G.R. No.

85750 September 28, 1990

INTERNATIONAL CATHOLIC IMMIGRATION COMMISSION, petitioner

vs
HON. PURA CALLEJA IN HER CAPACITY AS DIRECTOR OF THE BUREAU OF LABOR RELATIONS
AND TRADE UNIONS OF THE PHILIPPINES AND ALLIED SERVICES (TUPAS) WFTU respondents.

G.R. No. 89331 September 28, 1990

KAPISANAN NG MANGGAGAWA AT TAC SA IRRI-ORGANIZED LABOR ASSOCIATION IN LINE

INDUSTRIES AND AGRICULTURE, petitioner,
vs
SECRETARY OF LABOR AND EMPLOYMENT AND INTERNATIONAL RICE RESEARCH INSTITUTE,
INC., respondents.

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

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

Jimenez & Associates for IRRI.

Alfredo L. Bentulan for private respondent in 85750.

MELENCIO-HERRERA, J.:

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

Facts and Issues

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

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

In response to this crisis, on 23 February 1981, an Agreement was forged between the
Philippine Government and the United Nations High Commissioner for Refugees whereby an
operating center for processing Indo-Chinese refugees for eventual resettlement to other
countries was to be established in Bataan (Annex "A", Rollo, pp. 22-32).
ICMC was one of those accredited by the Philippine Government to operate the refugee
processing center in Morong, Bataan. It was incorporated in New York, USA, at the request of
the Holy See, as a non-profit agency involved in international humanitarian and voluntary work.
It is duly registered with the United Nations Economic and Social Council (ECOSOC) and enjoys
Consultative Status, Category II. As an international organization rendering voluntary and
humanitarian services in the Philippines, its activities are parallel to those of the International
Committee for Migration (ICM) and the International Committee of the Red Cross (ICRC) [DOLE
Records of BLR Case No. A-2-62-87, ICMC v. Calleja, Vol. 1].

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

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

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

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

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

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

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

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

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

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

As initially stated, the issue is whether or not the grant of diplomatic privileges and immunites
to ICMC extends to immunity from the application of Philippine labor laws.

ICMC sustains the affirmative of the proposition citing (1) its Memorandum of Agreement with
the Philippine Government giving it the status of a specialized agency, (infra); (2) the
Convention on the Privileges and Immunities of Specialized Agencies, adopted by the UN
General Assembly on 21 November 1947 and concurred in by the Philippine Senate through
Resolution No. 91 on 17 May 1949 (the Philippine Instrument of Ratification was signed by the
President on 30 August 1949 and deposited with the UN on 20 March 1950) infra; and (3)
Article II, Section 2 of the 1987 Constitution, which declares that the Philippines adopts the
generally accepted principles of international law as part of the law of the land.

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

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

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

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

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

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

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

On 20 April 1987, the Kapisanan filed a Petition for Direct Certification Election with Region IV,
Regional Office of the Department of Labor and Employment (DOLE).

IRRI opposed the petition invoking Pres. Decree No. 1620 conferring upon it the status of an
international organization and granting it immunity from all civil, criminal and administrative
proceedings under Philippine laws.

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

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

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

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

Art. 3 — The Institute shall enjoy immunity from any penal, civil and
administrative proceedings, except insofar as immunity has been expressly
waived by the Director-General of the Institution or his authorized
representative.
 Verily, unless and until the Institute expressly waives its immunity, no summons,
subpoena, orders, decisions or proceedings ordered by any court or
administrative or quasi-judicial agency are enforceable as against the Institute. In
the case at bar there was no such waiver made by the Director-General of the
Institute. Indeed, the Institute, at the very first opportunity already vehemently
questioned the jurisdiction of this Department by filing an ex-parte motion to
dismiss the case.

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

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

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

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

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

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

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

Findings in Both Cases.

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

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

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

Sec. 5. — The premises of the specialized agencies shall be inviolable. The

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

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

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

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

The foregoing opinions constitute a categorical recognition by the Executive Branch of the
Government that ICMC and IRRI enjoy immunities accorded to international organizations,
which determination has been held to be a political question conclusive upon the Courts in
order not to embarrass a political department of Government.
 It is a recognized principle of international law and under our system of
separation of powers that diplomatic immunity is essentially a political question
and courts should refuse to look beyond a determination by the executive
branch of the government, and where the plea of diplomatic immunity is
recognized and affirmed by the executive branch of the government as in the
case at bar, it is then the duty of the courts to accept the claim of immunity upon
appropriate suggestion by the principal law officer of the government . . . or
other officer acting under his direction. Hence, in adherence to the settled
principle that courts may not so exercise their jurisdiction . . . as to embarrass
the executive arm of the government in conducting foreign relations, it is
accepted doctrine that in such cases the judicial department of (this)
government follows the action of the political branch and will not embarrass the
latter by assuming an antagonistic jurisdiction. 3

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

"Specialized agencies" are international organizations having functions in particular fields. The
term appears in Articles 57 8 and 63 9 of the Charter of the United Nations:

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

The rapid growth of international organizations under contemporary international law has
paved the way for the development of the concept of international immunities.
 It is now usual for the constitutions of international organizations to contain
provisions conferring certain immunities on the organizations themselves,
representatives of their member states and persons acting on behalf of the
organizations. A series of conventions, agreements and protocols defining the
immunities of various international organizations in relation to their members
generally are now widely in force; . . . 11

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

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

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

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

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

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

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

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

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

We take note of a Manifestation, dated 28 September 1989, in the ICMC Case (p. 161, Rollo),
wherein TUPAS calls attention to the case entitled "International Catholic Migration
Commission v. NLRC, et als., (G.R. No. 72222, 30 January 1989, 169 SCRA 606), and claims that,
having taken cognizance of that dispute (on the issue of payment of salary for the unexpired
portion of a six-month probationary employment), the Court is now estopped from passing
upon the question of DOLE jurisdiction petition over ICMC.
We find no merit to said submission. Not only did the facts of said controversy occur between
1983-1985, or before the grant to ICMC on 15 July 1988 of the status of a specialized agency
with corresponding immunities, but also because ICMC in that case did not invoke its immunity
and, therefore, may be deemed to have waived it, assuming that during that period (1983-
1985) it was tacitly recognized as enjoying such immunity.

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

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

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

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

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

No pronouncement as to costs.

SO ORDERED

G.R. No. 77951 September 26, 1988

COOPERATIVE RURAL BANK OF DAVAO CITY, INC., petitioner,
vs.
PURA FERRER-CALLEJA, DIRECTOR, BUREAU OF LABOR RELATIONS, MOLE, MANILA; FELIZARDO
T. SERAPIO, MED-ARBITER DESIGNATE, REGIONAL OFFICE NO. XI, MOLE, DAVAO CITY; and
FEDERATION OF FREE WORKERS, respondents.

Herbert P. Artes for petitioner.

The Solicitor General for Public respondent.

GANCAYCO, J.:

This is a Petition for certiorari under Rule 65 of the Rules of Court where the issue is whether or
not the employees of a cooperative can organize themselves for purposes of collective
bargaining.

The record of the case discloses that the herein petitioner Cooperative Rural Bank of Davao
City, Inc. is a cooperative banking corporation operating in Davao City. It is owned in part by the
Government and its employees are members and co-owners of the same. The petitioner has
around 16 rank-and-file employees. As of August, 1986, there was no existing collective
bargaining agreement between the said employees and the establishment. On the other hand,
the herein private respondent Federation of Free Workers is a labor organization registered
with the Department of Labor and Employment. It is interested in representing the said
employees for purposes of collective bargaining.

On August 27, 1986, the private respondent filed with the Davao City Regional Office of the
then Ministry of Labor and Employment a verified Petition for certification election among the
rank-and-file employees of the petitioner. 1The same was docketed as Case No. R-325 ROXI
MED-UR-73-86. On September 18, 1986, the herein public respondent issued an Order granting
the Petition for certification election.

On October 3, 1986, the petitioner filed an Appeal Memorandum and sought a reversal of the
Order of the Med-Arbiter.2 The petitioner argues therein that, among others, a cooperative is
not covered by the Rules governing certification elections inasmuch as it is not an institution
operating for profit. The petitioner also adds that two of the alleged rank-and-file employees
seeking the certification election are managerial employees disqualified from joining concerted
labor activities. In sum, the petitioner insists that its employees are disqualified from forming
labor organizations for purposes of collective bargaining.

On October 8, 1986, the private respondent filed a "Motion to Dismiss the Appeal." On October
15, 1986, the petitioner filed its opposition to the said Motion.
On February 11, 1987, the herein public respondent Bureau of Labor Relations Director Pura
Ferrer-Calleja issued a Resolution affirming the Order of the Med-Arbiter and dismissing the
Appeal. 3 The pertinent portions of the said Resolution are as follows—

It is beyond doubt that respondent-appellant, Cooperative Rural Bank of Davao

City falls within the purview of Article 212, paragraph C of the Labor Code, acting
as such in the interest of an employer. To argue otherwise would amount to
closing one's eyes to the realities of today's cooperative banking institutions. ....

Moreover, basic is the right of every worker in any establishment whether

operated for profit or not to organize and engage in concerted activity, mutually
beneficial to their interest. Such right is sacredly enshrined and protected in our
fundamental law, granting every worker the right to organize into a collective
group and engage in concerted activities for purposes of promoting their well
being, subject only to such limitations as may be provided for by law.

xxx xxx xxx

As this Office has consistently ruled and applied in various cases, being a
member of a cooperative organization does not preclude one from forming or
joining a labor union provided that such person or persons are not among those
disqualified by law. Nowhere in the records can we find any piece of evidence
showing that the signatories in the petition are among those disqualified to form
or join a union.

Finally, we cannot give credence to (the) employer's allegation that two of the
signatories thereof, are managerial employees, since no evidence showing such
fact can be found from the records.

xxx xxx xxx

In a Motion dated March 2, 1987, the petitioner asked for a reconsideration of the said
Resolution. 4 The petitioner reiterated therein its view that its employees are disqualified from
forming the labor organization so contemplated. The petitioner also called attention to an
Opinion rendered by then Solicitor General and Minister of Justice Estelito P. Mendoza dated
August 14, 1981.5 The Opinion states that employees of an electric cooperative who are
themselves members/co-owners of the same cannot form or join labor organizations for
purposes of collective bargaining. The Opinion also states that the duty to bargain exists only
between an employer and his/its employees, and that an employer has no duty to bargain with
his co-owners of a corporation who are also its employees. The petitioner submits that the said
Opinion calls for application in the present controversy.

On March 26, 1987, director Calleja issued a Resolution denying the reconsideration sought by
the petitioner.6 Thus, the certification election was scheduled in the morning of April 23, 1987.
Finding the action taken by the Bureau unsatisfactory, the petitioner brought the case directly
to this Court on April 9, 1987 by way of the instant Petition for certiorari. The petitioner
maintains that the public respondents both acted without jurisdiction or in excess thereof, or
with grave abuse of discretion amounting to lack of jurisdiction, in allowing the certification
election sought by the private respondent despite the arguments of the petitioner in opposition
thereto. The petitioner reiterates its argument that employees of cooperatives who are
members and co-owners of the same cannot form and join labor organizations for purposes of
collective bargaining.

On April 15, 1987, this Court issued a temporary restraining order enjoining the Bureau of Labor
Relations from proceeding with the certification election scheduled on April 23, 1987. 7 The
certification election nonetheless pushed through as scheduled for the alleged reason that the
temporary restraining order was not seasonably transmitted to Davao City.8

This court also required the respondents to file their Comment on the Petition. The
respondents complied as instructed. The Office of the Solicitor General represented the public
respondents.

The Solicitor General intimated to this Court that the instant Petition has been rendered moot
and academic inasmuch as the certification election sought to be enjoined had already been
conducted. The Solicitor General added that the public respondents did not commit any
jurisdictional error. 10

In due time, the parties submitted other pleadings. On January 6, 1988, the case was deemed
submitted for decision.

After a careful examination of the entire record of the case, We find the instant Petition
meritorious.

Contrary to the view espoused by the Solicitor General, this case cannot be considered moot
and academic simply because the certification election sought to be enjoined went on as
scheduled. The instant Petition is one for certiorari as a special civil action. Errors of jurisdiction
on the part of the public respondents are alleged in the Petition itself. If the public respondents
had indeed committed jurisdictional errors, the action taken by both the Med-Arbiter and the
Bureau Director will be deemed null and void ab initio. 11 And if this were so, the certification
election would, necessarily, have no legal justification. The arguments raised in the instant
Petition strike at the very heart of the validity of the certification election itself.

We come now to the main aspect of the case.

Article 243 of the Labor Code 12 enumerates who are eligible to form, join, or assist labor
organizations for purposes of collective bargaining, to wit —
 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 of collective bargaining. ....

The recognized exception to this enumeration is found in Article 245 of the same code, which
provides for the ineligibility of managerial employees to join any labor reorganization, viz-

ART. 245. Ineligibility of managerial employees to join any labor organization.

Managerial employees are not eligible to join, assist or form any labor
organization.

From the foregoing provisions of law it would appear at first blush that all the rank and file
employees of a cooperative who are not managerial employees are eligible to form, join or
assist any labor organization of their own choosing for the purpose of collective bargaining.

However, under Section 2 of P.D. No. 175, a cooperative is defined to mean "organizations
composed primarily of small producers and of consumers who voluntarily join together to form
business enterprises which they themselves own, control, and patronize." Its creation and
growth were declared as a policy of the State as a means of increasing the income and
purchasing power of the low-income sector of the population in order to attain a more
equitable distribution of income and wealth . 13 The principles governing it are:

a) Open membership—"Should be voluntary and available without artificial

restriction, or any social, political, racial or religious discrimination, to all persons
who can make use of its services and are willing to accept responsibilities of
membership;"

b) Democratic control.—"Irrespective of the number of shares owned, each

member can only cast one vote in deciding upon the affairs of the cooperative;"

c) Limited interests to capital.— "Share capital shall earn only limited interest,
the maximum rate of interest to be established by the Department of Local
Government and Community Development from time to time;" and

d) Patronage refund — "Net income after the interest on capital has been paid
shall be redistributed among the members in proposition to their patronage." 14

While cooperatives may exercise the same rights and privileges given to persons, partnership
and corporations provided under existing laws, operate business enterprises of all kinds,
establish rural banks, enjoy all the privileges and incentives granted by the NACIDA Act and
other government agencies to business organizations under existing laws, to expropriate idle
urban or rural lands for its purposes, to own and dispose of properties, enter into contracts, to
sue and be sued and perform other acts necessary to pursue its objectives, 15 such cooperatives
enjoy such privileges as:

a) Exemption from income tax and sales taxes;

b) Preferential right to supply rice, corn and other grains, and other commodities produced by
them to State agencies administering price stabilization program; and

c) In appropriate cases, exemption from application of minimum wage law upon

recommendation of the Bureau of Cooperative Development subject to the approval of the
Secretary of Labor. 16

A cooperative development loan fund has been created for the development of the cooperative
movement. 17

It may be, further stated that the Department of Local Govemment and Community
Development through the Bureau of Cooperative Development is vested with full authority to
promulgate rules and regulations to cover the promotion, organization, registration, regulation
and supervision of all types of cooperatives. 18 Electric cooperatives, however, are under the
regulation and supervision of the National Electrification Ad. Administration, 19 while it is the
Monetary Board of the Central Bank that has exclusive responsibility and authority over the
banking functions and operations of cooperative banks . 20

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

An employee therefore of such a cooperative who is a member and co-owner thereof cannot
invoke the right to collective bargaining for certainly an owner cannot bargain with himself or
his co-owners. In the opinion of August 14, 1981 of the Solicitor General he correctly opined
that employees of cooperatives who are themselves members of the cooperative have no right
to form or join labor organizations for purposes of collective bargaining for being themselves
co-owners of the cooperative. 21

However, in so far as it involves cooperatives with employees who are not members or co-
owners thereof, certainly such employees are entitled to exercise the rights of all workers to
organization, collective bargaining, negotiations and others as are enshrined in the Constitution
and existing laws of the country.22
The questioned ruling therefore of public respondent Pura Ferrer-Calleja must be upheld
insofar as it refers to the employees of petitioner who are not members or co-owners of
petitioner. It cannot extend to the other employees who are at the same time its members or
co-owners.

The Court upholds the findings of said public respondent that no persuasive evidence has been
presented to show that two of the signatories in the petition for certification election are
managerial employees who under the law are disqualified from pursuing union activities.

WHEREFORE, the herein petition is hereby GRANTED and the resolution of public respondent
Pura Ferrer-Calleja, Director, Bureau of Labor Relations, of February 11, 1987 is hereby
MODIFIED to the effect that only the rank and file employees of petitioner who are not its
members or co-owners are entitled to self-organization, collective bargaining, and negotiations,
while the other employees who are members or co-owners thereof can not enjoy such right.

G.R. No. 79025. December 29, 1989.

BENGUET ELECTRIC COOPERATIVE, INC., petitioner,

vs.
HON. PURA FERRER-CALLEJA, Director of the Bureau of Labor Relations, and BENECO
EMPLOYEES LABOR UNION, respondents.

E.L. Gayo & Associates for petitioner.

CORTES, J.:

On June 21, 1985 Beneco Worker's Labor Union-Association of Democratic Labor Organizations
(hereinafter referred to as BWLU- ADLO) filed a petition for direct certification as the sole and
exclusive bargaining representative of all the rank and file employees of Benguet Electric
Cooperative, Inc. (hereinafter referred to as BENECO) at Alapang, La Trinidad, Benguet alleging,
inter alia, that BENECO has in its employ two hundred and fourteen (214) rank and file
employees; that one hundred and ninety-eight (198) or 92.5% of these employees have
supported the filing of the petition; that no certification election has been conducted for the
last 12 months; that there is no existing collective bargaining representative of the rank and file
employees sought to represented by BWLU- ADLO; and, that there is no collective bargaining
agreement in the cooperative.

An opposition to the petition was filed by the Beneco Employees Labor Union (hereinafter
referred to as BELU) contending that it was certified as the sole and exclusive bargaining
representative of the subject workers pursuant to an order issued by the med-arbiter on
October 20,1980; that pending resolution by the National Labor Relations Commission are two
cases it filed against BENECO involving bargaining deadlock and unfair labor practice; and, that
the pendency of these cases bars any representation question.

BENECO, on the other hand, filed a motion to dismiss the petition claiming that it is a non-profit
electric cooperative engaged in providing electric services to its members and patron-
consumers in the City of Baguio and Benguet Province; and, that the employees sought to be
represented by BWLU-ADLO are not eligible to form, join or assist labor organizations of their
own choosing because they are members and joint owners of the cooperative.

On September 2, 1985 the med-arbiter issued an order giving due course to the petition for
certification election. However, the med-arbiter limited the election among the rank and file
employees of petitioner who are non-members thereof and without any involvement in the
actual ownership of the cooperative. Based on the evidence during the hearing the med-arbiter
found that there are thirty-seven (37) employees who are not members and without any
involvement in the actual ownership of the cooperative. The dispositive portion of the med-
arbiter's order is as follows:

WHEREFORE, premises considered, a certification election should be as it is

hereby ordered to be conducted at the premises of Benguet, Electric
Cooperative, Inc., at Alapang, La Trinidad, Benguet within twenty (20) days from
receipt hereof among all the rank and file employees (non-members/consumers
and without any involvement in the actual ownership of the cooperative) with
the following choices:

1. BENECO WORKERS LABOR UNION-ADLO

2. BENECO EMPLOYEES LABOR UNION

3. NO UNION

The payroll for the month of June 1985 shall be the basis in determining the
qualified voters who may participate in the certification election to be
conducted.

SO ORDERED. [Rollo, pp. 22-23.]

BELU and BENECO appealed from this order but the same was dismissed for lack of merit on
March 25,1986. Whereupon BENECO filed with this Court a petition for certiorari with prayer
for preliminary injunction and /or restraining order, docketed as G.R. No. 74209, which the
Supreme Court dismissed for lack of merit in a minute resolution dated April 28, 1986.

The ordered certification election was held on October 1, 1986. Prior to the conduct thereof
BENECO's counsel verbally manifested that "the cooperative is protesting that employees who
are members-consumers are being allowed to vote when . . . they are not eligible to be
members of any labor union for purposes of collective bargaining; much less, to vote in this
certification election." [Rollo, p. 28]. Petitioner submitted a certification showing that only four
(4) employees are not members of BENECO and insisted that only these employees are eligible
to vote in the certification election. Canvass of the votes showed that BELU garnered forty-nine
(49) of the eighty-three (83) "valid" votes cast.

Thereafter BENECO formalized its verbal manifestation by filing a Protest. Finding, among
others, that the issue as to whether or not member-consumers who are employees of BENECO
could form, assist or join a labor union has been answered in the affirmative by the Supreme
Court in G.R. No. 74209, the med-arbiter dismissed the protest on February 17, 1987. On June
23, 1987, Bureau of Labor Relations (BLR) director Pura Ferrer-Calleja affirmed the med-
arbiter's order and certified BELU as the sole and exclusive bargaining agent of all the rank and
file employees of BENECO.

Alleging that the BLR director committed grave abuse of discretion amounting to lack or excess
of jurisdiction BENECO filed the instant petition for certiorari. In his Comment the Solicitor
General agreed with BENECO's stance and prayed that the petition be given due course. In view
of this respondent director herself was required by the Court to file a Comment. On April 19,
1989 the Court gave due course to the petition and required the parties to submit their
respective memoranda.

The main issue in this case is whether or not respondent director committed grave abuse of
discretion in certifying respondent BELU as the sole and exclusive bargaining representtative of
the rank and file employees of BENECO.

Under Article 256 of the Labor Code [Pres. Decree 442] to have a valid certification 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 workers in the unit." Petitioner BENECO asserts that the certification election held on
October 1, 1986 was null and void since members-employees of petitioner cooperative who are
not eligible to form and join a labor union for purposes of collective bargaining were allowed to
vote therein.

Respondent director and private respondent BELU on the other hand submit that members of a
cooperative who are also rank and file employees are eligible to form, assist or join a labor
union [Comment of Respondent Director, p. 4; Rollo, p. 125; Comment of BELU, pp. 9-10; Rollo
pp. 99-100].

The Court finds the present petition meritorious.

The issue of whether or not employees of a cooperative are qualified to form or join a labor
organization for purposes of collective bargaining has already been resolved and clarified in the
case of Cooperative Rural Bank of Davao City, Inc. vs. Ferrer Calleja, et al. [G.R. No. 7795,
September 26,1988] and reiterated in the cases of Batangas-Electric Cooperative Labor Union v.
Young, et al. [G.R. Nos. 62386, 70880 and 74560 November 9, 1988] and San Jose City Electric
Service Cooperative, Inc. v. Ministry of Labor and Employment, et al. [G.R. No. 77231, May 31,
1989] wherein the Court had stated that the right to collective bargaining is not available to an
employee of a cooperative who at the same time is a member and co-owner thereof. With
respect, however, to employees who are neither members nor co-owners of the cooperative
they are entitled to exercise the rights to self-organization, collective bargaining and
negotiation as mandated by the 1987 Constitution and applicable statutes.

Respondent director argues that to deny the members of petitioner cooperative the right to
form, assist or join a labor union of their own choice for purposes of collective bargaining would
amount to a patent violation of their right to self-organization. She points out that:

Albeit a person assumes a dual capacity as rank and file employee and as
member of a certain cooperative does not militate, as in the instant case, against
his/her exercise of the right to self-organization and to collective bargaining
guaranteed by the Constitution and Labor Code because, while so doing, he/she
is acting in his/her capacity as rank and file employee thereof. It may be added
that while the employees concerned became members of petitioner
cooperative, their status employment as rank and filers who are hired for fixed
compensation had not changed. They still do not actually participate in the
management of the cooperative as said function is entrusted to the Board of
Directors and to the elected or appointed officers thereof. They are not vested
with the powers and prerogatives to lay down and execute managerial policies;
to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline
employees; and/or to effectively recommend such managerial functions
[Comment of Respondent Director, p. 4; Rollo, p. 125.]

Private respondent BELU concurs with the above contention of respondent director and,
additionally, claims that since membership in petitioner cooperative is only nominal, the rank
and file employees who are members thereof should not be deprived of their right to self-
organization.

The above contentions are untenable. Contrary to respondents' claim, the fact that the
members-employees of petitioner do not participate in the actual management of the
cooperative does not make them eligible to form, assist or join a labor organization for the
purpose of collective bargaining with petitioner. The Court's ruling in the Davao City case that
members of cooperative cannot join a labor union for purposes of collective bargaining was
based on the fact that as members of the cooperative they are co-owners thereof. As such,
they cannot invoke the right to collective bargaining for "certainly an owner cannot bargain
with himself or his co-owners." [Cooperative Rural Bank of Davao City, Inc. v. Ferrer-Calleja, et
al., supra]. It is the fact of ownership of the cooperative, and not involvement in the
management thereof, which disqualifies a member from joining any labor organization within
the cooperative. Thus, irrespective of the degree of their participation in the actual
management of the cooperative, all members thereof cannot form, assist or join a labor
organization for the purpose of collective bargaining.

Respondent union further claims that if nominal ownership in a cooperative is "enough to take
away the constitutional protections afforded to labor, then there would be no hindrance for
employers to grant, on a scheme of generous profit sharing, stock bonuses to their employees
and thereafter claim that since their employees are not stockholders [of the corporation], albeit
in a minimal and involuntary manner, they are now also co-owners and thus disqualified to
form unions." To allow this, BELU argues, would be "to allow the floodgates of destruction to be
opened upon the rights of labor which the Constitution endeavors to protect and which welfare
it promises to promote." [Comment of BELU, p. 10; Rollo, p. 100].

The above contention of respondent union is based on the erroneous presumption that
membership in a cooperative is the same as ownership of stocks in ordinary corporations.
While cooperatives may exercise some of the rights and privileges given to ordinary
corporations provided under existing laws, such cooperatives enjoy other privileges not granted
to the latter [See Sections 4, 5, 6, and 8, Pres. Decree No. 175; Cooperative Rural Bank of Davao
City v. Ferrer-Calleja, supra]. Similarly, members of cooperatives have rights and obligations
different from those of stockholders of ordinary corporations. It was precisely because of the
special nature of cooperatives, that the Court held in the Davao City case that members-
employees thereof cannot form or join a labor union for purposes of collective bargaining. The
Court held that:

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

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

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

thereof cannot invoke the right to collective bargaining for certainly an owner
cannot bargain with himself or his co-owners.

It is important to note that, in her order dated September 2, 1985, med-arbiter Elnora V.
Balleras made a specific finding that there are only thirty-seven (37) employees of petitioner
who are not members of the cooperative and who are, therefore, the only employees of
petitioner cooperative eligible to form or join a labor union for purposes of collective
bargaining [Annex "A" of the Petition, p. 12; Rollo, p. 22]. However, the minutes of the
certification election [Annex "C" of the Petition: Rollo, p. 28] show that a total of eighty-three
(83) employees were allowed to vote and of these, forty-nine (49) voted for respondent union.
Thus, even if We agree with respondent union's contention that the thirty seven (37)
employees who were originally non-members of the cooperative can still vote in the
certification election since they were only "forced and compelled to join the cooperative on
pain of disciplinary action," the certification election held on October 1, 1986 is still null and
void since even those who were already members of the cooperative at the time of the
issuance of the med-arbiter's order, and therefore cannot claim that they were forced to join
the union were allowed to vote in the election.

Article 256 of the Labor Code provides, among others, that:

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 workers in the unit .
. . [Italics supplied.]

In this case it cannot be determined whether or not respondent union was duly elected by the
eligible voters of the bargaining unit since even employees who are ineligible to join a labor
union within the cooperative because of their membership therein were allowed to vote in the
certification election. Considering the foregoing, the Court finds that respondent director
committed grave abuse of discretion in certifying respondent union as the sole and exclusive
bargaining representative of the rank and file employees of petitioner cooperative.

WHEREFORE, the petition is hereby GRANTED and the assailed resolution of respondent
director is ANNULLED. The certification election conducted on October 1, 1986, is SET ASIDE.
The Regional Office No. 1 of San Fernando, La Union is hereby directed to immediately conduct
new certification election proceedings among the rank and file employees of the petitioner who
are not members of the cooperative.

SO ORDERED.

G.R. No. 122226 March 25, 1998

UNITED PEPSI-COLA SUPERVISORY UNION (UPSU), petitioner,
vs.
HON. BIENVENIDO E. LAGUESMA and PEPSI-COLA PRODUCTS, PHILIPPINES, INC. respondents.

FACTS: Petitioner is a union of supervisory employees. It appears that on March 20, 1995 the
union filed a petition for certification election on behalf of the route managers at Pepsi-Cola
Products Philippines, Inc. However, its petition was denied by the med-arbiter and, on appeal,
by the Secretary of Labor and Employment, on the ground that the route managers are
managerial employees and, therefore, ineligible for union membership under the first sentence
of Art. 245 of the Labor Code, which provides:
Ineligibility of managerial employees to join any labor organization; right of supervisory
employees. — Managerial employees are not eligible to join, assist or form any labor
organization. Supervisory employees shall not be eligible for membership in a labor
organization of the rank-and-file employees but may join, assist or form separate labor
organizations of their own.

Petitioner brought this suit challenging the validity of the order, dismissed.

Hence, this petition. Pressing for resolution its contention that the first sentence of Art. 245 of
the Labor Code, so far as it declares managerial employees to be ineligible to form, assist or join
unions, contravenes Art. III, §8 of the Constitution which provides:

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

ISSUES:
(1) whether the route managers at Pepsi-Cola Products Philippines, Inc. are managerial
employees and

(2) whether Art. 245, insofar as it prohibits managerial employees from forming, joining or
assisting labor unions, violates Art. III, §8 of the Constitution.

HELD: YES and NO

As a class, managers constitute three levels of a pyramid: (1) Top management; (2) Middle
Management; and (3) First-line Management [also called supervisors].

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

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

MIDDLE MANAGERS — The term middle management can refer to more than one level in an
organization. Middle managers direct the activities of other managers and sometimes also
those of operating employees. Middle managers’ principal responsibilities are to direct the
activities that implement their organizations’ policies and to balance the demands of their
superiors with the capacities of their subordinates. A plant manager in an electronics firm is an
example of a middle manager.
TOP MANAGERS — Composed of a comparatively small group of executives, top management
is responsible for the overall management of the organization. It establishes operating policies
and guides the organization’s interactions with its environment. Typical titles of top managers
are “chief executive officer,” “president,” and “senior vice-president.” Actual titles vary from
one organization to another and are not always a reliable guide to membership in the highest
management classification.

A distinction exists between those who have the authority to devise, implement and control
strategic and operational policies (top and middle managers) and those whose task is simply to
ensure that such policies are carried out by the rank-and-file employees of an organization
(first-level managers/supervisors). What distinguishes them from the rank-and-file employees is
that they act in the interest of the employer in supervising such rank-and-file employees.

“Managerial employees” may therefore be said to fall into two distinct categories: the
“managers” per se, who compose the former group described above, and the “supervisors”
who form the latter group.

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

To qualify as managerial employee, there must be a clear showing of the exercise of managerial
attributes under paragraph (m), Article 212 of the Labor Code as amended. Designations or
titles of positions are not controlling. As to the route managers and accounting manager, we
are convinced that they are managerial employees. Their job descriptions clearly reveal so
(Worker’s Alliance Trade Union (WATU) v. Pepsi-Cola Products Philippines, Inc., Nov. 13, 1991)

This finding was reiterated in Case No. OS-A-3-71-92. entitled In Re: Petition for Direct
Certification and/or Certification Election-Route Managers/Supervisory Employees of Pepsi-
Cola Products Phils.Inc.
* doctrine of res judicata certainly applies to adversary administrative proceedings
Thus, we have in this case an expert’s view that the employees concerned are managerial
employees within the purview of Art. 212.

At the very least, the principle of finality of administrative determination compels respect for
the finding of the Secretary of Labor that route managers are managerial employees as defined
by law in the absence of anything to show that such determination is without substantial
evidence to support it.
The Court now finds that the job evaluation made by the Secretary of Labor is indeed supported
by substantial evidence. The nature of the job of route managers is given in a four-page
pamphlet, prepared by the company, called “Route Manager Position Description,” the
pertinent parts of which read:

A. BASIC PURPOSE
A Manager achieves objectives through others.
As a Route Manager, your purpose is to meet the sales plan; and you achieve this objective
through the skillful MANAGEMENT OF YOUR JOB AND THE MANAGEMENT OF YOUR PEOPLE.
These then are your functions as Pepsi-Cola Route Manager. Within these functions —
managing your job and managing your people — you are accountable to your District Manager
for the execution and completion of various tasks and activities which will make it possible for
you to achieve your sales objectives.
Xxxx
Distinction is evident in the work of the route managers which sets them apart from supervisors
in general. Unlike supervisors who basically merely direct operating employees in line with set
tasks assigned to them, route managers are responsible for the success of the company’s main
line of business through management of their respective sales teams. Such management
necessarily involves the planning, direction, operation and evaluation of their individual teams
and areas which the work of supervisors does not entail.

The route managers cannot thus possibly be classified as mere supervisors because their work
does not only involve, but goes far beyond, the simple direction or supervision of operating
employees to accomplish objectives set by those above them.

While route managers do not appear to have the power to hire and fire people (the evidence
shows that they only “recommended” or “endorsed” the taking of disciplinary action against
certain employees), this is because thisis a function of the Human Resources or Personnel
Department of the company.

# 2: Constitutionality of Art. 245

Art.245 is the result of the amendment of the Labor Code in 1989 by R.A. No. 6715, otherwise
known as the Herrera-Veloso Law. Unlike the Industrial Peace Act or the provisions of the Labor
Code which it superseded, R.A. No. 6715 provides separate definitions of the terms
“managerial” and “supervisory employees,” as follows:

Art. 212. Definitions. . . .

(m) “managerial employee” is one who is vested with powers or prerogatives to lay down and
execute management policies and/or to hire transfer, suspend, lay off, recall, discharge, assign
or discipline employees. Supervisory employees are those who, in the interest of the employer,
effectively recommend such managerial actions if the exercise of such authority is not merely
routinary or clerical in nature but requires the use of independent judgment. All employees not
falling within any of the above definitions are considered rank-and-file employees for purposes
of this Book.
The distinction between top and middle managers, who set management policy, and front-line
supervisors, who are merely responsible for ensuring that such policies are carried out by the
rank and file, is articulated in the present definition. 30 When read in relation to this definition
in Art. 212(m), it will be seen that Art. 245 faithfully carries out the intent of the Constitutional
Commission in framing Art. III, §8 of the fundamental law.
*Framer’s Intent: MR. LERUM. My amendment is on Section 7, page 2, line 19, which is to insert
between the words “people” and “to” the following: WHETHER EMPLOYED BY THE STATE OR
PRIVATE ESTABLISHMENTS. In other words, the section will now read as follows: “The right of
the people WHETHER EMPLOYED BY THE STATE OR PRIVATE ESTABLISHMENTS to form
associations, unions, or societies for purposes not contrary to law shall not be abridged.”

Nor is the guarantee of organizational right in Art. III, §8 infringed by a ban against managerial
employees forming a union. The right guaranteed in Art. III, §8 is subject to the condition that
its exercise should be for purposes “not contrary to law.” In the case of Art. 245, there is a
rational basis for prohibiting managerial employees from forming or joining labor organizations.

PETITION is DISMISSED.