Professional Documents
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13. October 2005: Digitel appealed before CA alleging GADALEJ on RULING: WHEREFORE, the Petition is DENIED. The Decision of the
the part of the DOLE for ordering it to commence bargaining Court of Appeals in CA G.R. SP No. 91719 is AFFIRMED, while the
negotiations with DEU despite the pendency of the issue of union Decision in CA-G.R. SP No. 94825 declaring the dismissal of affected union
legitimacy. member-employees as illegal is MODIFIED to include the payment of moral
and exemplary damages in amount of P10,000.00 and P5,000.00,
14. January 2006: NLRC rendered decision dimissing ULP case against respectively, to each of the thirteen (13) illegally dismissed union-member
Digitel but declaring the dismissal of 13 employees of Digiserv as employees.
illegal and ordering their reinstatement.
Petitioner Digital Telecommunications Philippines, Inc. is ORDERED to pay
15. MR filed by Digitel. 4 affected employees were removed from the affected employees backwages and separation pay equivalent to one (1)
entitlement to the awards given by NLRC due to deeds of quitclaim. month salary, or one-half (l/2) month pay for every year of service,
whichever is higher.
16. June 2006: Digitel filed petition before CA, challenging NLRC
decision and arguing that the dismissed employees from Digiserv Let this case be REMANDED to the Labor Arbiter for the computation of
were not employees of Digitel. monetary claims due to the affected employees.
17. CA dismissed the Digitel petition, ordering reinstatement of the SO ORDERED.
employees and payment of backwages or separation pay in lieu of
reinstatement. RATIO:
18. CA upheld the DOLE order for Digitel to start CBA negotiations The pendency of a petition for cancellation of union registration does not
with DEU and emphasized that a petition for cancellation of union preclude collective bargaining.
registration does not bar the holding of CBA negotiations. It also
sustained the finding that Digiserv was engaged in labor-only 1. It is well-settled that the pendency of a petition for cancellation of
contracting, hence its employees were actually employees of Digitel. union registration does not preclude collective bargaining.
MR was denied.
2. In a previous case, it was held: “that there is a pending
19. Hence this petition for review on certiorari. cancellation proceeding against the respondent Union is not a
bar to set in motion the mechanics of collective bargaining. If a
ISSUES: certification election may still be ordered despite the pendency of
4. WON SOLE erred in issuing assumption order despite pendency a petition to cancel the union's registration certificate, more so
of the petition for cancellation of union registration – NO, SOLE should the collective bargaining process continue despite its
was correct. The pendency of a petition for cancellation of union pendency. We must emphasize that the majority status of the
registration does not preclude collective bargaining. respondent Union is not affected by the pendency of the Petition for
Cancellation pending against it. Unless its certificate of registration
5. WON Digiserv is a legitimate contractor – NO, Digiserv is a and its status as the certified bargaining agent are revoked, the
Hospital is, by express provision of the law, duty bound to affected employees were already employed by Digitel as Traffic
collectively bargain with the Union.” Operators, later renamed as Customer Service Representatives.
Digiserv is a labor-only contractor. 7. Digitel argues that the affected employees were legally dismissed on
the grounds of closure of Digiserv, a department within Digitel.
4. Labor-only contracting is expressly prohibited by our labor laws.
Article 106 of the Labor Code defines labor-only contracting as 8. For a valid retrenchment, the following elements must be present:
"supplying workers to an employer [who] does not have
substantial capital or investment in the form of tools, equipment, a. That retrenchment is reasonably necessary and likely to
machineries, work premises, among others, and the workers prevent business losses which, if already incurred, are not
recruited and placed by such person are performing activities merely de minimis, but substantial, serious, actual and real,
which are directly related to the principal business of such or if only expected, are reasonably imminent as perceived
employer." objectively and in good faith by the employer;
5. After an exhaustive review of the records, there is no showing that b. That the employer served written notice both to the
first, Digiserv has substantial investment in the form of capital, employees and to the Department of Labor and Employment
equipment or tools. Moreover, in the Amended Articles of at least one month prior to the intended date of retrenchment;
Incorporation, as well as in the General Information Sheets for the
years 1994, 2001 and 2005, the primary purpose of Digiserv is to c. That the employer pays the retrenched employees separation
provide manpower services. In a previous case, it was held that a pay equivalent to one (1) month pay or at least 1/2 month
legitimate job contractor provides services while the labor-only pay for every year of service, whichever is higher;
contractor provides only manpower. d. That the employer exercises its prerogative to retrench
6. Furthermore, Digiserv does not exercise control over the affected employees in good faith for the advancement of its interest
employees. The NLRC highlighted the fact that Digiserv shared the and not to defeat or circumvent the employees' right to
same Human Resources, Accounting, Audit and Legal Departments security of tenure; and
with Digitel which manifested that it was Digitel who exercised e. That the employer used fair and reasonable criteria in
control over the performance of the affected employees. ascertaining who would be dismissed and who would be
7. Considering that Digiserv has been found to be engaged in labor- retained among the employees, such as status, efficiency,
only contracting, the dismissed employees are deemed employees of seniority, physical fitness, age, and financial hardship for
Digitel. Section 7 of the Implementing Rules holds that labor-only certain workers.
contracting would give rise to: (1) the creation of an employer- 9. Only the first 3 elements of a valid retrenchment are present in
employee relationship between the principal and the employees of this case. The fourth is missing and the fifth is not applicable.
the contractor or sub-contractor; and (2) the solidary liability of the
principal and the contractor to the employees in the event of any 10. Indeed, it is management prerogative to close a department of the
violation of the Labor Code. Accordingly, Digitel is considered the company. Digitel's decision to outsource the call center operation of
principal employer of respondent employees. the company is a valid reason to close down the operations of a
department under which the affected employees were employed.
The affected employees were illegally dismissed. Digitel cited the decline in the volume of transaction of operator-
assisted call services as supported by Financial Statements for the
6. Records show that Digiserv’s dismissed employees are actually years 2003 and 2004, during which Digiserv incurred a deficit of
employees of Digitel. Even before the incorporation of Digiserv, the P163,624.00 and P164,055.00, respectively. 25 All affected
employees working under Digiserv were served with individual when such will interfere with, restrain or coerce employees in the exercise
notices of termination. DOLE was likewise served with the of their rights to self-organization
corresponding notice. All affected employees were offered
separation pay. Only 9 out of the 45 employees refused to accept the 1. At the height of the labor dispute, occasioned by Digitel's reluctance
separation pay and chose to contest their dismissal before this Court. to negotiate with the Union, I-tech was formed to provide, as it did
The fifth element regarding the criteria to be observed by Digitel provide, the same services performed by Digiserv, the Union
clearly does not apply because all employees under Digiserv were members' nominal employer.
dismissed.
2. The finding of unfair labor practice hinges on Digitel's contracting-
11. There was no good faith in the retrenchment. The effects of the out certain services performed by union member-employees to
assumption order issued by the Secretary of Labor are two-fold. It interfere with, restrain or coerce them in the exercise of their right to
enjoins an impending strike on the part of the employees and orders self-organization.
the employer to maintain the status quo. There is no doubt that
Digitel defied the assumption order by abruptly closing down 3. However, the closure of Digiserv is already a forgone conclusion.
Digiserv. The closure of a department is not illegal per se. What There is no finding, and the Union makes no such assertion, that
makes it unlawful is when the closure is undertaken in bad faith. Digiserv and I-tech are one and the same corporation. The timing of
Digiserv's closure and I-tech's ensuing creation is doubted, not the
12. Bad faith was manifested by the timing of the closure of Digiserv legitimacy of I-tech as a business process outsourcing corporation
and the rehiring of some employees to Interactive Technology providing both inbound and outbound services to an expanded local
Solutions, Inc. (I-tech), a corporate arm of Digitel. The assumption and international clientele.
order directs employees to return to work, and the employer to
reinstate the employees. The existence of the assumption order 1. There is no basis to direct reinstatement of the affected employees to
should have prompted Digitel to observe the status quo. an ostensibly different corporation. The surrounding circumstance
of the creation of I-tech point to bad faith on the part of Digitel,
13. The timing of the creation of I-tech is dubious. It was incorporated as well as constitutive of unfair labor practice in targeting the
on 18 January 2005 while the labor dispute within Digitel was dismissal of the union member-employees. However, this bad
pending. I-tech's primary purpose was to provide call faith does not contradict, much less negate, the impossibility of
center/customer contact service, the same service provided by the employees' reinstatement because Digiserv has been closed
Digiserv. and no longer exists.
14. Thus, when Digiserv was closed down, some of the employees 2. Under the doctrine of strained relations, the payment of separation
presumably non-union members were rehired by I-tech. Hence, the pay is considered an acceptable alternative to reinstatement when the
closure of Digiserv pending the existence of an assumption order latter option is no longer desirable or viable.
coupled with the creation of a new corporation performing similar
functions as Digiserv leaves no iota of doubt that the target of the 3. Finally, an illegally dismissed employee should be awarded moral
closure are the union member-employees. These factual and exemplary damages as their dismissal was tainted with unfair
circumstances prove that Digitel terminated the services of the labor practice.
affected employees to defeat their security of tenure. The
termination of service was not a valid retrenchment; it was an
illegal dismissal of employees.