. Chen Tsai Tyan

3. Cantalejo, Aida S. GP Engineering Mr. Noel Fernandez

4. Castillo, Ma. Riza R. GP Production Mr. Tsai Chen Chih

5. Lamadrid, Susana C. GP Production Mr. Robert Bautista

6. Mendoza, Jennifer L. GP Technical Mr. Mel Oña

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As can be gleaned from the above listing, it is rather curious that there would be several
secretaries/clerks for just one (1) department/division performing tasks which are mostly routine and
clerical. Respondent insisted they fall under the "Confidential and Executive Secretaries" expressly
excluded by the CBA from the rank-and-file bargaining unit. However, perusal of the job descriptions of
these secretaries/clerks reveals that their assigned duties and responsibilities involve routine activities of
recording and monitoring, and other paper works for their respective departments while secretarial tasks
such as receiving telephone calls and filing of office correspondence appear to have been commonly
imposed as additional duties.23 Respondent failed to indicate who among these numerous
secretaries/clerks have access to confidential data relating to management policies that could give rise to
potential conflict of interest with their Union membership. Clearly, the rationale under our previous rulings
for the exclusion of executive secretaries or division secretaries would have little or no significance
considering the lack of or very limited access to confidential information of these secretaries/clerks. It is
not even farfetched that the job category may exist only on paper since they are all daily-paid workers.
Quite understandably, petitioner had earlier expressed the view that the positions were just being
"reclassified" as these employees actually discharged routine functions.

We thus hold that the secretaries/clerks, numbering about forty (40), are rank-and-file employees and not
confidential employees.

With respect to the Sampling Inspectors/Inspectresses and the Gauge Machine Technician, there seems
no dispute that they form part of the Quality Control Staff who, under the express terms of the CBA, fall
under a distinct category. But we disagree with respondent’s contention that the twenty (20) checkers are
similarly confidential employees being "quality control staff" entrusted with the handling and custody of
company properties and sensitive information.

Again, the job descriptions of these checkers assigned in the storeroom section of the Materials
Department, finishing section of the Packaging Department, and the decorating and glass sections of the
Production Department plainly showed that they perform routine and mechanical tasks preparatory to the
delivery of the finished products.24While it may be argued that quality control extends to post-production
phase -- proper packaging of the finished products -- no evidence was presented by the respondent to
prove that these daily-paid checkers actually form part of the company’s Quality Control Staff who as
such "were exposed to sensitive, vital and confidential information about [company’s] products" or "have
knowledge of mixtures of the products, their defects, and even their formulas" which are considered ‘trade
secrets’. Such allegations of respondent must be supported by evidence. 25

Consequently, we hold that the twenty (20) checkers may not be considered confidential employees
under the category of Quality Control Staff who were expressly excluded from the CBA of the rank-and-
file bargaining unit.

Confidential employees are defined as those who (1) assist or act in a confidential capacity, (2) to
persons who formulate, determine, and effectuate management policies in the field of labor relations. The
two (2) criteria are cumulative, and both must be met if an employee is to be considered a confidential
employee – that is, the confidential relationship must exist between the employee and his supervisor, and
the supervisor must handle the prescribed responsibilities relating to labor relations. The exclusion from
bargaining units of employees who, in the normal course of their duties, become aware of management
policies relating to labor relations is a principal objective sought to be accomplished by the "confidential
employee rule."26 There is no showing in this case that the secretaries/clerks and checkers assisted or
acted in a confidential capacity to managerial employees and obtained confidential information relating to
labor relations policies. And even assuming that they had exposure to internal business operations of the
company, respondent claimed, this is not per se ground for their exclusion in the bargaining unit of the
daily-paid rank-and-file employees.27

Not being confidential employees, the secretaries/clerks and checkers are not disqualified from
membership in the Union of respondent’s rank-and-file employees. Petitioner argues that respondent’s
act of unilaterally stopping the deduction of union dues from these employees constitutes unfair labor
practice as it "restrained" the workers’ exercise of their right to self-organization, as provided in Article 248
(a) of the Labor Code.

Unfair labor practice refers to "acts that violate the workers’ right to organize." The prohibited acts are
related to the workers’ right to self organization and to the observance of a CBA. For a charge of unfair
labor practice to prosper, it must be shown that ABI was motivated by ill will, "bad faith, or fraud, or was
oppressive to labor, or done in a manner contrary to morals, good customs, or public policy, and, of
course, that social humiliation, wounded feelings or grave anxiety resulted x x x" 28 from ABI’s act in
discontinuing the union dues deduction from those employees it believed were excluded by the CBA.
Considering that the herein dispute arose from a simple disagreement in the interpretation of the CBA
provision on excluded employees from the bargaining unit, respondent cannot be said to have committed
unfair labor practice that restrained its employees in the exercise of their right to self-organization, nor
have thereby demonstrated an anti-union stance.

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WHEREFORE, the petition is GRANTED. The Decision dated November 22, 2002 and Resolution dated
January 28, 2004 of the Court of Appeals in CA-G.R. SP No. 55578 are hereby REVERSED and SET
ASIDE. The checkers and secretaries/clerks of respondent company are hereby declared rank-and-file
employees who are eligible to join the Union of the rank-and-file employees.

No costs.

SO ORDERED.

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G.R. No. 146728 February 11, 2004

GENERAL MILLING CORPORATION, petitioner,


vs
HON. COURT OF APPEALS, GENERAL MILLING CORPORATION INDEPENDENT LABOR UNION
(GMC-ILU), and RITO MANGUBAT, respondents.

DECISION

QUISUMBING, J.:

Before us is a petition for certiorari assailing the decision1 dated July 19, 2000, of the Court of Appeals in
CA-G.R. SP No. 50383, which earlier reversed the decision2 dated January 30, 1998 of the National
Labor Relations Commission (NLRC) in NLRC Case No. V-0112-94.

The antecedent facts are as follows:

In its two plants located at Cebu City and Lapu-Lapu City, petitioner General Milling Corporation
(GMC) employed 190 workers. They were all members of private respondent General Milling
Corporation Independent Labor Union (union, for brevity), a duly certified bargaining agent.

On April 28, 1989, GMC and the union concluded a collective bargaining agreement (CBA) which
included the issue of representation effective for a term of three years. The CBA was effective for
three years retroactive to December 1, 1988. Hence, it would expire on November 30, 1991.

On November 29, 1991, a day before the expiration of the CBA, the union sent GMC a proposed
CBA, with a request that a counter-proposal be submitted within ten (10) days.

As early as October 1991, however, GMC had received collective and individual letters from
workers who stated that they had withdrawn from their union membership, on grounds of religious
affiliation and personal differences. Believing that the union no longer had standing to negotiate a
CBA, GMC did not send any counter-proposal.

On December 16, 1991, GMC wrote a letter to the union’s officers, Rito Mangubat and Victor
Lastimoso. The letter stated that it felt there was no basis to negotiate with a union which no
longer existed, but that management was nonetheless always willing to dialogue with them on
matters of common concern and was open to suggestions on how the company may improve its
operations.

In answer, the union officers wrote a letter dated December 19, 1991 disclaiming any massive
disaffiliation or resignation from the union and submitted a manifesto, signed by its members,
stating that they had not withdrawn from the union.

On January 13, 1992, GMC dismissed Marcia Tumbiga, a union member, on the ground of
incompetence. The union protested and requested GMC to submit the matter to the grievance
procedure provided in the CBA. GMC, however, advised the union to "refer to our letter dated
December 16, 1991."3

Thus, the union filed, on July 2, 1992, a complaint against GMC with the NLRC, Arbitration Division, Cebu
City. The complaint alleged unfair labor practice on the part of GMC for: (1) refusal to bargain collectively;
(2) interference with the right to self-organization; and (3) discrimination. The labor arbiter dismissed the
case with the recommendation that a petition for certification election be held to determine if the union still
enjoyed the support of the workers.lawphi1.nêt

The union appealed to the NLRC.

On January 30, 1998, the NLRC set aside the labor arbiter’s decision. Citing Article 253-A of the Labor
Code, as amended by Rep. Act No. 6715,4 which fixed the terms of a collective bargaining agreement,
the NLRC ordered GMC to abide by the CBA draft that the union proposed for a period of two (2) years
beginning December 1, 1991, the date when the original CBA ended, to November 30, 1993. The NLRC
also ordered GMC to pay the attorney’s fees.5

In its decision, the NLRC pointed out that upon the effectivity of Rep. Act No. 6715, the duration of a CBA,
insofar as the representation aspect is concerned, is five (5) years which, in the case of GMC-
Independent Labor Union was from December 1, 1988 to November 30, 1993. All other provisions of the
CBA are to be renegotiated not later than three (3) years after its execution. Thus, the NLRC held that
respondent union remained as the exclusive bargaining agent with the right to renegotiate the economic

104 | P a g e
provisions of the CBA. Consequently, it was unfair labor practice for GMC not to enter into negotiation
with the union.

The NLRC likewise held that the individual letters of withdrawal from the union submitted by 13 of its
members from February to June 1993 confirmed the pressure exerted by GMC on its employees to resign
from the union. Thus, the NLRC also found GMC guilty of unfair labor practice for interfering with the right
of its employees to self-organization.

With respect to the union’s claim of discrimination, the NLRC found the claim unsupported by substantial
evidence.

On GMC’s motion for reconsideration, the NLRC set aside its decision of January 30, 1998, through a
resolution dated October 6, 1998. It found GMC’s doubts as to the status of the union justified and the
allegation of coercion exerted by GMC on the union’s members to resign unfounded. Hence, the union
filed a petition for certiorari before the Court of Appeals. For failure of the union to attach the required
copies of pleadings and other documents and material portions of the record to support the allegations in
its petition, the CA dismissed the petition on February 9, 1999. The same petition was subsequently filed
by the union, this time with the necessary documents. In its resolution dated April 26, 1999, the appellate
court treated the refiled petition as a motion for reconsideration and gave the petition due course.

On July 19, 2000, the appellate court rendered a decision the dispositive portion of which reads:

WHEREFORE, the petition is hereby GRANTED. The NLRC Resolution of October 6, 1998 is
hereby SET ASIDE, and its decision of January 30, 1998 is, except with respect to the award of
attorney’s fees which is hereby deleted, REINSTATED.6

A motion for reconsideration was seasonably filed by GMC, but in a resolution dated October 26, 2000,
the CA denied it for lack of merit.

Hence, the instant petition for certiorari alleging that:

THE COURT OF APPEALS DECISION VIOLATED THE CONSTITUTIONAL RULE THAT NO DECISION
SHALL BE RENDERED BY ANY COURT WITHOUT EXPRESSING THEREIN CLEARLY AND
DISTINCTLY THE FACTS AND THE LAW ON WHICH IT IS BASED.

II

THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN REVERSING THE


DECISION OF THE NATIONAL LABOR RELATIONS COMMISSION IN THE ABSENCE OF ANY
FINDING OF SUBSTANTIAL ERROR OR GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK
OR EXCESS OF JURISDICTION.

III

THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN NOT APPRECIATING THAT THE
NLRC HAS NO JURISDICTION TO DETERMINE THE TERMS AND CONDITIONS OF A COLLECTIVE
BARGAINING AGREEMENT.7

Thus, in the instant case, the principal issue for our determination is whether or not the Court of Appeals
acted with grave abuse of discretion amounting to lack or excess of jurisdiction in (1) finding GMC guilty
of unfair labor practice for violating the duty to bargain collectively and/or interfering with the right of its
employees to self-organization, and (2) imposing upon GMC the draft CBA proposed by the union for two
years to begin from the expiration of the original CBA.lawphi1.nêt

On the first issue, Article 253-A of the Labor Code, as amended by Rep. Act No. 6715, states:

ART. 253-A. Terms of a collective bargaining agreement. – Any Collective Bargaining


Agreement that the parties may enter into shall, insofar as the representation aspect is
concerned, be for a term of five (5) years. No petition questioning the majority status of the
incumbent bargaining agent shall be entertained and no certification election shall be conducted
by the Department of Labor and Employment outside of the sixty-day period immediately before
the date of expiry of such five year term of the Collective Bargaining Agreement. All other
provisions of the Collective Bargaining Agreement shall be renegotiated not later than three (3)
years after its execution....

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The law mandates that the representation provision of a CBA should last for five years. The relation
between labor and management should be undisturbed until the last 60 days of the fifth year. Hence, it is
indisputable that when the union requested for a renegotiation of the economic terms of the CBA on
November 29, 1991, it was still the certified collective bargaining agent of the workers, because it was
seeking said renegotiation within five (5) years from the date of effectivity of the CBA on December 1,
1988. The union’s proposal was also submitted within the prescribed 3-year period from the date of
effectivity of the CBA, albeit just before the last day of said period. It was obvious that GMC had no valid
reason to refuse to negotiate in good faith with the union. For refusing to send a counter-proposal to the
union and to bargain anew on the economic terms of the CBA, the company committed an unfair labor
practice under Article 248 of the Labor Code, which provides that:

ART. 248. Unfair labor practices of employers. – It shall be unlawful for an employer to commit
any of the following unfair labor practice:

...

(g) To violate the duty to bargain collectively as prescribed by this Code;

...

Article 252 of the Labor Code elucidates the meaning of the phrase "duty to bargain collectively,"
thus:

ART. 252. Meaning of duty to bargain collectively. – The duty to bargain collectively
means the performance of a mutual obligation to meet and convene promptly and
expeditiously in good faith for the purpose of negotiating an agreement....

We have held that the crucial question whether or not a party has met his statutory duty to
bargain in good faith typically turn$ on the facts of the individual case. 8 There is no per se test of
good faith in bargaining.9Good faith or bad faith is an inference to be drawn from the facts. 10 The
effect of an employer’s or a union’s actions individually is not the test of good-faith bargaining, but
the impact of all such occasions or actions, considered as a whole.11

Under Article 252 abovecited, both parties are required to perform their mutual obligation to meet and
convene promptly and expeditiously in good faith for the purpose of negotiating an agreement. The union
lived up to this obligation when it presented proposals for a new CBA to GMC within three (3) years from
the effectivity of the original CBA. But GMC failed in its duty under Article 252. What it did was to devise a
flimsy excuse, by questioning the existence of the union and the status of its membership to prevent any
negotiation.

It bears stressing that the procedure in collective bargaining prescribed by the Code is mandatory
because of the basic interest of the state in ensuring lasting industrial peace. Thus:

ART. 250. Procedure in collective bargaining. – The following procedures shall be observed in
collective bargaining:

(a) When a party desires to negotiate an agreement, it shall serve a written notice upon
the other party with a statement of its proposals. The other party shall make a reply
thereto not later than ten (10) calendar days from receipt of such notice. (Underscoring
supplied.)

GMC’s failure to make a timely reply to the proposals presented by the union is indicative of its utter lack
of interest in bargaining with the union. Its excuse that it felt the union no longer represented the workers,
was mainly dilatory as it turned out to be utterly baseless.

We hold that GMC’s refusal to make a counter-proposal to the union’s proposal for CBA negotiation is an
indication of its bad faith. Where the employer did not even bother to submit an answer to the bargaining
proposals of the union, there is a clear evasion of the duty to bargain collectively. 12

Failing to comply with the mandatory obligation to submit a reply to the union’s proposals, GMC violated
its duty to bargain collectively, making it liable for unfair labor practice. Perforce, the Court of Appeals did
not commit grave abuse of discretion amounting to lack or excess of jurisdiction in finding that GMC is,
under the circumstances, guilty of unfair labor practice.

Did GMC interfere with the employees’ right to self-organization? The CA found that the letters between
February to June 1993 by 13 union members signifying their resignation from the union clearly indicated
that GMC exerted pressure on its employees. The records show that GMC presented these letters to
prove that the union no longer enjoyed the support of the workers. The fact that the resignations of the

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union members occurred during the pendency of the case before the labor arbiter shows GMC’s
desperate attempts to cast doubt on the legitimate status of the union. We agree with the CA’s conclusion
that the ill-timed letters of resignation from the union members indicate that GMC had interfered with the
right of its employees to self-organization. Thus, we hold that the appellate court did not commit grave
abuse of discretion in finding GMC guilty of unfair labor practice for interfering with the right of its
employees to self-organization.

Finally, did the CA gravely abuse its discretion when it imposed on GMC the draft CBA proposed by the
union for two years commencing from the expiration of the original CBA?

The Code provides:

ART. 253. Duty to bargain collectively when there exists a collective bargaining
agreement. – .... It shall be the duty of both parties to keep the status quo and to continue in full
force and effect the terms and conditions of the existing agreement during the 60-day period
[prior to its expiration date] and/or until a new agreement is reached by the parties. (Underscoring
supplied.)

The provision mandates the parties to keep the status quo while they are still in the process of working
out their respective proposal and counter proposal. The general rule is that when a CBA already exists,
its provision shall continue to govern the relationship between the parties, until a new one is agreed upon.
The rule necessarily presupposes that all other things are equal. That is, that neither party is guilty of bad
faith. However, when one of the parties abuses this grace period by purposely delaying the bargaining
process, a departure from the general rule is warranted.

In Kiok Loy vs. NLRC,13 we found that petitioner therein, Sweden Ice Cream Plant, refused to submit any
counter proposal to the CBA proposed by its employees’ certified bargaining agent. We ruled that the
former had thereby lost its right to bargain the terms and conditions of the CBA. Thus, we did not hesitate
to impose on the erring company the CBA proposed by its employees’ union - lock, stock and barrel. Our
findings in Kiok Loy are similar to the facts in the present case, to wit:

… petitioner Company’s approach and attitude – stalling the negotiation by a series of


postponements, non-appearance at the hearing conducted, and undue delay in submitting its
financial statements, lead to no other conclusion except that it is unwilling to negotiate and reach
an agreement with the Union. Petitioner has not at any instance, evinced good faith or willingness
to discuss freely and fully the claims and demands set forth by the Union much less justify its
objection thereto.14

Likewise, in Divine Word University of Tacloban vs. Secretary of Labor and Employment,15 petitioner
therein, Divine Word University of Tacloban, refused to perform its duty to bargain collectively. Thus, we
upheld the unilateral imposition on the university of the CBA proposed by the Divine Word University
Employees Union. We said further:

That being the said case, the petitioner may not validly assert that its consent should be a
primordial consideration in the bargaining process. By its acts, no less than its action which
bespeak its insincerity, it has forfeited whatever rights it could have asserted as an employer. 16

Applying the principle in the foregoing cases to the instant case, it would be unfair to the union and its
members if the terms and conditions contained in the old CBA would continue to be imposed on GMC’s
employees for the remaining two (2) years of the CBA’s duration. We are not inclined to gratify GMC with
an extended term of the old CBA after it resorted to delaying tactics to prevent negotiations. Since it was
GMC which violated the duty to bargain collectively, based on Kiok Loy and Divine Word University of
Tacloban, it had lost its statutory right to negotiate or renegotiate the terms and conditions of the draft
CBA proposed by the union.

We carefully note, however, that as strictly distinguished from the facts of this case, there was no pre-
existing CBA between the parties in Kiok Loy and Divine Word University of Tacloban. Nonetheless, we
deem it proper to apply in this case the rationale of the doctrine in the said two cases. To rule otherwise
would be to allow GMC to have its cake and eat it too.

Under ordinary circumstances, it is not obligatory upon either side of a labor controversy to precipitately
accept or agree to the proposals of the other. But an erring party should not be allowed to resort with
impunity to schemes feigning negotiations by going through empty gestures. 17 Thus, by imposing on
GMC the provisions of the draft CBA proposed by the union, in our view, the interests of equity and fair
play were properly served and both parties regained equal footing, which was lost when GMC thwarted
the negotiations for new economic terms of the CBA.

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The findings of fact by the CA, affirming those of the NLRC as to the reasonableness of the draft CBA
proposed by the union should not be disturbed since they are supported by substantial evidence. On this
score, we see no cogent reason to rule otherwise. Hence, we hold that the Court of Appeals did not
commit grave abuse of discretion amounting to lack or excess of jurisdiction when it imposed on GMC,
after it had committed unfair labor practice, the draft CBA proposed by the union for the remaining two (2)
years of the duration of the original CBA. Fairness, equity, and social justice are best served in this case
by sustaining the appellate court’s decision on this issue.

WHEREFORE, the petition is DISMISSED and the assailed decision dated July 19, 2000, and the
resolution dated October 26, 2000, of the Court of Appeals in CA-G.R. SP No. 50383, are AFFIRMED.
Costs against petitioner.

SO ORDERED.

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G.R. No. 165407 June 5, 2009

HERMINIGILDO INGUILLO and ZENAIDA BERGANTE, Petitioners,


vs.
FIRST PHILIPPINE SCALES, Inc. and/or AMPARO POLICARPIO, Manager, Respondents.

DECISION

PERALTA, J.:

Assailed in this petition for review under Rule 45 of the Rules of Court are the Court of Appeals (1)
Decision1 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) Resolution2 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 dispute7 against FPSILU and FPSI. In said case, the Med-Arbiter
decided8 in favor of FPSILU. It also ordered the officers and members of NLM-KATIPUNAN to return to
FPSILU the amount of ₱90,000.00 pertaining to the union dues erroneously collected from the
employees. Upon finality of the Med-Arbiter's Decision, a Writ of Execution9 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 FPSI11 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 ₱13,032.18. Resultantly, the amount of
₱5,140.55 was collected,12 ₱1,695.72 of which came from the salary of Grutas, while the ₱3,444.83 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 Lucero16 (Grutas complaint, for brevity); and (2) Inguillo17 (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
Order18 dated October 1, 1996, dismissing with prejudice the complaints of Go, Shirley Tapang, Yolanda

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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.1avvphi1

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 Decision24 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 ................ ₱22,490.00

Legal Holiday Pay........... 839.00

Total 23,329.00

Zenaida Bergante

Separation pay................. ₱43,225.00

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.

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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 ₱23,334.00 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
Resolution26dated 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 merit31 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

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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 II42 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;

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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 FPSI’s 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

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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
substantive––whether 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 clarify their
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 employer’s 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.

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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 employee’s 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 (½) 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 (½) 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 employee’s 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

115 | P a g e
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 ₱30,000.00 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 ₱30,000.00 each as nominal damages. No
pronouncement as to costs.

SO ORDERED.

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G.R. No. 76989 September 29, 1987

MANILA MANDARIN EMPLOYEES UNION, petitioners,


vs.
NATIONAL LABOR RELATIONS COMMISSION, and MELBA C. BELONCIO, respondents.

GUTIERREZ, JR., J.:

This is a petition to review on certiorari the National Labor Relations Commission's (NLRC) decision
which modified the Labor Arbiter's decision and ordered the Manila Mandarin Employees Union to pay the
wages and fringe benefits of Melba C. Beloncio from the time she was placed on forced leave until she is
actually reinstated, plus ten percent (10%) thereof as attorney's fees. Manila Mandarin Hotel was ordered
to reinstate Beloncio and to pay her whatever service charges may be due her during that period, which
amount would be held in escrow by the hotel.

The petition was filed on January 19, 1987. The private respondent filed her comment on March 7, 1987
while the Solicitor General filed a comment on June 1, 1987 followed by the petitioner's reply on August
22, 1987. We treat the comment as answer and decide the case on its merits.

The facts of the case are undisputed.

Herein private respondent, Melba C. Beloncio, an employee of Manila Mandarin Hotel since 1976 and at
the time of her dismissal, assistant head waitress at the hotel's coffee shop, was expelled from the
petitioner Manila Mandarin Employees Union for acts allegedly inimical to the interests of the union. The
union demanded the dismissal from employment of Beloncio on the basis of the union security clause of
their collective bargaining agreement and the Hotel acceded by placing Beloncio on forced leave effective
August 10, 1984.

The union security clause of the collective bargaining agreement provides:

Section 2. Dismissals.

xxx xxx xxx

b) Members of the Union who cease to be such members and/or who fail to maintain their
membership in good standing therein by reason of their resignation from the Union and/or
by reason of their expulsion from the Union in accordance with the Constitution and By-
Laws of the Union, for non-payment of union dues and other assessment for organizing,
joining or forming another labor organization shall, upon written notice of such cessation
of membership or failure to maintain membership in the Union and upon written demand
to the company by the Union, be dismissed from employment by the Company after
complying with the requisite due process requirement; ... (Emphasis supplied) (Rollo, p.
114)

Two days before the effective date of her forced leave or on August 8, 1984, Beloncio filed a complaint for
unfair labor practice and illegal dismissal against herein petitioner-union and Manila Mandarin Hotel Inc.
before the NLRC, Arbitration Branch.

Petitioner-union filed a motion to dismiss on grounds that the complainant had no cause of action against
it and the NLRC had no jurisdiction over the subject matter of the complaint.

This motion was denied by the Labor Arbiter.

After the hearings that ensued and the submission of the parties' respective position papers, the Labor
Arbiter held that the union was guilty of unfair labor practice when it demanded the separation of
Beloncio. The union was then ordered to pay all the wages and fringe benefits due to Beloncio from the
time she was on forced leave until actual reinstatement, and to pay P30,000.00 as exemplary damages
and P10,000.00 as attorney's fees. The charge against the hotel was dismissed.

The Union then appealed to the respondent NLRC which modified the Labor Arbiter's decision as earlier
stated.

A subsequent motion for reconsideration and a second motion for reconsideration were denied.

Hence, this present petition.

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The petitioner raises the following assignment of errors:

THAT RESPONDENT NLRC ERRED IN NOT DECLARING THAT THE PRESENT


CONTROVERSY INVOLVED INTRA-UNION CONFLICTS AND THEREFOR IT HAS NO
JURISDICTION OVER THE SUBJECT-MATTER THEREOF.

II

THAT RESPONDENT NLRC SERIOUSLY ERRED IN HOLDING PETITIONER LIABLE


FOR THE PAYMENT OF PRIVATE RESPONDENT'S SALARY AND FRINGE
BENEFITS, AND AWARD OF 10% ATTORNEY'S FEES, AFTER FINDING AS
UNMERITORIOUS HER PRETENDED CLAIMS OR COMPLAINTS FOR UNFAIR
LABOR PRACTICE, ILLEGAL DISMISSAL, AND DAMAGES. (Rollo, pp. 6-9)

On the issue of the NLRC jurisdiction over the case, the Court finds no grave abuse of discretion in the
NLRC conclusion that the dispute is not purely intra-union but involves an interpretation of the collective
bargaining agreement (CBA) provisions and whether or not there was an illegal dismissal. Under the
CBA, membership in the union may be lost through expulsion only if there is non-payment of dues or a
member organizes, joins, or forms another labor organization. The charge of disloyalty against Beloncio
arose from her emotional remark to a waitress who happened to be a union steward, "Wala akong tiwala
sa Union ninyo." The remark was made in the course of a heated discussion regarding Beloncio's efforts
to make a lazy and recalcitrant waiter adopt a better attitude towards his work.

We agree with the Solicitor General when he noted that:

... The Labor Arbiter explained correctly that "(I)f the only question is the legality of the
expulsion of Beloncio from the Union undoubtedly, the question is one cognizable by the
BLR (Bureau of Labor Relations). But, the question extended to the dismissal of Beloncio
or steps leading thereto. Necessarily, when the hotel decides the recommended
dismissal, its acts would be subject to scrutiny. Particularly, it will be asked whether it
violates or not the existing CBA. Certainly, violations of the CBA would be unfair labor
practice."

Article 250 of the Labor Code provides the following:

Art. 250. Unfair labor practices of labor organizations. — It shall be unfair


labor practice for a labor organization, its officers, agents or
representatives:

xxx xxx xxx

(b) To cause or attempt to cause an employer to discriminate against an


employee, including discrimination against an employee with respect to
whom membership in such organization has been denied or to terminate
an employee on any ground other than the usual terms and conditions
under which membership or continuation of membership is made
available to other members. (Emphasis supplied)

Article 217 of the Labor Code also provides:

Art. 217. Jurisdiction of Labor Arbiters and the Commission — (a) The
Labor Arbiters shall have the original and exclusive jurisdiction to hear
and decide ... the following cases involving all workers, whether
agricultural or nonagricultural;

(1) Unfair labor practice cases;

xxx xxx xxx

(b) The Commission shall have exclusive appellate jurisdiction over all
cases decided by Labor Arbiters. (Rollo, pp. 155-157.)

The petitioner also questions the factual findings of the public respondent on the reasons for Beloncio's
dismissal and, especially, on the argument that she was on forced leave; she was never dismissed; and
not having worked, she deserved no pay.

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The Court finds nothing in the records that indicates reversible error, much less grave abuse of discretion,
in the NLRC's findings of facts.

It is a well-settled principle that findings of facts quasi-judicial agencies like the NLRC, which have
acquired expertise because their jurisdiction is confined to specific matters, are generally accorded not
only respect but at times even finality if such findings are supported by substantial evidence. (Akay
Printing Press vs. Minister of Labor and Employment, 140 SCRA 381; Alba Patio de Makati vs. Alba Patio
de Makati Employees Association, 128 SCRA 253; Dangan vs. National Labor Relations Commission,
127 SCRA 706; De la Concepcion vs. Mindanao Portland Cement Corporation, 127 SCRA 647).

The petitioner now questions the decision of the National Labor Relations Commission ordering the
reinstatement of the private respondent and directing the Union to pay the wages and fringe benefits
which she failed to receive as a result of her forced leave and to pay attorney's fees.

We find no error in the questioned decision.

The Hotel would not have compelled Beloncio to go on forced leave were it not for the union's insistence
and demand to the extent that because of the failure of the hotel to dismiss Beloncio as requested, the
union filed a notice of strike with the Ministry of Labor and Employment on August 17, 1984 on the issue
of unfair labor practice. The hotel was then compelled to put Beloncio on forced leave and to stop
payment of her salary from September 1, 1984.

Furthermore, as provided for in the collective bargaining agreement between the petitioner-the Union and
the Manila Mandarin Hotel "the Union shall hold the Company free and blameless from any and all
liabilities that may arise" should the employee question the dismissal, as has happened in the case at bar.

It is natural for a union to desire that all workers in a particular company should be its dues-paying
members. Since it would be difficult to insure 100 percent membership on a purely voluntary basis and
practically impossible that such total membership would continuously be maintained purely on the merits
of belonging to the union, the labor movement has evolved the system whereby the employer is asked,
on the strength of collective action, to enter into what are now familiarly known as "union security"
agreements.

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
vs. 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. vs. Blanco, 109 SCRA 87; Manalang vs. Artex Development
Company, Inc., 21 SCRA 561).

The Court stresses, however, that union security clauses are also governed by law and by principles of
justice, fair play, and legality. Union security clauses cannot be used by union officials against an
employer, much less their own members, except with a high sense of responsibility, fairness, prudence,
and judiciousness.

A union member may not be expelled from her union, and consequently from her job, for personal or
impetuous reasons or for causes foreign to the closed-shop agreement and in a manner characterized by
arbitrariness and whimsicality.

This is particularly true in this case where Ms. Beloncio was trying her best to make a hotel bus boy do his
work promptly and courteously so as to serve hotel customers in the coffee shop expeditiously and
cheerfully. Union membership does not entitle waiters, janitors, and other workers to be sloppy in their
work, inattentive to customers, and disrespectful to supervisors. The Union should have disciplined its
erring and troublesome members instead of causing so much hardship to a member who was only doing
her work for the best interests of the employer, all its employees, and the general public whom they
serve.

WHEREFORE, the petition is hereby DISMISSED. The questioned decision of the National Labor
Relations Commission is AFFIRMED. Costs against the petitioner.

SO ORDERED.

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120 | P a g e
G.R. No. 135547 January 23, 2002

GERARDO F. RIVERA, ALFRED A. RAMISO, AMBROCIO PALAD, DENNIS R. ARANAS, DAVID


SORIMA, JR., JORGE P. DELA ROSA, and ISAGANI ALDEA, Petitioners,
vs.
HON. EDGARDO ESPIRITU in his capacity as Chairman of the PAL Inter-Agency Task Force
created under Administrative Order No. 16; HON. BIENVENIDO LAGUESMA in his capacity as
Secretary of Labor and Employment; PHILIPPINE AIRLINES (PAL), LUCIO TAN, HENRY SO UY,
ANTONIO V. OCAMPO, MANOLO E. AQUINO, JAIME J. BAUTISTA, and ALEXANDER O.
BARRIENTOS, Respondents.

DECISION

QUISUMBING, J.:

In this special civil action for certiorari and prohibition, petitioners charge public respondents with grave
abuse of discretion amounting to lack or excess of jurisdiction for acts taken in regard to the enforcement
of the agreement dated September 27, 1998, between Philippine Airlines (PAL) and its union, the PAL
Employees Association (PALEA).

The factual antecedents of this case are as follows:

On June 5, 1998, PAL pilots affiliated with the Airline Pilots Association of the Philippines (ALPAP) went
on a three-week strike, causing serious losses to the financially beleaguered flag carrier. As a result,
PAL’s financial situation went from bad to worse. Faced with bankruptcy, PAL adopted a rehabilitation
plan and downsized its labor force by more than one-third.

On July 22, 1998, PALEA went on strike to protest the retrenchment measures adopted by the airline,
which affected 1,899 union members. The strike ended four days later, when PAL and PALEA agreed to
a more systematic reduction in PAL’s work force and the payment of separation benefits to all retrenched
employees.

On August 28, 1998, then President Joseph E. Estrada issued Administrative Order No. 16 creating an
Inter-Agency Task Force (Task Force) to address the problems of the ailing flag carrier. The Task Force
was composed of the Departments of Finance, Labor and Employment, Foreign Affairs, Transportation
and Communication, and Tourism, together with the Securities and Exchange Commission (SEC). Public
respondent Edgardo Espiritu, then the Secretary of Finance, was designated chairman of the Task Force.
It was "empowered to summon all parties concerned for conciliation, mediation (for) the purpose of
arriving at a total and complete solution of the problem."1Conciliation meetings were then held between
PAL management and the three unions representing the airline’s employees, 2 with the Task Force as
mediator.

On September 4, 1998, PAL management submitted to the Task Force an offer by private respondent
Lucio Tan, Chairman and Chief Executive Officer of PAL, of a plan to transfer shares of stock to its
employees. The pertinent portion of said plan reads:

1. From the issued shares of stock within the group of Mr. Lucio Tan’s holdings, the ownership of
60,000 fully paid shares of stock of Philippine Airlines with a par value of PH₱5.00/share will be
transferred in favor of each employee of Philippine Airlines in the active payroll as of September
15, 1998. Should any share-owning employee leave PAL, he/she has the option to keep the
shares or sells (sic) his/her shares to his/her union or other employees currently employed by
PAL.

2. The aggregate shares of stock transferred to PAL employees will allow them three (3)
members to (sic) the PAL Board of Directors. We, thus, become partners in the boardroom and
together, we shall address and find solutions to the wide range of problems besetting PAL.

3. In order for PAL to attain (a) degree of normalcy while we are tackling its problems, we would
request for a suspension of the Collective Bargaining Agreements (CBAs) for 10 years.3

On September 10, 1998, the Board of Directors of PALEA voted to accept Tan’s offer and requested the
Task Force’s assistance in implementing the same. Union members, however, rejected Tan’s offer. Under
intense pressure from PALEA members, the union’s directors subsequently resolved to reject Tan’s offer.

On September 17, 1998, PAL informed the Task Force that it was shutting down its operations effective
September 23, 1998, preparatory to liquidating its assets and paying off its creditors. The airline claimed
that given its labor problems, rehabilitation was no longer feasible, and hence, the airline had no
alternative but to close shop.

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On September 18, 1998, PALEA sought the intervention of the Office of the President in immediately
convening the parties, the PAL management, PALEA, ALPAP, and FASAP, including the SEC under the
direction of the Inter-Agency Task Force, to prevent the imminent closure of PAL.4

On September 19, 1998, PALEA informed the Department of Labor and Employment (DOLE) that it had
no objection to a referendum on the Tan’s offer. 2,799 out of 6,738 PALEA members cast their votes in
the referendum under DOLE supervision held on September 21-22, 1998. Of the votes cast, 1,055 voted
in favor of Tan’s offer while 1,371 rejected it.

On September 23, 1998, PAL ceased its operations and sent notices of termination to its employees.

Two days later, the PALEA board wrote President Estrada anew, seeking his intervention. PALEA offered
a 10-year moratorium on strikes and similar actions and a waiver of some of the economic benefits in the
existing CBA.5 Tan, however, rejected this counter-offer.

On September 27, 1998, the PALEA board again wrote the President proposing the following terms and
conditions, subject to ratification by the general membership:

1. Each PAL employee shall be granted 60,000 shares of stock with a par value of ₱5.00, from
Mr. Lucio Tan’s shareholdings, with three (3) seats in the PAL Board and an additional seat from
government shares as indicated by His Excellency;

2. Likewise, PALEA shall, as far as practicable, be granted adequate representation in


committees or bodies which deal with matters affecting terms and conditions of employment;

3. To enhance and strengthen labor-management relations, the existing Labor-Management


Coordinating Council shall be reorganized and revitalized, with adequate representation from
both PAL management and PALEA;

4. To assure investors and creditors of industrial peace, PALEA agrees, subject to the ratification
by the general membership, (to) the suspension of the PAL-PALEA CBA for a period of ten (10)
years, provided the following safeguards are in place:

a. PAL shall continue recognizing PALEA as the duly certified bargaining agent of the
regular rank-and-file ground employees of the Company;

b. The ‘union shop/maintenance of membership’ provision under the PAL-PALEA CBA


shall be respected.

c. No salary deduction, with full medical benefits.

5. PAL shall grant the benefits under the 26 July 1998 Memorandum of Agreement forged by and
between PAL and PALEA, to those employees who may opt to retire or be separated from the
company.

6. PALEA members who have been retrenched but have not received separation benefits shall be
granted priority in the hiring/rehiring of employees.

7. In the absence of applicable Company rule or regulation, the provisions of the Labor Code
shall apply.6

Among the signatories to the letter were herein petitioners Rivera, Ramiso, and Aranas, as officers and/or
members of the PALEA Board of Directors. PAL management accepted the PALEA proposal and the
necessary referendum was scheduled.

On October 2, 1998, 5,324 PALEA members cast their votes in a DOLE-supervised referendum. Of the
votes cast, 61% were in favor of accepting the PAL-PALEA agreement, while 34% rejected it.

On October 7, 1998, PAL resumed domestic operations. On the same date, seven officers and members
of PALEA filed this instant petition to annul the September 27, 1998 agreement entered into between PAL
and PALEA on the following grounds:

PUBLIC RESPONDENTS GRAVELY ABUSED THEIR DISCRETION AND EXCEEDED THEIR


JURISDICTION IN ACTIVELY PURSUING THE CONCLUSION OF THE PAL-PALEA AGREEMENT AS
THE CONSTITUTIONAL RIGHTS TO SELF-ORGANIZATION AND COLLECTIVE BARGAINING, BEING
FOUNDED ON PUBLIC POLICY, MAY NOT BE WAIVED, NOR THE WAIVER, RATIFIED.

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II

PUBLIC RESPONDENTS GRAVELY ABUSED THEIR DISCRETION AND EXCEEDED THEIR


JURISDICTION IN PRESIDING OVER THE CONCLUSION OF THE PAL-PALEA AGREEMENT UNDER
THREAT OF ABUSIVE EXERCISE OF PAL’S MANAGEMENT PREROGATIVE TO CLOSE BUSINESS
USED AS SUBTERFUGE FOR UNION-BUSTING.

The issues now for our resolution are:

(1) Is an original action for certiorari and prohibition the proper remedy to annul the PAL-PALEA
agreement of September 27, 1998;

(2) Is the PAL-PALEA agreement of September 27, 1998, stipulating the suspension of the PAL-
PALEA CBA unconstitutional and contrary to public policy?

Anent the first issue, petitioners aver that public respondents as functionaries of the Task Force, gravely
abused their discretion and exceeded their jurisdiction when they actively pursued and presided over the
PAL-PALEA agreement.

Respondents, in turn, argue that the public respondents merely served as conciliators or mediators,
consistent with the mandate of A.O. No. 16 and merely supervised the conduct of the October 3, 1998
referendum during which the PALEA members ratified the agreement. Thus, public respondents did not
perform any judicial and quasi-judicial act pertaining to jurisdiction. Furthermore, respondents pray for the
dismissal of the petition for violating the "hierarchy of courts" doctrine enunciated in People v.
Cuaresma7 and Enrile v. Salazar.8

Petitioners allege grave abuse of discretion under Rule 65 of the 1997 Rules of Civil Procedure. The
essential requisites for a petition for certiorari under Rule 65 are: (1) the writ is directed against a tribunal,
a board, or an officer exercising judicial or quasi-judicial functions; (2) such tribunal, board, or officer has
acted without or in excess of jurisdiction, or with grave abuse of discretion amounting to lack or excess of
jurisdiction; and (3) there is no appeal or any plain, speedy, and adequate remedy in the ordinary course
of law.9 For writs of prohibition, the requisites are: (1) the impugned act must be that of a "tribunal,
corporation, board, officer, or person, whether exercising judicial, quasi-judicial or ministerial functions;"
and (2) there is no plain, speedy, and adequate remedy in the ordinary course of law." 10

The assailed agreement is clearly not the act of a tribunal, board, officer, or person exercising judicial,
quasi-judicial, or ministerial functions. It is not the act of public respondents Finance Secretary Edgardo
Espiritu and Labor Secretary Bienvenido Laguesma as functionaries of the Task Force. Neither is there a
judgment, order, or resolution of either public respondents involved. Instead, what exists is a contract
between a private firm and one of its labor unions, albeit entered into with the assistance of the Task
Force. The first and second requisites for certiorari and prohibition are therefore not present in this case.

Furthermore, there is available to petitioners a plain, speedy, and adequate remedy in the ordinary course
of law. While the petition is denominated as one for certiorari and prohibition, its object is actually the
nullification of the PAL-PALEA agreement. As such, petitioners’ proper remedy is an ordinary civil action
for annulment of contract, an action which properly falls under the jurisdiction of the regional trial
courts.11 Neither certiorari nor prohibition is the remedy in the present case.

Petitioners further assert that public respondents were partial towards PAL management. They allegedly
pressured the PALEA leaders into accepting the agreement. Petitioners ask this Court to examine the
circumstances that led to the signing of said agreement. This would involve review of the facts and factual
issues raised in a special civil action for certiorari which is not the function of this Court.12

Nevertheless, considering the prayer of the parties principally we shall look into the substance of the
petition, in the higher interest of justice13 and in view of the public interest involved, inasmuch as what is
at stake here is industrial peace in the nation’s premier airline and flag carrier, a national concern.

On the second issue, petitioners contend that the controverted PAL-PALEA agreement is void because it
abrogated the right of workers to self-organization14 and their right to collective bargaining.15 Petitioners
claim that the agreement was not meant merely to suspend the existing PAL-PALEA CBA, which expires
on September 30, 2000, but also to foreclose any renegotiation or any possibility to forge a new CBA for
a decade or up to 2008. It violates the "protection to labor" policy16 laid down by the Constitution.

Article 253-A of the Labor Code reads:

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

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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 the retroactivity thereof. In case of a deadlock in the renegotiation of the collective
bargaining agreement, the parties may exercise their rights under this Code.

Under this provision, insofar as representation is concerned, a CBA has a term of five years, while the
other provisions, except for representation, may be negotiated not later than three years after the
execution.17 Petitioners submit that a 10-year CBA suspension is inordinately long, way beyond the
maximum statutory life of a CBA, provided for in Article 253-A. By agreeing to a 10-year suspension,
PALEA, in effect, abdicated the workers’ constitutional right to bargain for another CBA at the mandated
time.

We find the argument devoid of merit.

A CBA is "a contract executed upon request of either the employer or the exclusive bargaining
representative incorporating the agreement reached after negotiations with respect to wages, hours of
work and all other terms and conditions of employment, including proposals for adjusting any grievances
or questions arising under such agreement."18 The primary purpose of a CBA is the stabilization of labor-
management relations in order to create a climate of a sound and stable industrial peace. 19 In construing
a CBA, the courts must be practical and realistic and give due consideration to the context in which it is
negotiated and the purpose which it is intended to serve.20

The assailed PAL-PALEA agreement was the result of voluntary collective bargaining negotiations
undertaken in the light of the severe financial situation faced by the employer, with the peculiar and
unique intention of not merely promoting industrial peace at PAL, but preventing the latter’s closure. We
find no conflict between said agreement and Article 253-A of the Labor Code. Article 253-A has a two-fold
purpose. One is to promote industrial stability and predictability. Inasmuch as the agreement sought to
promote industrial peace at PAL during its rehabilitation, said agreement satisfies the first purpose of
Article 253-A. The other is to assign specific timetables wherein negotiations become a matter of right
and requirement. Nothing in Article 253-A, prohibits the parties from waiving or suspending the mandatory
timetables and agreeing on the remedies to enforce the same.

In the instant case, it was PALEA, as the exclusive bargaining agent of PAL’s ground employees, that
voluntarily entered into the CBA with PAL. It was also PALEA that voluntarily opted for the 10-year
suspension of the CBA. Either case was the union’s exercise of its right to collective bargaining. The right
to free collective bargaining, after all, includes the right to suspend it.

The acts of public respondents in sanctioning the 10-year suspension of the PAL-PALEA CBA did not
contravene the "protection to labor" policy of the Constitution. The agreement afforded full protection to
labor; promoted the shared responsibility between workers and employers; and the
exercised voluntary modes in settling disputes, including conciliation to foster industrial peace." 21

Petitioners further allege that the 10-year suspension of the CBA under the PAL-PALEA agreement
virtually installed PALEA as a company union for said period, amounting to unfair labor practice, in
violation of Article 253-A of the Labor Code mandating that an exclusive bargaining agent serves for five
years only.

The questioned proviso of the agreement reads:

a. PAL shall continue recognizing PALEA as the duly certified-bargaining agent of the regular rank-and-
file ground employees of the Company;

Said proviso cannot be construed alone. In construing an instrument with several provisions, a
construction must be adopted as will give effect to all. Under Article 1374 of the Civil Code, 22 contracts
cannot be construed by parts, but clauses must be interpreted in relation to one another to give effect to
the whole. The legal effect of a contract is not determined alone by any particular provision disconnected
from all others, but from the whole read together.23 The aforesaid provision must be read within the
context of the next clause, which provides:

b. The ‘union shop/maintenance of membership’ provision under the PAL-PALEA CBA shall be
respected.

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The aforesaid provisions, taken together, clearly show the intent of the parties to maintain "union security"
during the period of the suspension of the CBA. Its objective is to assure the continued existence of
PALEA during the said period. We are unable to declare the objective of union security an unfair labor
practice. It is State policy to promote unionism to enable workers to negotiate with management on an
even playing field and with more persuasiveness than if they were to individually and separately bargain
with the employer. For this reason, the law has allowed stipulations for "union shop" and "closed shop" as
means of encouraging workers to join and support the union of their choice in the protection of their rights
and interests vis-à-vis the employer.24

Petitioners’ contention that the agreement installs PALEA as a virtual company union is also
untenable.1âwphi1 Under Article 248 (d) of the Labor Code, a company union exists when the employer
acts "[t]o initiate, dominate, assist or otherwise interfere with the formation or administration of any labor
organization, including the giving of financial or other support to it or its organizers or supporters." The
case records are bare of any showing of such acts by PAL.

We also do not agree that the agreement violates the five-year representation limit mandated by Article
253-A. Under said article, the representation limit for the exclusive bargaining agent applies only when
there is an extant CBA in full force and effect. In the instant case, the parties agreed to suspend the CBA
and put in abeyance the limit on the representation period.

In sum, we are of the view that the PAL-PALEA agreement dated September 27, 1998, is a valid exercise
of the freedom to contract. Under the principle of inviolability of contracts guaranteed by the
Constitution,25 the contract must be upheld.

WHEREFORE, there being no grave abuse of discretion shown, the instant petition is DISMISSED. No
pronouncement as to costs.

SO ORDERED

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G.R. No. 183335 December 23, 2009

JUANITO TABIGUE, ALEX BIBAT, JECHRIS DASALLA, ANTONIO TANGON, ROLANDO PEDRIGAL,
DANTE MAUL, ALFREDO IDUL, EDGAR RAMOS, RODERICK JAVIER, NOEL PONAYO, ROMEL
ORAPA, REY JONE, ALMA PATAY, JERIC BANDIGAN, DANILO JAYME, ELENITA S. BELLEZA,
JOSEPHINE COTANDA, RENE DEL MUNDO, PONCIANO ROBUCA, and MARLON
MADICLUM, Petitioners,
vs.
INTERNATIONAL COPRA EXPORT CORPORATION (INTERCO), Respondent.

DECISION

CARPIO MORALES, J.:

Petitioner Juanito Tabigue and his 19 co-petitioners, all employees of respondent International Copra
Export Corp-oration (INTERCO), filed a Notice of Preventive Mediation with the Department of Labor and
Employment – National Conciliation and Mediation Board (NCMB), Regional Branch No. XI, Davao City
against respondent, for violation of Collective Bargaining Agreement (CBA) and failure to sit on the
grievance conference/meeting.1

As the parties failed to reach a settlement before the NCMB, petitioners requested to elevate the case to
voluntary arbitration. The NCMB thus set a date for the parties to agree on a Voluntary Arbitrator.

Before the parties could finally meet, respondent presented before the NCMB a letter 2 of Genaro Tan
(Tan), president of the INTERCO Employees/Laborers’ Union (the union) of which petitioners are
members, addressed to respondent’s plant manager Engr. Paterno C. Tangente (Tangente), stating that
petitioners "are not duly authorized by [the] board or the officers to represent the union, [hence] . . . all
actions, representations or agreements made by these people with the management will not be honored
or recognized by the union." Respondent thus moved to dismiss petitioners’ complaint for lack of
jurisdiction.3

Petitioners soon sent union president Tan and respondent’s plant manager Tangente a Notice to
Arbitrate, citing the "Revised Guidelines" in the Conduct of Voluntary Arbitration Procedure vis a vis
Section 3, Article XII of the CBA, furnishing the NCMB with a copy4 thereof, which notice respondent
opposed.5

The parties having failed to arrive at a settlement, 6 NCMB Director Teodorico O. Yosores wrote petitioner
Alex Bibat and respondent’s plant manager Tangente of the lack of willingness of both parties to submit to
voluntary arbitration, which willingness is a pre-requisite to submit the case thereto; and that under the
CBA forged by the parties, the union is an indispensable party to a voluntary arbitration but that since Tan
informed respondent that the union had not authorized petitioners to represent it, it would be absurd to
bring the case to voluntary arbitration.

The NCMB Director thus concluded that "the demand of [petitioners] to submit the issues . . . to voluntary
arbitration CAN NOT BE GRANTED." He thus advised petitioners to avail of the compulsory arbitration
process to enforce their rights.7

On petitioners’ Motion for Reconsideration, 8 the NCMB Director, by letter of April 11, 2007 to petitioners’
counsel, stated that the NCMB "has no rule-making power to decide on issues [as it] only facilitates
settlement among the parties to . . . labor disputes."

Petitioners thus assailed the NCMB Director’s decision via Petition for Review before the Court of
Appeals9 which dismissed it by Resolution10 of October 24, 2007 in this wise:

xxxx

Considering that NCMB is not a quasi-judicial agency exercising quasi-judicial functions but merely a
conciliatory body for the purpose of facilitating settlement of disputes between parties, its decisions or that
of its authorized officer cannot be appealed either through a petition for review under Rule 43 or under
Rule 65 of the Revised Rules of Court.

Further perusal of the petition reveals the following infirmities:

1. Payment of the docket fees and other legal fees is short by One Thousand Pesos (Php
1,000.00);

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2. Copy of the assailed "Decision" of the Regional Director of the National Conciliation and
Mediation Board has not been properly certified as the name and designation of the certifying
officer thereto are not indicated; and

3. Not all of the petitioners named in the petition signed the verification and non-forum
shopping.11 (emphasis and underscoring supplied)

Their Motion for Reconsideration12 having been denied,13 petitioners filed the present Petition for Review
on Certiorari,14 raising the following arguments:

THIS PARTICULAR CASE XXX FALLS SQUARELY WITHIN THE PURVIEW OF SECTION 6, RULE IV,
IN RELATION TO PARAGRAPH 3, SUB-PARAGRAPH 3.2, SECTION 4, RULE IV, ALL OF THE
REVISED PROCEDURAL GUIDELINES IN THE CONDUCT OF VOLUNTARY ARBITRATION
PROCEEDINGS.15

THE NCMB, WHEN EXERCISING ADJUDICATIVE POWERS, ACTS AS A QUASI-JUDICIAL


AGENCY.16

FINAL JUDGMENTS, DECISIONS, RESOLUTIONS, ORDERS, OR AWARDS OF REGIONAL TRIAL


COURTS AND QUASI-JUDICIAL BOARDS, LIKE THE NCMB, COMMISSIONS, AGENCIES,
INSTRUMENTALITIES, ARE APPEALABLE BY PETITION FOR REVIEW TO THE COURT OF
APPEALS.17 (emphasis in the original)

LABOR CASES, AS A GENERAL RULE, ARE NEVER RESOLVED ON THE BASIS OF


TECHNICALITY ESPECIALLY SO WHEN SUBSTANTIAL RIGHTS OF EMPLOYEES ARE
AFFECTED.18 (emphasis and underscoring supplied)

The petition fails.

Section 7 of Rule 43 of the Rules of Court provides that

[t]he failure of the petitioner to comply with any of the foregoing requirements regarding the payment of
the docket and other lawful fees, the deposit for costs, proof of service of the petition, and the contents of
and the documents which should accompany the petition shall be sufficient ground for the dismissal
thereof. (underscoring and emphasis supplied)

Petitioners claim that they had completed the payment of the appellate docket fee and other legal fees
when they filed their motion for reconsideration before the Court of Appeals. 19 While the Court has, in the
interest of justice, given due course to appeals despite the belated payment of those fees, 20 petitioners
have not proffered any reason to call for a relaxation of the above-quoted rule. On this score alone, the
dismissal by the appellate court of petitioners’ petition is in order.

But even if the above-quoted rule were relaxed, the appellate court’s dismissal would just the same be
sustained. Under Section 9 (3) of the Judiciary Reorganization Act of 1980, 21 the Court of Appeals
exercises exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders or awards
of Regional Trial Courts and quasi-judicial agencies, instrumentalities, boards or commissions.

Rule 43 of the Rules of Court under which petitioners filed their petition before the Court of
Appeals22 applies to awards, judgments, final orders or resolutions of or authorized by any quasi-judicial
agency in the exercise of its quasi-judicial functions.23

A[n agency] is said to be exercising judicial function where [it] has the power to determine what the law is
and what the legal rights of the parties are, and then undertakes to determine these questions and
adjudicate upon the rights of the parties. Quasi-judicial function is a term which applies to the action,
discretion, etc. of public administrative officers or bodies, who are required to investigate facts or
ascertain the existence of facts, hold hearings, and draw conclusions from them as a basis for their
official action and to exercise discretion of a judicial nature.24(underscoring supplied)

Given NCMB’s following functions, as enumerated in Section 22 of Executive Order No. 126 (the
Reorganization Act of the Ministry of Labor and Employment), viz:

(a) Formulate policies, programs, standards, procedures, manuals of operation and guidelines
pertaining to effective mediation and conciliation of labor disputes;

(b) Perform preventive mediation and conciliation functions;

(c) Coordinate and maintain linkages with other sectors or institutions, and other government
authorities concerned with matters relative to the prevention and settlement of labor disputes;

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(d) Formulate policies, plans, programs, standards, procedures, manuals of operation and
guidelines pertaining to the promotion of cooperative and non-adversarial schemes, grievance
handling, voluntary arbitration and other voluntary modes of dispute settlement;

(e) Administer the voluntary arbitration program; maintain/update a list of voluntary arbitrations;
compile arbitration awards and decisions;

(f) Provide counseling and preventive mediation assistance particularly in the administration of
collective agreements;

(g) Monitor and exercise technical supervision over the Board programs being implemented in the
regional offices; and

(h) Perform such other functions as may be provided by law or assigned by the Minister,

it can not be considered a quasi-judicial agency.

Respecting petitioners’ thesis that unsettled grievances should be referred to voluntary arbitration as
called for in the CBA, the same does not lie. The pertinent portion of the CBA reads:

In case of any dispute arising from the interpretation or implementation of this Agreement or any matter
affecting the relations of Labor and Management, the UNION and the COMPANY agree to exhaust all
possibilities of conciliation through the grievance machinery. The committee shall resolve all problems
submitted to it within fifteen (15) days after the problems ha[ve] been discussed by the members. If the
dispute or grievance cannot be settled by the Committee, or if the committee failed to act on the matter
within the period of fifteen (15) days herein stipulated, the UNION and the COMPANY agree to submit the
issue to Voluntary Arbitration. Selection of the arbitrator shall be made within seven (7) days from the
date of notification by the aggrieved party. The Arbitrator shall be selected by lottery from four (4)
qualified individuals nominated by in equal numbers by both parties taken from the list of Arbitrators
prepared by the National Conciliation and Mediation Board (NCMB). If the Company and the Union
representatives within ten (10) days fail to agree on the Arbitrator, the NCMB shall name the Arbitrator.
The decision of the Arbitrator shall be final and binding upon the parties. However, the Arbitrator shall not
have the authority to change any provisions of the Agreement. The cost of arbitration shall be borne
equally by the parties.25(capitalization in the original, underscoring supplied)1avvphi1

Petitioners have not, however, been duly authorized to represent the union. Apropos is this Court’s
pronouncement in Atlas Farms, Inc. v. National Labor Relations Commission,26 viz:

x x x Pursuant to Article 260 of the Labor Code, the parties to a CBA shall name or designate their
respective representatives to the grievance machinery and if the grievance is unsettled in that level, it
shall automatically be referred to the voluntary arbitrators designated in advance by parties to a CBA.
Consequently only disputes involving the union and the company shall be referred to the grievance
machinery or voluntary arbitrators.27(emphasis and underscoring supplied)

Clutching at straws, petitioners invoke the first paragraph of Article 255 of the Labor Code which states:

Art. 255. The labor organization designated or selected by the majority of the employees in an
appropriate collective bargaining unit shall be the exclusive representative of the employees in such unit
for the purpose of collective bargaining. However, an individual employee or group of employees shall
have the right at any time to present grievances to their employer.

x x x x (emphasis and underscoring supplied)

To petitioners, the immediately quoted provision "is meant to be an exception to the exclusiveness of the
representative role of the labor organization/union."28

This Court is not persuaded. The right of any employee or group of employees to, at any time, present
grievances to the employer does not imply the right to submit the same to voluntary arbitration.

WHEREFORE, the petition is DENIED.

SO ORDERED.

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