SPECIAL FIRST DIVISION

[G.R. No. 127598. August 1, 2000.]

MANILA ELECTRIC COMPANY , petitioner, vs . HON. SECRETARY OF

LABOR LEONARDO QUISUMBING and MERALCO EMPLOYEES AND
WORKERS ASSOCIATION (MEWA) , respondents.

Rolando R. Arbues, Atilano S. Guevarra, Jr., and Marianito D. Miranda and Siguion
Reyna, Montecillo & Ongsiako for petitioner.
Perfecto V. Fernandez, Jose P. Fernandez & Cristobal P. Fernandez for MEWA.
The Solicitor General for public respondent.
M.B. Tomacruz Law O ce a n d Jesus S. Silo for First Line Assoc. of Meralco
Supervisory Employees.

SYNOPSIS

On February 22, 2000, the Court issued a Resolution which ruled, among others, that
where an arbitral award granted beyond six months after the expiration of the existing
Collective Bargaining Agreement (CBA) and there is no agreement between the parties as
to the date of effectivity thereof, the arbitral award shall retroact to the rst day after the
six-month period following the expiration of the last day of the CBA. However, the
dispositive portion thereof inadvertently stated that the arbitral award shall retroact from
December 1, 1995 up to November 30, 1997. On March 17, 2000, petitioner Manila Electric
Company led with the Court motion for partial modi cation. Petitioner speci cally
assailed the foregoing portion of the Resolution by contending, among others, that the
Resolution was internally awed because when it held that the award shall retroact to the
rst day after the six-month period following the expiration of the last day of the CBA, the
reckoning date should have been June 1, 1996 not December 1, 1995, which is the last day
of the three-year lifetime of the economic provisions of the CBA. Petitioner, further, sought
a declaration by the Court that the award of P2,000.00 be paid to petitioner's rank-and- le
employees only during this two-year period considering that the retroactive application of
the arbitral award will cost it no less than P800 million.
In resolving the motions for reconsideration in this case, the Court took into account
the fact that petitioner belongs to an industry imbued with public interest. As such, the
Court can not ignore the enormous cost that petitioner will have to bear as a consequence
of the full retroaction of the arbitral award to the date of expiry of the CBA, and the
inevitable effect that it would have on the national economy. On the other hand, under the
policy of social justice, the law bends over backward to accommodate the interests of the
working class on the humane justi cation that those with less privilege in life should have
more in law. Balancing these two contrasting interests, the Court turned to the dictates of
fairness and equitable justice and thus arrived at a formula that would address the
concerns of both sides. Hence, the Court held that the arbitral award in this case be made
to retroact to the rst day after the six-month period following the expiration of the last
day of the CBA, i.e., from June 1, 1996 to May 31, 1998. Finally, the Court found that
petitioner's prayer, that the award of Two Thousand Pesos shall be paid to rank-and- le
CD Technologies Asia, Inc. 2018 cdasiaonline.com
 employees during the two-year period, was well-taken, and the award does not extend to
supervisory employees of petitioner.

SYLLABUS

1. LABOR AND SOCIAL LEGISLATIONS; LABOR CODE; LABOR RELATIONS;

ARBITRAL AWARD; RETROACTIVE TO THE FIRST DAY AFTER THE SIX-MONTH PERIOD
FOLLOWING THE EXPIRATION OF THE LAST DAY OF THE COLLECTIVE BARGAINING
AGREEMENT (CBA). — [T]his Court took into account the fact that petitioner belongs to an
industry imbued with public interest. As such, this Court can not ignore the enormous cost
that petitioner will have to bear as a consequence of the full retroaction of the arbitral
award to the date of expiry of the CBA, and the inevitable effect that it would have on the
national economy. On the other hand, under the policy of social justice, the law bends over
backward to accommodate the interests of the working class on the humane justi cation
that those with less privilege in life should have more in law. Balancing these two
contrasting interests, this Court turned to the dictates of fairness and equitable justice and
thus arrived at a formula that would address the concerns of both sides. Hence, this Court
held that the arbitral award in this case be made to retroact to the rst day after the six-
month period following the expiration of the last day of the CBA, i.e., from June 1, 1996 to
May 31, 1998. This Court, therefore, maintains the foregoing rule in the assailed Resolution
pro hac vice.
2. ID.; ID.; ID.; ID.; SHALL BE PAID TO RANK-AND-FILE EMPLOYEES ONLY. — [T]his
Court nds that petitioner's prayer, that the award of Two Thousand Pesos shall be paid to
rank-and- le employees during the two-year period, is well-taken. The award does not
extend to supervisory employees of petitioner. cdasia

3. ID.; ID.; ID.; HOLD-OVER PRINCIPLE SHALL GOVERN DURING THE INTERREGNUM
BETWEEN THE EXPIRATION OF THE ECONOMIC PROVISIONS OF THE CBA AND THE
DATE OF EFFECTIVITY OF THE ARBITRAL AWARD. — During the interregnum between the
expiration of the economic provisions of the CBA and the date of effectivity of the arbitral
award, it is understood that the hold-over principle shall govern, viz: "[I]t shall be the duty of
both parties to keep the status quo and to continue in full force and effect the terms and
conditions of the existing agreement during the 60-day freedom period and/or until a new
agreement is reached by the parties." Despite the lapse of the formal effectivity of the CBA
the law still considers the same as continuing in force and effect until a new CBA shall have
been validly executed.

RESOLUTION

YNARES-SANTIAGO , J : p

On February 22, 2000, this Court promulgated a Resolution with the following
decretal portion:
WHEREFORE, the motion for reconsideration is PARTIALLY GRANTED and
the assailed Decision is MODIFIED as follows: (1) the arbitral award shall retroact
from December 1, 1995 to November 30, 1997; and (2) the award of wage is
increased from the original amount of One Thousand Nine Hundred Pesos
CD Technologies Asia, Inc. 2018 cdasiaonline.com
 (P1,900.00) to Two Thousand Pesos (P2,000.00) for the years 1995 and 1996.
This Resolution is subject to the monetary advances granted by petitioner to its
rank-and- le employees during the pendency of this case assuming such
advances had actually been distributed to them. The assailed Decision is
AFFIRMED in all other respects.
SO ORDERED.

Petitioner Manila Electric Company led with this Court, on March 17, 2000, a
"Motion for Partial Modi cation (Re: Resolution Dated 22 February 2000) anchored on the
following grounds:
I

With due respect, this Honorable Court's ruling on the retroactivity issue: (a)
fails to account for previous rulings of the Court on the same issue; (b) fails to
indicate the reasons for reversing the original ruling in this case on the
retroactivity issue; and (c) is internally inconsistent.
II

With due respect, the Honorable Court's ruling on the retroactivity issue
does not take into account the huge cost that this award imposes on petitioner,
estimated at no less than P800 Million.

In the assailed Resolution, it was held:

Labor laws are silent as to when an arbitral award in a labor dispute where
the Secretary (of Labor and Employment) had assumed jurisdiction by virtue of
Article 263 (g) of the Labor Code shall retroact. In general, a CBA negotiated
within six months after the expiration of the existing CBA retroacts to the day
immediately following such date and if agreed thereafter, the effectivity depends
on the agreement of the parties. On the other hand, the law is silent as to the
retroactivity of a CBA arbitral award or that granted not by virtue of the mutual
agreement of the parties but by intervention of the government. Despite the
silence of the law, the Court rules herein that CBA arbitral awards granted after six
months from the expiration of the last CBA shall retroact to such time agreed
upon by both employer and the employees or their union. Absent such an
agreement as to retroactivity, the award shall retroact to the rst day after the six-
month period following the expiration of the last day of the CBA should there be
one. In the absence of a CBA, the Secretary's determination of the date of
retroactivity as part of his discretionary powers over arbitral awards shall control.

Petitioner speci cally assails the foregoing portion of the Resolution as being
logically awed, arguing, rst , that while it alludes to the Secretary's discretionary powers
only in the absence of a CBA, Article 253-A of the Labor Code always presupposes the
existence of a prior or subsisting CBA; hence the exercise by the Secretary of his
discretionary powers will never come to pass. Second, petitioner claims that the
Resolution contravenes the jurisprudential rule laid down in the cases of Union of Filipro
Employees v. NLRC, 1 Pier 8 Arrastre and Stevedoring Services v. Roldan-Confesor 2 and St.
Luke' s Medical Center v. Torres . 3 Third, petitioner contends that this Court erred in
holding that the effectivity of CBA provisions are automatically retroactive. Petitioner
invokes, rather, this Court's ruling in the Decision dated January 27, 1999, which was
modi ed in the assailed Resolution, that in the absence of an agreement between the
parties, an arbitrated CBA takes on the nature of any judicial or quasi-judicial award; it
CD Technologies Asia, Inc. 2018 cdasiaonline.com
 operates and may be executed only prospectively unless there are legal justi cations for
its retroactive application. Fourth, petitioner assigns as error this Court's interpretation of
certain acts of petitioner as consent to the retroactive application of the arbitral award.
Fifth, petitioner contends that the Resolution is internally awed because when it held that
the award shall retroact to the rst day after the six-month period following the expiration
of the last day of the CBA, the reckoning date should have been June 1, 1996, not
December 1, 1995, which is the last day of the three-year lifetime of the economic
provisions of the CBA.
Anent the second ground, petitioner alleges that the retroactive application of the
arbitral award will cost it no less than P800 Million. Thus, petitioner prays that the two-year
term of the CBA be xed from December 28, 1996 to December 27, 1998. Petitioner also
seeks this Court's declaration that the award of P2,000.00 be paid to petitioner's rank-and-
le employees during this two-year period. In the alternative, petitioner prays that the
award of P2,000.00 be made to retroact to June 1, 1996 as the effectivity date of the CBA.
IDASHa

Private respondent MEWA led its Comment on May 19, 2000, contending that the
Motion for Partial Modi cation was unauthorized inasmuch as Mr. Manuel M. Lopez,
President of petitioner corporation, has categorically stated in a memorandum to the rank-
and- le employees that management will comply with this Court's ruling and will not le
any motion for reconsideration; and that the assailed Resolution should be modi ed to
conform to the St. Luke's ruling, to the effect that, in the absence of a speci c provision of
law prohibiting retroactivity of the effectivity of arbitral awards issued by the Secretary of
Labor pursuant to Article 263(g) of the Labor Code, he is deemed vested with plenary and
discretionary powers to determine the effectivity thereof.
This Court has re-examined the assailed portion of the Resolution in this case vis-a-
vis the rulings cited by petitioner. Invariably, these cases involve Article 253-A in relation to
Article 263 (g) 4 of the Labor Code. Article 253-A is hereunder reproduced for ready
reference:
ARTICLE 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 ve (5) years. No petition
questioning the majority status of the incumbent bargaining agent shall be
entertained and no certi cation 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 ve 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 xed in
such Collective Bargaining Agreement, shall retroact to the day immediately
following such date. If any such agreement is entered into beyond six months, the
parties shall agree on the duration of retroactivity thereof. In case of a deadlock in
the renegotiation of the collective bargaining agreement, the parties may exercise
their rights under this Code. 5

The parties' respective positions are both well supported by jurisprudence. For its
part, petitioner invokes the ruling in Union of Filipro Employees, 6 wherein this Court upheld
the NLRC's act of giving prospective effect to the CBA, and argues that the two-year
arbitral award in the case at bar should likewise be applied prospectively, counted from
December 28, 1996 to December 27, 1998. Petitioner maintains that there is nothing in
CD Technologies Asia, Inc. 2018 cdasiaonline.com
 Article 253-A of the Labor Code which states that arbitral awards or renewals of a
collective bargaining agreement shall always have retroactive effect. The Filipro case was
applied more recently in Pier 8 Arrastre & Stevedoring Services, Inc. v. Roldan-Confesor 7
thus:
I n Union of Filipro Employees v. NLRC , 192 SCRA 414 (1990), this Court
interpreted the above law as follows:
"In light of the foregoing, this Court upholds the pronouncement of
the NLRC holding the CBA to be signed by the parties effective upon the
promulgation of the assailed resolution. It is clear and explicit from Article
253-A that any agreement on such other provisions of the CBA shall be
given retroactive effect only when it is entered into within six (6) months
from its expiry date. If the agreement was entered into outside the six (6)
month period, then the parties shall agree on the duration of the
retroactivity thereof.
"The assailed resolution which incorporated the CBA to be signed by
the parties was promulgated June 5, 1989, and hence, outside the 6 month
period from June 30, 1987, the expiry date of the past CBA. Based on the
provision of Section 253-A, its retroactivity should be agreed upon by the
parties. But since no agreement to that effect was made, public respondent
did not abuse its discretion in giving the said CBA a prospective effect. The
action of the public respondent is within the ambit of its authority vested
by existing laws."

In the case of Lopez Sugar Corporation v. Federation of Free Workers, 189

SCRA 179 (1991), this Court reiterated the rule that although a CBA has expired, it
continues to have legal effects as between the parties until a new CBA has been
entered into. It is the duty of both parties to the CBA to keep the status quo, and to
continue in full force and effect the terms and conditions of the existing
agreement during the 60-day freedom period and/or until a new agreement is
reached by the parties (National Congress of Unions in the Sugar Industry of the
Philippines v. Ferrer-Calleja , 205 SCRA 478 [1992]). Applied to the case at bench,
the legal effects of the immediate past CBA between petitioner and private
respondent terminated, and the effectivity of the new CBA began, only on March
4, 1993, when public respondent resolved their dispute. 8

On the other hand, respondent MEWA invokes the ruling in St. Luke's Medical Center,
Inc. v. Torres , 9 which held that the Secretary of Labor has plenary and discretionary
powers to determine the effectivity of arbitral awards. 1 0 Thus, respondent maintains that
the arbitral award in this case should be made effective from December 1, 1995 to
November 30, 1997. The ruling in the St. Luke's case was restated in the 1998 case of
Manila Central Line Corporation v. Manila Central Line Free Workers Union-National
Federation of Labor, et al., 1 1 where it was held that:
Art. 253-A refers to collective bargaining agreements entered into by the
parties as a result of their mutual agreement. The CBA in this case, on the other
hand, is part of an arbitral award. As such, it may be made retroactive to the date
of expiration of the previous agreement. As held in St. Luke's Medical Center Inc.
v. Torres:
Finally, the effectivity of the Order of January 28, 1991, must
retroact to the date of the expiration of the previous CBA, contrary to the
position of petitioner. Under the circumstances of the case, Article 253-A
CD Technologies Asia, Inc. 2018 cdasiaonline.com
 cannot be properly applied to herein case. As correctly stated by public
respondent in his assailed Order of April 12, 1991 dismissing petitioner's
Motion for Reconsideration —
Anent the alleged lack of basis for the retroactivity provisions
awarded, we would stress that the provision of law invoked by the
Hospital, Article 253-A of the Labor Code, speaks of agreements by
and between the parties, and not arbitral awards . . . (p. 818 Rollo).
Therefore, in the absence of a speci c provision of law prohibiting
retroactivity of the effectivity of arbitral awards issued by the Secretary of
Labor pursuant to Article 263(g) of the Labor Code, such as herein
involved, public respondent is deemed vested with plenary and
discretionary powers to determine the effectivity thereof (223 SCRA 779,
792-793 [1993]; reiterated in Philippine Airlines, Inc. v. Confessor, 231 SCRA
41 [1994]).
Indeed, petitioner has not shown that the question of effectivity was not
included in the general agreement of the parties to submit their dispute for
arbitration. To the contrary, as the order of the labor arbiter states, this question
was among those submitted for arbitration by the parties:

As regards the "Effectivity and Duration" clause, the company

proposes that the collective bargaining agreement shall take effect only
upon its signing and shall remain in full force and effect for a period of
ve years. The union proposes that the agreement shall take effect
retroactive to March 15, 1989, the expiration date of the old CBA.

And after an evaluation of the parties' respective contention and

argument thereof, it is believed that that of the union is fair and
reasonable. It is the observation of this Arbitrator that in almost
subsequent CBAs, the effectivity of the renegotiated CBA, usually and most
often is made effective retroactive to the date when the immediately
preceding CBA expires so as to give a semblance of continuity. Hence, for
this particular case, it is believed that there is nothing wrong adopting the
stand of the union, that is that this CBA be made retroactive effective
March 15, 1989. 1 2

Parenthetically, the Decision rendered in the case at bar on January 27, 1999 1 3
ordered that the CBA should be effective for a term of two years counted from December
28, 1996 (the date of the Secretary of Labor's disputed Order on the parties' motion for
reconsideration) up to December 27, 1998. 1 4 That is to say, the arbitral award was given
prospective effect.
Upon a reconsideration of the Decision, this Court issued the assailed Resolution
which ruled that where an arbitral award granted beyond six months after the expiration of
the existing CBA, and there is no agreement between the parties as to the date of
effectivity thereof, the arbitral award shall retroact to the rst day after the six-month
period following the expiration of the last day of the CBA. In the dispositive portion,
however, the period to which the award shall retroact was inadvertently stated as
beginning on December 1, 1995 up to November 30, 1997.
In resolving the motions for reconsideration in this case, this Court took into
account the fact that petitioner belongs to an industry imbued with public interest. As
such, this Court can not ignore the enormous cost that petitioner will have to bear as a
CD Technologies Asia, Inc. 2018 cdasiaonline.com
 consequence of the full retroaction of the arbitral award to the date of expiry of the CBA,
and the inevitable effect that it would have on the national economy. On the other hand,
under the policy of social justice, the law bends over backward to accommodate the
interests of the working class on the humane justi cation that those with less privilege in
life should have more in law. 1 5 Balancing these two contrasting interests, this Court turned
to the dictates of fairness and equitable justice and thus arrived at a formula that would
address the concerns of both sides. Hence, this Court held that the arbitral award in this
case be made to retroact to the rst day after the six-month period following the
expiration of the last day of the CBA, i.e., from June 1, 1996 to May 31, 1998.
This Court, therefore, maintains the foregoing rule in the assailed Resolution pro hac
vice. It must be clari ed, however, that consonant with this rule, the two-year effectivity
period must start from June 1, 1996 up to May 31, 1998, not December 1, 1995 to
November 30, 1997.
During the interregnum between the expiration of the economic provisions of the
CBA and the date of effectivity of the arbitral award, it is understood that the hold-over
principle shall govern, viz:
"[I]t shall be the duty of both parties to keep the status quo and to continue
in full force and effect the terms and conditions of the existing agreement during
the 60-day freedom period and/or until a new agreement is reached by the
parties." Despite the lapse of the formal effectivity of the CBA the law still
considers the same as continuing in force and effect until a new CBA shall have
been validly executed. 1 6

Finally, this Court nds that petitioner's prayer, that the award of Two Thousand
Pesos shall be paid to rank-and- le employees during the two-year period, is well-taken.
The award does not extend to supervisory employees of petitioner. HSaCcE

WHEREFORE, the Motion for Partial Modi cation is GRANTED. The Resolution of
February 22, 2000 is PARTIALLY MODIFIED as follows: (a) the arbitral award shall retroact
to the two-year period from June 1, 1996 to May 31, 1998; (b) the increased wage award
of Two Thousand Pesos (P2,000.00) shall be paid to the rank-and- le employees during
the said two-year period. This Resolution is subject to the monetary advances granted by
petitioner to said employees during the pendency of this case, assuming such advances
had actually been distributed to them.
SO ORDERED.
Davide, Jr., C .J ., Melo, Kapunan, and Pardo, JJ ., concur.

Footnotes
1. 192 SCRA 414 (1990).
2. 241 SCRA 294 (1995).

3. 223 SCRA 779 (1993).

4. "When, in his opinion, there exists a labor dispute causing or likely to cause a strike or lockout
in an industry indispensable to the national interest, the Secretary of Labor and
Employment may assume jurisdiction over the dispute and decide it or certify the same
to the Commission for compulsory arbitration. . . . . "
CD Technologies Asia, Inc. 2018 cdasiaonline.com
 5. Italics provided.
6. Op. cit., note 1.

7. 241 SCRA 294 (1995).

8. Ibid., at 307.
9. Op. Cit., note 3.
10. Ibid., at 793.
11. 290 SCRA 690 (1998).

12. Ibid., at 702-703.

13. 302 SCRA 173 (1999).
14. Erroneously written in the Decision as "December 27 1999."
15. Felix Uy, et al. v. Commission on Audit , G.R. No. 130685, March 21, 2000; citing Ditan v.
POEA Administrator, 191 SCRA 823, 829 (1990).
16. National Congress of Unions in the Sugar Industry of the Philippines v. Ferrer-Calleja , 205
SCRA 478, 485 (1992).

CD Technologies Asia, Inc. 2018 cdasiaonline.com