Assumption of Jurisdiction by the Secretary of Labor/Certification of the Labor Dispute to the NLRC for Compulsory Arbitration

CIRTEK EMPLOYEES LABOR UNION-FEDERATION OF FREE WORKERS, Petitioner,

vs.
CIRTEK ELECTRONICS, INC., Respondent.

G.R. No. 190515               November 15, 2010

DOCTRINE:

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

FACTS:

Cirtek Electronics, Inc. (respondent), an electronics and semi-conductor firm situated inside the Laguna
Technopark, had an existing Collective Bargaining Agreement (CBA) with Cirtek Employees Labor Union-
Federation of Free Workers (petitioner) for the period January 1, 2001 up to December 31, 2005. Prior to the
3rd year of the CBA, the parties renegotiated its economic provisions but failed to reach a settlement,
particularly on the issue of wage increases. The Union thereupon declared a bargaining deadlock and filed a
Notice of Strike. Respondent company, upon the other hand, filed a Notice of Lockout.

While the conciliation proceedings were ongoing, the company placed seven union officers under preventive
suspension for allegedly spearheading a boycott of overtime work. The officers were eventually dismissed
from employment, prompting the union to file another Notice of Strike which was, after conciliation meetings,
converted to a voluntary arbitration case. The dismissal of the officers was later found to be legal, hence, the
Union appealed.

In the meantime, as amicable settlement of the CBA was deadlocked, the Union went on strike on June 20,
2005. By Order dated June 23, 2005, the Secretary of Labor assumed jurisdiction over the controversy and
issued a Return to Work Order which was complied with.

Before the Secretary of Labor could rule on the controversy, respondent created a Labor Management Council
(LMC) through which it concluded with the remaining officers of petitioner a Memorandum of Agreement
(MOA) providing for daily wage increases of ₱6.00 per day effective January 1, 2004 and ₱9.00 per day
effective January 1, 2005. Petitioner Union submitted the MOA via Motion and Manifestation to the Secretary
of Labor, alleging that the remaining officers signed the MOA under respondent’s assurance that should the
Secretary order a higher award of wage increase, respondent company would comply.

By Order, the Secretary of Labor resolved the CBA deadlock by awarding a wage increase of from ₱6.00 to
₱10.00 per day effective January 1, 2004 and from ₱9.00 to ₱15.00 per day effective January 1, 2005, and
adopting all other benefits as embodied in the MOA.
Assumption of Jurisdiction by the Secretary of Labor/Certification of the Labor Dispute to the NLRC for Compulsory Arbitration

Respondent moved for a reconsideration of the Decision as petitioner’s vice-president submitted a "Muling
Pagpapatibay ng Pagsang-ayon sa Kasunduan na may Petsang ika-4 ng Agosto 2005," stating that the union
members were waiving their rights and benefits under the Secretary’s Decision. Reconsideration of the
Decision was denied by Resolution of August 12, 2008, hence, respondent filed a petition for certiorari before
the Court of Appeals.

By Decision of September 24, 2009, the appellate court ruled in favor of respondent company and accordingly
set aside the Decision of the Secretary of Labor. It held that the Secretary of Labor gravely abused his
discretion in not respecting the MOA. It did not give credence to the minutes of the meeting that attended the
forging of the MOA as it was not verified, nor to the "Paliwanag" submitted by respondent union members
explaining why they signed the MOA as it was not notarized.

Petitioner Union’s motion for reconsideration having been denied by Resolution of December 2, 2009, the
present petition was filed, maintaining that the Secretary of Labor’s award is in order, being in accord with the
parties’ CBA history ─ respondent having already granted ₱15.00 per day for 2001, ₱10.00 per day for 2002,
and ₱10.00 per day for 2003, and that the Secretary has the power to grant awards higher than what are
stated in the CBA.

Respecting the MOA, petitioner Union posits that it was "surreptitiously entered into [in] bad faith," it having
been forged without the assistance of the Federation of Free Workers or counsel, adding that respondent
could have waited for the Secretary’s resolution of the pending CBA deadlock or that the MOA could have
been concluded before representatives of the Secretary of Labor.

ISSUE:

Whether or not the Secretary of Labor is empowered to give arbitral awards in the exercise of his authority to
assume jurisdiction over labor disputes alleged disaffiliation of the Union from the Federation of Free Workers
during the pendency of the case resulted in the Federation of Free Workers losing its personality to represent
the Union.

HELD:

Yes.

It is well-settled that the Secretary of Labor, in the exercise of his power to assume jurisdiction under Art. 263
(g) of the Labor Code, may resolve all issues involved in the controversy including the award of wage increases
and benefits. While an arbitral award cannot per se be categorized as an agreement voluntarily entered into
by the parties because it requires the intervention and imposing power of the State thru the Secretary of
Labor when he assumes jurisdiction, the arbitral award can be considered an approximation of a collective
bargaining agreement which would otherwise have been entered into by the parties, hence, it has the force
and effect of a valid contract obligation.
Assumption of Jurisdiction by the Secretary of Labor/Certification of the Labor Dispute to the NLRC for Compulsory Arbitration

That the arbitral award was higher than that which was purportedly agreed upon in the MOA is of no moment.
For the Secretary, in resolving the CBA deadlock, is not limited to considering the MOA as basis in computing
the wage increases. He could, as he did, consider the financial documents submitted by respondent as well as
the parties’ bargaining history and respondent’s financial outlook and improvements as stated in its website.

It bears noting that since the filing and submission of the MOA did not have the effect of divesting the
Secretary of his jurisdiction, or of automatically disposing the controversy, then neither should the provisions
of the MOA restrict the Secretary’s leeway in deciding the matters before him.

While a contract constitutes the law between the parties, this is so in the present case with respect to the
CBA, not to the MOA in which even the union’s signatories had expressed reservations thereto. But even
assuming arguendo that the MOA is treated as a new CBA, since it is imbued with public interest, it must be
construed liberally and yield to the common good.