Table of Contents

1.) Franklin Baker v Trajano.....................................................................................................................2

2.) PMTI v Pura Ferrer.............................................................................................................................6
4.) Cathay Pacific Steel Corp v CA (Cuse & Tomondong).........................................................................27
5.) San Miguel Corp Supervisors Union v Laguesma...............................................................................33
6.) Standard Chartered Bank Union v Standard Chartered Bank............................................................38
7.) Natu v Torres (& Republic Planters Bank).........................................................................................42
8.) Metrolab v Confesor (& Metrolab Employees Association)................................................................49
9.) Sugbuanon Rural Bank v Laguesma (& Sagbuanon association of professional, supervisory, office,
and technical employees..............................................................................................................................60
10.) Tunay na Pagkakaisa ng Mangagawa sa Asia Brewery v Asia Brewery............................................65
11.) San Miguel Foods v San Miguel Supervisors and Exempt Union........................................................71
12.) Heritage Hotel v Secretary of Labor (& NUWHRAIN-HHMSC)............................................................76
13.) Benguet Electric Cooperative v. Ferrer-Calleja..................................................................................85
15.) Victoriano v Elizalde Rope Workers Union........................................................................................93
18.) BPI v BPI Employees........................................................................................................................112
18.) B. Dissent on BPI, Brion...................................................................................................................127
18.) C.) Dissent. Carpio..........................................................................................................................136
21.) Oca v Trajano.................................................................................................................................161
22.) Halili v CIR......................................................................................................................................165
23.) Toncino v Ferrer-Calleja..................................................................................................................178
24.) Palacol v. Ferrer-Caleja...................................................................................................................181
25.) Rance v. NLRC.................................................................................................................................186
26.) Aldovino v. NLRC............................................................................................................................190
27.) Producer’s Bank v NLRC..................................................................................................................194
28.) Gabriel v Secretary.........................................................................................................................197
29.) Diamonon v DOLE...........................................................................................................................201
30.) Verceles v BLR-DOLE.......................................................................................................................204

Labor II – 1
1.) Franklin Baker v Trajano

G.R. No. 75039 January 28, 1988

FRANKLIN BAKER COMPANY OF THE PHILIPPINES, petitioner,

vs.
HONORABLE CRESENCIO B. TRAJANO, DIRECTOR OF BUREAU OF LABOR RELATIONS, FRANKLIN
BAKER BROTHERHOOD ASSOCIATION (TECHNICAL AND OFFICE EMPLOYEES)-ASSOCIATION OF TRADE
UNIONS (ATU), respondents.

PARAS, J.:

This is a petition for certiorari seeking the annulment of. (a) the Order of Mediator-Arbiter Conchita J. Martinez of the Ministry of Labor and Employment, Davao
City, dated September 17, 1984 in LRD Case No. R-22 MED-ROXI-UR-28-84 entitled "In Re: Petition for Certification Election Among the Office and Technical
Employees of Franklin Baker Company of the Philippines, Davao Plant at Coronan, Sta. Cruz, Davao del Sur, Franklin Baker Company of the Philippines, Davao
Plant, Employer, Franklin Baker Brotherhood Association (Technical and Office Employees)-Association of Trade Unions (ATU)," insofar as it includes the
managerial employees (inspectors, foremen and supervisors) in the certification election; (b) the Order of April 7, 1986 of Director Cresencio B. Trajano, also of the
MOLE, dismissing the appeal of aforesaid Order of September 17, 1985 for lack of merit; and (c) the Order of June 6, 1986 of said Director denying
reconsideration of his Order of April 7, 1986 and affirming the same in toto (Rollo, p. 90).

In brief, the undisputed facts of this case are as follows:

On April 23, 1984, private respondent Franklin Baker Brotherhood Association-(ATU) filed a petition for certification
election among the office and technical employees of petitioner company with the Ministry of Labor and
Employment, Regional Office No. XI, Davao City, docketed as LRD No. R-22, MED-ROXI-UR-2884. Among other
things, it alleges that Franklin Baker Company of the Phils. Davao Plant, had in its employ approximately ninety (90)
regular technical and office employees, which group is separate and distinct from the regular rank and file
employees and is excluded from the coverage of existing Collective Bargaining Agreement.

Petitioner company did not object to the holding of such an election but manifested that out of the ninety (90)
employees sought to be represented by the respondent union, seventy four (74) are managerial employees while
two (2) others are confidential employees, hence, must be excluded from the certification election and from the
bargaining unit that may result from such election (Rollo, p. 3).

Hearings were held and thereafter, the parties agreed to file their respective memoranda. Likewise, petitioner filed a
reply to private respondent's Memorandum (Rollo, p. 4).

Subsequently, on September 17, 1984, Med-Arbiter Conchita J. Martinez issued an order, the dispositive part of
which reads:

Accordingly, the petition is hereby granted and a certification election among the office and technical
employees of Franklin Baker Company of the Philippines, Davao Plant is ordered within twenty (20)
days from receipt hereof. The choices shall be the following:

1. Franklin Baker Brotherhood Association-(ATU)

2. No Union

The representation officer assigned shall call the parties for a pre-election conference at least five
(5) days before the date of the election to thresh out the mechanics of the election, the finalization of
the list of voters, the posting of notices and other relevant matters.

The company's latest payroll shall be the basis for determining the office and technical workers
qualified to vote.

Labor II – 1
 SO ORDERED. (Rollo, pp. 47-48).

From the aforequoted order petitioner Company appealed to the Bureau of Labor Relations, docketed as BLR Case
No. A-22884, praying that the appealed order be set aside and another be issued declaring the seventy four (74)
inspectors, foremen and supervisors as managerial employees.

During the pendency of the appeal, sixty one (61) of the employees involved, filed a Motion to Withdraw the petition
for certification election praying therein for their exclusion from the Bargaining Unit and for a categorical declaration
that they are managerial employees, as they are performing managerial functions (Rollo, p. 4).

On April 7, 1986, public respondent Bureau of Labor Relations Cresencio B. Trajano issued a Resolution
affirming the order dated September 17, 1984, the dispositive part of which reads:

WHEREFORE, the appealed Order dated September 17, 1985 is hereby affirmed and the appeal
dismissed for lack of merit. Let the certification election among the office and technical employees of
Franklin Baker Company of the Philippines proceed without delay.

The latest payrolls of the company shall be used as basis of determining the list of eligible voters.
(Rollo, p. 77),

Petitioner company sought the reconsideration of the aforequoted resolution but its motion was denied by Director
Cresencio B. Trajano in his order dated June 6, 1986, the dispositive part of which reads:

WHEREFORE, the appeal of respondent company is, dismissed for lack of merit and the Bureau's
Resolution dated April 1986 affirmed in toto.

Let, therefore, the pertinent papers of this case be immediately forwarded to the Office of origin for
the conduct of the certification election. (Rollo, p. 90).

Hence, this petition.

In the resolution of July 30, 1986, the Second Division of this Court without giving due course to the petition required
the respondents to file their comment (Rollo, p. 91). On August 28, 1986, public respondent filed its comment (Rollo,
pp. 99 to 102). Likewise private respondent filed its comment on September 5, 1986 (Rollo, pp. 104 to 107).

In the resolution of September 8, 1986, petitioner was required to file its reply to public respondent's comment
(Rollo, p. 119) which reply was filed on September 18, 1986 (Rollo, pp. 122-127).

On October 20, 1986, this Court resolved to give due course to the petition and required the parties to file their
respective Memoranda (Rollo, p. 133). In compliance with said resolution, petitioner and private respondent filed
their Memoranda on December 8, 1986 and December 29, 1986, respectively (Rollo, pp. 183-187). On the other
hand, public respondent filed with this Court a manifestation (Rollo, p. 153) to the effect that it is adopting as its
memorandum its comment dated August 18, 1986 (Rollo, p. 99) which manifestation was noted by this Court in its
resolution dated November 26, 1986
(Rollo, p. 155).

The lone assignment of error raised by petitioner states:

Public respondent acted with grave abuse of discretion amounting to lack of jurisdiction when he
ruled that the 76 employees subject of this petition are not managerial employees (inspectors,
foremen, supervisors and the like) and therefore, may participate in the certification election among
the office and technical employees. Such ruling is contrary to jurisprudence and to the factual
evidence presented by petitioner which was not rebutted by private respondent union and is
therefore patently baseless.

Labor II – 1
From this assigned error two questions are raised by petitioner, namely: (1) whether or not subject employees are
managerial employees under the purview of the Labor Code and its Implementing Rules; and (2) whether the
Director of the Bureau of Labor Relations acted with abuse of discretion in affirming the order of Mediator-Arbiter
Conchita J. Martinez.

There is no question that there are in the DAVAO Plant of petitioner company approximately 90 regular technical
and office employees which form a unit, separate and distinct from the regular rank and file employees and are
excluded from the coverage of existing Collective Bargaining Agreement; that said group of employees organized
themselves as Franklin Baker Brotherhood Association (technical and office employees) and affiliated with the local
chapter of the Association of trade Unions (ATU), a legitimate labor organization with Registration Permit No. 8745
(Fed) LC and with office located at the 3rd Floor of Antwell Bldg., Sta. Ana, Davao City; that petitioner company did
not object to the holding of such certification, but only sought the exclusion of inspectors, foremen and supervisors,
members of Franklin Baker Brotherhood Association (technical and office employees) numbering 76 from the
certification election on the ground that they are managerial employees.

A managerial employee is defined as 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, or
to effectively recommend such managerial actions." (Reynolds Phil. Corp. v. Eslava, 137 SCRA [1985], citing
Section 212 (K), Labor Code.

Also pertinent thereto is Section 1 (M) of the Implementing Rules and Regulations, which is practically a restatement
of the above provision of law.

To sustain its posture, that the inspectors, foreman and supervisors numbering 76 are managerial
employees, petitioner painstakingly demonstrates that subject employees indeed participate in the formulation and
execution of company policies and regulations as to the conduct of work in the plant, exercised the power to hire,
suspend or dismiss subordinate employees and effectively recommend such action, by citing concrete cases,
among which are: (1) Mr. Ponciano Viola, a wet process inspector, who while in the performance of his duty, found
Mr. Enrique Asuncion, a trimmer "forging", falsifying and simulating a company time card (timesheet) resulting in
payroll padding, immediately recommended the dismissal of said erring employee, resulting in the latter's discharge.
(Employer's Memo, Rollo, p.18); (2) Mr. Manuel Alipio, an opening inspector, recommended for suspension Nut
Operator Ephraim Dumayos who was caught in the act of surreptitiously transferring to a co-worker's bin some
whole nuts which act constitutes a violation of company policy; (3) Mr. Sofronio Abangan, a line inspector, censured
and thereafter recommended the suspension of Mr. Romeo Fullante, for being remiss in the proper and accurate
counting of nuts; (4) Binleader Dionisio Agtang was required to explain his inefficiency of Mr. Saturnino Bangkas,
Bin Loading Inspector; (5) for disobeying the orders of Bin Loading Inspector Mauricio Lumanog's order, Macario
Mante, Eduardo Adaptor, Rodolfo Irene and George Rellanos were all recommended for suspension which
culminated in an investigation conducted by Lumanog's higher bosses (Ibid., p. 20).

It has also been shown that subject employees have the power to hire, as evidenced by the hiring of Rolando Asis,
Roy Layson, Arcadio Gaudicos and Felix Arciaga, upon the recommendation of Opening Inspector Serafin Suelo,
Processing Inspector Leonardo Velez and Laureano C. Lim, Opening Inspector (Ibid., p. 21).

It will be noted, however, that in the performance of their duties and functions and in the exercise of their
recommendatory powers, subject employees may only recommend, as the ultimate power to hire, fire or suspend as
the case may be, rests upon the plant personnel manager.

The test of "supervisory" or "managerial status" depends on whether a person possesses authority to act in the
interest of his employer in the matter specified in Article 212 (k) of the Labor Code and Section 1 (m) of its
Implementing Rules and whether such authority is not merely routinary or clerical in nature, but requires the use of
independent judgment. Thus, where such recommendatory powers as in the case at bar, are subject to evaluation,
review and final action by the department heads and other higher executives of the company, the same, although
present, are not effective and not an exercise of independent judgment as required by law (National Warehousing
Corp. v. CIR, 7 SCRA 602-603 [1963]).

Furthermore, in line with the ruling of this Court, subject employees are not managerial employees because as
borne by the records, they do not participate in policy making but are given ready policies to execute and standard
Labor II – 1
practices to observe, thus having little freedom of action (National Waterworks and Sewerage Authority v. NWSA
Consolidated, L-18938, 11 SCRA 766 [1964]).

Petitioner's contention that the Director of the Bureau of Labor Relations acted with abuse of discretion amounting to
lack of jurisdiction in holding that the 76 employees are not managerial employees and must be included in the
certification election has no basis in fact and in law. Neither is its contention that the use of the word's "and/or"
categorically shows that performance of the functions enumerated in the law qualifies an employee as a managerial
employee.

It is well settled that the findings of fact of the Ministry of Labor and National Labor Relations Commission are
entitled to great respect, unless the findings of fact and the conclusions made therefrom, are not supported by
substantial evidence, or when there is grave abuse of discretion committed by said public official (Kapisanan ng
Manggagawa sa Camara Shoes, 2nd Heirs of Santos Camara, et al., 111 SCRA 477 [1982]; International hardwood
and Veneer Co. of the Philippines v. Leonardo, 117 SCRA 967 [1982]; Pan-Phil-Life, Inc. v. NLRC, 114 SCRA 866
[1982]; Pepsi-Cola Labor Union-BF LUTUPAS Local Chapter N-896 v. NLRC, 114 SCRA 930 [1982]; Egyptair v.
NLRC, 148 SCRA 125 [1987]; RJL Martinez Fishing Corp. v. NLRC, G.R. Nos. 63550-51, 127 SCRA 455 [1984];
and Reyes v. Phil. Duplicators, G.R. No. 54996, 109 SCRA 489 [1981]).

By "grave abuse of discretion" is meant, such capricious and whimsical exercise of judgment as is equivalent to lack
of jurisdiction. The abuse of discretion must be grave as where the power is exercised in an arbitrary or despotic
manner by reason of passion or personal hostility and must be so patent and gross as to amount to an evasion of
positive duty or to a virtual refusal to perform the duty enjoined by or to act at all in contemplation of law (G.R. No.
59880, George Arguelles [Hda. Emma Arguelles v. Romeo Yang, etc.], September 11, 1987).

Moreover, this Court has ruled that findings of administrative agencies which have acquired expertise, like the Labor
Ministry, are accorded respect and finality (Special Events and Central Shipping Office Workers Union v. San Miguel
Corp., 122 SCRA 557 [1983] and that the remedy of certiorari does not lie in the absence of any showing of abuse
or misuse of power properly vested in the Ministry of Labor and Employment (Buiser v. Leogardo, Jr., 131 SCRA
151 [1984]).

After a careful review of the records, no plausible reason could be found to disturb the findings of fact and the
conclusions of law of the Ministry of Labor.

Even if We regard the employees concerned as "managerial employees," they can still join the union of the rank and
file employees. They cannot however form their own exclusive union as "managerial employees" (Bulletin Publishing
Corporation v. Sanchez, 144 SCRA 628).

PREMISES CONSIDERED, the petition is DISMISSED, and the assailed resolution and orders are AFFIRMED

Labor II – 1
2.) PMTI v Pura Ferrer
[G.R. No. 85915. January 17, 1990.]

PAGKAKAISA NG MGA MANGGAGAWA SA TRIUMPH INTERNATIONAL-UNITED LUMBER AND

GENERAL WORKERS OF THE PHILIPPINES (PMTI-ULGWF), Petitioner, v. PURA FERRER-
CALLEJA, DIRECTOR OF THE BUREAU OF LABOR RELATIONS AND THE CONFEDERATION OF
FILIPINO WORKERS (CFW), PROGRESSIVE EMPLOYEES UNION (PEU-TIPI), Respondents.

Godofredo R. Paceño, Jr. for Petitioner.

Sycip, Salazar, Hernandez & Gatmaitan for Triumph International Phils. Inc.

Rogelio R. Udarbe for Private Respondents.

SYLLABUS

1. LABOR LAWS; BUREAU OF LABOR RELATIONS; FINDING OF FACT OF QUASI-JUDICIAL BODIES

SUPPORTED BY SUBSTANTIAL EVIDENCE ARE BINDING ON THE COURT. — In the determination of
whether or not the members of respondent union are managerial employees, we accord due respect
and, therefore, sustain the findings of fact made by the public respondent pursuant to the time-
honored rule that findings of fact of quasi-judicial agencies like the Bureau of Labor Relations which
are supported by substantial evidence are binding on us and entitled to great respect considering
their expertise in their respective fields. (see Phil. Airlines Employees Asso. (PALEA) v. Ferrer-Calleja,
162 SCRA 426 [1988]; Producers Bank of the Philippines v. National Labor Relations Commission,
G.R. No. 76001, September 5, 1988; Salvador Lacorte v. Hon. Amado G. Inciong, Et Al., G.R. No.
52034, September 27, 1988; Johnson and Johnson Labor Union-FFW, Et. Al. v. Director of Labor
Relations, G.R. No. 76427, February 21, 1989; Teofila Arica, Et. Al. v. National Labor Relations
Commission, Et Al., G.R. No. 78210, February 28, 1989; A.M. Oreta & Co. Inc. v. National Labor
Relations Commission, G.R. No. 74004, August 10, 1989). According to the Med-Arbiter, while the
functions, and we may add, the titles of the personnel sought to be organized appear on paper to
involve an apparent exercise of managerial authority, the fact remains that none of them discharge
said functions. The petitioner has failed to show reversible error insofar as this finding is concerned.

2. ID.; ID.; RULE IN DETERMINING WHETHER OR NOT THE UNION MEMBERS ARE RANK & FILE
EMPLOYEES. — In ruling that the members of respondent union are rank-and-file and not managerial
employees, the public respondent made the following findings: ". . . (1) They do not have the power
to lay down and execute management policies as they are given ready policies merely to execute and
standard practices to observe; 2) they do not have the power to hire, transfer, suspend, lay-off,
recall, discharge, assign or discipline employees but only to recommend for such actions as the
power rests upon the personnel manager; and 3) they do not have the power to effectively
recommend any managerial actions as their recommendations have to pass through the department
manager for review, the personnel manager for attestation and the general manager/president for
final actions."cralaw virtua1aw library

3. ID.; ID.; TEST OF SUPERVISORY OR MANAGERIAL STATUS. — The Court had explicitly explained
in the case of Franklin Baker Company of the Philippines v. Trajano, 157 SCRA 416 [1988] that: "The
test of ‘supervisory or managerial status’ depends on whether a person possesses authority to act in
the interest of his employer in the matter specified in Article 212 (K) of the Labor Code and Section 1
(m) of its Implementing Rules and whether such authority is not merely routinary or clerical in
nature, but requires the use of independent judgment. Thus, where such recommendatory powers as
in the case at bar, are subject to evaluation, review and final action by the department heads and
other higher executives of the company, the same, although present, are not effective and not an
Labor II – 1
exercise of independent judgment as required by law (National Warehousing Corp. v. CIR, 7 SCRA
602-603 [1963])." The public respondent, in its factual findings, found that the supervisory
employees sought to be represented by the respondent union are not involved in policy-making and
their recommendatory powers are not even instantly effective since the same are still subject to
review by at least three managerial heads (department manager, personnel manager and general
manager) before final action can be taken. Hence, it is evidently settled that the said employees do
not possess a managerial status. The fact that their work designations are either managers or
supervisors is of no moment considering that it is the nature of their functions and not the said
nomenclatures or titles of their jobs which determines their statuses (see Engineering Equipment,
Inc. v. National Labor Relations Commission, 133 SCRA 752 [1984] citing National Waterworks and
Sewerage Authority v. NWSA Consolidated Unions, 11 SCRA 766 [1964]).

4. ID.; ID.; CERTIFICATION ELECTION; CONTRACT BAR RULE; APPLICABLE IN CASE AT BAR. —
Anent the correlative issue of whether or not the contract-bar rule applies to the present case, Rule
V, Section 3, Book V of the Implementing Rules and Regulations of the Labor Code is written in plain
and simple terms. It provides in effect that if a collective bargaining agreement validly exists, a
petition for certification election can only be entertained within sixty (60) days prior to the expiry
date of said agreement. Respondent union’s petition for certification election was filed on November
25, 1987. At the time of the filing of the said petition, a valid and existing CBA was present between
petitioner and Triumph International. The CBA was effective up to September 24, 1989. There is no
doubt that the respondent union’s CBA constituted a bar to the holding of the certification election as
petitioned by the respondent union with public Respondent. (see Associated Trade Unions [ATU] v.
Trajano, 162 SCRA 318 [1988], Federation of Democratic Trade Union v. Pambansang Kilusan ng
Paggawa, 156 SCRA 482 [1987]); Tanduay Distillery Labor Union v. National Labor Relations
Commission, 149 SCRA 470 [1987]). The members of the respondent union should wait for the
proper time.

DECISION

GUTIERREZ, JR., J.:

Once again we uphold the existing law which encourages one-union, one-company policy in this
petition for certiorari with prayer for preliminary injunction. The petitioner assails the resolutions of
the public respondent dated August 24, 1988 and October 28, 1988 both ordering the holding of a
certification election among certain monthly-paid employees of Triumph International Philippines,
Inc. (Triumph International for brevity).

The petitioner is the recognized collective bargaining agent of the rank-and-file employees of

Triumph International with which the latter has a valid and existing collective bargaining
agreement effective up to September 24, 1989.

On November 25, 1987, a petition for certification election was filed by the respondent union with the
Department of Labor and Employment.

On January 30, 1988, a motion to dismiss the petition for certification election was filed by Triumph
International on the grounds that the respondent union cannot lawfully represent managerial
employees and that the petition cannot prosper by virtue of the contract-bar rule. On the same
grounds, the petitioner, as intervenor, filed its opposition to the petition on February 18, 1988.

On April l3, 1988, the Labor Arbiter issued an order granting the petition for certification election and
directing the holding of a certification election to determine the sole and exclusive bargaining
representative of all monthly-paid administrative, technical, confidential and supervisory employees
Labor II – 1
of Triumph International. chanrobles virtual lawlibrary

On appeal, the public respondent on August 24, 1988 affirmed the Labor Arbiter’s order with certain
modifications as follows: jgc:chanrobles.com.ph

"WHEREFORE, premises considered, the order appealed from is hereby affirmed subject to the

modification in that the subject employees sought to be represented by the petitioner union are given
the option whether to join the existing bargaining unit composed of daily paid rank-and-file
employees. If they opt to join, the pertinent provision of the existing CBA should be amended so as
to include them in its coverage." (Rollo, p. 19)

On September 5, 1988, Triumph International filed a motion for reconsideration which was denied by
the public respondent in a resolution dated October 28, 1988.

The sole issue presented by the petitioner in the instant case is whether or not the public respondent
gravely abused its discretion in ordering the immediate holding of a certification election among the
workers sought to be represented by the respondent union.

The petitioner argues that the members of respondent union are managerial employees who are
expressly excluded from joining, assisting or forming any labor organization under Art. 245 of the
Labor Code.

In the determination of whether or not the members of respondent union are managerial employees,
we accord due respect and, therefore, sustain the findings of fact made by the public respondent
pursuant to the time-honored rule that findings of fact of quasi-judicial agencies like the Bureau of
Labor Relations which are supported by substantial evidence are binding on us and entitled to great
respect considering their expertise in their respective fields. (see Phil. Airlines Employees Asso.
(PALEA) v. Ferrer-Calleja, 162 SCRA 426 [1988]; Producers Bank of the Philippines v. National Labor
Relations Commission, G.R. No. 76001, September 5, 1988; Salvador Lacorte v. Hon. Amado G.
Inciong, Et Al., G.R. No. 52034, September 27, 1988; Johnson and Johnson Labor Union-FFW, Et. Al.
v. Director of Labor Relations, G.R. No. 76427, February 21, 1989; Teofila Arica, Et. Al. v. National
Labor Relations Commission, Et Al., G.R. No. 78210, February 28, 1989; A.M. Oreta & Co. Inc. v.
National Labor Relations Commission, G.R. No. 74004, August 10, 1989). According to the Med-
Arbiter, while the functions, and we may add, the titles of the personnel sought to be organized
appear on paper to involve an apparent exercise of managerial authority, the fact remains that none
of them discharge said functions. The petitioner has failed to show reversible error insofar as this
finding is concerned.

In ruling that the members of respondent union are rank-and-file and not managerial employees, the
public respondent made the following findings: jgc:chanrobles.com.ph

". . . (1) They do not have the power to lay down and execute management policies as they are
given ready policies merely to execute and standard practices to observe; 2) they do not have the
power to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline employees but only to
recommend for such actions as the power rests upon the personnel manager; and 3) they do not
have the power to effectively recommend any managerial actions as their recommendations have to
pass through the department manager for review, the personnel manager for attestation and the
general manager/president for final actions. . . ." (At pp. 17-18, Rollo)

The petitioner further argues that while it has recognized those signatories and employees occupying
the positions of Assistant Manager, Section Chief, Head Supervisor and Supervisor as managerial
employees under the existing collective bargaining agreement, in the event that they are declared as
rank-and-file employees in the present case they are not precluded from joining and they should join
the petitioner.chanrobles virtual lawlibrary

Labor II – 1
We find the aforesaid contention of the petitioner meritorious in the absence of a showing that there
are compelling reasons such as the denial of the right to join the petitioner which is the certified
bargaining unit to the members of respondent union or that there are substantial distinctions
warranting the recognition of a separate group of rank-and-file employees even as there is an
existing bargaining agent for rank-and-file employees.

In the case of Philtranco Service Enterprises v. Bureau of Labor Relations, et. al., G.R. No. 85343
promulgated on June 28, 1989, we stated that: jgc:chanrobles.com.ph

"The Labor Code recognizes two (2) principal groups of employees, namely, the managerial and the
rank-and-file groups. Thus, Art. 212 (k) of the Code provides: chanrob1es virtual 1aw library

x          x           x

"(k) ‘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, or to effectively recommend such managerial action. All employees not falling within this
definition are considered rank-and-file employees for purposes of this Book.

"In implementation of the aforequoted provision of the law, Section II of Rule II, Book V of the
Omnibus Rules implementing the Labor Code did away with existing supervisory unions classifying
the members either as managerial or rank and file employees depending on the work they perform.
If they discharge managerial functions, supervisors are prohibited from forming or joining any labor
organization. If they do not perform managerial work, they may join the rank and file union and if
none exists, they may form one such rank and file organization. This rule was emphasized in the case
of Bulletin Publishing Corp. v. Sanchez, (144 SCRA 628 [1986])." cralaw virtua1aw library

We have explicitly explained in the case of Franklin Baker Company of the Philippines v. Trajano, 157
SCRA 416 [1988] that: jgc:chanrobles.com.ph

"The test of ‘supervisory or managerial status’ depends on whether a person possesses authority to
act in the interest of his employer in the matter specified in Article 212 (K) of the Labor Code and
Section 1 (m) of its Implementing Rules and whether such authority is not merely routinary or
clerical in nature, but requires the use of independent judgment. Thus, where such recommendatory
powers as in the case at bar, are subject to evaluation, review and final action by the department
heads and other higher executives of the company, the same, although present, are not effective and
not an exercise of independent judgment as required by law (National Warehousing Corp. v. CIR, 7
SCRA 602-603 [1963])." cralaw virtua1aw library

The public respondent, in its factual findings, found that the supervisory employees sought to be
represented by the respondent union are not involved in policy-making and their recommendatory
powers are not even instantly effective since the same are still subject to review by at least three
managerial heads (department manager, personnel manager and general manager) before final
action can be taken. Hence, it is evidently settled that the said employees do not possess a
managerial status. The fact that their work designations are either managers or supervisors is of no
moment considering that it is the nature of their functions and not the said nomenclatures or titles of
their jobs which determines their statuses (see Engineering Equipment, Inc. v. National Labor
Relations Commission, 133 SCRA 752 [1984] citing National Waterworks and Sewerage Authority v.
NWSA Consolidated Unions, 11 SCRA 766 [1964]). chanrobles.com.ph : virtual law library

Under the old Industrial Peace Act (Republic Act No. 875), the term "supervisors" had the following
definition, to wit:
jgc:chanrobles.com.ph

"Sec. 2. Definitions — As used in this Act —

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 x          x           x

(k) ‘Supervisor’ means any person having authority in the interest of an employer, to hire, transfer,
suspend, lay-off, recall, discharge, assign, recommend, or discipline, other employees, or responsibly
to direct them, and to adjust their grievances, or effectively to recommend such acts if, in connection
with the foregoing, the exercise of such authority is not of a merely routinary or clerical nature but
requires the use of independent judgment." cralaw virtua1aw library

Section 3 of the same Act further provides that the supervisors as defined above shall not be eligible
for membership in a labor organization of employees under their supervision but may form separate
organizations of their own.

With the enactment of the Labor Code (Presidential Decree No. 442 as amended), the term
"supervisor" was replaced by "managerial employee." Book V, Art. 212, subparagraph (k) of said
Code reads: jgc:chanrobles.com.ph

"(k) ‘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, or to effectively recommend such managerial actions. All employees not falling within this
definition are considered rank and file employees for purposes of this Book." cralaw virtua1aw library

Art. 245 of the aforementioned Code prohibits managerial employees from joining, assisting or
forming any labor organization. Hence, employees who had then formed supervisory unions were
classified either as managerial or rank-and-file depending on their functions in their respective work
assignments. (Bulletin Publishing Corp. v. Sanchez, supra.)

The recent amendments to the Labor Code contain separate definitions for managerial and
supervisory employees. Section 4 of Republic Act No. 6715 states that: jgc:chanrobles.com.ph

"Section 4, Article 212 of the Labor Code of the Philippines, as amended, is further amended to read
as follows: chanrob1es virtual 1aw library

x          x           x

"(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 management 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." cralaw virtua1aw library

Section 18 of the same Act retains the provision on the ineligibility of managerial employees to join
any labor organization. However, the right of supervisory employees to form their own union is
revived under the said section which states, in part, to wit: jgc:chanrobles.com.ph

". . . Supervisory employees shall not be eligible for membership in a labor organization of the rank-
and-file employees but may join, assist or form separate labor organizations of their own." cralaw virtua1aw library

Thus, the right of supervisory employees to organize under the Industrial Peace Act is once more
recognized under the present amendments to the Labor Code. (see Adamson & Adamson, Inc., v.
The Court of Industrial Relations, 127 SCRA 268 [1984]). In the absence of any grave abuse of
discretion on the part of the public respondent as to the status of the members of the respondent
Labor II – 1
union, we adopt its findings that the employees sought to be represented by the respondent union
are rank-and-file employees.

There is no evidence in the records which sufficiently distinguishes and clearly separates the group of
employees sought to be represented by the private respondents into managerial and supervisory on
one hand or supervisory and rank-and-file on the other. The ‘respondents’ pleadings do not show the
distinctions in functions and responsibilities which differentiate the managers from the supervisors
and sets apart the rank-and-file from either the managerial or supervisory groups. As a matter of
fact, the formation of a supervisor’s union was never before the Labor Arbiter and the Bureau of
Labor Relations and neither is the issue before us. We, therefore, abide by the public respondent’s
factual findings in the absence of a showing of grave abuse of discretion. chanrobles.com.ph : virtual law library

In the case at bar, there is no dispute that the petitioner is the exclusive bargaining representative of
the rank-and-file employees of Triumph International. A careful examination of the records of this
case reveals no evidence that rules out the commonality of interests among the rank-and-file
members of the petitioner and the herein declared rank-and-file employees who are members of the
respondent union. Instead of forming another bargaining unit, the law requires them to be members
of the existing one. The ends of unionism are better served if all the rank-and-file employees with
substantially the same interests and who invoke their right to self-organization are part of a single
unit so that they can deal with their employer with just one and yet potent voice. The employees’
bargaining power with management is strengthened thereby. Hence, the circumstances of this case
impel us to disallow the holding of a certification election among the workers sought to be
represented by the respondent union for want of proof that the right of said workers to self-
organization is being suppressed.

Once again we enunciate that the proliferation of unions in an employer unit is discouraged as a
matter of policy unless compelling reasons exist which deny a certain and distinct class of employees
the right to self-organization for purposes of collective bargaining. (see General Rubber & Footwear
Corporation v. Bureau of Labor Relations, 155 SCRA 283 [1987]).

Anent the correlative issue of whether or not the contract-bar rule applies to the present case, Rule
V, Section 3, Book V of the Implementing Rules and Regulations of the Labor Code is written in plain
and simple terms. It provides in effect that if a collective bargaining agreement validly exists, a
petition for certification election can only be entertained within sixty (60) days prior to the expiry
date of said agreement. Respondent union’s petition for certification election was filed on November
25, 1987. At the time of the filing of the said petition, a valid and existing CBA was present between
petitioner and Triumph International. The CBA was effective up to September 24, 1989. There is no
doubt that the respondent union’s CBA constituted a bar to the holding of the certification election as
petitioned by the respondent union with public Respondent. (see Associated Trade Unions [ATU] v.
Trajano, 162 SCRA 318 [1988], Federation of Democratic Trade Union v. Pambansang Kilusan ng
Paggawa, 156 SCRA 482 [1987]); Tanduay Distillery Labor Union v. National Labor Relations
Commission, 149 SCRA 470 [1987]). The members of the respondent union should wait for the
proper time.

The CBA in this case expired on September 24, 1989. If a new CBA with the same provisions as the
old one has been executed, its terms should be amended so as to conform to the tenor of this
decision.

WHEREFORE, in view of the foregoing, the assailed resolutions of the public respondent dated August
24, 1988 and October 28, 1988 are hereby SET ASIDE. The restraining order dated January 11, 1989
issued by the Court is made permanent.

Labor II – 1
 3.) 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.

MENDOZA, J.:

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 dated August 31, 1995, as reiterated
in the order dated September 22, 1995, of the Secretary of Labor and Employment. Its petition was
dismissed by the Third Division for lack of showing that respondent committed grave abuse of
discretion. But petitioner filed a motion for reconsideration, 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.

For this reason, the petition was referred to the Court en banc.

The Issues in this Case

Two questions are presented by the petition: (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.

In resolving these issues it would be useful to begin by defining who are "managerial employees" and
considering the types of "managerial employees."

Types of Managerial Employees

The term "manager" generally refers to "anyone who is responsible for subordinates and other
organizational resources." 1 As a class, managers constitute three levels of a pyramid:

Top management

--------

Labor II – 1
 Middle

Management

----------

First-Line

Management

(also called

Supervisor)

====================

Operatives

or

Operating

Employees

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. 2

As can be seen from this description, 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.

Labor II – 1
"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. Whether they belong to the first or the second category, managers, vis-a-
vis employers, are, likewise, employees. 3

The first question is whether route managers are managerial employees or supervisors.

Previous Administrative Determinations of

the Question Whether Route Managers
are Managerial Employees

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.

In Case No. OS-MA-10-318-91, entitled Worker's Alliance Trade Union (WATU) v.  Pepsi-Cola
Products Philippines, Inc., decided on November 13, 1991, the Secretary of Labor found:

We examined carefully the pertinent job descriptions of the subject employees and other
documentary evidence on record vis-a-vis paragraph (m), Article 212 of the Labor Code, as
amended, and we find that only those employees occupying the position of route manager and
accounting manager are managerial employees. The rest i.e. quality control manager, yard/transport
manager and warehouse operations manager are supervisory employees.

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. In the instant case, nothing on record will support the claim that the
quality control manager, yard/transport manager and warehouse operations manager are vested with
said attributes. The warehouse operations manager, for example, merely assists the plant finance
manager in planning, organizing, directing and controlling all activities relative to development and
implementation of an effective management control information system at the sale offices. The
exercise of authority of the quality control manager, on the other hand, needs the concurrence of the
manufacturing manager.

As to the route managers and accounting manager, we are convinced that they are managerial
employees. Their job descriptions clearly reveal so.

On July 6, 1992, 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., as follows:

The issue brought before us is not of first impression. At one time, we had the occasion to rule upon
the status of route manager in the same company  vis a vis the issue as to whether or not it is
supervisory employee or a managerial employee. In the case of Workers Alliance Trade Unions
(WATU) vs.  Pepsi Cola Products, Phils., Inc. (OS-MA-A-10-318-91 ), 15 November 1991, we ruled
that a route manager is a managerial employee within the context of the definition of the law, and
hence, ineligible to join, form or assist a union. We have once more passed upon the logic of our
Decision aforecited in the light of the issues raised in the instant appeal, as well as the available
documentary evidence on hand, and have come to the view that there is no cogent reason to depart
from our earlier holding. Route Managers are, by the very nature of their functions and the authority
they wield over their subordinates, managerial employees. The prescription found in Art. 245 of the
Labor Code, as amended therefore, clearly applies to them.  4

Citing our ruling in Nasipit Lumber Co. v.  National Labor Relations Commission, 5 however, petitioner
argues that these previous administrative determinations do not have the effect of res judicata in this
Labor II – 1
case, because "labor relations proceedings" are "non-litigious and summary in nature without regard
to legal technicalities." 6 Nasipit Lumber Co. involved a clearance to dismiss an employee issued by
the Department of Labor. The question was whether in a subsequent proceeding for illegal dismissal,
the clearance was res judicata. In holding it was not, this Court made it clear that it was referring to
labor relations proceedings of a non-adversary character, thus:

The requirement of a clearance to terminate employment was a creation of the Department of labor
to carry out the Labor Code provisions on security of tenure and termination of employment. The
proceeding subsequent to the filing of an application for clearance to terminate employment was
outlined in Book V, Rule XIV of the Rules and Regulations Implementing the Labor Code. The fact
that said rule allowed a procedure for the approval of the clearance with or without the opposition of
the employee concerned (Secs. 7 & 8), demonstrates the non-litigious and summary nature of the
proceeding. The clearance requirement was therefore necessary only as an expeditious shield against
arbitrary dismissal without the knowledge and supervision of the Department of Labor. Hence, a duly
approved clearance implied that the dismissal was legal or for cause (Sec. 2).  7

But the doctrine of res judicata certainly applies to adversary administrative proceedings. As early as
1956, in Brillantes v.  Castro, 8 we sustained the dismissal of an action by a trial court on the basis of
a prior administrative determination of the same case by the Wage Administration Service, applying
the principle of res judicata. Recently, in Abad v.  NLRC 9 we applied the related doctrine of stare
decisis in holding that the prior determination that certain jobs at the Atlantic Gulf and Pacific Co.,
were project employments was binding in another case involving another group of employees of the
same company. Indeed, in Nasipit Lumber Co., this Court clarified toward the end of its opinion that
"the doctrine of res judicata applies . . . to judicial or quasi judicial proceedings and not to the
exercise of administrative powers."  10 Now proceedings for certification election, such as those
involved in Case No. OS-M-A-10-318-91 and Case No. OS-A-3-71-92, are quasi judicial in nature
and, therefore, decisions rendered in such proceedings can attain finality.  11

Thus, we have in this case an expert's view that the employees concerned are managerial
employees within the purview of Art. 212 which provides:

(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.

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. Nonetheless, the Court, concerned that employees who are otherwise supervisors may wittingly or
unwittingly be classified as managerial personnel and thus denied the right of self-organization, has
decided to review the record of this case.

DOLE's Finding that Route Managers are

Managerial Employees Supported by
Substantial Evidence in the Record

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:

Labor II – 1
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.

B. PRINCIPAL ACCOUNTABILITIES

1.0 MANAGING YOUR JOB

The Route Manager is accountable for the following:

1.1 SALES DEVELOPMENT

1.1.1 Achieve the sales plan.

1.1.2 Achieve all distribution and new account objectives.

1.1.3 Develop new business opportunities thru personal contacts with dealers.

1.1.4 Inspect and ensure that all merchandizing [sic] objectives are achieved in all outlets.

1.1.5 maintain and improve productivity of all cooling equipment and kiosks.

1.1.6 Execute and control all authorized promotions.

1.1.7 Develop and maintain dealer goodwill.

1.1.8 Ensure all accounts comply with company suggested retail pricing.

1.1.9 Study from time to time individual route coverage and productivity for possible adjustments to
maximize utilization of resources.

1.2 Administration

1.2.1 Ensure the proper loading of route trucks before check-out and the proper sorting of bottles
before check-in.

1.2.2 Ensure the upkeep of all route sales reports and all other related reports and forms required on
an accurate and timely basis.

1.2.3 Ensure proper implementation of the various company policies and procedures incl. but not
limited to shakedown; route shortage; progressive discipline; sorting; spoilages; credit/collection;
accident; attendance.

1.2.4 Ensure collection of receivables and delinquent accounts.

Labor II – 1
2.0 MANAGING YOUR PEOPLE

The Route Manager is accountable for the following:

2.1 Route Sales Team Development

2.1.2 Conduct route rides to train, evaluate and develop all assigned route salesmen and helpers at
least 3 days a week, to be supported by required route ride documents/reports & back check/spot
check at least 2 days a week to be supported by required documents/reports.

2.1.2 Conduct sales meetings and morning huddles. Training should focus on the enhancement of
effective sales and merchandizing [sic] techniques of the salesmen and helpers. Conduct group
training at least 1 hour each week on a designated day and of specific topic.

2.2 Code of Conduct

2.2.1 Maintain the company's reputation through strict adherence to PCPPI's code of conduct and the
universal standards of unquestioned business
ethics. 12

Earlier in this opinion, reference was made to the distinction between managers per se (top
managers and middle managers) and supervisors (first-line managers). That 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. They are not mere functionaries with simple
oversight functions but business administrators in their own right. An idea of the role of route
managers as managers  per se can be gotten from a memo sent by the director of metro sales
operations of respondent company to one of the route managers. It reads:  13

03 April 1995

To : CESAR T  . REOLADA

From : REGGIE M.  SANTOS

Subj : SALARY INCREASE

Effective 01 April 1995, your basic monthly salary of P11,710 will be increased to P12,881 or an
increase of 10%. This represents the added managerial responsibilities you will assume due to the
recent restructuring and streamlining of Metro Sales Operations brought about by the continuous
losses for the last nine (9) months.

Let me remind you that for our operations to be profitable, we have to sustain the intensity and
momentum that your group and yourself have shown last March. You just have to deliver the desired
volume targets, better negotiated concessions, rationalized sustaining deals, eliminate or reduced
overdues, improved collections, more cash accounts, controlled operating expenses, etc. Also, based
on the agreed set targets, your monthly performance will be closely monitored.
Labor II – 1
You have proven in the past that your capable of achieving your targets thru better planning,
managing your group as a fighting team, and thru aggressive selling.  I am looking forward to your
success and I expect that you just have to exert your doubly best in turning around our operations
from a losing to a profitable one!

Happy Selling!!

(Sgd.) R.M. SANTOS

The plasticized card given to route managers, quoted in the separate opinion of Justice Vitug,
although entitled "RM's Job Description," is only a summary of performance standards. It does not
show whether route managers are managers per se or supervisors. Obviously, these performance
standards have to be related to the specific tasks given to route managers in the four-page "Route
Manager Position Description," and, when this is done, the managerial nature of their jobs is fully
revealed. Indeed, if any, the card indicates the great latitude and discretion given to route managers
- from servicing and enhancing company goodwill to supervising and auditing accounts, from trade
(new business) development to the discipline, training and monitoring of performance of their
respective sales teams, and so forth, - if they are to fulfill the company's expectations in the "key
result areas."

Article 212(m) says that "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." Thus, their only power
is to recommend. Certainly, the route managers in this case more than merely recommend effective
management action. They perform operational, human resource, financial and marketing functions
for the company, all of which involve the laying down of operating policies for themselves and their
teams. For example, with respect to marketing, route managers, in accordance with B.1.1.1 to
B.1.1.9 of the Route Managers Job Description, are charged, among other things, with expanding the
dealership base of their respective sales areas, maintaining the goodwill of current dealers, and
distributing the company's various promotional items as they see fit. It is difficult to see how
supervisors can be given such responsibility when this involves not just the routine supervision of
operating employees but the protection and expansion of the company's business vis-a-vis its
competitors.

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 this
is a function of the Human Resources or Personnel Department of the company. 14 And neither should
it be presumed that just because they are given set benchmarks to observe, they are ipso
facto supervisors. Adequate control methods (as embodied in such concepts as "Management by
Objectives [MBO]" and "performance appraisals") which require a delineation of the functions and
responsibilities of managers by means of ready reference cards as here, have long been recognized
in management as effective tools for keeping businesses competitive.

This brings us to the second question, whether the first sentence of Art. 245 of the Labor Code,
prohibiting managerial employees from forming, assisting or joining any labor organization, is
constitutional in light of 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.

As already stated, whether they belong to the first category (managers  per se) or the second
category (supervisors), managers are employees. Nonetheless, in the United States, as Justice
Puno's separate opinion notes, supervisors have no right to form unions. They are excluded from the

Labor II – 1
definition of the term "employee" in 2(3) of the Labor-Management Relations Act of 1947.  15 In the
Philippines, the question whether managerial employees have a right of self-organization has arisen
with respect to first-level managers or supervisors, as shown by a review of the course of labor
legislation in this country.

Right of Self-Organization of Managerial

Employees under Pre-Labor Code Laws

Before the promulgation of the Labor Code in 1974, the field of labor relations was governed by the
Industrial Peace Act (R.A. No. 875).

In accordance with the general definition above, this law defined "supervisor" as follows:

Sec. 2. . . .

(k) "Supervisor" means any person having authority in the interest of an employer, to hire, transfer,
suspend, lay-off, recall, discharge, assign, recommend, or discipline other employees, or responsibly
to direct them, and to adjust their grievances, or effectively to recommend such acts, if, in
connection with the foregoing, the exercise of such authority is not of a merely routinary or clerical
nature but requires the use of independent judgment.  16

The right of supervisors to form their own organizations was affirmed:

Sec. 3. Employees' Right to Self-Organization. - Employees shall have the right to self-organization
and to form, join or assist labor organizations of their own choosing for the purpose of collective
bargaining through representatives of their own choosing and to engage in concerted activities for
the purpose of collective bargaining and other mutual aid and protection. Individuals employed as
supervisors shall not be eligible for membership in a labor organization of employees under their
supervision but may form separate organizations of their own.  17

For its part, the Supreme Court upheld in several of its decisions the right of supervisors to organize
for purposes of labor relations. 18

Although it had a definition of the term "supervisor," the Industrial Peace Act did not define the term
"manager." But, using the commonly-understood concept of "manager," as above stated, it is
apparent that the law used the term "supervisors" to refer to the sub-group of "managerial
employees" known as front-line managers. The other sub-group of "managerial employees," known
as managers  per se, was not covered.

However, in Caltex Filipino Managers and Supervisors Association v.  Court of Industrial
Relations, 19 the right of all managerial employees to self-organization was upheld as a general
proposition, thus:

It would be going too far to dismiss summarily the point raised by respondent Company - that of the
alleged identity of interest between the managerial staff and the employing firm. That should
ordinarily be the case, especially so where the dispute is between management and the rank and file.
It does not necessarily follow though that what binds the managerial staff to the corporation
forecloses the possibility of conflict between them. There could be a real difference between what the
welfare of such group requires and the concessions the firm is willing to grant. Their needs might not
be attended to then in the absence of any organization of their own. Nor is this to indulge in empty
theorizing. The record of respondent Company, even the very case cited by it, is proof enough of
their uneasy and troubled relationship. Certainly the impression is difficult to erase that an alien firm
failed to manifest sympathy for the claims of its Filipino executives. To predicate under such

Labor II – 1
circumstances that agreement inevitably marks their relationship, ignoring that discord would not be
unusual, is to fly in the face of reality.

. . . The basic question is whether the managerial personnel can organize. What respondent
Company failed to take into account is that the right to self-organization is not merely a statutory
creation. It is fortified by our Constitution. All are free to exercise such right unless their purpose is
contrary to law. Certainly it would be to attach unorthodoxy to, not to say an emasculation of, the
concept of law if managers as such were precluded from organizing. Having done so and having been
duly registered, as did occur in this case, their union is entitled to all the rights under Republic Act
No. 875. Considering what is denominated as unfair labor practice under Section 4 of such Act and
the facts set forth in our decision, there can be only one answer to the objection raised that no unfair
labor practice could be committed by respondent Company insofar as managerial personnel is
concerned. It is, as is quite obvious, in the negative.  20

Actually, the case involved front-line managers or supervisors only, as the plantilla of employees,
quoted in the main opinion, 21 clearly indicates:

CAFIMSA members holding the following Supervisory Payroll Position Title are Recognized by the
Company

Payroll Position Title

Assistant to Mgr. - National Acct. Sales

Jr. Sales Engineer

Retail Development Asst.

Staff Asst. - 0 Marketing

Sales Supervisor

Supervisory Assistant

Jr. Supervisory Assistant

Credit Assistant

Lab. Supvr. - Pandacan

Jr. Sales Engineer B

Operations Assistant B

Field Engineer

Sr. Opers. Supvr. - MIA A/S

Purchasing Assistant

Jr. Construction Engineer

Sr. Sales Supervisor

Labor II – 1
Deport Supervisor A

Terminal Accountant B

Merchandiser

Dist. Sales Prom. Supvr.

Instr. - Merchandising

Asst. Dist. Accountant B

Sr. Opers. Supervisor

Jr. Sales Engineer A

Asst. Bulk Ter. Supt.

Sr. Opers. Supvr.

Credit Supervisor A

Asst. Stores Supvr. A

Ref. Supervisory Draftsman

Refinery Shift Supvr. B

Asst. Supvr. A - Operations (Refinery)

Refinery Shift Supvr. B

Asst. Lab. Supvr. A (Refinery)

St. Process Engineer B (Refinery)

Asst. Supvr. A - Maintenance (Refinery)

Asst. Supvr. B - Maintenance (Refinery)

Supervisory Accountant (Refinery)

Communications Supervisor (Refinery)

Finally, also deemed included are all other employees excluded from the rank and file unions but not
classified as managerial or otherwise excludable by law or applicable judicial precedents.

Right of Self-Organization of Managerial

Employees under the Labor Code

Thus, the dictum in the Caltex case which allowed at least for the theoretical unionization of top and
middle managers by assimilating them with the supervisory group under the broad phrase
"managerial personnel," provided the lynchpin for later laws denying the right of self-organization not
Labor II – 1
only to top and middle management employees but to front line managers or supervisors as well.
Following the Caltex case, the Labor Code, promulgated in 1974 under martial law, dropped the
distinction between the first and second sub-groups of managerial employees. Instead of treating the
terms "supervisor" and "manager" separately, the law lumped them together and called them
"managerial employees," as follows:

Art. 212. Definitions . . . .

(k) "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, or to effectively recommend such managerial actions. All employees not falling within this
definition are considered rank and file employees for purposes of this Book.  22

The definition shows that it is actually a combination of the commonly understood definitions of both
groups of managerial employees, grammatically joined by the phrase "and/or."

This general definition was perhaps legally necessary at that time for two reasons. First, the 1974
Code denied supervisors their right to self-organize as theretofore guaranteed to them by the
Industrial Peace Act. Second, it stood the dictum in the Caltex case on its head by prohibiting all
types of managers from forming unions. The explicit general prohibition was contained in the then
Art. 246 of the Labor Code.

The practical effect of this synthesis of legal concepts was made apparent in the Omnibus Rules
Implementing the Labor Code which the Department of Labor promulgated on January 19, 1975.
Book V, Rule II, 11 of the Rules provided:

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

Members of supervisory unions who do not fall within the definition of managerial employees shall
become eligible to join or assist the rank and file labor organization, and if none exists, to form or
assist in the forming of such rank and file organization. The determination of who are managerial
employees and who are not shall be the subject of negotiation between representatives of the
supervisory union and the employer. If no agreement is reached between the parties, either or both
of them may bring the issue to the nearest Regional Office for determination.

The Department of Labor continued to use the term "supervisory unions" despite the demise of the
legal definition of "supervisor" apparently because these were the unions of front line managers
which were then allowed as a result of the statutory grant of the right of self-organization under the
Industrial Peace Act. Had the Department of Labor seen fit to similarly ban unions of top and middle
managers which may have been formed following the dictum in Caltex, it obviously would have done
so. Yet it did not, apparently because no such unions of top and middle managers really then existed.

Real Intent of the 1986 Constitutional Commission

This was the law as it stood at the time the Constitutional Commission considered the draft of Art.
III, 8. Commissioner Lerum sought to amend the draft of what was later to become Art. III, 8 of the
present Constitution:

Labor II – 1
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."  23

Explaining his proposed amendment, he stated:

MR. LERUM. Under the 1935 Bill of Rights, the right to form associations is granted to all persons
whether or not they are employed in the government. Under that provision, we allow unions in the
government, in government-owned and controlled corporations and in other industries in the private
sector, such as the Philippine Government Employees' Association, unions in the GSIS, the SSS, the
DBP and other government-owned and controlled corporations. Also, we have unions of supervisory
employees and of security guards. But what is tragic about this is that after the 1973 Constitution
was approved and in spite of an express recognition of the right to organize in P.D. No. 442, known
as the Labor Code, the right of government workers, supervisory employees and security guards to
form unions was abolished.

And we have been fighting against this abolition. In every tripartite conference attended by the
government, management and workers, we have always been insisting on the return of these rights.
However, both the government and employers opposed our proposal, so nothing came out of this
until this week when we approved a provision which states:

Notwithstanding any provision of this article, the right to self-organization shall not be denied to
government employees.

We are afraid that without any corresponding provision covering the private sector, the security
guards, the supervisory employees or majority employees [sic] will still be excluded, and that is the
purpose of this amendment.

I will be very glad to accept any kind of wording as long as it will amount to absolute recognition of
private sector employees, without exception, to organize.

THE PRESIDENT. What does the Committee say?

FR. BERNAS. Certainly, the sense is very acceptable, but the point raised by Commissioner Rodrigo is
well-taken. Perhaps, we can lengthen this a little bit more to read: "The right of the people WHETHER
UNEMPLOYED OR EMPLOYED BY STATE OR PRIVATE ESTABLISHMENTS.

I want to avoid also the possibility of having this interpreted as applicable only to the employed.

MR. DE LOS REYES. Will the proponent accept an amendment to the amendment, Madam President?

MR. LERUM. Yes, as long as it will carry the idea that the right of the employees in the private sector
is recognized. 24

Lerum thus anchored his proposal on the fact that (1) government employees, supervisory
employees, and security guards, who had the right to organize under the Industrial Peace Act, had
been denied this right by the Labor Code, and (2) there was a need to reinstate the right of these
employees. In consonance with his objective to reinstate the right of government, security, and
supervisory employees to organize, Lerum then made his proposal:

MR. LERUM. Mr. Presiding Officer, after a consultation with several Members of this Commission, my
amendment will now read as follows: "The right of the people INCLUDING THOSE EMPLOYED IN THE
Labor II – 1
PUBLIC AND PRIVATE SECTORS to form associations, unions, or societies for purposes not contrary
to law shall not be abridged. In proposing that amendment I ask to make of record that I want the
following provisions of the Labor Code to be automatically abolished, which read:

Art. 245. Security guards and other personnel employed for the protection and security of the
person, properties and premises of the employers shall not be eligible for membership in a labor
organization.

Art. 246. Managerial employees are not eligible to join, assist, and form any labor organization.

THE PRESIDING OFFICER (Mr. Bengzon). What does the Committee say?

FR. BERNAS. The Committee accepts.

THE PRESIDING OFFICER. (Mr. Bengzon) The Committee has accepted the amendment, as amended.

Is there any objection? (Silence) The Chair hears none; the amendment, as amended, is approved.  25

The question is what Commissioner Lerum meant in seeking to "automatically abolish" the then Art.
246 of the Labor Code. Did he simply want "any kind of wording as long as it will amount to absolute
recognition of private sector employees, without exception, to organize"?  26 Or, did he instead intend
to have his words taken in the context of the cause which moved him to propose the amendment in
the first place, namely, the denial of the right of supervisory employees to organize, because he said,
"We are afraid that without any corresponding provision covering the private sector, security guards,
supervisory employees or majority [of] employees will still be excluded, and that is the purpose of
this amendment"? 27

It would seem that Commissioner Lerum simply meant to restore the right of supervisory employees
to organize. For even though he spoke of the need to "abolish" Art. 246 of the Labor Code which, as
already stated, prohibited "managerial employees" in general from forming unions, the fact was that
in explaining his proposal, he repeatedly referred to "supervisory employees" whose right under the
Industrial Peace Act to organize had been taken away by Art. 246. It is noteworthy that
Commissioner Lerum never referred to the then definition of "managerial employees" in Art. 212(m)
of the Labor Code which put together, under the broad phrase "managerial employees," top and
middle managers and supervisors. Instead, his repeated use of the term "supervisory employees,"
when such term then was no longer in the statute books, suggests a frame of mind that remained
grounded in the language of the Industrial Peace Act.

Nor did Lerum ever refer to the dictum in Caltex recognizing the right of all managerial employees to
organize, despite the fact that the Industrial Peace Act did not expressly provide for the right of top
and middle managers to organize. If Lerum was aware of the Caltex dictum, then his insistence on
the use of the term "supervisory employees" could only mean that he was excluding other
managerial employees from his proposal. If, on the other hand, he was not aware of the Caltex
statement sustaining the right to organize to top and middle managers, then the more should his
repeated use of the term "supervisory employees" be taken at face value, as it had been defined in
the then Industrial Peace Act.

At all events, that the rest of the Commissioners understood his proposal to refer solely to
supervisors and not to other managerial employees is clear from the following account of
Commissioner Joaquin G. Bernas, who writes:

In presenting the modification on the 1935 and 1973 texts, Commissioner Eulogio R. Lerum
explained that the modification included three categories of workers: (1) government employees, (2)

Labor II – 1
supervisory employees, and (3) security guards. Lerum made of record the explicit intent to repeal
provisions of P.D. 442, the Labor Code. The provisions referred to were:

Art. 245. Security guards and other personnel employed for the protection and security of the
person, properties and premises of the employers shall not be eligible for membership in a labor
organization.

Art. 246. Managerial employees are not eligible to join, assist, and form any labor organization.  28

Implications of the Lerum Proposal

In sum, Lerum's proposal to amend Art. III, 8 of the draft Constitution by including labor unions in
the guarantee of organizational right should be taken in the context of statements that his aim was
the removal of the statutory ban against security guards and supervisory employees joining labor
organizations. The approval by the Constitutional Commission of his proposal can only mean,
therefore, that the Commission intended the absolute right to organize of government workers,
supervisory employees, and security guards to be constitutionally guaranteed. By implication, no
similar absolute constitutional right to organize for labor purposes should be deemed to have been
granted to top-level and middle managers. As to them the right of self-organization may be regulated
and even abridged conformably to Art. III, 8.

Constitutionality of Art.  245

Finally, the question is whether the present ban against managerial employees, as embodied in Art.
245 (which superseded Art. 246) of the Labor Code, is valid. This provision reads:

Art. 245. Ineligibility of managerial employees to join any labor organization; right of supervisory

employees. - Managerial employees are not eligible to join, assist or form any labor organization.
Supervisory employees shall not be eligible for membership in a labor organization of the rank-and-
file employees but may join, assist or form separate labor organizations of their own.  29

This provision 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.

Although the definition of "supervisory employees" seems to have been unduly restricted to the last
phrase of the definition in the Industrial Peace Act, the legal significance given to the phrase
"effectively recommends" remains the same. In fact, 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.
Labor II – 1
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. As Justice
Davide, Jr., himself a constitutional commissioner, said in his ponencia  in Philips Industrial
Development, Inc. v.  NLRC: 31

In the first place, all these employees, with the exception of the service engineers and the sales force
personnel, are confidential employees. Their classification as such is not seriously disputed by PEO-
FFW; the five (5) previous CBAs between PIDI and PEO-FFW explicitly considered them as
confidential employees. By the very nature of their functions, they assist and act in a confidential
capacity to, or have access to confidential matters of, persons who exercise managerial functions in
the field of labor relations. As such, the rationale behind the ineligibility of managerial employees to
form, assist or joint a labor union equally applies to them.

In Bulletin Publishing Co., Inc. v. Hon.  Augusto Sanchez, this Court elaborated on this rationale,

thus:

. . . The rationale for this inhibition has been stated to be, because if these managerial employees
would belong to or be affiliated with a Union, the latter might not be assured of their loyalty to the
Union in view of evident conflict of interests. The Union can also become company-dominated with
the presence of managerial employees in Union membership.  32

To be sure, the Court in Philips Industrial was dealing with the right of confidential employees to
organize. But the same reason for denying them the right to organize justifies even more the ban on
managerial employees from forming unions. After all, those who qualify as top or middle managers
are executives who receive from their employers information that not only is confidential but also is
not generally available to the public, or to their competitors, or to other employees. It is hardly
necessary to point out that to say that the first sentence of Art. 245 is unconstitutional would be to
contradict the decision in that case.

WHEREFORE, the petition is DISMISSED.

Labor II – 1
4.) Cathay Pacific Steel Corp v CA (Cuse & Tomondong)

G.R. No. 164561 August 30, 2006

CATHAY PACIFIC STEEL CORPORATION, BENJAMIN CHUA JR., VIRGILIO AGERO, and LEONARDO
VISORRO, JR., Petitioners,
vs.
HON. COURT OF APPEALS, CAPASCO UNION OF SUPERVISORY EMPLOYEES (CUSE) and ENRIQUE
TAMONDONG III, Respondents.

DECISION

CHICO-NAZARIO, J.:

This is a special civil action for Certiorari under Rule 65 of the Rules of Court seeking to annul and set aside, on the
ground of grave abuse of discretion amounting to lack or excess of jurisdiction, (1) the Decision 1 of the Court of
Appeals in CA-G.R. SP No. 57179 dated 28 October 2003 which annulled the Decision 2 of the National Labor
Relations Commission (NLRC) in NLRC Case No. 017822-99 dated 25 August 1999, thereby, reinstating the
Decision 3 of Acting Executive Labor Arbiter Pedro C. Ramos dated 7 August 1998; and (2) the Resolution 4 of the
same court, dated 3 June 2004, which denied the petitioners’ Motion for Reconsideration.

Herein petitioners are Cathay Pacific Steel Corporation (CAPASCO), a domestic corporation engaged in the
business of manufacturing steel products; Benjamin Chua, Jr. (now deceased), the former CAPASCO President;
Virgilio Agerro, CAPASCO’s Vice-President; and Leonardo Visorro, Jr., CAPASCO’s Administrative-Personnel
Manager. Herein private respondents are Enrique Tamondong III, the Personnel Superintendent of CAPASCO who
was previously assigned at the petitioners’ Cainta Plant, and CAPASCO Union of Supervisory Employees (CUSE),
a duly registered union of CAPASCO.

The facts of the case are as follows:

Four former employees of CAPASCO originally filed this labor case before the NLRC, namely: Fidel Lacambra,
Armando Dayson, Reynaldo Vacalares, and Enrique Tamondong III. However, in the course of the proceedings,
Fidel Lacambra 5 and Armando Dayson 6 executed a Release and Quitclaim, thus, waiving and abandoning any and
all claims that they may have against petitioner CAPASCO. On 3 November 1999, Reynaldo Vacalares also signed
a Quitclaim/Release/Waiver. 7 Hence, this Petition shall focus solely on issues affecting private respondent
Tamondong.

Petitioner CAPASCO, hired private respondent Tamondong as Assistant to the Personnel Manager for its Cainta
Plant on 16 February 1990. Thereafter, he was promoted to the position of Personnel/Administrative Officer, and
later to that of Personnel Superintendent. Sometime in June 1996, the supervisory personnel of CAPASCO
launched a move to organize a union among their ranks, later known as private respondent CUSE. Private
respondent Tamondong actively involved himself in the formation of the union and was even elected as one of its
officers after its creation. Consequently, petitioner CAPASCO sent a memo 8 dated 3 February 1997, to private
respondent Tamondong requiring him to explain and to discontinue from his union activities, with a warning that a
continuance thereof shall adversely affect his employment in the company. Private respondent Tamondong ignored
said warning and made a reply letter 9 on 5 February 1997, invoking his right as a supervisory employee to join and
organize a labor union. In view of that, on 6 February 1997, petitioner CAPASCO through a memo 10 terminated the
employment of private respondent Tamondong on the ground of loss of trust and confidence, citing his union
activities as acts constituting serious disloyalty to the company.

Private respondent Tamondong challenged his dismissal for being illegal and as an act involving unfair labor
practice by filing a Complaint for Illegal Dismissal and Unfair Labor Practice before the NLRC, Regional Arbitration
Branch IV. According to him, there was no just cause for his dismissal and it was anchored solely on his
Labor II – 1
involvement and active participation in the organization of the union of supervisory personnel in CAPASCO.
Though private respondent Tamondong admitted his active role in the formation of a union composed of supervisory
personnel in the company, he claimed that such was not a valid ground to terminate his employment because it was
a legitimate exercise of his constitutionally guaranteed right to self-organization.

In contrast, petitioner CAPASCO contended that by virtue of private respondent Tamondong’s position as Personnel
Superintendent and the functions actually performed by him in the company, he was considered as a managerial
employee, thus, under the law he was prohibited from joining a union as well as from being elected as one of its
officers. Accordingly, petitioners maintained their argument that the dismissal of private respondent Tamondong was
perfectly valid based on loss of trust and confidence because of the latter’s active participation in the affairs of the
union.

On 7 August 1998, Acting Executive Labor Arbiter Pedro C. Ramos rendered a Decision in favor of private
respondent Tamondong, decreeing as follows:

WHEREFORE, premises considered, judgment is hereby rendered finding [petitioner CAPASCO] guilty of unfair
labor practice and illegal dismissal. Concomitantly, [petitioner CAPASCO] is hereby ordered:

1. To cease and desist from further committing acts of unfair labor practice, as charged;

2. To reinstate [private respondent Tamondong] to his former position without loss of seniority rights and other
privileges and his full backwages inclusive of allowances, and to his other benefits or their monetary equivalent,
computed from the time his compensation was withheld from him up to the time of his actual reinstatement, and
herein partially computed as follows:

a) P167,076.00 - backwages from February 7, 1997 to August 7, 1998;

b) P18,564.00 - 13th month pay for 1997 and 1998;

c) P4,284.00 - Holiday pay for 12 days;

d) P3,570.00 - Service Incentive Leave for 1997 and 1998.

P 193,494.00 - Total partial backwages and benefits. 11

Aggrieved, petitioners appealed the afore-quoted Decision to the NLRC. On 25 August 1999, the NLRC rendered its
Decision modifying the Decision of the Acting Executive Labor Arbiter Pedro C. Ramos, thus:

WHEREFORE, premises all considered, the decision appealed from is hereby MODIFIED:

a) Dismissing the Complaint for Illegal Dismissal filed by [private respondent Tamondong] for utter lack of merit;

b) Dismissing the Complaint for Unfair Labor Practice for lack of factual basis;

c) Deleting the awards to [private respondent Tamondong] of backwages, moral and exemplary damages, and
attorney’s fees;

d) Affirming the awards to [private respondent Tamondong], representing 13th month pay for 1997 and 1998,
holiday pay for 12 days, and service incentive leave for 1997 totaling P26,418.00; and

e) Ordering the payment of backwages to [private respondent Tamondong] reckoned from 16 September 1998 up to
the date of this Decision. 12

Labor II – 1
Petitioners filed a Motion for Clarification and Partial Reconsideration, while, private respondent Tamondong filed a
Motion for Reconsideration of the said NLRC Decision, but the NLRC affirmed its original Decision in its
Resolution 13 dated 25 November 1999.

Dissatisfied with the above-mentioned Decision of the NLRC, private respondents Tamondong and CUSE filed a
Petition for Certiorari under Rule 65 of the Rules of Court before the Court of Appeals, alleging grave abuse of
discretion on the part of the NLRC. Then, the Court of Appeals in its Decision dated 28 October 2003, granted the
said Petition. The dispositive of which states that:

WHEREFORE, premises considered, the instant Petition for Certiorari is GRANTED and the herein assailed
Decision dated August 25, 1999 of the NLRC, Third Division is ANNULLED and SET ASIDE. Accordingly, the
Decision dated August 7, 1998 of NLRC, RAB IV Acting Executive Labor Arbiter Pedro C. Ramos, insofar as [private
respondent Tamondong] is concerned is hereby REINSTATED. 14

Consequently, petitioners filed a Motion for Reconsideration of the aforesaid Decision of the Court of Appeals.
Nonetheless, the Court of Appeals denied the said Motion for Reconsideration for want of convincing and
compelling reason to warrant a reversal of its judgment.

Hence, this present Petition for Certiorari under Rule 65 of the 1997 Rules of Civil Procedure.

In the Memorandum 15 filed by petitioners, they aver that private respondent Tamondong as Personnel

Superintendent of CAPASCO was performing functions of a managerial employee because he was the one laying
down major management policies on personnel relations such as: issuing memos on company rules and
regulations, imposing disciplinary sanctions such as warnings and suspensions, and executing the same with full
power and discretion. They claim that no further approval or review is necessary for private respondent Tamondong
to execute these functions, and the notations "NOTED BY" of petitioner Agerro, the Vice-President of petitioner
CAPASCO, on the aforesaid memos are nothing but mere notice that petitioner Agerro was aware of such company
actions performed by private respondent Tamondong. Additionally, private respondent Tamondong was not only a
managerial employee but also a confidential employee having knowledge of confidential information involving
company policies on personnel relations. Hence, the Court of Appeals acted with grave abuse of discretion
amounting to lack or excess of jurisdiction when it held that private respondent Tamondong was not a managerial
employee but a mere supervisory employee, therefore, making him eligible to participate in the union activities of
private respondent CUSE.

Petitioners further argue that they are not guilty of illegal dismissal and unfair labor practice because private
respondent Tamondong was validly dismissed and the reason for preventing him to join a labor union was the
nature of his position and functions as Personnel Superintendent, which position was incompatible and in conflict
with his union activities. Consequently, it was grave abuse of discretion on the part of the Court of Appeals to rule
that petitioner CAPASCO was guilty of illegal dismissal and unfair labor practice.

Lastly, petitioners maintain that the Court of Appeals gravely abused its discretion when it reinstated the Decision of
Executive Labor Arbiter Pedro C. Ramos holding CAPASCO liable for backwages, 13th month pay, service
incentive leave, moral damages, exemplary damages, and attorney’s fees.

On the other hand, private respondents, assert that the assailed Decision being a final disposition of the Court of
Appeals is appealable to this Court by a Petition for Review on Certiorari under Rule 45 of the Rules of Court and
not under Rule 65 thereof. They also claim that petitioners new ground that private respondent Tamondong was a
confidential employee of CAPASCO, thus, prohibited from participating in union activities, is not a valid ground to be
raised in this Petition for Certiorari seeking the reversal of the assailed Decision and Resolution of the Court of
Appeals.

Now, given the foregoing arguments raise by both parties, the threshold issue that must first be resolved is whether
or not the Petition for Certiorari under Rule 65 of the 1997 Rules of Civil Procedure is the proper remedy for the
petitioners, to warrant the reversal of the Decision and Resolution of the Court of Appeals dated 28 October 2003
and 3 June 2004, respectively.

Labor II – 1
The petition must fail.

The special civil action for Certiorari is intended for the correction of errors of jurisdiction only or grave abuse of
discretion amounting to lack or excess of jurisdiction. Its principal office is only to keep the inferior court within the
parameters of its jurisdiction or to prevent it from committing such a grave abuse of discretion amounting to lack or
excess of jurisdiction. 16

The essential requisites for a Petition for Certiorari under Rule 65 are: (1) the writ is directed against a tribunal, a
board, or an officer exercising judicial or quasi-judicial function; (2) such tribunal, board, or officer has acted without
or in excess of jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction; and (3)
there is no appeal or any plain, speedy, and adequate remedy in the ordinary course of law. 17 Excess of jurisdiction
as distinguished from absence of jurisdiction means that an act, though within the general power of a tribunal, board
or officer is not authorized, and invalid with respect to the particular proceeding, because the conditions which alone
authorize the exercise of the general power in respect of it are wanting. 18 Without jurisdiction means lack or want of
legal power, right or authority to hear and determine a cause or causes, considered either in general or with
reference to a particular matter. It means lack of power to exercise authority. 19 Grave abuse of discretion implies
such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction or, in other words, where
the power is exercised in an arbitrary manner by reason of passion, prejudice, or personal hostility, and it must be
so patent or gross as to amount to an evasion of a positive duty or to a virtual refusal to perform the duty enjoined or
to act at all in contemplation of law. 20

In the case before this Court, petitioners fail to meet the third requisite for the proper invocation of Petition for
Certiorari under Rule 65, to wit: that there is no appeal or any plain, speedy, and adequate remedy in the ordinary
course of law. They simply alleged that the Court of Appeals gravely abuse its discretion which amount to lack or
excess of jurisdiction in rendering the assailed Decision and Resolution. They did not bother to explain why an
appeal cannot possibly cure the errors committed by the appellate court. It must be noted that the questioned
Decision of the Court of Appeals was already a disposition on the merits; this Court has no remaining issues to
resolve, hence, the proper remedy available to the petitioners is to file Petition for Review under Rule 45 not under
Rule 65.

Additionally, the general rule is that a writ of certiorari will not issue where the remedy of appeal is available to the
aggrieved party. The remedies of appeal in the ordinary course of law and that of certiorari under Rule 65 of the
Revised Rules of Court are mutually exclusive and not alternative or cumulative. 21 Time and again this Court
reminded members of the bench and bar that the special civil action of Certiorari cannot be used as a substitute for
a lost appeal 22 where the latter remedy is available. Such a remedy will not be a cure for failure to timely file a
Petition for Review on Certiorari under Rule 45. Nor can it be availed of as a substitute for the lost remedy of an
ordinary appeal, especially if such loss or lapse was occasioned by one’s own negligence or error in the choice of
remedies. 23

In the case at bar, petitioners received on 9 June 2004 the Resolution of the Court of Appeals dated 3 June 2004
denying their Motion for Reconsideration. Upon receipt of the said Resolution, they had 15 days or until 24 June
2004 within which to file an appeal by way of Petition for Review under Rule 45, but instead of doing so, they just
allowed the 15 day period to lapse, and then on the 61st day from receipt of the Resolution denying their Motion for
Reconsideration, they filed this Petition for Certiorari under Rule 65 alleging grave abuse of discretion on the part of
the appellate court. Admittedly, this Court, in accordance with the liberal spirit pervading the Rules of Court and in
the interest of justice, has the discretion to treat a Petition for Certiorari as a Petition for Review on Certiorari under
Rule 45, especially if filed within the reglementary period for filing a Petition for Review. 24 However, in the present
case, this Court finds no compelling reason to justify a liberal application of the rules, as this Court did in the case of
Delsan Transport Lines, Inc. v. Court of Appeals. 25 In the said case, this Court treated the Petition for Certiorari filed
by the petitioner therein as having been filed under Rule 45 because said Petition was filed within the 15-day
reglementary period for filing a Petition for Review on Certiorari. Petitioner’s counsel therein received the Court of
Appeals Resolution denying their Motion for Reconsideration on 26 October 1993 and filed the Petition for Certiorari
on 8 November 1993, which was within the 15-day reglementary period for filing a Petition for Review on Certiorari.
It cannot therefore be claimed that the Petition was used, as a substitute for appeal after that remedy has been lost
through the fault of the petitioner. 26 Conversely, such was not the situation in the present case. Hence, this Court
finds no reason to justify a liberal application of the rules.

Labor II – 1
Accordingly, where the issue or question involves or affects the wisdom or legal soundness of the decision, and not
the jurisdiction of the court to render said decision, the same is beyond the province of a petition for certiorari. 27 It is
obvious in this case that the arguments raised by the petitioners delved into the wisdom or legal soundness of the
Decision of the Court of Appeals, therefore, the proper remedy is a Petition for Review on Certiorari under Rule 45.
Consequently, it is incumbent upon this Court to dismiss this Petition.

In any event, granting arguendo, that the present petition is proper, still it is dismissible. The Court of Appeals
cannot be said to have acted with grave abuse of discretion amounting to lack or excess of jurisdiction in annulling
the Decision of the NLRC because the findings of the Court of Appeals that private respondent Tamondong was
indeed a supervisory employee and not a managerial employee, thus, eligible to join or participate in the union
activities of private respondent CUSE, were supported by evidence on record. In the Decision of the Court of
Appeals dated 28 October 2003, it made reference to the Memorandum 28 dated 12 September 1996, which required
private respondent Tamondong to observe fixed daily working hours from 8:00 am to 12:00 noon and from 1:00 pm
to 5:00 pm. This imposition upon private respondent Tamondong, according to the Court of Appeals, is very
uncharacteristic of a managerial employee. To support such a conclusion, the Court of Appeals cited the case of
Engineering Equipment, Inc. v. NLRC 29 where this Court held that one of the essential characteristics 30 of an
employee holding a managerial rank is that he is not subjected to the rigid observance of regular office hours or
maximum hours of work.

Moreover, the Court of Appeals also held that upon careful examination of the documents submitted before it, it
found out that:

[Private respondent] Tamondong may have possessed enormous powers and was performing important functions
that goes with the position of Personnel Superintendent, nevertheless, there was no clear showing that he is at
liberty, by using his own discretion and disposition, to lay down and execute major business and operational
policies for and in behalf of CAPASCO. [Petitioner] CAPASCO miserably failed to establish that [private respondent]
Tamondong was authorized to act in the interest of the company using his independent judgment. x x x. Withal,
[private respondent] Tamondong may have been exercising certain important powers, such as control and
supervision over erring rank-and-file employees, however, x x x he does not possess the power to hire, transfer,
terminate, or discipline erring employees of the company. At the most, the record merely showed that [private
respondent] Tamondong informed and warned rank-and-file employees with respect to their violations of
CAPASCO’s rules and regulations. x x x. [Also, the functions performed by private respondent such as] issuance of
warning 31 to employees with irregular attendance and unauthorized leave of absences and requiring employees to
explain regarding charges of abandonment of work, are normally performed by a mere supervisor, and not by a
manager. 32

Accordingly, Article 212(m) of the Labor Code, as amended, differentiates supervisory employees from managerial
employees, to wit: 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; whereas, managerial employees are those who are vested with powers or
prerogatives to lay down and execute management policies and/or hire, transfer, suspend, lay off, recall, discharge,
assign or discipline employees. Thus, from the foregoing provision of the Labor Code, it can be clearly inferred
that private respondent Tamondong was just a supervisory employee. Private respondent Tamondong did not
perform any of the functions of a managerial employee as stated in the definition given to it by the Code. Hence, the
Labor Code 33 provisions regarding disqualification of a managerial employee from joining, assisting or forming any
labor organization does not apply to herein private respondent Tamondong. Being a supervisory employee of
CAPASCO, he cannot be prohibited from joining or participating in the union activities of private respondent CUSE,
and in making such a conclusion, the Court of Appeals did not act whimsically, capriciously or in a despotic manner,
rather, it was guided by the evidence submitted before it. Thus, given the foregoing findings of the Court of Appeals
that private respondent is a supervisory employee, it is indeed an unfair labor practice 34 on the part of petitioner
CAPASCO to dismiss him on account of his union activities, thereby curtailing his constitutionally guaranteed right to
self-organization. 35

With regard to the allegation that private respondent Tamondong was not only a managerial employee but also a
confidential employee, the same cannot be validly raised in this Petition for Certiorari. It is settled that an issue
which was not raised in the trial court cannot be raised for the first time on appeal. This principle applies to a special

Labor II – 1
civil action for certiorari under Rule 65. 36 In addition, petitioners failed to adduced evidence which will prove that,
indeed, private respondent was also a confidential employee.

WHEREFORE, premises considered, the instant Petition is DISMISSED. The Decision and Resolution of the Court
of Appeals dated 28 October 2003 and 3 June 2004, respectively, in CA-G.R. SP No. 57179, which annulled the
Decision of the NLRC in NLRC Case No. 017822-99 dated 25 August 1999, thereby, reinstating the Decision of
Acting Executive Labor Arbiter Pedro C. Ramos dated 7 August 1998, is hereby AFFIRMED. With costs against
petitioners.

SO ORDERED.

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5.) San Miguel Corp Supervisors Union v Laguesma
[G.R. No. 110399. August 15, 1997.]

SAN MIGUEL CORPORATION SUPERVISORS AND EXEMPT UNION AND ERNESTO L. PONCE,
President, Petitioners, v. HONORABLE BIENVENIDO E. LAGUESMA IN HIS CAPACITY AS
UNDERSECRETARY OF LABOR AND EMPLOYMENT, HONORABLE DANILO L. REYNANTE IN
HIS CAPACITY AS MED-ARBITER AND SAN MIGUEL CORPORATION, Respondents.

DECISION

ROMERO, J.:

This is a Petition for Certiorari with Prayer for the Issuance of Preliminary Injunction seeking to
reverse and set aside the Order of public respondent, Undersecretary of the Department of Labor and
Employment, Bienvenido E. Laguesma, dated March 11, 1993, in Case No. OS MA A-2-70-91 1
entitled "In Re: Petition for Certification Election Among the Supervisory and Exempt Employees of
the San Miguel Corporation Magnolia Poultry Products Plants of Cabuyao, San Fernando and Otis, San
Miguel Corporation Supervisors and Exempt Union, Petitioner." The Order excluded the employees
under supervisory levels 3 and 4 and the so-called exempt employees from the proposed bargaining
unit and ruled out their participation in the certification election. cralawnad

The antecedent facts are undisputed: chanrob1es virtual 1aw library

On October 5, 1990, petitioner union filed before the Department of Labor and Employment (DOLE) a
Petition for Direct Certification or Certification Election among the supervisors and exempt employees
of the SMC Magnolia Poultry Products Plants of Cabuyao, San Fernando and Otis.

On December 19, 1990, Med-Arbiter Danilo L. Reynante issued an Order ordering the conduct of
certification election among the supervisors and exempt employees of the SMC Magnolia Poultry
Products Plants of Cabuyao, San Fernando and Otis as one bargaining unit.

On January 18, 1991, respondent San Miguel Corporation filed a Notice of Appeal with Memorandum
on Appeal, pointing out, among others, the Med-Arbiter’s error in grouping together all three (3)
separate plants, Otis, Cabuyao and San Fernando, into one bargaining unit, and in including
supervisory levels 3 and above whose positions are confidential in nature.

On July 23, 1991, the public respondent, Undersecretary Laguesma, granted respondent company’s
Appeal and ordered the remand of the case to the Med-Arbiter of origin for determination of the true
classification of each of the employees sought to be included in the appropriate bargaining unit.

Upon petitioner-union’s motion dated August 7, 1991, Undersecretary Laguesma granted the

reconsideration prayed for on September 3, 1991 and directed the conduct of separate certification
elections among the supervisors ranked as supervisory levels 1 to 4 (S1 to S4) and the exempt
employees in each of the three plants at Cabuyao, San Fernando and Otis.

On September 21, 1991, respondent company, San Miguel Corporation filed a Motion for
Reconsideration with Motion to suspend proceedings.

On March 11, 1993, an Order was issued by the public respondent granting the Motion, citing the
doctrine enunciated in Philips Industrial Development, Inc. v. NLRC 2 case. Said Order reads in
part: jgc:chanrobles.com.ph

Labor II – 1
". . . Confidential employees, like managerial employees, are not allowed to form, join or assist a
labor union for purposes of collective bargaining.

In this case, S3 and S4 Supervisors and the so-called exempt employees are admittedly confidential
employees and therefore, they are not allowed to form, join or assist a labor union for purposes of
collective bargaining following the above court’s ruling. Consequently, they are not allowed to
participate in the certification election.

WHEREFORE, the Motion is hereby granted and the Decision of this Office dated 03 September 1991
is hereby modified to the extent that employees under supervisory levels 3 and 4 (S3 and S4) and
the so-called exempt employees are not allowed to join the proposed bargaining unit and are
therefore excluded from those who could participate in the certification election." 3

Hence this petition.

For resolution in this case are the following issues: chanrob1es virtual 1aw library

1. Whether Supervisory employees 3 and 4 and the exempt employees of the company are
considered confidential employees, hence ineligible from joining a union.

2. If they are not confidential employees, do the employees of the three plants constitute an
appropriate single bargaining unit.

On the first issue, this Court rules that said employees do not fall within the term "confidential
employees" who may be prohibited from joining a union.

There is no question that the said employees, supervisors and the exempt employees, are not vested
with the powers and prerogatives to lay down and execute management policies and/or to hire,
transfer, suspend, layoff, recall, discharge or dismiss employees. They are, therefore, not qualified to
be classified as managerial employees who, under Article 245 4 of the Labor Code, are not eligible to
join, assist or form any labor organization. In the very same provision, they are not allowed
membership in a labor organization of the rank-and-file employees but may join, assist or form
separate labor organizations of their own. The only question that need be addressed is whether these
employees are properly classified as confidential employees or not.

Confidential employees are those who (1) assist or act in a confidential capacity, (2) to persons who
formulate, determine, and effectuate management policies in the field of labor relations. 5 The two
criteria are cumulative, and both must be met if an employee is to be considered a confidential
employee — that is, the confidential relationship must exist between the employee and his
supervisor, and the supervisor must handle the prescribed responsibilities relating to labor relations.
6

The exclusion from bargaining units of employees who, in the normal course of their duties, become
aware of management policies relating to labor relations is a principal objective sought to be
accomplished by the "confidential employee rule." The broad rationale behind this rule is that
employees should not be placed in a position involving a potential conflict of interests. 7
"Management should not be required to handle labor relations matters through employees who are
represented by the union with which the company is required to deal and who in the normal
performance of their duties may obtain advance information of the company’s position with regard to
contract negotiations, the disposition of grievances, or other labor relations matters." 8

There have been ample precedents in this regard, thus in Bulletin Publishing Company v. Hon.
Augusto Sanchez, 9 the Court held that "if these managerial employees would belong to or be
affiliated with a Union, the latter might not be assured of their loyalty to the Union in view of evident
Labor II – 1
conflict of interest. The Union can also become company-dominated with the presence of managerial
employees in Union membership." The same rationale was applied to confidential employees in
"Golden Farms, Inc. v. Ferrer-Calleja" 10 and in the more recent case of "Philips Industrial
Development, Inc. v. NLRC" 11 which held that confidential employees, by the very nature of their
functions, assist and act in a confidential capacity to, or have access to confidential matters of,
person who exercise managerial functions in the field of labor relations. Therefore, the rationale
behind the ineligibility of managerial employees to form, assist or join a labor union was held equally
applicable to them. 12

An important element of the "confidential employee rule" is the employee’s need to use labor
relations information. Thus, in determining the confidentiality of certain employees, a key question
frequently considered is the employees’ necessary access to confidential labor relations
information. 13

It is the contention of respondent corporation that Supervisory employees 3 and 4 and the exempt
employees come within the meaning of the term "confidential employees" primarily because they
answered in the affirmative when asked "Do you handle confidential data or documents?" in the
Position Questionnaires submitted by the Union. 14 In the same questionnaire, however, it was also
stated that the confidential information handled by questioned employees relate to product
formulation, product standards and product specification which by no means relate to "labor
relations." 15

Granting arguendo that an employee has access to confidential labor relations information but such is
merely incidental to his duties and knowledge thereof is not necessary in the performance of such
duties, said access does not render the employee a confidential employee. 16 "If access to
confidential labor relations information is to be a factor in the determination of an employee’s
confidential status, such information must relate to the employer’s labor relations policies. Thus, an
employee of a labor union, or of a management association, must have access to confidential labor
relations information with respect to his employer, the union, or the association, to be regarded a
confidential employee, and knowledge of labor relations information pertaining to the companies with
which the union deals, or which the association represents, will not cause an employee to be
excluded from the bargaining unit representing employees of the union or association." 17 "Access to
information which is regarded by the employer to be confidential from the business standpoint, such
as financial information 18 or technical trade secrets, will not render an employee a confidential
employee." 19

Herein listed are the functions of supervisors 3 and higher: chanrob1es virtual 1aw library

1. To undertake decisions to discontinue/temporarily stop shift operations when situations require.

2. To effectively oversee the quality control function at the processing lines in the storage of chicken
and other products.

3. To administer efficient system of evaluation of products in the outlets.

4. To be directly responsible for the recall, holding and rejection of direct manufacturing materials.

5. To recommend and initiate actions in the maintenance of sanitation and hygiene throughout the

plant. 20

It is evident that whatever confidential data the questioned employees may handle will have to relate
to their functions. From the foregoing functions, it can be gleaned that the confidential information
said employees have access to concern the employer’s internal business operations. As held in
Westinghouse Electric Corporation v. National Labor Relations Board, 21 "an employee may not be
excluded from appropriate bargaining unit merely because he has access to confidential information
Labor II – 1
concerning employer’s internal business operations and which is not related to the field of labor
relations."  chanrobles virtual lawlibrary

It must be borne in mind that Section 3 of Article XIII of the 1987 Constitution mandates the State to
guarantee to "all" workers the right to self-organization. Hence, confidential employees who may be
excluded from bargaining unit must be strictly defined so as not to needlessly deprive many
employees of their right to bargain collectively through representatives of their choosing. 22

In the case at bar, supervisors 3 and above may not be considered confidential employees merely
because they handle "confidential data" as such must first be strictly classified as pertaining to labor
relations for them to fall under said restrictions. The information they handle are properly classifiable
as technical and internal business operations data which, to our mind, has no relevance to
negotiations and settlement of grievances wherein the interests of a union and the management are
invariably adversarial. Since the employees are not classifiable under the confidential type, this Court
rules that they may appropriately form a bargaining unit for purposes of collective bargaining.
Furthermore, even assuming that they are confidential employees, jurisprudence has established that
there is no legal prohibition against confidential employees who are not performing managerial
functions to form and join a union. 23

In this connection, the issue of whether the employees of San Miguel Corporation Magnolia Poultry
Products Plants of Cabuyao, San Fernando, and Otis constitute a single bargaining unit needs to be
threshed out.

It is the contention of the petitioner union that the creation of three (3) separate bargaining units,
one each for Cabuyao, Otis and San Fernando as ruled by the respondent Undersecretary, is contrary
to the one-company, one-union policy. It adds that Supervisors level 1 to 4 and exempt employees
of the three plants have a similarity or a community of interests.

This Court finds the contention of the petitioner meritorious.

An appropriate bargaining unit may be defined as "a group of employees of a given employer,
comprised of all or less than all of the entire body of employees, which the collective interest of all
the employees, consistent with equity to the employer, indicate to be best suited to serve the
reciprocal rights and duties of the parties under the collective bargaining provisions of the law." 24

A unit to be appropriate must effect a grouping of employees who have substantial, mutual interests
in wages, hours, working conditions and other subjects of collective bargaining.25 cralaw:red

It is readily seen that the employees in the instant case have "community or mutuality of interests,"
which is the standard in determining the proper constituency of a collective bargaining unit. 26 It is
undisputed that they all belong to the Magnolia Poultry Division of San Miguel Corporation. This
means that, although they belong to three different plants, they perform work of the same nature,
receive the same wages and compensation, and most importantly, share a common stake in
concerted activities.

In light of these considerations, the Solicitor General has opined that separate bargaining units in the
three different plants of the division will fragmentize the employees of the said division, thus greatly
diminishing their bargaining leverage. Any concerted activity held against the private respondent for
a labor grievance in one bargaining unit will, in all probability, not create much impact on the
operations of the private Respondent. The two other plants still in operation can well step up their
production and make up for the slack caused by the bargaining unit engaged in the concerted
activity. This situation will clearly frustrate the provisions of the Labor Code and the mandate of the
Constitution. 27

The fact that the three plants are located in three different places, namely, in Cabuyao, Laguna, in
Labor II – 1
Otis, Pandacan, Metro Manila, and in San Fernando, Pampanga is immaterial. Geographical location
can be completely disregarded if the communal or mutual interests of the employees are not
sacrificed as demonstrated in UP v. Calleja-Ferrer where all non-academic rank and file employees of
the University of the Philippines in Diliman, Quezon City, Padre Faura, Manila, Los Baños, Laguna and
the Visayas were allowed to participate in a certification election. We rule that the distance among
the three plants is not productive of insurmountable difficulties in the administration of union affairs.
Neither are there regional differences that are likely to impede the operations of a single bargaining
representative.

WHEREFORE, the assailed Order of March 11, 1993 is hereby SET ASIDE and the Order of the Med-
Arbiter on December 19, 1990 is REINSTATED under which a certification election among the
supervisors (level 1 to 4) and exempt employees of the San Miguel Corporation Magnolia Poultry
Products Plants of Cabuyao, San Fernando, and Otis as one bargaining unit is ordered conducted. chanrobles virtual lawlibrary

Labor II – 1
6.) Standard Chartered Bank Union v Standard Chartered Bank.

[G.R. NO. 161933 : April 22, 2008]

STANDARD CHARTERED BANK EMPLOYEES UNION (SCBEU-NUBE), Petitioner, v. STANDARD

CHARTERED BANK and ANNEMARIE DURBIN, in her capacity as Chief Executive Officer,
Philippines, Standard Chartered Bank, Respondents.

DECISION

AUSTRIA-MARTINEZ, J.:

For resolution is an appeal by certiorari filed by petitioner under Rule 45 of the Rules of Court,
assailing the Decision1 dated October 9, 2002 and Resolution2 dated January 26, 2004 issued by the
Court of Appeals (CA), dismissing their petition and affirming the Secretary of Labor and
Employment's Orders dated May 31, 2001 and August 30, 2001.

Petitioner and the Standard Chartered Bank (Bank) began negotiating for a new Collective Bargaining
Agreement (CBA) in May 2000 as their 1998-2000 CBA already expired. Due to a deadlock in the
negotiations, petitioner filed a Notice of Strike prompting the Secretary of Labor and Employment to
assume jurisdiction over the labor dispute.

On May 31, 2001, Secretary Patricia A. Sto. Tomas of the Department of Labor and Employment
(DOLE) issued an Order with the following dispositive portion:

WHEREFORE, PREMISES CONSIDERED, the Standard Chartered Bank and the Standard Chartered
Bank Employees Union are directed to execute their collective bargaining agreement effective 01
April 2001 until 30 March 2003 incorporating therein the foregoing dispositions and the agreements
they reached in the course of negotiations and conciliation. All other submitted issues that were not
passed upon are dismissed.

The charge of unfair labor practice for bargaining in bad faith and the claim for damages relating
thereto are hereby dismissed for lack of merit.

Finally, the charge of unfair labor practice for gross violation of the economic provisions of the CBA is
hereby dismissed for want of jurisdiction.

SO ORDERED.3

Both petitioner and the Bank filed their respective motions for reconsideration, which were denied by
the Secretary per Order dated August 30, 2001.4

Petitioner sought recourse with the CA via a Petition for Certiorari, and in the assailed Decision dated
October 9, 20025 and Resolution dated January 26, 2004,6 the CA dismissed their petition and
affirmed the Secretary's Orders.

Hence, herein petition based on the following grounds:

I.

THE COURT A QUO ERRED IN DECIDING THAT THERE WAS NO BASIS FOR REVISING THE SCOPE OF
EXCLUSIONS FROM THE APPROPRIATE BARGAINING UNIT UNDER THE CBA.

Labor II – 1
 II.

THE COURT A QUO ERRED IN DECIDING THAT A ONE-MONTH OR LESS TEMPORARY OCCUPATION OF

A POSITION (ACTING CAPACITY) DOES NOT MERIT ADJUSTMENT IN REMUNERATION. 7

The resolution of this case has been overtaken by the execution of the parties' 2003-2005 CBA. While
this would render the case moot and academic, nevertheless, the likelihood that the same issues will
come up in the parties' future CBA negotiations is not far-fetched, thus compelling its resolution.
Courts will decide a question otherwise moot if it is capable of repetition yet evading review.[8]

The CBA provisions in dispute are the exclusion of certain employees from the appropriate bargaining
unit and the adjustment of remuneration for employees serving in an acting capacity for one month.

In their proposal, petitioner sought the exclusion of only the following employees from the
appropriate bargaining unit - all managers who are vested with the right to hire and fire employees,
confidential employees, those with access to labor relations materials, Chief Cashiers, Assistant
Cashiers, personnel of the Telex Department and one Human Resources (HR) staff.9

In the previous 1998-2000 CBA,10 the excluded employees are as follows:

A. All covenanted and assistant officers (now called National Officers)

B. One confidential secretary of each of the:

1. Chief Executive, Philippine Branches

2. Deputy Chief Executive/Head, Corporate Banking Group

3. Head, Finance

4. Head, Human Resources

5. Manager, Cebu

6. Manager, Iloilo

7. Covenanted Officers provided said positions shall be filled by new recruits.

C. The Chief Cashiers and Assistant Cashiers in Manila, Cebu and Iloilo, and in any other branch that
the BANK may establish in the country.

D. Personnel of the Telex Department

E. All Security Guards

F. Probationary employees, without prejudice to Article 277 (c) of the Labor Code, as amended by
R.A. 6715, casuals or emergency employees; and cralawlibrary

G. One (1) HR Staff11

The Secretary, however, maintained the previous exclusions because petitioner failed to show that
the employees sought to be removed from the list qualify for exclusion.12

Labor II – 1
With regard to the remuneration of employees working in an acting capacity, it was petitioner's
position that additional pay should be given to an employee who has been serving in a
temporary/acting capacity for one week. The Secretary likewise rejected petitioner's proposal and
instead, allowed additional pay for those who had been working in such capacity for one month. The
Secretary agreed with the Bank's position that a restrictive provision would curtail management's
prerogative, and at the same time, recognized that employees should not be made to work in an
acting capacity for long periods of time without adequate compensation.

The Secretary's disposition of the issues raised by petitioner were affirmed by the CA. 13 The Court
sustains the CA.

Whether or not the employees sought to be excluded from the appropriate bargaining unit are
confidential employees is a question of fact, which is not a proper issue in a Petition for Review under
Rule 45 of the Rules of Court.14 This holds more true in the present case in which petitioner failed to
controvert with evidence the findings of the Secretary and the CA.

The disqualification of managerial and confidential employees from joining a bargaining unit for rank
and file employees is already well-entrenched in jurisprudence. While Article 245 of the Labor Code
limits the ineligibility to join, form and assist any labor organization to managerial employees,
jurisprudence has extended this prohibition to confidential employees or those who by reason of their
positions or nature of work are required to assist or act in a fiduciary manner to managerial
employees and hence, are likewise privy to sensitive and highly confidential records.15

In this case, the question that needs to be answered is whether the Bank's Chief Cashiers and
Assistant Cashiers, personnel of the Telex Department and HR staff are confidential employees, such
that they should be excluded.

As regards the qualification of bank cashiers as confidential employees, National Association of

Trade Unions (NATU) - Republic Planters Bank Supervisors Chapter v. Torres16 declared that they are
confidential employees having control, custody and/or access to confidential matters, e.g., the
branch's cash position, statements of financial condition, vault combination, cash codes for
telegraphic transfers, demand drafts and other negotiable instruments, pursuant to Sec. 1166.4 of
the Central Bank Manual regarding joint custody, and therefore, disqualified from joining or assisting
a union; or joining, assisting or forming any other labor organization.17

Golden Farms, Inc. v. Ferrer-Calleja18 meanwhile stated that "confidential employees such as

accounting personnel, radio and telegraph operators who, having access to confidential
information, may become the source of undue advantage. Said employee(s) may act as spy or spies
of either party to a collective bargaining agreement."19

Finally, in Philips Industrial Development, Inc. v. National Labor Relations Commission,20 the Court
designated personnel staff, in which human resources staff may be qualified, as confidential
employees because by the very nature of their functions, they assist and act in a confidential
capacity to, or have access to confidential matters of, persons who exercise managerial functions in
the field of labor relations.

Petitioner insists that the foregoing employees are not confidential employees; however, it failed to
buttress its claim. Aside from its generalized arguments, and despite the Secretary's finding that
there was no evidence to support it, petitioner still failed to substantiate its claim. Petitioner did not
even bother to state the nature of the duties and functions of these employees, depriving the Court
of any basis on which it may be concluded that they are indeed confidential employees. As aptly
stated by the CA:

Labor II – 1
While We agree that petitioner's proposed revision is in accordance with the law, this does not
necessarily mean that the list of exclusions enumerated in the 1998-2000 CBA is contrary to law. As
found by public respondent, petitioner failed to show that the employees sought to be
removed from the list of exclusions are actually rank and file employees who are not
managerial or confidential in status and should, accordingly, be included in the appropriate
bargaining unit.

Absent any proof that Chief Cashiers and Assistant Cashiers, personnel of the Telex department and
one (1) HR Staff have mutuality of interest with the other rank and file employees, then they are
rightfully excluded from the appropriate bargaining unit. x x x 21 (Emphasis supplied) cralawlibrary

Petitioner cannot simply rely on jurisprudence without explaining how and why it should apply to this
case. Allegations must be supported by evidence. In this case, there is barely any at all.

There is likewise no reason for the Court to disturb the conclusion of the Secretary and the CA that
the additional remuneration should be given to employees placed in an acting capacity for one
month. The CA correctly stated:

Likewise, We uphold the public respondent's Order that no employee should be temporarily placed in
a position (acting capacity) for more than one month without the corresponding adjustment in the
salary. Such order of the public respondent is not in violation of the "equal pay for equal work"
principle, considering that after one (1) month, the employee performing the job in an acting
capacity will be entitled to salary corresponding to such position.

xxx

In arriving at its Order, the public respondent took all the relevant evidence into account and
weighed both parties arguments extensively. Thus, public respondent concluded that a restrictive
provision with respect to employees being placed in an acting capacity may curtail management's
valid exercise of its prerogative. At the same time, it recognized that employees should not be made
to perform work in an acting capacity for extended periods of time without being adequately
compensated. x x x22

Thus, the Court reiterates the doctrine that:

[T]he office of a Petition for Review on Certiorari under Rule 45 of the Rules of Court requires that it
shall raise only questions of law. The factual findings by quasi-judicial agencies, such as the
Department of Labor and Employment, when supported by substantial evidence, are entitled to great
respect in view of their expertise in their respective fields. Judicial review of labor cases does not go
so far as to evaluate the sufficiency of evidence on which the labor official's findings rest. It is not our
function to assess and evaluate all over again the evidence, testimonial and documentary, adduced
by the parties to an appeal, particularly where the findings of both the trial court (here, the DOLE
Secretary) and the appellate court on the matter coincide, as in this case at bar. The Rule limits that
function of the Court to the review or revision of errors of law and not to a second analysis of the
evidence. x x x Thus, absent any showing of whimsical or capricious exercise of judgment, and
unless lack of any basis for the conclusions made by the appellate court be amply demonstrated, we
may not disturb such factual findings.23

WHEREFORE, the petition is DENIED.

Labor II – 1
7.) Natu v Torres (& Republic Planters Bank).

G.R. No. 93468 December 29, 1994

NATIONAL ASSOCIATION OF TRADE UNIONS (NATU)-REPUBLIC PLANTERS BANK

SUPERVISORS CHAPTER, petitioner,
vs.
HON. RUBEN D. TORRES, SECRETARY OF LABOR AND EMPLOYMENT and REPUBLIC PLANTERS
BANK, respondents.

Filemon G. Tercero for petitioner.

The Government Corporate Counsel for Republic Planters Bank.

BELLOSILLO, J.:

NATIONAL ASSOCIATION OF TRADE UNIONS (NATU)-REPUBLIC PLANTERS BANK SUPERVISORS

CHAPTER seeks nullification of the decision of public respondent Secretary of Labor dated 23 March 1990, which
modified the order of Med-Arbiter Manases T. Cruz dated 17 August 1989 as well as his order dated 20 April 1990
denying reconsideration.

On 17 March 1989, NATU filed a petition for certification election to determine the exclusive bargaining
representative of respondent Bank's employees occupying supervisory positions. On 24 April 1989, the Bank moved
to dismiss the petition on the ground that the supposed supervisory employees were actually managerial and/or
confidential employees thus ineligible to join, assist or form a union, and that the petition lacked the 20% signatory
requirement under the Labor Code.

On 17 August 1989, Med-Arbiter Manases T. Cruz granted the petition thus —

WHEREFORE, . . . let a certification election be ordered conducted among all the regular employees
of the Republic Planters Bank occupying supervisory positions or the equivalent within 20 days from
receipt of a copy of this Order. The choice shall be: (1) National Association of Trade Unions
(NATU)-Republic Planters Bank Supervisors Chapter; and (2) No Union.

The payroll three months prior to the filing of this petition shall be utilized in determining the list of
eligible voters . . . .
1

Respondent Bank appealed the order to the Secretary of Labor on the main ground that several of the employees
sought to be included in the certification election, particularly the Department Managers, Branch Managers/OICs,
Cashiers and Controllers were managerial and/or confidential employees and thus ineligible to join, assist or form a
union. It presented annexes detailing the job description and duties of the positions in question and affidavits of
certain employees. It also invoked provisions of the General Banking Act and the Central Bank Act to show the
duties and responsibilities of the bank and its branches.

On 23 March 1990, public respondent issued a decision partially granting the appeal, which is now being
challenged before us —

WHEREFORE, . . . the appeal is hereby partially granted. Accordingly, the Order dated 17 August
1989 is modified to the extent that Department Managers, Assistant Managers, Branch Managers,
Cashiers and Controllers are declared managerial employees. Perforce, they cannot join the union
of supervisors such as Division Chiefs, Accounts Officers, Staff Assistants and OIC's (sic) unless the
latter are regular managerial employees . . . . 2

Labor II – 1
NATU filed a motion for reconsideration but the same was denied on 20 April 1990.  Hence this recourse assailing
3

public respondent for rendering the decision of 23 March 1990 and the order of 20 April 1990 both with grave abuse
of discretion.

The crucial issue presented for our resolution is whether the Department Managers, Assistant Managers, Branch
Managers/OICs, Cashiers and Controllers of respondent Bank are managerial and/or confidential employees hence
ineligible to join or assist the union of petitioner.

NATU submits that an analysis of the decision of public respondent readily yields certain flaws that result in
erroneous conclusions. Firstly, a branch does not enjoy relative autonomy precisely because it is treated as one unit
with the head office and has to comply with uniform policies and guidelines set by the bank itself. It would be absurd
if each branch of a particular bank would be adopting and implementing different policies covering multifarious
banking transactions. Moreover, respondent Bank's own evidence clearly shows that policies and guidelines
covering the various branches are set by the head office. Secondly, there is absolutely no evidence showing that
bank policies are laid down through the collective action of the Branch Manager, the Cashier and the Controller.
Thirdly, the organizational setup where the Branch Manager exercises control over branch operations, the Controller
controls the Accounting Division, and the Cashier controls the Cash Division, is nothing but a proper delineation of
duties and responsibilities. This delineation is a Central Bank prescribed internal control measure intended to
objectively establish responsibilities among the officers to easily pinpoint culpability in case of error. The "dual
control" and "joint custody" aspects mentioned in the decision of public respondent are likewise internal control
measures prescribed by the Central Bank.

Neither is there evidence showing that subject employees are vested with powers or prerogatives to hire, transfer,
suspend, lay off, recall, discharge, assign or discipline employees. The bare allegations in the affidavits of
respondent Bank's Executive Assistant to the President  and the Senior Manager of the Human Resource
4

Management Department  that those powers and prerogatives are inherent in subject positions are self-serving.
5

Their claim cannot be made to prevail upon the actual duties and responsibilities of subject employees.

The other evidence of respondent Bank which purports to show that subject employees exercise managerial
functions even belies such claim. Insofar as Department Managers and Assistant Managers are concerned, there is
absolutely no reason mentioned in the decision why they are managerial employees. Not even respondent Bank in
its appeal questioned the inclusion of Assistant Managers among the qualified petitioning employees. Public
respondent has deviated from the real issue in this case, which is, the determination of whether subject employees
are managerial employees within the contemplation of the Labor Code, as amended by RA 6715; instead, he merely
concentrated on the nature, conduct and management of banks conformably with the General Banking Act and the
Central Bank Act.

Petitioner concludes that subject employees are not managerial employees but supervisors. Even assuming that
they are confidential employees, there is no legal prohibition against confidential employees who are not performing
managerial functions to form and join a union.

On the other hand, respondent Bank maintains that the Department Managers, Branch Managers, Cashiers and
Controllers are inherently possessed of the powers enumerated in Art. 212, par. (m), of the Labor Code. It relies
heavily on the affidavits of its Executive Assistant to the President and Senior Manager of the Human Resource
Department. The Branch Managers, Cashiers and Controllers are vested not only with policy-making powers
necessary to run the affairs of the branch, given the independence and relative autonomy which it enjoys in the
pursuit of its goals and objectives, but also with the concomitant disciplinary authority over the employees.

The Solicitor General argues that NATU loses sight of the fact that by virtue of the appeal of respondent Bank, the
whole case is thrown open for consideration by public respondent. Even errors not assigned in the appeal, such as
the exclusion by the Med-Arbiter of Assistant Managers from the managerial employees category, is within his
discretion to consider as it is closely related to the errors properly assigned. The fact that Department Managers are
managerial employees is borne out by the evidence of petitioner itself. Furthermore, while it assails public
respondent's finding that subject employees are managerial employees, petitioner never questioned the fact that
said officers also occupy confidential positions and thus remain prohibited from forming or joining any labor
organization.

Labor II – 1
Respondent Bank has no legal personality to move for the dismissal of the petition for certification election on the
ground that its supervisory employees are in reality managerial employees. An employer has no standing to
question the process since this is the sole concern of the workers. The only exception is where the employer itself
has to file the petition pursuant to Art. 258 of the Labor Code because of a request to bargain collectively.
6

Public respondent, invoking RA 6715 and the inherent functions of Department Managers, Assistant Managers,
Branch Managers, Cashiers and Controllers, held that these officers properly fall within the definition of managerial
employees. The ratiocination in his Decision of 23 March 1990  is that —
7

Republic Act No. 6715, otherwise known as the Herrera-Veloso Law, restored the right of
supervisors to form their own unions while maintaining the proscription on the right to self-
organization of managerial employees. Accordingly, the Labor Code, as amended, distinguishes
managerial, supervisory and rank-and-file employees thus:

Art. 212 (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 managerial
authority is not routinary 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 (emphasis supplied).

At first glance, pursuant to the above-definitions and based on their job descriptions as guideposts,
there would seem to be no difficulty in distinguishing a managerial employee from that of a
supervisor, or from that of a mere rank-and-file employee. Yet, this task takes on a different
dimension when applied to banks, particularly the branches thereof. This is so because unlike
ordinary corporations, a bank's organizational operation is governed and regulated by the General
Banking Act and the Central Bank Act, both special laws . . . .

As pointed out by the respondent, in the banking industry, a branch is the microcosm of a banking
institution, uniquely autonomous and
self-governing.

This relative autonomy of a branch finds legal basis in Section 27 of the General Banking Act, as
amended, thus:

. . . . The bank shall be responsible for all business conducted in such branches to
the same extent and in the same manner as though such business had all been
conducted in the head office.

For the purpose of this Act, a bank and its branches shall be treated as a
unit (emphasis supplied).

Conformably with the above, bank policies are laid down and/or executed through the collective
action of the Branch Manager, Cashier and Controller at the branch level. The Branch Manager
exercises over-all control and supervision over branch operation being on the top of the branch's
pyramid structure. However, both the controller and the cashier who are called in banking parlance
as "Financial Managers" due to their fiscal functions are given such a share and sphere of
responsibility in the operations of the bank. The cashier controls and supervises the cash division
while the controller that of the Accounting Division. Likewise, their assigned task is of great
significance, without which a bank or branch for that matter cannot operate or function.

Through the collective action of these three branch officers operational transactions are carried out
like: The two (2)-signature requirement of the manager, on one hand, and that of the controller or
cashier on the other hand as required in bank's issuances and releases. This is the so-called "dual

Labor II – 1
 control" through check-and-balance as prescribed by the Central Bank, per Section 1166.6, Book I,
Manual of Regulations for Banks and Financial Intermediaries. Another is in the joint custody of the
branch's cash in vault, accountable forms, collaterals, documents of title, deposit, ledgers and
others, among the branch manager and at least two (2) officers of the branch as required under
Section 1166.6 of the Manual of Regulations for Banks and Other Financial Intermediaries.

This structural set-up creates a triad of managerial authority among the branch manager, cashier
and controller. Hence, no officer of the bank ". . . have (sic) complete authority and responsibility for
handling all phases of any transaction from beginning to end without some control or balance from
some other part of the organization" (Section 1166.3, Division of Duties and
Responsibilities, Ibid). This aspect in the banking system which calls for the division of duties and
responsibilities is a clear manifestation of managerial power and authority. No operational
transaction at branch level is carried out by the singular act of the Branch Manager but rather
through the collective act of the Branch Manager, Cashier/Controller (emphasis supplied).

Noteworthy is the "on call client" set up in banks. Under this scheme, the branch manager is tasked
with the responsibility of business development and marketing of the bank's services which place
him on client call. During such usual physical absences from the branch, the cashier assumes the
reins of branch control and administration. On those occasions, the "dual control system" is clearly
manifest in the transactions and operations of the branch bank as it will then require the necessary
joint action of the controller and the cashier.

The grave abuse of discretion committed by public respondent is at once apparent. Art. 212, par. (m), of the Labor
Code is explicit. A managerial employee is (a) one who is vested with powers or prerogatives to lay down and
execute management policies, or to hire, transfer, suspend, lay off, recall, discharge, assign or discipline
employees; or (b) one who is vested with both powers or prerogatives. A supervisory employee is different from a
managerial employee in the sense that the supervisory employee, in the interest of the employer, effectively
recommends such managerial actions, if the exercise of such managerial authority is not routinary in nature but
requires the use of independent judgment.

Ranged against these definitions and after a thorough examination of the evidence submitted by both parties, we
arrive at a contrary conclusion. Branch Managers, Cashiers and Controllers of respondent Bank are not managerial
employees but supervisory employees. The finding of public respondent that bank policies are laid down and/or
executed through the collective action of these employees is simply erroneous. His discussion on the division of
their duties and responsibilities does not logically lead to the conclusion that they are managerial employees, as the
term is defined in Art. 212, par. (m).

Among the general duties and responsibilities of a Branch Manager is "[t]o discharge his duties and authority with a
high sense of responsibility and integrity and shall at all times be guided by prudence like a good father of the
family, and sound judgment in accordance with and within the limitations of the policy/policies promulgated by the
Board of Directors and implemented by the Management until suspended, superseded, revoked or modified" (par. 5,
emphasis supplied).  Similarly, the job summary of a Controller states: "Supervises the Accounting Unit of the
8

branch; sees to the compliance by the Branch with established procedures, policies, rules and regulations of the
Bank and external supervising authorities; sees to the strict implementation of control procedures (emphasis
supplied).  The job description of a Cashier does not mention any authority on his part to lay down policies,
9

either.   On the basis of the foregoing evidence, it is clear that subject employees do not participate in policy-making
10

but are given approved and established policies to execute and standard practices to observe,  leaving little or no
11

discretion at all whether to implement said policies or not.  It is the nature of the employee's functions, and not the
12

nomenclature or title given to his job, which determines whether he has rank-and-file, supervisory or managerial
status.
13

Moreover, the bare statement in the affidavit of the Executive Assistant to the President of respondent Bank that the
Branch Managers, Cashiers and Controllers "formulate and implement the plans, policies and marketing strategies
of the branch towards the successful accomplishment of its profit targets and objectives,"  is contradicted by the
14

following evidence submitted by respondent Bank itself:

Labor II – 1
 (a) Memorandum issued by respondent Bank's Assistant Vice President to all Regional Managers
and Branch Managers giving them temporary discretionary authority to grant additional interest over
the prescribed board rates for both short-term and long-term CTDs subject, however, to specific
limitations and guidelines set forth in the same memorandum; 15

(b) Memorandum issued by respondent Bank's Executive Vice President to all Regional Managers
and Branch Officers regarding the policy and guidelines on drawing against uncollected deposits
(DAUD); 16

(c) Memorandum issued by respondent Bank's President to all Field Offices regarding the guidelines
on domestic bills purchased
(DBP);  and
17

(d) Memorandum issued by the same officer to all Branch Managers regarding lending authority at
the branch level and the terms and conditions thereof. 18

As a consequence, the affidavit of the Executive Assistant cannot be given any weight at all.

Neither do the Branch Managers, Cashiers and Controllers have the power to hire, transfer, suspend, lay off, recall,
discharge, assign or discipline employees. The Senior Manager of the Human Resource Management Department
of respondent Bank, in her affidavit, stated that "the power to hire, fire, suspend, transfer, assign or otherwise
impose discipline among subordinates within their respective jurisdictions is lodged with the heads of the various
departments, the branch managers and officers-in-charge, the branch cashiers and the branch controllers. Inherent
as it is in the aforementioned positions, the authority to hire, fire, suspend, transfer, assign or otherwise discipline
employees within their respective domains was deemed unnecessary to be incorporated in their individual job
descriptions; By way of illustration, on August 24, 1989, Mr. Renato A. Tuates, the Officer-in-Charge/Branch Cashier
of the Bank's Dumaguete Branch, placed under preventive suspension and thereafter terminated the teller of the
same branch . . . . Likewise, on February 22, 1989, Mr. Francis D. Robite, Sr., the Officer-in-Charge of International
Department, assigned the cable assistant of the International Department as the concurrent FCDU Accountable
Forms Custodian." 19

However, a close scrutiny of the memorandum of Mr. Tuates reveals that he does not have said managerial power
because as plainly stated therein, it was issued "upon instruction from Head Office."   With regard to the
20

memorandum of Mr. Robite, Sr., it appears that the power he exercised was merely in an isolated instance, taking
into account the other evidence submitted by respondent Bank itself showing lack of said power by other Branch
Managers/OICs:

(a) Memorandum from the Branch Manager for the

AVP-Manpower Management Department expressing the opinion that a certain employee, due to
habitual absenteeism and tardiness, must be penalized in accordance with respondent Bank's Code
of Discipline; and

(b) Memorandum from a Branch OIC for the Assistant Vice President recommending a certain
employee's promotional adjustment to the present position he occupies.

Clearly, those officials or employees possess only recommendatory powers subject to evaluation, review and final
action by higher officials. Therefore, the foregoing affidavit cannot bolster the stand of respondent Bank.

The positions of Department Managers and Assistant Managers were also declared by public respondent as
managerial, without providing any basis therefor. Petitioner asserts that the position of Assistant Manager was not
even included in the appeal filed by respondent Bank. While we agree with the Office of the Solicitor General that it
is within the discretion of public respondent to consider an unassigned issue that is closely related to an issue
properly assigned, still, public respondent's error lies in the fact that his finding has no leg to stand on. Anyway,
inasmuch as the entire records are before us, now is the opportunity to discuss this issue.

Labor II – 1
We analyzed the evidence submitted by respondent Bank in support of its claim that Department Managers are
managerial employees   and concluded that they are not. Like Branch Managers, Cashiers and Controllers,
21

Department Managers do not possess the power to lay down policies nor to hire, transfer, suspend, lay off, recall,
discharge, assign or discipline employees. They occupy supervisory positions, charged with the duty among others
to "recommend proposals to improve and streamline operations."  With respect to Assistant Managers, there is
22

absolutely no evidence submitted to substantiate public respondent's finding that they are managerial employees;
understandably so, because this position is not included in the appeal of respondent Bank.

As regards the other claim of respondent Bank that Branch Managers/OICs, Cashiers and Controllers are
confidential employees, having control, custody and/or access to confidential matters, e.g., the branch's cash
position, statements of financial condition, vault combination, cash codes for telegraphic transfers, demand drafts
and other negotiable instruments,   pursuant to Sec. 1166.4 of the Central Bank Manual regarding joint
23

custody,   this claim is not even disputed by petitioner. A confidential employee is one entrusted with confidence on
24

delicate matters, or with the custody, handling, or care and protection of the employer's property.   While Art. 245 of
25

the Labor Code singles out managerial employees as ineligible to join, assist or form any labor organization, under
the doctrine of necessary implication, confidential employees are similarly disqualified. This doctrine states that what
is implied in a statute is as much a part thereof as that which is expressed, as elucidated in several cases  the latest
26

of which is Chua v. Civil Service Commission   where we said:

27

No statute can be enacted that can provide all the details involved in its application. There is always
an omission that may not meet a particular situation. What is thought, at the time of enactment, to be
an all-embracing legislation may be inadequate to provide for the unfolding events of the future. So-
called gaps in the law develop as the law is enforced. One of the rules of statutory construction used
to fill in the gap is the doctrine of necessary implication . . . . Every statute is understood, by
implication, to contain all such provisions as may be necessary to effectuate its object and purpose,
or to make effective rights, powers, privileges or jurisdiction which it grants, including all such
collateral and subsidiary consequences as may be fairly and logically inferred from its terms. Ex
necessitate
legis . . . .

In applying the doctrine of necessary implication, we took into consideration the rationale behind the disqualification
of managerial employees expressed in Bulletin Publishing Corporation v. Sanchez,  thus: ". . . if these managerial
28

employees would belong to or be affiliated with a Union, the latter might not be assured of their loyalty to the Union
in view of evident conflict of interests. The Union can also become company-dominated with the presence of
managerial employees in Union membership." Stated differently, in the collective bargaining process, managerial
employees are supposed to be on the side of the employer, to act as its representatives, and to see to it that its
interests are well protected. The employer is not assured of such protection if these employees themselves are
union members. Collective bargaining in such a situation can become one-sided.  It is the same reason that
29

impelled this Court to consider the position of confidential employees as included in the disqualification found in Art.
245 as if the disqualification of confidential employees were written in the provision. If confidential employees could
unionize in order to bargain for advantages for themselves, then they could be governed by their own motives rather
than the interest of the employers. Moreover, unionization of confidential employees for the purpose of collective
bargaining would mean the extension of the law to persons or individuals who are supposed to act "in the interest
of" the employers.   It is not farfetched that in the course of collective bargaining, they might jeopardize that interest
30

which they are duty-bound to protect. Along the same line of reasoning we held in Golden Farms, Inc. v. Ferrer-
Calleja   reiterated in Philips Industrial Development, Inc. v. NLRC,  that "confidential employees such as
31 32

accounting personnel, radio and telegraph operators who, having access to confidential information, may become
the source of undue advantage. Said employee(s) may act as spy or spies of either party to a collective bargaining
agreement."

In fine, only the Branch Managers/OICs, Cashiers and Controllers of respondent Bank, being confidential
employees, are disqualified from joining or assisting petitioner Union, or joining, assisting or forming any other labor
organization. But this ruling should be understood to apply only to the present case based on the evidence of the
parties, as well as to those similarly situated. It should not be understood in any way to apply to banks in general.

WHEREFORE, the petition is partially GRANTED. The decision of public respondent Secretary of Labor dated 23
March 1990 and his order dated 20 April 1990 are MODIFIED, hereby declaring that only the Branch

Labor II – 1
Managers/OICs, Cashiers and Controllers of respondent Republic Planters Bank are ineligible to join or assist
petitioner National Association of Trade Unions (NATU)-Republic Planters Bank Supervisors Chapter, or join, assist
or form any other labor organization.

Labor II – 1
8.) Metrolab v Confesor (& Metrolab Employees Association)

G.R. No. 108855             February 28, 1996

METROLAB INDUSTRIES, INC., petitioner,

vs.
HONORABLE MA. NIEVES ROLDAN-CONFESOR, in her capacity as Secretary of the Department of Labor
and Employment and METRO DRUG CORPORATION EMPLOYEES ASSOCIATION - FEDERATION OF FREE
WORKERS, respondents.

DECISION

KAPUNAN, J.:

This is a petition for certiorari under Rule 65 of the Revised Rules of Court seeking the annulment of the Resolution
and Omnibus Resolution of the Secretary of Labor and Employment dated 14 April 1992 and 25 January 1993,
respectively, in OS-AJ-04491-11 (NCMB-NCR-NS-08-595-91; NCMB-NCR-NS-09-678-91) on grounds that these
were issued with grave abuse of discretion and in excess of jurisdiction.

Private respondent Metro Drug Corporation Employees Association-Federation of Free Workers (hereinafter
referred to as the Union) is a labor organization representing the rank and file employees of petitioner Metrolab
Industries, Inc. (hereinafter referred to as Metrolab/MII) and also of Metro Drug, Inc.

On 31 December 1990, the Collective Bargaining Agreement (CBA) between Metrolab and the Union expired. The
negotiations for a new CBA, however, ended in a deadlock.

Consequently, on 23 August 1991, the Union filed a notice of strike against Metrolab and Metro Drug Inc. The
parties failed to settle their dispute despite the conciliation efforts of the National Conciliation and Mediation Board.

To contain the escalating dispute, the then Secretary of Labor and Employment, Ruben D. Torres, issued an
assumption order dated 20 September 1991, the dispositive portion of which reads, thus:

WHEREFORE, PREMISES CONSIDERED, and pursuant to Article 263 (g) of the Labor Code, as amended,
this Office hereby assumes jurisdiction over the entire labor dispute at Metro Drug, Inc. - Metro Drug
Distribution Division and Metrolab Industries, Inc.

Accordingly, any strike or lockout is hereby strictly enjoined. The Companies and the Metro Drug
Corp. Employees Association - FFW are likewise directed to cease and desist from committing any and all
acts that might exacerbate the situation.

Finally, the parties are directed to submit their position papers and evidence on the aforequoted deadlocked
issues to this office within twenty (20) days from receipt hereof.

SO ORDERED. (Emphasis ours.)

1 

On 27 December 1991, then Labor Secretary Torres issued an order resolving all the disputed items in the CBA and
ordered the parties involved to execute a new CBA.

Thereafter, the union filed a motion for reconsideration.

On 27 January 1992, during the pendency of the abovementioned motion for reconsideration, Metrolab laid off 94 of
its rank and file employees.

Labor II – 1
On the same date, the Union filed a motion for a cease and desist order to enjoin Metrolab from implementing the
mass layoff, alleging that such act violated the prohibition against committing acts that would exacerbate the
dispute as specifically directed in the assumption order.  2

On the other hand, Metrolab contended that the layoff was temporary and in the exercise of its management
prerogative. It maintained that the company would suffer a yearly gross revenue loss of approximately sixty-six (66)
million pesos due to the withdrawal of its principals in the Toll and Contract Manufacturing Department. Metrolab
further asserted that with the automation of the manufacture of its product "Eskinol," the number of workers required
for its production is significantly reduced.
3

Thereafter, on various dates, Metrolab recalled some of the laid off workers on a temporary basis due to availability
of work in the production lines.

On 14 April 1992, Acting Labor Secretary Nieves Confesor issued a resolution declaring the layoff of Metrolab's 94
rank and file workers illegal and ordered their reinstatement with full backwages. The dispositive portion reads as
follows:

WHEREFORE, the Union's motion for reconsideration is granted in part, and our order of 28 December
1991 is affirmed subject to the modifications in allowances and in the close shop provision. The layoff of the
94 employees at MII is hereby declared illegal for the failure of the latter to comply with our injunction
against committing any act which may exacerbate the dispute and with the 30-day notice requirement.
Accordingly, MII is hereby ordered to reinstate the 94 employees, except those who have already been
recalled, to their former positions or substantially equivalent, positions with full backwages from the date
they were illegally laid off on 27 January 1992 until actually reinstated without loss of seniority rights and
other benefits. Issues relative to the CBA agreed upon by the parties and not embodied in our earlier order
are hereby ordered adopted for incorporation in the CBA. Further, the dispositions and directives contained
in all previous orders and resolutions relative to the instant dispute, insofar as not inconsistent herein, are
reiterated. Finally, the parties are enjoined to cease and desist from committing any act which may tend to
circumvent this resolution.

SO RESOLVED.  4

On 6 March 1992, Metrolab filed a Partial Motion for Reconsideration alleging that the layoff did not aggravate the
dispute since no untoward incident occurred as a result thereof. It, likewise, filed a motion for clarification regarding
the constitution of the bargaining unit covered by the CBA.

On 29 June 1992, after exhaustive negotiations, the parties entered into a new CBA. The execution, however, was
without prejudice to the outcome of the issues raised in the reconsideration and clarification motions submitted for
decision to the Secretary of Labor.  5

Pending the resolution of the aforestated motions, on 2 October 1992, Metrolab laid off 73 of its employees on
grounds of redundancy due to lack of work which the union again promptly opposed on 5 October 1992.

On 15 October 1992, Labor Secretary Confesor again issued a cease and desist order. Metrolab moved for a
reconsiderations. 6

On 25 January 1993, Labor Secretary Confesor issued the assailed Omnibus Resolution containing the following
orders:

xxx       xxx       xxx

1. MII's motion for partial reconsideration of our 14 April 1992 resolution specifically that portion thereof
assailing our ruling that the layoff of the 94 employees is illegal, is hereby denied. MII is hereby ordered to
pay such employees their full backwages computed from the time of actual layoff to the time of actual recall;

Labor II – 1
 2. For the parties to incorporate in their respective collective bargaining agreements the clarifications herein
contained; and

3. MII's motion for reconsideration with respect to the consequences of the second wave of layoff affecting
73 employees, to the extent of assailing our ruling that such layoff tended to exacerbate the dispute, is
hereby denied. But inasmuch as the legality of the layoff was not submitted for our resolution and no
evidence had been adduced upon which a categorical finding thereon can be based, the same is hereby
referred to the NLRC for its appropriate action.

Finally, all prohititory injunctions issued as a result of our assumption of jurisdiction over this dispute are
hereby lifted.

SO RESOLVED. 7

Labor Secretary Confesor also ruled that executive secretaries are excluded from the closed-shop provision of the
CBA, not from the bargaining unit.

On 4 February 1993, the Union filed a motion for execution. Metrolab opposed. Hence, the present petition
for certiorari with application for issuance of a Temporary Restraining Order.

On 4 March 1993, we issued a Temporary Restraining Order enjoining the Secretary of Labor from enforcing and
implementing the assailed Resolution and Omnibus Resolution dated 14 April 1992 and 25 January 1993,
respectively.

In its petition, Metrolab assigns the following errors:

A.

THE PUBLIC RESPONDENT HON. SECRETARY OF LABOR AND EMPLOYMENT COMMITTED GRAVE
ABUSE OF DISCRETION AND EXCEEDED HER JURISDICTION IN DECLARING THE TEMPORARY
LAYOFF ILLEGAL, AND ORDERING THE REINSTATEMENT AND PAYMENT OF BACKWAGES TO THE
AFFECTED EMPLOYEES.*

B.

THE PUBLIC RESPONDENT HON. SECRETARY OF LABOR AND EMPLOYMENT GRAVELY ABUSED
HER DISCRETION IN INCLUDING EXECUTIVE SECRETARIES AS PART OF THE BARGAINING UNIT
OF RANK AND FILE EMPLOYEES. 8

Anent the first issue, we are asked to determine whether or not public respondent Labor Secretary committed grave
abuse of discretion and exceeded her jurisdiction in declaring the subject layoffs instituted by Metrolab illegal on
grounds that these unilateral actions aggravated the conflict between Metrolab and the Union who were, then,
locked in a stalemate in CBA negotiations.

Metrolab argues that the Labor Secretary's order enjoining the parties from committing any act that might
exacerbate the dispute is overly broad, sweeping and vague and should not be used to curtail the employer's right
to manage his business and ensure its viability.

We cannot give credence to Metrolab's contention.

This Court recognizes the exercise of management prerogatives and often declines to interfere with the legitimate
business decisions of the employer. However, this privilege is not absolute but subject to limitations imposed by
law. 
9

In PAL v. NLRC,  we issued this reminder:

10 

Labor II – 1
 xxx       xxx       xxx

. . . the exercise of management prerogatives was never considered boundless. Thus, in Cruz
vs. Medina (177 SCRA 565 [1989]), it was held that management's prerogatives must be without abuse of
discretion. . . .

xxx       xxx       xxx

All this points to the conclusion that the exercise of managerial prerogatives is not unlimited. It is
circumscribed by limitations found in law, a collective bargaining agreement, or the general principles of fair
play and justice (University of Sto. Tomas v. NLRC, 190 SCRA 758 [1990]) . . . . (Emphasis ours.)

xxx       xxx       xxx

The case at bench constitutes one of the exceptions. The Secretary of Labor is expressly given the power under the
Labor Code to assume jurisdiction and resolve labor disputes involving industries indispensable to national interest.
The disputed injunction is subsumed under this special grant of authority. Art. 263 (g) of the Labor Code specifically
provides that:

xxx       xxx       xxx

(g) 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.
Such assumption or certification shall have the effect of automatically enjoining the intended or impending
strike or lockout as specified in the assumption or certification order. If one has already taken place at the
time of assumption or certification, all striking or locked out employees shall immediately return to work and
the employer shall immediately resume operations and readmit all workers under the same terms and
conditions prevailing before the strike or lockout. The Secretary of Labor and Employment or the
Commission may seek the assistance of law enforcement agencies to ensure compliance with this
provision as well as with such orders as he may issue to enforce the same. . . . (Emphasis ours.)

xxx       xxx       xxx

That Metrolab's business is of national interest is not disputed. Metrolab is one of the leading manufacturers and
suppliers of medical and pharmaceutical products to the country.

Metrolab's management prerogatives, therefore, are not being unjustly curtailed but duly balanced with and
tempered by the limitations set by law, taking into account its special character and the particular circumstances in
the case at bench.

As aptly declared by public respondent Secretary of Labor in its assailed resolution:

xxx       xxx       xxx

MII is right to the extent that as a rule, we may not interfere with the legitimate exercise of management
prerogatives such as layoffs. But it may nevertheless be appropriate to mention here that one of the
substantive evils which Article 263 (g) of the Labor Code seeks to curb is the exacerbation of a labor dispute
to the further detriment of the national interest. When a labor dispute has in fact occurred and a general
injunction has been issued restraining the commission of disruptive acts, management prerogatives must
always be exercise consistently with the statutory objective.  11

xxx       xxx       xxx

Metrolab insists that the subject layoffs did not exacerbate their dispute with the Union since no untoward incident
occurred after the layoffs were implemented. There were no work disruptions or stoppages and no mass actions
Labor II – 1
were threatened or undertaken. Instead, petitioner asserts, the affected employees calmly accepted their fate "as
this was a matter which they had been previously advised would be inevitable.  12

After a judicious review of the record, we find no compelling reason to overturn the findings of the Secretary of
Labor.

We reaffirm the doctrine that considering their expertise in their respective fields, factual findings of administrative
agencies supported by substantial evidence are accorded great respect and binds this Court.  13

The Secretary of Labor ruled, thus:

xxx       xxx       xxx

Any act committed during the pendency of the dispute that tends to give rise to further contentious issues or
increase the tensions between the parties should be considered an act of exacerbation. One must look at
the act itself, not on speculative reactions. A misplaced recourse is not needed to prove that a dispute has
been exacerbated. For instance, the Union could not be expected to file another notice of strike. For this
would depart from its theory of the case that the layoff is subsumed under the instant dispute, for which a
notice of strike had already been filed. On the other hand, to expect violent reactions, unruly behavior, and
any other chaotic or drastic action from the Union is to expect it to commit acts disruptive of public order or
acts that may be illegal. Under a regime of laws, legal remedies take the place of violent ones.  14

xxx       xxx       xxx

Protest against the subject layoffs need not be in the form of violent action or any other drastic measure. In the
instant case the Union registered their dissent by swiftly filing a motion for a cease and desist order. Contrary to
petitioner's allegations the Union strongly condemned the layoffs and threatened mass action if the Secretary of
Labor fails to timely intervene:

xxx       xxx       xxx

3. This unilateral action of management is a blatant violation of the injunction of this Office against
committing acts which would exacerbate the dispute. Unless such act is enjoined the Union will be
compelled to resort to its legal right to mass actions and concerted activities to protest and stop the said
management action. This mass layoff is clearly one which would result in a very serious labor dispute unless
this Office swiftly intervenes. 
15

xxx       xxx       xxx

Metrolab and the Union were still in the process of resolving their CBA deadlock when petitioner implemented the
subject layoffs. As a result, motions and oppositions were filed diverting the parties', attention, delaying resolution of
the bargaining deadlock and postponing the signing of their new CBA, thereby aggravating the whole conflict.

We, likewise, find untenable Metrolab's contention that the layoff of the 94 rank-and-file employees was temporary,
despite the recall of some of the laid off workers.

If Metrolab intended the layoff of the 94 workers to be temporary, it should have plainly stated so in the notices it
sent to the affected employees and the Department of Labor and Employment. Consider the tenor of the pertinent
portions of the layoff notice to the affected employees:

xxx       xxx       xxx

Dahil sa mga bagay na ito, napilitan ang ating kumpanya na magsagawa ng "lay-off" ng mga empleyado sa
Rank & File dahil nabawasan ang trabaho at puwesto para sa kanila. Marami sa atin ang kasama sa "lay-
off" dahil wala nang trabaho para sa kanila. Mahirap tanggapin ang mga bagay na ito subalit kailangan
nating gawin dahil hindi kaya ng kumpanya ang magbayad ng suweldo kung ang empleyado ay walang
Labor II – 1
 trabaho. Kung tayo ay patuloy na magbabayad ng suweldo, mas hihina ang ating kumpanya at mas marami
ang maaaring maapektuhan.

Sa pagpapatupad ng "lay-off" susundin natin ang LAST IN-FIRST OUT policy. Ang mga empleyadong may
pinakamaikling serbisyo sa kumpanya ang unang maaapektuhan. Ito ay batay na rin sa nakasaad sa ating
CBA na ang mga huling pumasok sa kumpanya ang unang masasama sa "lay-off" kapag nagkaroon ng
ganitong mga kalagayan.

Ang mga empleyado na kasama sa "lay-off" ay nakalista sa sulat na ito. Ang umpisa ng lay-off ay sa Lunes,
Enero 27. Hindi na muna sila papasok sa kumpanya. Makukuha nila ang suweldo nila sa Enero 30, 1992.

Hindi po natin matitiyak kung gaano katagal ang "lay-off", ngunit ang aming tingin ay matatagalan bago
maakaroon na dagdag na trabaho. Dahil dito, sinimulan na namin ang isang "Redundancy Program" sa
mga supervisors. Mabawasan ang mga puwesto para sa kanila, kaya sila ay mawawalan ng trabaho at
bibigyan na ng redundancy pay.  (Emphasis ours.)
16 

xxx       xxx       xxx

We agree with the ruling of the Secretary of Labor, thus:

xxx       xxx       xxx

. . . MII insists that the layoff in question is temporary not permanent. It then cites International
Hardware, Inc. vs. NLRC, 176 SCRA 256, in which the Supreme Court held that the 30-day notice required
under Article 283 of the Labor Code need not be complied with if the employer has no intention to
permanently severe (sic) the employment relationship.

We are not convinced by this argument. International Hardware involves a case where there had been a
reduction of workload. Precisely to avoid laying off the employees, the employer therein opted to give them
work on a rotating basis. Though on a limited scale, work was available. This was the Supreme Court's
basis for holding that there was no intention to permanently severe (sic) the employment relationship.

Here, there is no circumstance at all from which we can infer an intention from MII not to sever the
employment relationship permanently. If there was such an intention, MII could have made it very clear in
the notices of layoff. But as it were, the notices are couched in a language so uncertain that the only
conclusion possible is the permanent termination, not the continuation, of the employment relationship.

MII also seeks to excuse itself from compliance with the 30-day notice with a tautology. While insisting that
there is really no best time to announce a bad news, (sic) it also claims that it broke the bad news only on 27
January 1992 because had it complied with the 30-day notice, it could have broken the bad news on 02
January 1992, the first working day of the year. If there is really no best time to announce a bad news (sic), it
wouldn't have mattered if the same was announced at the first working day of the year. That way, MII could
have at least complied with the requirement of the law.  17

The second issue raised by petitioner merits our consideration.

In the assailed Omnibus Resolution, Labor Secretary Confesor clarified the CBA provisions on closed-shop and the
scope of the bargaining unit in this wise:

xxx       xxx       xxx

Appropriateness of the bargaining unit.

xxx       xxx       xxx

Labor II – 1
 Exclusions. In our 14 April 1992 resolution, we ruled on the issue of exclusion as follows:

These aside, we reconsider our denial of the modifications which the Union proposes to introduce on
the close shop provision. While we note that the provision as presently worded has served the
relationship of the parties well under previous CBA'S, the shift in constitutional policy toward
expanding the right of all workers to self-organization should now be formally by the parties, subject
to the following exclusions only:

1. Managerial employees; and

2. The executive secretaries of the President, Executive Vice-President, Vice-President, Vice-

President for Sales, Personnel manager, and Director for Corporate Planning who may have access
to vital labor relations information or who may otherwise act in a confidential capacity to persons who
determine or formulate management policies.

The provisions of Article I (b) and Attachment I of the 1988-1990 CBA shall thus be modified
consistently with the foregoing.

Article I (b) of the 1988-1990 CBA provides:

b) Close Shop. - All Qualified Employees must join the Association immediately upon regularization
as a condition for continued employment. This provision shall not apply to: (i) managerial employees
who are excluded from the scope of the bargaining unit; (ii) the auditors and executive secretaries of
senior executive officers, such as, the President, Executive Vice-President, Vice-President for
Finance, Head of Legal, Vice-President for Sales, who are excluded from membership in the
Association; and (iii) those employees who are referred to in Attachment I hereof, subject, however,
to the application of the provision of Article II, par. (b) hereof. Consequently, the above-specified
employees are not required to join the Association as a condition for their continued employment.

On the other hand, Attachment I provides:

Exclusion from the Scope of the Close Shop Provision.

The following positions in the Bargaining Unit are not covered by the Close Shop provision of the
CBA (Article I, par. b):

1. Executive Secretaries of Vice-Presidents, or equivalent positions.

2. Executive Secretary of the Personnel Manager, or equivalent Positions.

3. Executive Secretary, of the Director for Corporate Planning, or equivalent positions.

4. Some personnel in the Personnel Department, EDP Staff at Head Office, Payroll Staff at Head
office, Accounting Department at Head Office, and Budget Staff, who because of the nature of their
duties and responsibilities need not join the Association as a condition for their employment.

5. Newly-hired secretaries of Branch Managers and Regional Managers.

Both MDD and MII read the exclusion of managerial employees and executive secretaries in our 14 April
1992 resolution as exclusion from the bargaining unit. They point out that managerial employees are lumped
under one classification with executive secretaries, so that since the former are excluded from the
bargaining unit, so must the latter be likewise excluded.

This reading is obviously contrary to the intent of our 14 April 1992 resolution. By recognizing the expanded
scope of the right to self-organization, our intent was to delimit the types of employees excluded from the

Labor II – 1
 close shop provision, not from the bargaining unit, to executive secretaries only. Otherwise, the conversion
of the exclusionary provision to one that refers to the bargaining unit from one that merely refers to the close
shop provision would effectively curtail all the organizational rights of executive secretaries.

The exclusion of managerial employees, in accordance with law, must therefore still carry the qualifying
phrase "from the bargaining unit", in Article I (b) (i) of the 1988-1990 CBA. In the same manner, the
exclusion of executive secretaries should be read together with the qualifying phrase "are excluded from
membership in the Association" of the same Article and with the heading of Attachment I. The latter refers to
"Exclusions from Scope of Close Shop Provision" and provides that "[t]he following positions in Bargaining
Unit are not covered by the close shop provision of the CBA."

The issue of exclusion has different dimension in the case of MII. In an earlier motion for clarification, MII
points out that it has done away with the positions of Executive Vice-President, Vice-President for Sales,
and Director for Corporate Planning. Thus, the foregoing group of exclusions is no longer appropriate in its
present organizational structure. Nevertheless, there remain MII officer positions for which there may be
executive secretaries. These include the General Manager and members of the Management Committee,
specifically i) the Quality Assurance Manager; ii) the Product Development Manager; iii) the Finance
Director; iv) the Management System Manager; v) the Human Resources Manager; vi) the Marketing
Director; vii) the Engineering Manager., viii) the Materials Manager; and ix) the Production Manager.

xxx       xxx       xxx

The basis for the questioned exclusions, it should be noted, is no other than the previous CBA between MII
and the Union. If MII had undergone an organizational restructuring since then, this is a fact to which we
have never been made privy. In any event, had this been otherwise the result would have been the same.
To repeat, we limited the exclusions to recognize the expanded scope of the right to self-organization as
embodied in the Constitution.  18

Metrolab, however, maintains that executive secretaries of the General Manager and the executive secretaries of
the Quality Assurance Manager, Product Development Manager, Finance Director, Management System Manager,
Human Resources Manager, Marketing Director, Engineering Manager, Materials Manager and Production
Manager, who are all members of the company's Management Committee should not only be exempted from the
closed-shop provision but should be excluded from membership in the bargaining unit of rank and file employees as
well on grounds that their executive secretaries are confidential employees, having access to "vital labor
information."  19

We concur with Metrolab.

Although Article 245 of the Labor Code  limits the ineligibility to join, form and assist any labor organization to
20 

managerial employees, jurisprudence has extended this prohibition to confidential employees or those who by
reason of their positions or nature of work are required to assist or act in a fiduciary manner to managerial
employees and hence, are likewise privy to sensitive and highly confidential records.

The rationale behind the exclusion of confidential employees from the bargaining unit of the rank and file employees
and their disqualification to join any labor organization was succinctly discussed in Philips Industrial Development
v. NLRC:  21

xxx       xxx       xxx

On the main issue raised before Us, it is quite obvious that respondent NLRC committed grave abuse of
discretion in reversing the decision of the Executive Labor Arbiter and in decreeing that PIDI's "Service
Engineers, Sales Force, division secretaries, all Staff of General Management, Personnel and Industrial
Relations Department, Secretaries of Audit, EDP and Financial Systems are included within the rank and file
bargaining unit."

Labor II – 1
 In the first place, all these employees, with the exception of the service engineers and the sales force
personnel, are confidential employees. Their classification as such is not seriously disputed by PEO-FFW;
the five (5) previous CBAs between PIDI and PEO-FFW explicitly considered them as confidential
employees. By the very nature of their functions, they assist and act in a confidential capacity to, or have
access to confidential matters of, persons who exercise managerial functions in the field of labor relations.
As such, the rationale behind the ineligibility of managerial employees to form, assist or join a labor union
equally applies to them.

In Bulletin Publishing Co., Inc. vs. Hon. Augusto Sanchez, this court elaborated on this rationale, thus:

. . . The rationale for this inhibition has been stated to be, because if these managerial employees
would belong to or be affiliated with a Union, the latter might not be assured of their loyalty to the
Union in view of evident conflict of interests. The union can also become company-dominated with
the presence of managerial employees in Union membership.

In Golden Farms, Inc. vs. Ferrer-Calleja, this Court explicitly made this rationale applicable to confidential
employees:

This rationale holds true also for confidential employees such as accounting personnel, radio and
telegraph operators, who having access to confidential information, may become the source of
undue advantage. Said employees may act as a spy or spies of either party to a collective
bargaining agreement. This is specially true in the present case where the petitioning Union is
already the bargaining agent of the rank-and-file employees in the establishment. To allow the
confidential employees to join the existing Union of the rank-and-file would be in violation of the
terms of the Collective Bargaining Agreement wherein this kind of employees by the nature of their
functions/positions are expressly excluded.

xxx       xxx       xxx

Similarly, in National Association of Trade Union-Republic Planters Bank Supervisors Chapter v. Torres  we 22 

declared:

xxx       xxx       xxx

. . . As regards the other claim of respondent Bank that Branch Managers/OICs, Cashiers and
Controllers are confidential employees, having control, custody and/or access to confidential
matters, e.g., the branch's cash position, statements of financial condition, vault combination, cash
codes for telegraphic transfers, demand drafts and other negotiable instruments, pursuant to Sec.
1166.4 of the Central Bank Manual regarding joint custody, this claim is not even disputed by
petitioner. A confidential employee is one entrusted with confidence on delicate matters, or with the
custody, handling, or care and protection of the employer's property. While Art. 245 of the Labor
Code singles out managerial employees as ineligible to join, assist or form any labor organization,
under the doctrine of necessary implication, confidential employees are similarly disqualified. . . .

xxx       xxx       xxx

. . . (I)n the collective bargaining process, managerial employees are supposed to be on the side of
the employer, to act as its representatives, and to see to it that its interest are well protected. The
employer is not assured of such protection if these employees themselves are union members.
Collective bargaining in such a situation can become one-sided. It is the same reason that impelled
this Court to consider the position of confidential employees as included in the disqualification found
in Art. 245 as if the disqualification of confidential employees were written in the provision. If
confidential employees could unionize in order to bargain for advantages for themselves, then they
could be governed by their own motives rather than the interest of the employers. Moreover,
unionization of confidential employees for the purpose of collective bargaining would mean the
extension of the law to persons or individuals who are supposed to act "in the interest of the

Labor II – 1
 employers. It is not farfetched that in the course of collective bargaining, they might jeopardize that
interest which they are duty-bound to protect. . . .

xxx       xxx       xxx

And in the latest case of Pier 8 Arrastre & Stevedoring Services, Inc. vs. Roldan-Confesor,  we ruled that:
23 

xxx       xxx       xxx

Upon the other hand, legal secretaries are neither managers nor supervisors. Their work is basically
routinary and clerical. However, they should be, differentiated from rank-and-file employees because they
are tasked with, among others, the typing of legal documents, memoranda and correspondence, the keeping
of records and files, the giving of and receiving notices, and such other duties as required by the legal
personnel of the corporation. Legal secretaries therefore fall under the category of confidential
employees. . . .

xxx       xxx       xxx

We thus hold that public respondent acted with grave abuse of discretion in not excluding the four foremen
and legal secretary from the bargaining unit composed of rank-and-file employees.

xxx       xxx       xxx

In the case at bench, the Union does not disagree with petitioner that the executive secretaries are confidential
employees. It however, makes the following contentions:

xxx       xxx       xxx

There would be no danger of company domination of the Union since the confidential employees would not
be members of and would not participate in the decision making processes of the Union.

Neither would there be a danger of espionage since the confidential employees would not have any conflict
of interest, not being members of the Union. In any case, there is always the danger that any employee
would leak management secrets to the Union out of sympathy for his fellow rank and filer even if he were not
a member of the union nor the bargaining unit.

Confidential employees are rank and file employees and they, like all the other rank and file employees,
should be granted the benefits of the Collective Bargaining Agreement. There is no valid basis for
discriminating against them. The mandate of the Constitution and the Labor Code, primarily of protection to
Labor, compels such conclusion.  24

xxx       xxx       xxx

The Union's assurances fail to convince. The dangers sought to be prevented, particularly the threat of conflict of,
interest and espionage, are not eliminated by non-membership of Metrolab's executive secretaries or confidential
employees in the Union. Forming part of the bargaining unit, the executive secretaries stand to benefit from any
agreement executed between the Union and Metrolab. Such a scenario, thus, gives rise to a potential conflict
between personal interests and their duty as confidential employees to act for and in behalf of Metrolab. They do not
have to be union members to affect or influence either side.

Finally, confidential employees cannot be classified as rank and file. As previously discussed, the nature of
employment of confidential employees is quite distinct from the rank and file, thus, warranting a separate category.
Excluding confidential employees from the rank and file bargaining unit, therefore, is not tantamount to
discrimination.

Labor II – 1
WHEREFORE, premises considered, the petition is partially GRANTED. The resolutions of public respondent
Secretary of Labor dated 14 April 1992 and 25 January 1993 are hereby MODIFIED to the extent that executive
secretaries of petitioner Metrolab's General Manager and the executive secretaries of the members of its
Management Committee are excluded from the bargaining unit of petitioner's rank and file employees.

Labor II – 1
9.) Sugbuanon Rural Bank v Laguesma (& Sagbuanon association of professional, supervisory, office, and
technical employees.

G.R. No. 116194           February 2, 2000

SUGBUANON RURAL BANK, INC., petitioner,

vs.
HON. UNDERSECRETARY BIENVENIDO E. LAGUESMA, DEPARTMENT OF LABOR AND EMPLOYMENT,
MED-ARBITER ACHILLES MANIT, DEPARTMENT OF LABOR AND EMPLOYMENT, REGIONAL OFFICE NO.
7, CEBU CITY, AND SUGBUANON RURAL BANK, INC. — ASSOCIATION OF PROFESSIONAL,
SUPERVISORY, OFFICE, AND TECHNICAL EMPLOYEES UNION-TRADE UNIONS CONGRESS OF THE
PHILIPPINES, respondents.

QUISUMBING, J.:

In this special civil action for certiorari and prohibition, petitioner seeks the annulment of the April 27, 1994
Resolution of the Department of Labor and Employment, affirming the order of the Med-Arbiter, dated December 9,
1993, which denied petitioner's motion to dismiss respondent union's petition for certification election.

Petitioner Sugbuanon Rural Bank, Inc., (SRBI, for brevity) is a duly-registered banking institution with principal office
in Cebu City and a branch in Mandaue City. Private respondent SRBI Association of Professional, Supervisory,
Office, and Technical Employees Union (APSOTEU) is a legitimate labor organization affiliated with the Trade
Unions Congress of the Philippines (TUCP). 1âwphi1.nêt

On October 8, 1993, the DOLE Regional Office in Cebu City granted Certificate of Registration No. R0700-9310-
UR-0064 to APSOTEU-TUCP, hereafter referred to as the union.

On October 26, 1993, the union filed a petition for certification election of the supervisory employees of SRBI. It
alleged, among others, that: (1) APSOTEU-TUCP was a labor organization duly-registered with the Labor
Department; (2) SRBI employed 5 or more supervisory employees; (3) a majority of these employees supported the
petition: (4) there was no existing collective bargaining agreement (CBA) between any union and SRBI; and (5) no
certification election had been held in SRBI during the past 12 months prior to the petition.

On October 28, 1993, the Med-Arbiter gave due course to the petition. The pre-certification election conference
between SRBI and APSOTEU-TUCP was set for November 15, 1993.

On November 12, 1993, SRBI filed a motion to dismiss the union's petition. It sought to prevent the holding of a
certification election on two grounds. First, that the members of APSOTEU-TUCP were in fact managerial or
confidential employees. Thus, following the doctrine in Philips Industrial Development Corporation v. National Labor
Relations Commission,1 they were disqualified from forming, joining, or assisting any labor organization. Petitioner
attached the job descriptions of the employees concerned to its motion. Second, the Association of Labor Unions-
Trade Unions Congress of the Philippines or ALU-TUCP was representing the union. Since ALU-TUCP also sought
to represent the rank-and-file employees of SRBI, there was a violation of the principle of separation of
unions enunciated in Atlas Lithographic Services, Inc. v. Laguesma.2

The union filed its opposition to the motion to dismiss on December 1, 1993. It argued that its members were not
managerial employees but merely supervisory employees. The members attached their affidavits describing the
nature of their respective duties. The union pointed out that Article 245 of the Labor Code expressly allowed
supervisory employees to form, join, or assist their own unions.

On December 9, 1993, the Med-Arbiter denied petitioner's motion to dismiss. He scheduled the inclusion-exclusion
proceedings in preparation for the certification election on December 16, 1993.

SRBI appealed the Med-Arbiter's decision to the Secretary of Labor and Employment. The appeal was denied for
lack of merit. The certification election was ordered.
Labor II – 1
On June 16, 1994, the Med-Arbiter scheduled the holding of the certification election for June 29, 1994. His order
identified the following SRBI personnel as the voting supervisory employees in the election: the Cashier of the Main
Office, the Cashier of the Mandaue Branch, the Accountant of the Mandaue Branch, and the Acting Chief of the
Loans Department.

On June 17, 1994, SRBI filed with the Med-Arbiter an urgent motion to suspend proceedings. The Med-Arbiter
denied the same on June 21, 1994. SRBI then filed a motion for reconsideration. Two days later, the Med-Arbiter
cancelled the certification election scheduled for June 29, 1994 in order to address the motion for reconsideration.

The Med-Arbiter later denied petitioner's motion for reconsideration, SRBI appealed the order of denial to the DOLE
Secretary on December 16, 1993..

On December 22, 1993, petitioner proceeded to file a petition with the DOLE Regional Office seeking the
cancellation of the respondent union's registration. It averred that the APSOTEU-TUCP members were actually
managerial employees who were prohibited by law from joining or organizing unions.

On April 22, 1994, respondent DOLE Undersecretary denied SRBI's appeal for lack of merit. He ruled that
APSOTEU-TUCP was a legitimate labor organization. As such, it was fully entitled to all the rights and privileges
granted by law to a legitimate labor organization, including the right to file a petition for certification election. He also
held that until and unless a final order is issued cancelling APSOTEU-TUCP's registration certificate, it had the legal
right to represent its members for collective bargaining purposes. Furthermore, the question of whether the
APSOTEU-TUCP members should be considered as managerial or confidential employees should not be
addressed in the proceedings involving a petition for certification election but best threshed out in other appropriate
proceedings.

On May 25, 1994, SRBI moved for reconsideration of the Undersecretary's decision which was denied on July 7,
1994. The Med-Arbiter scheduled the holding of certification elections on August 12, 1994.

Hence the instant petition grounded on the following assignments of error:

RESPONDENT UNDERSECRETARY LAGUESMA ACTED WITH GRAVE ABUSE OF DISCRETION AND

PALPABLY ERRED:

A: IN HOLDING THAT ART. 257 OF THE LABOR CODE REQUIRES THE MED-ARBITER TO CONDUCT A
CERTIFICATION ELECTION IN ANY UNORGANIZED ESTABLISHMENT EVEN WHEN THE PETITIONING
UNION DOES NOT POSSESS THE QUALIFICATION FOR AN APPROPRIATE BARGAINING AGENT; AND

B. IN REFUSING TO ASSUME JURISDICTION OVER THE PETITIONER'S APPEAL AND TO DISMISS THE
RESPONDENT UNION'S PETITION FOR CERTIFICATION ELECTION.

II

RESPONDENT UNDERSECRETARY LAGUESMA ACTED WITH GRAVE ABUSE OF DISCRETION AND

PALPABLY ERRED IN DENYING THE PETITIONER'S APPEAL DESPITE THE FACT THAT:

A. THE ALLEGED MEMBERS OF RESPONDENT UNION ARE MANAGERIAL EMPLOYEES WHO ARE LEGALLY
DISQUALIFIED FROM JOINING ANY LABOR ORGANIZATION.

B. AT THE VERY LEAST, THE ALLEGED MEMBERS OF RESPONDENT UNION ARE OCCUPYING HIGHLY
CONFIDENTIAL POSITIONS IN PETITIONER AND, THUS, THE LEGAL DISQUALIFICATION OF MANAGERIAL
EMPLOYEES EQUALLY APPLY TO THEM.

III

Labor II – 1
IN ANY EVENT, THE CONCLUSIONS REACHED IN THE SUBJECT RESOLUTIONS ARE CONTRARY TO LAW
AND ARE DIAMETRICALLY OPPOSED TO RESPONDENT UNION'S RECORDED ADMISSIONS AND
REPRESENTATIONS.

Considering petitioner's assigned errors, we find two core issues for immediate resolution:

(1) Whether or not the members of the respondent union are managerial employees and/or highly-placed
confidential employees, hence prohibited by law from joining labor organizations and engaging in union
activities?

(2) Whether or not the Med-Arbiter may validly order the holding of a certification election upon the filing of a
petition for certification election by a registered union, despite the petitioner's appeal pending before the
DOLE Secretary against the issuance of the union's registration?

The other issues based on the assigned errors could be resolved easily after the core issues are settled.

Respecting the first issue, Article 212 (m) of the Labor Code defines the terms "managerial employee" 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 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 (Emphasis supplied).

Petitioner submitted detailed job descriptions to support its contention that the union members are managerial
employees and/or confidential employees proscribed from engaging in labor activities.3 Petitioner vehemently
argues that the functions and responsibilities of the employees involved constitute the "very core of the bank's
business, lending of money to clients and borrowers, evaluating their capacity to pay, approving the loan and its
amount, scheduling the terms of repayment, and endorsing delinquent accounts to counsel for collection." 4 Hence,
they must be deemed managerial employees. Petitioner cites Tabacalera Insurance Co. v. National Labor Relations
Commission,5 and Panday v. National Labor Relations Commission,6 to sustain its submission. In Tabacalera, we
sustained the classification of a credit and collection supervisor by management as a managerial/supervisory
personnel. But in that case, the credit and collection supervisor "had the power to recommend the hiring and
appointment of his subordinates, as well as the power to recommend any promotion and/or increase." 7 For this
reason he was deemed to be a managerial employee. In the present case, however, petitioner failed to show that
the employees in question were vested with similar powers. At best they only had recommendatory powers subject
to evaluation, review, and final decision by the bank's management. The job description forms submitted by
petitioner clearly show that the union members in question may not transfer, suspend, lay-off, recall, discharge,
assign, or discipline employees. Moreover, the forms also do not show that the Cashiers, Accountants, and Acting
Chiefs of the Loans Department formulate and execute management policies which are normally expected of
management officers.

Petitioner's reliance on Panday is equally misplaced. There, we held that a branch accountant is a managerial
employee because the said employee had managerial powers, similar to the supervisor in Tabaculera. Their powers
included recommending the hiring and appointment of his subordinates, as well as the power to recommend any
promotion and/or increase.8

Here, we find that the Cashiers, Accountant, and Acting Chief of the Loans Department of the petitioner did not
possess managerial powers and duties. We are, therefore, constrained to conclude that they are not managerial
employees.

Labor II – 1
Now may the said bank personnel be deemed confidential employees? Confidential employees are those who (1)
assist or act in a confidential capacity, in regard (2) to persons who formulate, determine, and effectuate
management policies [specifically in the field of labor relations].9 The two criteria are cumulative, and both must be
met if an employee is to be considered a confidential employee — that is, the confidential relationship must exist
between the employee and his superior officer; and that officer must handle the prescribed responsibilities relating
to labor relations.10

Art. 245 of the Labor Code11 does not directly prohibit confidential employees from engaging in union activities.
However, under the doctrine of necessary implication, the disqualification of managerial employees equally applies
to confidential employees.12 The confidential-employee rule justifies exclusion of confidential employees because in
the normal course of their duties they become aware of management policies relating to labor relations. 13 It must be
stressed, however, that when the employee does not have access to confidential labor relations information, there is
no legal prohibition against confidential employees from forming, assisting, or joining a union.14

Petitioner contends that it has only 5 officers running its day-to-day affairs. They assist in confidential capacities and
have complete access to the bank's confidential data. They form the core of the bank's management
team. Petitioner explains that:

. . . Specifically: (1) the Head of the Loans Department initially approves the loan applications before they
are passed on to the Board for confirmation. As such, no loan application is even considered by the Board
and approved by petitioner without his stamp of approval based upon his interview of the applicant and
determination of his (applicant's) credit standing and financial capacity. The same holds true with respect to
renewals or restructuring of loan accounts. He himself determines what account should be collected,
whether extrajudicially or judicially, and settles the problems or complaints of borrowers regarding their
accounts;

(2) the Cashier is one of the approving officers and authorized signatories of petitioner. He approves the
opening of accounts, withdrawals and encashment, and acceptance of check deposits. He deals with other
banks and, in the absence of the regular Manager, manages the entire office or branch and approves
disbursements of funds for expenses; and

(3) the Accountant, who heads the Accounting Department, is also one of the authorized signatories of
petitioner and, in the absence of the Manager or Cashier, acts as substitute approving officer and assumes
the management of the entire office. She handles the financial reports and reviews the debit/credit tickets
submitted by the other departments. 15

Petitioner's explanation, however, does not state who among the employees has access to information specifically
relating to its labor to relations policies. Even Cashier Patricia Maluya, who serves as the secretary of the bank's
Board of Directors may not be so classified. True, the board of directors is responsible for corporate policies, the
exercise of corporate powers, and the general management of the business and affairs of the corporation. As
secretary of the bank's governing body. Patricia Maluya serves the bank's management, but could not be deemed to
have access to confidential information specifically relating to SRBI's labor relations policies, absent a clear showing
on this matter. Thus, while petitioner's explanation confirms the regular duties of the concerned employees, it shows
nothing about any duties specifically connected to labor relations.

As to the second issue. One of the rights of a legitimate labor organization under Article 242(b) of the Labor Code is
the right to be certified as the exclusive representative of all employees in an appropriate bargaining unit for
purposes of collective bargaining. Having complied with the requirements of Art. 234, it is our view that respondent
union is a legitimate labor union. Article 257 of the Labor Code mandates that a certification election
shall automatically be conducted by the Med-Arbiter upon the filing of a petition by a legitimate labor
organization.16 Nothing is said therein that prohibits such automatic conduct of the certification election if the
management appeals on the issue of the validity of the union's registration. On this score, petitioner's appeal was
correctly dismissed.

Petitioner argues that giving due course to respondent union's petition for certification election would violate the
separation of unions doctrine.17 Note that the petition was filed by APSOTEU-TUCP, a legitimate labor organization.
It was not filed by ALU. Nor was it filed by TUCP, which is a national labor federation of with which respondent union
Labor II – 1
is affiliated. Petitioner says that respondent union is a mere alter ego of ALU. The records show nothing to this
effect. What the records instead reveal is that respondent union was initially assisted by ALU during its preliminary
stages of organization. A local union maintains its separate personality despite affiliation with a larger national
federation.18 Petitioner alleges that ALU seeks to represent both respondent union and the rank-and-file
union. Again, we find nothing in the records to support this bare assertion.

The law frowns on a union where the membership is composed of both supervisors and rank-and-file employees, for
fear that conflicts of interest may arise in the areas of discipline, collective bargaining, and strikes. 19 However, in the
present case, none of the members of the respondent union came from the rank-and-file employees of the bank.

Taking into account the circumstances in this case, it is our view that respondent Undersecretary committed no
reversible error nor grave abuse of discretion when he found the order of the Med-Arbiter scheduling a certification
election in order. The list of employees eligible to vote in said certification election was also found in order, for none
was specifically disqualified from union membership. 1âwphi1.nêt

WHEREFORE, the instant petition is hereby DISMISSED. No pronouncement as to costs.

Labor II – 1
10.) Tunay na Pagkakaisa ng Mangagawa sa Asia Brewery v Asia Brewery.

G.R. No. 162025               August 3, 2010

TUNAY NA PAGKAKAISA NG MANGGAGAWA SA ASIA BREWERY, Petitioner,

vs.
ASIA BREWERY, INC., Respondent.

DECISION

VILLARAMA, JR., J.:

For resolution is an appeal by certiorari filed by petitioner under Rule 45 of the 1997 Rules of Civil Procedure, as
amended, assailing the Decision1 dated November 22, 2002 and Resolution 2 dated January 28, 2004 rendered by
the Court of Appeals (CA) in CA-G.R. SP No. 55578, granting the petition of respondent company and reversing the
Voluntary Arbitrator’s Decision3 dated October 14, 1999.

The facts are:

Respondent Asia Brewery, Inc. (ABI) is engaged in the manufacture, sale and distribution of beer, shandy, bottled
water and glass products. ABI entered into a Collective Bargaining Agreement (CBA),4 effective for five (5) years
from August 1, 1997 to July 31, 2002, with Bisig at Lakas ng mga Manggagawa sa Asia-Independent (BLMA-
INDEPENDENT), the exclusive bargaining representative of ABI’s rank-and-file employees. On October 3, 2000,
ABI and BLMA-INDEPENDENT signed a renegotiated CBA effective from August 1, 2000 to 31 July 2003. 5

Article I of the CBA defined the scope of the bargaining unit, as follows:

Section 1. Recognition. The COMPANY recognizes the UNION as the sole and exclusive bargaining representative
of all the regular rank-and-file daily paid employees within the scope of the appropriate bargaining unit with respect
to rates of pay, hours of work and other terms and conditions of employment. The UNION shall not represent or
accept for membership employees outside the scope of the bargaining unit herein defined.

Section 2. Bargaining Unit. The bargaining unit shall be comprised of all regular rank-and-file daily-paid employees
of the COMPANY. However, the following jobs/positions as herein defined shall be excluded from the bargaining
unit, to wit:

1. Managers

2. Assistant Managers

3. Section Heads

4. Supervisors

5. Superintendents

6. Confidential and Executive Secretaries

7. Personnel, Accounting and Marketing Staff

8. Communications Personnel

9. Probationary Employees

Labor II – 1
 10. Security and Fire Brigade Personnel

11. Monthly Employees

12. Purchasing and Quality Control Staff6 [emphasis supplied.]

Subsequently, a dispute arose when ABI’s management stopped deducting union dues from eighty-one (81)
employees, believing that their membership in BLMA-INDEPENDENT violated the CBA. Eighteen (18) of these
affected employees are QA Sampling Inspectors/Inspectresses and Machine Gauge Technician who formed part of
the Quality Control Staff. Twenty (20) checkers are assigned at the Materials Department of the Administration
Division, Full Goods Department of the Brewery Division and Packaging Division. The rest are secretaries/clerks
directly under their respective division managers.7

BLMA-INDEPENDENT claimed that ABI’s actions restrained the employees’ right to self-organization and brought
the matter to the grievance machinery. As the parties failed to amicably settle the controversy, BLMA-
INDEPENDENT lodged a complaint before the National Conciliation and Mediation Board (NCMB). The parties
eventually agreed to submit the case for arbitration to resolve the issue of "[w]hether or not there is restraint to
employees in the exercise of their right to self-organization." 8

In his Decision, Voluntary Arbitrator Bienvenido Devera sustained the BLMA-INDEPENDENT after finding that the
records submitted by ABI showed that the positions of the subject employees qualify under the rank-and-file
category because their functions are merely routinary and clerical. He noted that the positions occupied by the
checkers and secretaries/clerks in the different divisions are not managerial or supervisory, as evident from the
duties and responsibilities assigned to them. With respect to QA Sampling Inspectors/Inspectresses and Machine
Gauge Technician, he ruled that ABI failed to establish with sufficient clarity their basic functions as to consider them
Quality Control Staff who were excluded from the coverage of the CBA. Accordingly, the subject employees were
declared eligible for inclusion within the bargaining unit represented by BLMA-INDEPENDENT.9

On appeal, the CA reversed the Voluntary Arbitrator, ruling that:

WHEREFORE, foregoing premises considered, the questioned decision of the Honorable Voluntary Arbitrator
Bienvenido De Vera is hereby REVERSED and SET ASIDE, and A NEW ONE ENTERED DECLARING THAT:

a) the 81 employees are excluded from and are not eligible for inclusion in the bargaining unit as defined in
Section 2, Article I of the CBA;

b) the 81 employees cannot validly become members of respondent and/or if already members, that their
membership is violative of the CBA and that they should disaffiliate from respondent; and

c) petitioner has not committed any act that restrained or tended to restrain its employees in the exercise of
their right to self-organization.

NO COSTS.

SO ORDERED.10

BLMA-INDEPENDENT filed a motion for reconsideration. In the meantime, a certification election was held on
August 10, 2002 wherein petitioner Tunay na Pagkakaisa ng Manggagawa sa Asia (TPMA) won. As the incumbent
bargaining representative of ABI’s rank-and-file employees claiming interest in the outcome of the case, petitioner
filed with the CA an omnibus motion for reconsideration of the decision and intervention, with attached petition
signed by the union officers.11 Both motions were denied by the CA.12

The petition is anchored on the following grounds:

(1)

Labor II – 1
THE COURT OF APPEALS ERRED IN RULING THAT THE 81 EMPLOYEES ARE EXCLUDED FROM AND ARE
NOT ELIGIBLE FOR INCLUSION IN THE BARGAINING UNIT AS DEFINED IN SECTION 2, ARTICLE 1 OF THE
CBA[;]

(2)

THE COURT OF APPEALS ERRED IN HOLDING THAT THE 81 EMPLOYEES CANNOT VALIDLY BECOME
UNION MEMBERS, THAT THEIR MEMBERSHIP IS VIOLATIVE OF THE CBA AND THAT THEY SHOULD
DISAFFILIATE FROM RESPONDENT;

(3)

THE COURT OF APPEALS SERIOUSLY ERRED IN HOLDING THAT PETITIONER (NOW PRIVATE
RESPONDENT) HAS NOT COMMITTED ANY ACT THAT RESTRAINED OR TENDED TO RESTRAIN ITS
EMPLOYEES IN THE EXERCISE OF THEIR RIGHT TO SELF-ORGANIZATION.13

Although Article 245 of the Labor Code limits the ineligibility to join, form and assist any labor organization to
managerial employees, jurisprudence has extended this prohibition to confidential employees or those who by
reason of their positions or nature of work are required to assist or act in a fiduciary manner to managerial
employees and hence, are likewise privy to sensitive and highly confidential records. 14 Confidential employees are
thus excluded from the rank-and-file bargaining unit. The rationale for their separate category and disqualification to
join any labor organization is similar to the inhibition for managerial employees because if allowed to be affiliated
with a Union, the latter might not be assured of their loyalty in view of evident conflict of interests and the Union can
also become company-denominated with the presence of managerial employees in the Union membership. 15 Having
access to confidential information, confidential employees may also become the source of undue advantage. Said
employees may act as a spy or spies of either party to a collective bargaining agreement. 16

In Philips Industrial Development, Inc. v. NLRC,17 this Court held that petitioner’s "division secretaries, all Staff of
General Management, Personnel and Industrial Relations Department, Secretaries of Audit, EDP and Financial
Systems" are confidential employees not included within the rank-and-file bargaining unit. 18 Earlier, in Pier 8 Arrastre
& Stevedoring Services, Inc. v. Roldan-Confesor, 19 we declared that legal secretaries who are tasked with, among
others, the typing of legal documents, memoranda and correspondence, the keeping of records and files, the giving
of and receiving notices, and such other duties as required by the legal personnel of the corporation, fall under the
category of confidential employees and hence excluded from the bargaining unit composed of rank-and-file
employees.20

Also considered having access to "vital labor information" are the executive secretaries of the General Manager and
the executive secretaries of the Quality Assurance Manager, Product Development Manager, Finance Director,
Management System Manager, Human Resources Manager, Marketing Director, Engineering Manager, Materials
Manager and Production Manager.21

In the present case, the CBA expressly excluded "Confidential and Executive Secretaries" from the rank-and-file
bargaining unit, for which reason ABI seeks their disaffiliation from petitioner. Petitioner, however, maintains that
except for Daisy Laloon, Evelyn Mabilangan and Lennie Saguan who had been promoted to monthly paid positions,
the following secretaries/clerks are deemed included among the rank-and-file employees of ABI:22

NAME DEPARTMENT IMMEDIATE SUPERIOR

C1 ADMIN DIVISION    
1. Angeles, Cristina C. Transportation Mr. Melito K. Tan
2. Barraquio, Carina P. Transportation Mr. Melito K. Tan
3. Cabalo, Marivic B. Transportation Mr. Melito K. Tan
4. Fameronag, Leodigario C. Transportation Mr. Melito K. Tan
     
1. Abalos, Andrea A. Materials Mr. Andres G. Co
2. Algire, Juvy L. Materials Mr. Andres G. Co

Labor II – 1
 3. Anoñuevo, Shirley P.
4. Aviso, Rosita S.
5. Barachina, Pauline C.
6. Briones, Catalina P.
7. Caralipio, Juanita P.
8. Elmido, Ma. Rebecca S.
9. Giron, Laura P.
10. Mane, Edna A.
xxxx
C2 BREWERY DIVISION
1. Laloon, Daisy S.
1. Arabit, Myrna F.
2. Burgos, Adelaida D.
3. Menil, Emmanuel S.
4. Nevalga, Marcelo G.
1. Mapola, Ma. Esraliza T.
2. Velez, Carmelito A.
1. Bordamonte, Rhumela D.
2. Deauna, Edna R.
3. Punongbayan, Marylou F.
4. Saguan, Lennie Y.
1. Alcoran, Simeon A.
2. Cervantes, Ma. Sherley Y.
3. Diongco, Ma. Teresa M.
4. Mabilangan, Evelyn M.
5. Rivera, Aurora M.
6. Salandanan, Nancy G.
1. Magbag, Ma. Corazon C.
1. Capiroso, Francisca A.
1. Alconaba, Elvira C.
2. Bustillo, Bernardita E.
3. Catindig, Ruel A.
4. Sison, Claudia B.
xxxx
C3 PACKAGING DIVISION
1. Alvarez, Ma. Luningning L.
2. Cañiza, Alma A.
Labor II – 1
Materials Mr. Andres G. Co
Materials Mr. Andres G. Co
Materials Mr. Andres G. Co
Materials Mr. Andres G. Co
Materials Mr. Andres G. Co
Materials Mr. Andres G. Co
Materials Mr. Andres G. Co
Materials Mr. Andres G. Co
   
   
Brewhouse Mr. William Tan
Bottling Production Mr. Julius Palmares
Bottling Production Mr. Julius Palmares
Bottling Production Mr. Julius Palmares
Bottling Production Mr. Julius Palmares
Bottling Maintenance Mr. Ernesto Ang
Bottling Maintenance Mr. Ernesto Ang
Bottled Water Mr. Faustino Tetonche
Bottled Water Mr. Faustino Tetonche
Bottled Water Mr. Faustino Tetonche
Bottled Water Mr. Faustino Tetonche
Full Goods Mr. Tsoi Wah Tung
Full Goods Mr. Tsoi Wah Tung
Full Goods Mr. Tsoi Wah Tung
Full Goods Mr. Tsoi Wah Tung
Full Goods Mr. Tsoi Wah Tung
Full Goods Mr. Tsoi Wah Tung
Tank Farm/ Mr. Manuel Yu Liat
Cella Services
Quality Assurance Ms. Regina Mirasol
Engineering Mr. Clemente Wong
Electrical Mr. Jorge Villarosa
Civil Works Mr. Roger Giron
Utilities Mr. Venancio Alconaba
   
   
GP Administration Ms. Susan Bella
GP Technical Mr. Chen Tsai Tyan
 3. Cantalejo, Aida S. GP Engineering Mr. Noel Fernandez
4. Castillo, Ma. Riza R. GP Production Mr. Tsai Chen Chih
5. Lamadrid, Susana C. GP Production Mr. Robert Bautista
6. Mendoza, Jennifer L. GP Technical Mr. Mel Oña

As can be gleaned from the above listing, it is rather curious that there would be several secretaries/clerks for just
one (1) department/division performing tasks which are mostly routine and clerical. Respondent insisted they fall
under the "Confidential and Executive Secretaries" expressly excluded by the CBA from the rank-and-file bargaining
unit. However, perusal of the job descriptions of these secretaries/clerks reveals that their assigned duties and
responsibilities involve routine activities of recording and monitoring, and other paper works for their respective
departments while secretarial tasks such as receiving telephone calls and filing of office correspondence appear to
have been commonly imposed as additional duties.23 Respondent failed to indicate who among these numerous
secretaries/clerks have access to confidential data relating to management policies that could give rise to potential
conflict of interest with their Union membership. Clearly, the rationale under our previous rulings for the exclusion of
executive secretaries or division secretaries would have little or no significance considering the lack of or very
limited access to confidential information of these secretaries/clerks. It is not even farfetched that the job category
may exist only on paper since they are all daily-paid workers. Quite understandably, petitioner had earlier expressed
the view that the positions were just being "reclassified" as these employees actually discharged routine functions.

We thus hold that the secretaries/clerks, numbering about forty (40), are rank-and-file employees and not
confidential employees.

With respect to the Sampling Inspectors/Inspectresses and the Gauge Machine Technician, there seems no dispute
that they form part of the Quality Control Staff who, under the express terms of the CBA, fall under a distinct
category. But we disagree with respondent’s contention that the twenty (20) checkers are similarly confidential
employees being "quality control staff" entrusted with the handling and custody of company properties and sensitive
information.

Again, the job descriptions of these checkers assigned in the storeroom section of the Materials Department,
finishing section of the Packaging Department, and the decorating and glass sections of the Production Department
plainly showed that they perform routine and mechanical tasks preparatory to the delivery of the finished
products.24 While it may be argued that quality control extends to post-production phase -- proper packaging of the
finished products -- no evidence was presented by the respondent to prove that these daily-paid checkers actually
form part of the company’s Quality Control Staff who as such "were exposed to sensitive, vital and confidential
information about [company’s] products" or "have knowledge of mixtures of the products, their defects, and even
their formulas" which are considered ‘trade secrets’. Such allegations of respondent must be supported by
evidence.25

Consequently, we hold that the twenty (20) checkers may not be considered confidential employees under the
category of Quality Control Staff who were expressly excluded from the CBA of the rank-and-file bargaining unit.

Confidential employees are defined as those who (1) assist or act in a confidential capacity, (2) to persons who
formulate, determine, and effectuate management policies in the field of labor relations. The two (2) criteria are
cumulative, and both must be met if an employee is to be considered a confidential employee – that is, the
confidential relationship must exist between the employee and his supervisor, and the supervisor must handle the
prescribed responsibilities relating to labor relations. The exclusion from bargaining units of employees who, in the
normal course of their duties, become aware of management policies relating to labor relations is a principal
objective sought to be accomplished by the "confidential employee rule." 26 There is no showing in this case that the
secretaries/clerks and checkers assisted or acted in a confidential capacity to managerial employees and obtained
confidential information relating to labor relations policies. And even assuming that they had exposure to internal
business operations of the company, respondent claimed, this is not per se ground for their exclusion in the
bargaining unit of the daily-paid rank-and-file employees. 27

Not being confidential employees, the secretaries/clerks and checkers are not disqualified from membership in the
Union of respondent’s rank-and-file employees. Petitioner argues that respondent’s act of unilaterally stopping the

Labor II – 1
deduction of union dues from these employees constitutes unfair labor practice as it "restrained" the workers’
exercise of their right to self-organization, as provided in Article 248 (a) of the Labor Code.

Unfair labor practice refers to "acts that violate the workers’ right to organize." The prohibited acts are related to the
workers’ right to self organization and to the observance of a CBA. For a charge of unfair labor practice to prosper, it
must be shown that ABI was motivated by ill will, "bad faith, or fraud, or was oppressive to labor, or done in a
manner contrary to morals, good customs, or public policy, and, of course, that social humiliation, wounded feelings
or grave anxiety resulted x x x"28 from ABI’s act in discontinuing the union dues deduction from those employees it
believed were excluded by the CBA. Considering that the herein dispute arose from a simple disagreement in the
interpretation of the CBA provision on excluded employees from the bargaining unit, respondent cannot be said to
have committed unfair labor practice that restrained its employees in the exercise of their right to self-organization,
nor have thereby demonstrated an anti-union stance.

WHEREFORE, the petition is GRANTED. The Decision dated November 22, 2002 and Resolution dated January
28, 2004 of the Court of Appeals in CA-G.R. SP No. 55578 are hereby REVERSED and SET ASIDE. The checkers
and secretaries/clerks of respondent company are hereby declared rank-and-file employees who are eligible to join
the Union of the rank-and-file employees.

Labor II – 1
11.) San Miguel Foods v San Miguel Supervisors and Exempt Union.

G.R. No. 146206               August 1, 2011

SAN MIGUEL FOODS, INCORPORATED, Petitioner,

vs.
SAN MIGUEL CORPORATION SUPERVISORS and EXEMPT UNION, Respondent.

DECISION

PERALTA, J.:

The issues in the present case, relating to the inclusion of employees in supervisor levels 3 and 4 and the exempt
employees in the proposed bargaining unit, thereby allowing their participation in the certification election; the
application of the "community or mutuality of interests" test; and the determination of the employees who belong to
the category of confidential employees, are not novel.

In G.R. No. 110399, entitled San Miguel Corporation Supervisors and Exempt Union v. Laguesma, 1 the Court held
that even if they handle confidential data regarding technical and internal business operations, supervisory
employees 3 and 4 and the exempt employees of petitioner San Miguel Foods, Inc. (SMFI) are not to be considered
confidential employees, because the same do not pertain to labor relations, particularly, negotiation and settlement
of grievances. Consequently, they were allowed to form an appropriate bargaining unit for the purpose of collective
bargaining. The Court also declared that the employees belonging to the three different plants of San Miguel
Corporation Magnolia Poultry Products Plants in Cabuyao, San Fernando, and Otis, having "community or mutuality
of interests," constitute a single bargaining unit. They perform work of the same nature, receive the same wages
and compensation, and most importantly, share a common stake in concerted activities. It was immaterial that the
three plants have different locations as they did not impede the operations of a single bargaining representative. 2

Pursuant to the Court's decision in G.R. No. 110399, the Department of Labor and Employment – National Capital
Region (DOLE-NCR) conducted pre-election conferences. 3 However, there was a discrepancy in the list of eligible
voters, i.e., petitioner submitted a list of 23 employees for the San Fernando plant and 33 for the Cabuyao plant,
while respondent listed 60 and 82, respectively.4

On August 31, 1998, Med-Arbiter Agatha Ann L. Daquigan issued an Order5 directing Election Officer Cynthia
Tolentino to proceed with the conduct of certification election in accordance with Section 2, Rule XII of Department
Order No. 9.

On September 30, 1998, a certification election was conducted and it yielded the following results, 6 thus:

Cabuyao San Fernando Total

Plant Plant

Yes 23 23 46

No 0 0 0

Spoiled 2 0 2

Segregated 41 35 76

Total Votes Cast 66 58 124

On the date of the election, September 30, 1998, petitioner filed the Omnibus Objections and Challenge to
Voters,7 questioning the eligibility to vote by some of its employees on the grounds that some employees do not
Labor II – 1
belong to the bargaining unit which respondent seeks to represent or that there is no existence of employer-
employee relationship with petitioner. Specifically, it argued that certain employees should not be allowed to vote as
they are: (1) confidential employees; (2) employees assigned to the live chicken operations, which are not covered
by the bargaining unit; (3) employees whose job grade is level 4, but are performing managerial work and scheduled
to be promoted; (4) employees who belong to the Barrio Ugong plant; (5) non-SMFI employees; and (6) employees
who are members of other unions.

On October 21, 1998, the Med-Arbiter issued an Order directing respondent to submit proof showing that the
employees in the submitted list are covered by the original petition for certification election and belong to the
bargaining unit it seeks to represent and, likewise, directing petitioner to substantiate the allegations contained in its
Omnibus Objections and Challenge to Voters.8

In compliance thereto, respondent averred that (1) the bargaining unit contemplated in the original petition is the
Poultry Division of San Miguel Corporation, now known as San Miguel Foods, Inc.; (2) it covered the operations in
Calamba, Laguna, Cavite, and Batangas and its home base is either in Cabuyao, Laguna or San Fernando,
Pampanga; and (3) it submitted individual and separate declarations of the employees whose votes were
challenged in the election.9

Adding the results to the number of votes canvassed during the September 30, 1998 certification election, the final
tally showed that: number of eligible voters – 149; number of valid votes cast – 121; number of spoiled ballots - 3;
total number of votes cast – 124, with 118 (i.e., 46 + 72 = 118 ) "Yes" votes and 3 "No" votes.10

The Med-Arbiter issued the Resolution11 dated February 17, 1999 directing the parties to appear before the Election
Officer of the Labor Relations Division on March 9, 1999, 10:00 a.m., for the opening of the segregated ballots.
Thereafter, on April 12, 1999, the segregated ballots were opened, showing that out of the 76 segregated

votes, 72 were cast for "Yes" and 3 for "No," with one "spoiled" ballot. 12

Based on the results, the Med-Arbiter issued the Order13 dated April 13, 1999, stating that since the "Yes" vote
received 97% of the valid votes cast, respondent is certified to be the exclusive bargaining agent of the supervisors
and exempt employees of petitioner's Magnolia Poultry Products Plants in Cabuyao, San Fernando, and Otis.

On appeal, the then Acting DOLE Undersecretary, in the Resolution 14 dated July 30, 1999, in OS-A-2-70-91 (NCR-
OD-M-9010-017), affirmed the Order dated April 13, 1999, with modification that George C. Matias, Alma Maria M.
Lozano, Joannabel T. Delos Reyes, and Marilyn G. Pajaron be excluded from the bargaining unit which respondent
seeks to represent. She opined that the challenged voters should be excluded from the bargaining unit, because
Matias and Lozano are members of Magnolia Poultry Processing Plants Monthly Employees Union, while Delos
Reyes and Pajaron are employees of San Miguel Corporation, which is a separate and distinct entity from petitioner.

Petitioner’s Partial Motion for Reconsideration 15 dated August 14, 1999 was denied by the then Acting DOLE
Undersecretary in the Order16 dated August 27, 1999.

In the Decision17 dated April 28, 2000, in CA-G.R. SP No. 55510, entitled San Miguel Foods, Inc. v. The Honorable
Office of the Secretary of Labor, Bureau of Labor Relations, and San Miguel Corporation Supervisors and Exempt
Union, the Court of Appeals (CA) affirmed with modification the Resolution dated July 30, 1999 of the DOLE
Undersecretary, stating that those holding the positions of Human Resource Assistant and Personnel Assistant are
excluded from the bargaining unit.

Petitioner’s Motion for Partial Reconsideration 18 dated May 23, 2000 was denied by the CA in the Resolution 19 dated
November 28, 2000.

Hence, petitioner filed this present petition raising the following issues:

I.

Labor II – 1
 WHETHER THE COURT OF APPEALS DEPARTED FROM JURISPRUDENCE WHEN IT EXPANDED THE
SCOPE OF THE BARGAINING UNIT DEFINED BY THIS COURT'S RULING IN G.R. NO. 110399.

II.

WHETHER THE COURT OF APPEALS DEPARTED FROM JURISPRUDENCE - SPECIFICALLY, THIS

COURT'S DEFINITION OF A "CONFIDENTIAL EMPLOYEE" - WHEN IT RULED FOR THE INCLUSION OF
THE "PAYROLL MASTER" POSITION IN THE BARGAINING UNIT.

III.

WHETHER THIS PETITION IS A "REHASH" OR A "RESURRECTION" OF THE ISSUES RAISED IN G.R.

NO. 110399, AS ARGUED BY PRIVATE RESPONDENT.

Petitioner contends that with the Court's ruling in G.R. No. 110399 20 identifying the specific employees who can
participate in the certification election, i.e., the supervisors (levels 1 to 4) and exempt employees of San Miguel
Poultry Products Plants in Cabuyao, San Fernando, and Otis, the CA erred in expanding the scope of the
bargaining unit so as to include employees who do not belong to or who are not based in its Cabuyao or San
Fernando plants. It also alleges that the employees of the Cabuyao, San Fernando, and Otis plants of petitioner’s
predecessor, San Miguel Corporation, as stated in G.R. No. 110399, were engaged in "dressed" chicken
processing, i.e., handling and packaging of chicken meat, while the new bargaining unit, as defined by the CA in the
present case, includes employees engaged in "live" chicken operations, i.e., those who breed chicks and grow
chickens.

Respondent counters that petitioner’s proposed exclusion of certain employees from the bargaining unit was a
rehashed issue which was already settled in G.R. No. 110399. It maintains that the issue of union membership
coverage should no longer be raised as a certification election already took place on September 30, 1998, wherein
respondent won with 97% votes.

Petitioner’s contentions are erroneous. In G.R. No. 110399, the Court explained that the employees of San Miguel
Corporation Magnolia Poultry Products Plants of Cabuyao, San Fernando, and Otis constitute a single bargaining
unit, which is not contrary to the one-company, one-union policy. An appropriate bargaining unit is defined as a
group of employees of a given employer, comprised of all or less than all of the entire body of employees, which the
collective interest of all the employees, consistent with equity to the employer, indicate to be best suited to serve the
reciprocal rights and duties of the parties under the collective bargaining provisions of the law.21

In National Association of Free Trade Unions v. Mainit Lumber Development Company Workers Union – United
Lumber and General Workers of the Phils,22 the Court, taking into account the "community or mutuality of interests"
test, ordered the formation of a single bargaining unit consisting of the Sawmill Division in Butuan City and the
Logging Division in Zapanta Valley, Kitcharao, Agusan [Del] Norte of the Mainit Lumber Development Company. It
held that while the existence of a bargaining history is a factor that may be reckoned with in determining the
appropriate bargaining unit, the same is not decisive or conclusive. Other factors must be considered. The test of
grouping is community or mutuality of interest. This is so because the basic test of an asserted bargaining unit’s
acceptability is whether or not it is fundamentally the combination which will best assure to all employees the
exercise of their collective bargaining rights.23 Certainly, there is a mutuality of interest among the employees of the
Sawmill Division and the Logging Division. Their functions mesh with one another. One group needs the other in the
same way that the company needs them both. There may be differences as to the nature of their individual
assignments, but the distinctions are not enough to warrant the formation of a separate bargaining unit. 24

Thus, applying the ruling to the present case, the Court affirms the finding of the CA that there should be only one
bargaining unit for

the employees in Cabuyao, San Fernando, and Otis25 of Magnolia Poultry Products Plant involved in "dressed"
chicken processing and Magnolia Poultry Farms engaged in "live" chicken operations. Certain factors, such as
specific line of work, working conditions, location of work, mode of compensation, and other relevant conditions do
not affect or impede their commonality of interest. Although they seem separate and distinct from each other, the

Labor II – 1
specific tasks of each division are actually interrelated and there exists mutuality of interests which warrants the
formation of a single bargaining unit.

Petitioner asserts that the CA erred in not excluding the position of Payroll Master in the definition of a confidential
employee and, thus, prays that the said position and all other positions with access to salary and compensation data
be excluded from the bargaining unit.

This argument must fail. Confidential employees are defined as those who (1) assist or act in a confidential capacity,
in regard (2) to persons who formulate, determine, and effectuate management policies in the field of labor
relations.26 The two criteria are cumulative, and both must be met if an employee is to be considered a confidential
employee - that is, the confidential relationship must exist between the employee and his supervisor, and the
supervisor must handle the prescribed responsibilities relating to labor relations. The exclusion from bargaining units
of employees who, in the normal course of their duties, become aware of management policies relating to labor
relations is a principal objective sought to be accomplished by the "confidential employee rule."27

A confidential employee is one entrusted with confidence on delicate, or with the custody, handling or care and
protection of the employer’s property.28 Confidential employees, such as accounting personnel, should be excluded
from the bargaining unit, as their access to confidential information may become the source of undue
advantage.29 However, such fact does not apply to the position of Payroll Master and the whole gamut of employees
who, as perceived by petitioner, has access to salary and compensation data. The CA correctly held that the
position of Payroll Master does not involve dealing with confidential labor relations information in the course of the
performance of his functions. Since the nature of his work does not pertain to company rules and regulations and
confidential labor relations, it follows that he cannot be excluded from the subject bargaining unit.

Corollarily, although Article 24530 of the Labor Code limits the ineligibility to join, form and assist any labor
organization to managerial employees, jurisprudence has extended this prohibition to

confidential employees or those who by reason of their positions or nature of work are required to assist or act in a
fiduciary manner to managerial employees and, hence, are likewise privy to sensitive and highly confidential
records.31 Confidential employees are thus excluded from the rank-and-file bargaining unit. The rationale for their
separate category and disqualification to join any labor organization is similar to the inhibition for managerial
employees, because if allowed to be affiliated with a union, the latter might not be assured of their loyalty in view of
evident conflict of interests and the union can also become company-denominated with the presence of managerial
employees in the union membership. 32 Having access to confidential information, confidential employees may also
become the source of undue advantage. Said employees may act as a spy or spies of either party to a collective
bargaining agreement.33 1avvphi1

In this regard, the CA correctly ruled that the positions of Human Resource Assistant and Personnel Assistant
belong to the category of confidential employees and, hence, are excluded from the bargaining unit, considering
their respective positions and job descriptions. As Human Resource Assistant, 34 the scope of one’s work necessarily
involves labor relations, recruitment and selection of employees, access to employees' personal files and
compensation package, and human resource management. As regards a Personnel Assistant, 35 one's work includes
the recording of minutes for management during collective bargaining negotiations, assistance to management
during grievance meetings and administrative investigations, and securing legal advice for labor issues from the
petitioner’s team of lawyers, and implementation of company programs. Therefore, in the discharge of their
functions, both gain access to vital labor relations information which outrightly disqualifies them from union
membership.

The proceedings for certification election are quasi-judicial in nature and, therefore, decisions rendered in such
proceedings can attain finality.36 Applying the doctrine of res judicata, the issue in the

present case pertaining to the coverage of the employees who would constitute the bargaining unit is now a
foregone conclusion.

It bears stressing that a certification election is the sole concern of the workers; hence, an employer lacks the
personality to dispute the same. The general rule is that an employer has no standing to question the process of
certification election, since this is the sole concern of the workers.37 Law and policy demand that employers take a
Labor II – 1
strict, hands-off stance in certification elections. The bargaining representative of employees should be chosen free
from any extraneous influence of management. A labor bargaining representative, to be effective, must owe its
loyalty to the employees alone and to no other.38 The only exception is where the employer itself has to file the
petition pursuant to Article 25839 of the Labor Code because of a request to bargain collectively. 40

With the foregoing disquisition, the Court writes finis to the issues raised so as to forestall future suits of similar
nature.

WHEREFORE, the petition is DENIED. The Decision dated April 28, 2000 and Resolution dated November 28, 2000
of the Court of Appeals, in CA-G.R. SP No. 55510, which affirmed with modification the Resolutions dated July 30,
1999 and August 27, 1999 of the Secretary of Labor, are AFFIRMED.

Labor II – 1
12.) Heritage Hotel v Secretary of Labor (& NUWHRAIN-HHMSC).

G.R. No. 172132, July 23, 2014

THE HERITAGE HOTEL MANILA, ACTING THROUGH ITS OWNER, GRAND PLAZA HOTEL

CORPORATION, Petitioner, v. SECRETARY OF LABOR AND EMPLOYMENT; MED-ARBITER
TOMAS F. FALCONITIN; AND NATIONAL UNION OF WORKERS IN THE HOTEL, RESTAURANT
AND ALLIED INDUSTRIES–HERITAGE HOTEL MANILA SUPERVISORS
CHAPTER (NUWHRAIN-HHMSC), Respondents.

DECISION

BERSAMIN, J.:

Although case law has repeatedly held that the employer was but a bystander in respect of the
conduct of the certification election to decide the labor organization to represent the employees in
the bargaining unit, and that the pendency of the cancellation of union registration brought against
the labor organization applying for the certification election should not prevent  the conduct of the
certification election, this review has to look again at the seemingly never-ending quest of the
petitioner employer to stop the conduct of the certification election on the ground of the pendency of
proceedings to cancel the labor organization’s registration it had initiated on the ground that the
membership of the labor organization was a mixture of managerial and supervisory employees with
the rank-and-file employees.

Under review at the instance of the employer is the decision promulgated on December 13,
2005,1 whereby the Court of Appeals (CA) dismissed its petition for certiorari to assail the resolutions
of  respondent Secretary of Labor and Employment sanctioning the conduct of the certification
election initiated by respondent labor organization. 2
cralawlawlibrary

Antecedents

On October 11, 1995, respondent National Union of Workers in Hotel Restaurant and Allied
Industries-Heritage Hotel Manila Supervisors Chapter (NUWHRAIN-HHMSC) filed a petition
for certification election,3 seeking to represent all the supervisory employees of Heritage
Hotel Manila. The petitioner filed its opposition, but the opposition was deemed denied on February
14, 1996 when Med-Arbiter Napoleon V. Fernando issued his order for the conduct of the certification
election.

The petitioner appealed the order of Med-Arbiter Fernando, but the appeal was also denied. A pre-
election conference was then scheduled. On February 20, 1998, however, the pre-election conference
was suspended until further notice because of the repeated non-appearance of NUWHRAIN-
HHMSC.4 cralawlawlibrary

On January 29, 2000, NUWHRAIN-HHMSC moved for the conduct of the pre-election

conference. The petitioner primarily filed its comment on the list of employees submitted
by NUWHRAIN-HHMSC, and simultaneously sought the exclusion of some from the list of
employees for occupying either confidential or managerial positions.5 The petitioner filed a
motion to dismiss on April 17, 2000,6 raising the prolonged lack of interest of NUWHRAIN-HHMSC to
pursue its petition for certification election.

On May 12, 2000, the petitioner filed a petition for the cancellation of NUWHRAIN-HHMSC’s
registration as a labor union for failing to submit its annual financial reports and an
updated list of members as required by Article 238 and Article 239 of the Labor Code, docketed as

Labor II – 1
Case No. NCR-OD-0005-004-IRD entitled The Heritage Hotel Manila, acting through its owner, Grand
Plaza Hotel Corporation v. National Union of Workers in the Hotel, Restaurant and Allied Industries-
Heritage Hotel Manila Supervisors Chapter (NUWHRAIN-HHSMC).7 It filed another motion on June 1,
2000 to seek either the dismissal or the suspension of the proceedings on the basis of its pending
petition for the cancellation of union registration. 8 cralawlawlibrary

The following day, however, the Department of Labor and Employment (DOLE) issued a notice
scheduling the certification elections on June 23, 2000.9 cralawlawlibrary

Dissatisfied, the petitioner commenced in the CA on June 14, 2000 a special civil action
for certiorari,10 alleging that the DOLE gravely abused its discretion in not suspending the certification
election proceedings. On June 23, 2000, the CA dismissed the petition for  certiorari  for non-
exhaustion of administrative remedies.11 cralawlawlibrary

The certification election proceeded as scheduled, and NUWHRAIN-HHMSC obtained the

majority vote of the bargaining unit.12 The petitioner filed a protest (with motion to defer
the certification of the election results and the winner), 13 insisting on the illegitimacy of
NUWHRAIN-HHMSC.

Ruling of the Med-Arbiter

On January 26, 2001, Med-Arbiter Tomas F. Falconitin issued an order,14 ruling that the petition for
the cancellation of union registration was not a bar to the holding of the certification election, and
disposing thusly:chanRoblesvirtualLawlibrary

WHEREFORE, premises considered, respondent employer/protestant’s protest with motion to defer

certification of results and winner is hereby dismissed for lack of merit.

Accordingly, this Office hereby certify pursuant to the rules that petitioner/protestee, National Union
of Workers in Hotels, Restaurants and Allied Industries-Heritage Hotel Manila Supervisory Chapter
(NUWHRAIN-HHSMC) is the sole and exclusive bargaining agent of all supervisory employees of the
Heritage Hotel Manila acting through its owner, Grand Plaza Hotel Corporation for purposes of
collective bargaining with respect to wages, and hours of work and other terms and conditions of
employment.

SO ORDERED.

The petitioner timely appealed to the DOLE Secretary claiming that: (a) the membership of
NUWHRAIN-HHMSC consisted of managerial, confidential, and rank-and-file employees; (b)
NUWHRAIN-HHMSC failed to comply with the reportorial requirements; and (c) Med-Arbiter Falconitin
simply brushed aside serious questions on the illegitimacy of NUWHRAIN-HHMSC. 15 It contended
that a labor union of mixed membership of supervisory and rank-and-file employees had
no legal right to petition for the certification election pursuant to the pronouncements
in Toyota Motor Philippines Corporation v. Toyota Motor Philippines Corporation Labor Union16(Toyota
Motor) and  Dunlop Slazenger (Phils.) v. Secretary of Labor and Employment17(Dunlop Slazenger).

Ruling of the DOLE Secretary

On August 21, 2002, then DOLE Secretary Patricia A. Sto. Tomas issued a resolution denying the
appeal,18 and affirming the order of Med-Arbiter Falconitin, viz: chanRoblesvirtualLawlibrary

WHEREFORE, the appeal is DENIED. The order of the Med-Arbiter dated 26 January 2001 is hereby
AFFIRMED.

SO RESOLVED.

Labor II – 1
DOLE Secretary Sto. Tomas observed that the petitioner’s reliance on Toyota Motor and Dunlop
Slazenger was misplaced because both rulings were already overturned by SPI Technologies, Inc. v.
Department of Labor and Employment,19 to the effect that once a union acquired a legitimate status
as a labor organization, it continued as such until its certificate of registration was cancelled or
revoked in an independent action for cancellation.

The petitioner moved for reconsideration.

In denying the motion on October 21, 2002, the DOLE Secretary declared that the mixture or co-
mingling of employees in a union was not a ground for dismissing a petition for the certification
election under Section 11, par. II, Rule XI of Department Order No. 9; that the appropriate remedy
was to exclude the ineligible employees from the bargaining unit during the inclusion-exclusion
proceedings;20 that the dismissal of the petition for the certification election based on the legitimacy
of the petitioning union would be inappropriate because it would effectively allow a collateral attack
against the union’s legal personality; and that a collateral attack against the personality of the labor
organization was prohibited under Section 5, Rule V of Department Order No. 9, Series of 1997. 21 cralawlawlibrary

Upon denial of its motion for reconsideration, the petitioner elevated the matter to the CA by petition
for certiorari.22 cralawlawlibrary

Ruling of the CA

On December 13, 2005,23 the CA dismissed the petition for certiorari, giving its following
disquisition: chanRoblesvirtualLawlibrary

The petition for certiorari filed by the petitioner is, in essence, a continuation of the debate on the
relevance of the Toyota Motor, Dunlop Slazenger and  Progressive Development cases to the issues
raised.

Toyota Motor and Dunlop Slazenger are anchored on the provisions of Article 245 of the Labor Code
which prohibit managerial employees from joining any labor union and permit supervisory employees
to form a separate union of their own.  The language naturally suggests that a labor organization
cannot carry a mixture of supervisory and rank-and-file employees.  Thus, courts have held that a
union cannot become a legitimate labor union if it shelters under its wing both types of employees. 
But there are elements of an elliptical reasoning in the holding of these two cases that a petition for
certification election may not prosper until the composition of the union is settled therein. Toyota
Motor, in particular, makes the blanket statement that a supervisory union has no right to file a
certification election for as long as it counts rank-and-file employees among its ranks.  More than
four years after  Dunlop Slazenger, the Court clarified in Tagaytay Highlands International Golf Club
Inc vs Tagaytay Highlands Employees Union-PTGWO that while Article 245 prohibits supervisory
employees from joining a rank-and-file union, it does not provide what the effect is if a rank-and-file
union takes in supervisory employees as members, or vice versa. Toyota Motor and Dunlop
Slazenger jump into an unnecessary conclusion when they foster the notion that Article 245 carries
with it the authorization to inquire collaterally into the issue wherever it rears its ugly head.

Tagaytay Highlands proclaims, in the light of Department Order 9, that after a certificate of

registration is issued to a union, its legal personality cannot be subject to a collateral attack.  It may
be questioned only in an independent petition for cancellation. In fine, Toyota and Dunlop
Slazenger are a spent force. Since Tagaytay Highlands was handed down after these two cases, it
constitutes the latest expression of the will of the Supreme Court and supersedes or overturns
previous rulings inconsistent with it.  From this perspective, it is needless to discuss whether SPI
Technologies as a mere resolution of the Court may prevail over a full-blown decision that Toyota
Motor or Dunlop Slazenger was.  The ruling in SPI Technologies  has been echoed in Tagaytay
Highlands, for which reason it is with Tagaytay Highlands, not SPI Technologies, that the petitioner
Labor II – 1
must joust.

The fact that the cancellation proceeding has not yet been resolved makes it obvious that the legal
personality of the respondent union is still very much in force.  The DOLE has thus every reason to
proceed with the certification election and commits no grave abuse of discretion in allowing it to
prosper because the right to be certified as collective bargaining agent is one of the legitimate
privileges of a registered union.  It is for the petitioner to expedite the cancellation case if it wants to
put an end to the certification case, but it cannot place the issue of the union’s legitimacy in the
certification case, for that would be tantamount to making the collateral attack the DOLE has
staunchly argued to be impermissible.

The reference made by the petitioner to another Progressive Development  case that it would be
more prudent for the DOLE to suspend the certification case until the issue of the legality of the
registration is resolved, has also been satisfactorily answered.  Section 11, Rule XI of Department
Order 9 provides for the grounds for the dismissal of a petition for certification election, and the
pendency of a petition for cancellation of union registration is not one of them.  Like Toyota
Motor and Dunlop Slazenger, the second Progressive case came before Department Order 9.

IN VIEW OF THE FOREGOING, the disputed resolutions of the Secretary of Labor and Employment
are AFFIRMED, and the petition is DISMISSED.

SO ORDERED.

The petitioner sought reconsideration,24 but its motion was denied.

Issues

Hence, this appeal, with the petitioner insisting that: chanRoblesvirtualLawlibrary

THE COURT OF APPEALS ERRED IN RULING THAT TAGAYTAY HIGHLANDS APPLIES TO THE CASE AT

BAR

II

[THE HONORABLE COURT OF APPEALS] SERIOUSLY ERRED WHEN IT DISREGARDED PROGRESSIVE

DEVELOPMENT CORPORATION – PIZZA HUT V. LAGUESMA  WHICH HELD THAT IT WOULD BE MORE
PRUDENT TO SUSPEND THE CERTIFICATION CASE UNTIL THE ISSUE OF THE LEGALITY OF THE
REGISTRATION OF THE UNION IS FINALLY RESOLVED

III

BECAUSE OF THE PASSAGE OF TIME, RESPONDENT UNION NO LONGER POSSESSES THE MAJORITY
STATUS SUCH THAT A NEW CERTIFICATION ELECTION IS IN ORDER 25 chanrobleslaw

The petitioner maintains that the ruling in Tagaytay Highlands International Golf Club Inc
v. Tagaytay Highlands Employees Union-PTGWO26 (Tagaytay Highlands) was inapplicable
because it involved the co-mingling of supervisory and rank-and-file employees in one
labor organization, while the issue here related to the mixture of membership between
two employee groups — one vested with the right to self-organization (i.e., the rank-and-
file and supervisory employees), and the other deprived of such right (i.e., managerial and
confidential employees); that suspension of the certification election was appropriate because a
finding of “illegal mixture” of membership during a petition for the cancellation of union registration
determined whether or not the union had met the 20% representation requirement under Article

Labor II – 1
234(c) of the Labor Code; 27 and that in holding that mixed membership was not a ground for
canceling the union registration, except when such was done through misrepresentation, false
representation or fraud under the circumstances enumerated in Article 239(a) and (c) of the Labor
Code, the CA completely ignored the 20% requirement under Article 234(c) of the Labor Code.

The petitioner posits that the grounds for dismissing a petition for the certification election under
Section 11, Rule XI of Department Order No. 9, Series of 1997, were not exclusive because the other
grounds available under the Rules of Court could be invoked; that in Progressive Development
Corporation v. Secretary, Department of Labor and Employment,28 the Court ruled that prudence
could justify the suspension of the certification election proceedings until the issue of the legality of
the union registration could be finally resolved; that the non-submission of the annual financial
statements and the list of members in the period from 1996 to 1999 constituted a serious challenge
to NUWHRAIN-HHMSC’s right to file its petition for the certification election; and that from the time
of the conduct of the certification election on June 23, 2000, the composition of NUWHRAIN-HHMSC
had substantially changed, thereby necessitating another certification election to determine the true
will of the bargaining unit.

In short, should the petition for the cancellation of union registration based on mixed
membership of supervisors and managers in a labor union, and the non-submission of
reportorial requirements to the DOLE justify the suspension of the proceedings for the
certification elections or even the denial of the petition for the certification election?

Ruling

We deny the petition for review on certiorari.

Basic in the realm of labor union rights is that the certification election is the sole concern of the
workers,29 and the employer is deemed an intruder as far as the certification election is
concerned.30 Thus, the petitioner  lacked the legal personality to assail the proceedings for the
certification election,31 and should stand aside as a mere bystander who could not oppose the
petition, or even appeal the Med-Arbiter’s orders relative to the conduct of the certification
election.32 As the Court has explained in Republic v. Kawashima Textile Mfg., Philippines,
Inc.33 (Kawashima): chanRoblesvirtualLawlibrary

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

The petitioner’s meddling in the conduct of the certification election among its employees unduly
gave rise to the suspicion that it intended to establish a company union. 34 For that reason, the
challenges it posed against the certification election proceedings were rightly denied.

Under the long established rule, too, the filing of the petition for the cancellation of NUWHRAIN-
HHMSC’s registration should not bar the conduct of the certification election.35 In that respect, only a
final order for the cancellation of the registration would have prevented NUWHRAIN-HHMSC from
continuing to enjoy all the rights conferred on it as a legitimate labor union, including the right to the
petition for the certification election. 36 This rule is now enshrined in Article 238-A of the Labor Code,
as amended by Republic Act No. 9481,37 which reads: chanRoblesvirtualLawlibrary

Labor II – 1
Article 238-A. Effect of a Petition for Cancellation of Registration. – A petition for cancellation of
union registration shall not suspend the proceedings for certification election nor shall it prevent the
filing of a petition for certification election.

xxxx

Still, the petitioner assails the failure of NUWHRAIN-HHMSC to submit its periodic financial reports
and updated list of its members pursuant to Article 238 and Article 239 of the Labor Code. It
contends that the serious challenges against the legitimacy of NUWHRAIN-HHMSC as a union raised
in the petition for the cancellation of union registration should have cautioned the Med-Arbiter
against conducting the certification election.

The petitioner does not convince us.

In The Heritage Hotel Manila v. National Union of Workers in the Hotel, Restaurant and Allied
Industries-Heritage Hotel Manila Supervisors Chapter (NUWHRAIN-HHMSC),38 the Court declared that
the dismissal of the petition for the cancellation of the registration of NUWHRAIN-HHMSC was proper
when viewed against the primordial right of the workers to self-organization, collective bargaining
negotiations and peaceful concerted actions, viz: chanRoblesvirtualLawlibrary

xxxx

[Articles 238 and 239 of the Labor Code] give the Regional Director ample discretion in dealing with a
petition for cancellation of a union's registration, particularly, determining whether the union still
meets the requirements prescribed by law. It is sufficient to give the Regional Director license to
treat the late filing of required documents as sufficient compliance with the requirements of the law.
After all, the law requires the labor organization to submit the annual financial report and list of
members in order to verify if it is still viable and financially sustainable as an organization so as to
protect the employer and employees from fraudulent or fly-by-night unions. With the submission of
the required documents by respondent, the purpose of the law has been achieved, though belatedly.

We cannot ascribe abuse of discretion to the Regional Director and the DOLE Secretary in denying
the petition for cancellation of respondent's registration. The union members and, in fact, all the
employees belonging to the appropriate bargaining unit should not be deprived of a bargaining
agent, merely because of the negligence of the union officers who were responsible for the
submission of the documents to the BLR.

Labor authorities should, indeed, act with circumspection in treating petitions for cancellation of
union registration, lest they be accused of interfering with union activities. In resolving the petition,
consideration must be taken of the fundamental rights guaranteed by Article XIII, Section 3 of the
Constitution, i.e., the rights of all workers to self-organization, collective bargaining and negotiations,
and peaceful concerted activities. Labor authorities should bear in mind that registration confers upon
a union the status of legitimacy and the concomitant right and privileges granted by law to a
legitimate labor organization, particularly the right to participate in or ask for certification election in
a bargaining unit. Thus, the cancellation of a certificate of registration is the equivalent of snuffing
out the life  of a labor organization. For without such registration, it loses - as a rule - its rights under
the Labor Code.

It is worth mentioning that the Labor Code's provisions on cancellation of union registration and on
reportorial requirements have been recently amended by Republic Act (R.A.) No. 9481,  An Act
Strengthening the Workers’ Constitutional Right to Self-Organization, Amending for the Purpose
Presidential Decree No. 442, As Amended, Otherwise Known as the Labor Code of the Philippines,
which lapsed into law on May 25, 2007 and became effective on June 14, 2007. The amendment
sought to strengthen the workers’ right to self-organization and enhance the Philippines' compliance
with its international obligations as embodied in the International Labor Organization (ILO)
Labor II – 1
Convention No. 87, pertaining to the non-dissolution of workers’ organizations by administrative
authority. Thus, R.A. No. 9481 amended Article 239 to read: chanRoblesvirtualLawlibrary

ART. 239. Grounds for Cancellation of Union Registration.--The following may constitute grounds for
cancellation of union registration: chanRoblesvirtualLawlibrary

(a) Misrepresentation, false statement or fraud in connection with the adoption or ratification of the
constitution and by-laws or amendments thereto, the minutes of ratification, and the list of members
who took part in the ratification;

(b) Misrepresentation, false statements or fraud in connection with the election of officers, minutes of
the election of officers, and the list of voters;

(c) Voluntary dissolution by the members.

R.A. No. 9481 also inserted in the Labor Code Article 242-A, which provides: chanroblesvirtuallawlibrary

ART. 242-A. Reportorial Requirements.--The following are documents required to be submitted to the
Bureau by the legitimate labor organization concerned: chanRoblesvirtualLawlibrary

(a) Its constitution and by-laws, or amendments thereto, the minutes of ratification, and the list of
members who took part in the ratification of the constitution and by-laws within thirty (30) days from
adoption or ratification of the constitution and by-laws or amendments thereto;

(b) Its list of officers, minutes of the election of officers, and list of voters within thirty (30) days
from election;

(c) Its annual financial report within thirty (30) days after the close of every fiscal year; and

(d) Its list of members at least once a year or whenever required by the Bureau.

Failure to comply with the above requirements shall not be a ground for cancellation of
union registration but shall subject the erring officers or members to suspension,
expulsion from membership, or any appropriate penalty.

xxxx

The ruling thereby wrote finis to the challenge being posed by the petitioner against the illegitimacy
of NUWHRAIN-HHMSC.

The remaining issue to be resolved is which among Toyota Motor, Dunlop

Slazenger and Tagaytay Highlands applied in resolving the dispute arising from the mixed
membership in NUWHRAIN-HHMSC.

This is not a novel matter. In Kawashima,39 we have reconciled our rulings in Toyota Motor, Dunlop
Slazenger and Tagaytay Highlands by emphasizing on the laws prevailing at the time of filing of the
petition for the certification election.

Toyota Motor and  Dunlop Slazenger involved petitions for certification election filed on November 26,
1992 and September 15, 1995, respectively. In both cases, we applied the Rules and Regulations
Implementing R.A. No. 6715 (also known as the 1989 Amended Omnibus Rules), the prevailing rule
then.

The 1989 Amended Omnibus Rules was amended on June 21, 1997 by Department Order No. 9,
Series of 1997. Among the amendments was the removal of the requirement of indicating in the
petition for the certification election that there was no co-mingling of rank-and-file and supervisory
employees in the membership of the labor union. This was the prevailing rule when the Court
Labor II – 1
promulgated Tagaytay Highlands, declaring therein that mixed membership should have no
bearing on the legitimacy of a registered labor organization, unless the co-mingling was
due to misrepresentation, false statement or fraud as provided in Article 239 of the Labor
Code.40 cralawlawlibrary

Presently, then, the mixed membership does not result in the illegitimacy of the registered labor
union unless the same was done through misrepresentation, false statement or fraud according to
Article 239 of the Labor Code. In Air Philippines Corporation v. Bureau of Labor Relations,41 we
categorically explained that—

Clearly, then, for the purpose of de-certifying a union, it is not enough to establish that the rank-
and-file union includes ineligible employees in its membership. Pursuant to Article 239 (a) and (c) of
the Labor Code, it must be shown that there was misrepresentation, false statement or fraud in
connection with the adoption or ratification of the constitution and by-laws or amendments thereto,
the minutes of ratification, or in connection with the election of officers, minutes of the election of
officers, the list of voters, or failure to submit these documents together with the list of the newly
elected-appointed officers and their postal addresses to the BLR.

We note that NUWHRAIN-HHMSC filed its petition for the certification election on October
11, 1995. Conformably with Kawashima, the applicable law was the 1989 Amended
Omnibus Rules, and the prevailing rule was the pronouncement in Toyota
Motor and Dunlop Slazenger to the effect that a labor union of mixed membership was not
possessed with the requisite personality to file a petition for the certification election.

Nonetheless, we still rule in favor of NUWHRAIN-HHMSC. We expound.

In both Toyota Motor and Dunlop Slazenger, the Court was convinced that the concerned labor
unions were comprised by mixed rank-and-file and supervisory employees. In Toyota Motor, the
employer submitted the job descriptions of the concerned employees to prove that there
were supervisors in the petitioning union for rank-and-file employees. In Dunlop Slazenger,
the Court observed that the labor union of supervisors included employees occupying positions that
apparently belonged to the rank-and-file. In both Toyota Motor and Dunlop Slazenger, the
employers were able to adduce substantial evidence to prove the existence of the mixed
membership. Based on the records herein, however, the petitioner failed in that respect. To recall,
it raised the issue of the mixed membership in its comment on the list of members submitted by
NUWHRAIN-HHMSC, and in its protest. In the comment, it merely identified the positions that
were either confidential or managerial, but did not present any supporting evidence to
prove or explain the identification. In the protest, it only enumerated the positions that
were allegedly confidential and managerial, and identified two employees that belonged to
the rank-and-file, but did not offer any description to show that the positions belonged to
different employee groups.

Worth reiterating is that the actual functions of an employee, not his job designation, determined
whether the employee occupied a managerial, supervisory or rank-and-file position. 42 As to
confidential employees who were excluded from the right to self-organization, they must (1) assist or
act in a confidential capacity, in regard (2) to persons who formulated, determined, and effectuated
management policies in the field of labor relations.43 In that regard, mere allegations sans
substance would not be enough, most especially because the constitutional right of
workers to self-organization would be compromised.

At any rate, the members of NUWHRAIN-HHSMC had already spoken, and elected it as the
bargaining agent. As between the rigid application of Toyota Motors  and Dunlop Slazenger, and the
right of the workers to self-organization, we prefer the latter. For us, the choice is clear and settled.
“What is important is that there is an unmistakeable intent of the members of [the] union to exercise
their right to organize. We cannot impose rigorous restraints on such right if we are to give meaning
Labor II – 1
to the protection to labor and social justice clauses of the Constitution.” 44 cralawlawlibrary

WHEREFORE, the Court DENIES the petition for review on certiorari; AFFIRMS the decision

promulgated on December 13, 2005 by the Court of Appeals; and ORDERS the petitioner to pay the
costs of suit.

Labor II – 1
13.) Benguet Electric Cooperative v. Ferrer-Calleja

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
Labor II – 1
 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

Labor II – 1
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
Labor II – 1
 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

Labor II – 1
14.) G.R. No. 94045 September 13, 1991

CENTRAL NEGROS ELECTRIC COOPERATIVE, INC. (CENECO), petitioner,

vs.
HONORABLE SECRETARY, DEPARTMENT OF LABOR AND EMPLOYMENT, and CENECO UNION OF
RATIONAL EMPLOYEES (CURE), respondents.

Enrique S. Tabino for petitioner.

Edmundo G. Manlapao for private respondent.

REGALADO, J.:

In this special civil action for certiorari, petitioner Central Negros Electric Cooperative, Inc. (CENECO) seeks to
annul the order  issued by then Acting Secretary of Labor Bienvenido E. Laguesma on June 6, 1990, declaring the
1

projected certification election unnecessary and directing petitioner CENECO to continue recognizing private
respondent CENECO Union of Rational Employees (CURE) as the sole and exclusive bargaining representative of
all the rank-and-file employees of petitioner's electric cooperative for purposes of collective bargaining.

It appears from the records that on August 15, 1987, CENECO entered into a collective bargaining agreement with
CURE, a labor union representing its rank-and-file employees, providing for a term of three years retroactive to April
1, 1987 and extending up to March 31, 1990. On December 28, 1989, CURE wrote CENECO proposing that
negotiations be conducted for a new collective bargaining agreement (CBA).

On January 18, 1990, CENECO denied CURE's request on the ground that, under applicable decisions of the
Supreme Court, employees who at the same time are members of an electric cooperative are not entitled to form or
join a union. 2

Prior to the submission of the proposal for CBA renegotiation, CURE members, in a general assembly held on
December 9, 1989, approved Resolution No. 35 whereby it was agreed that 'tall union members shall
withdraw, retract, or recall the union members' membership from Central Negros Electric Cooperative,
Inc. in order to avail (of) the full benefits under the existing Collective Bargaining Agreement entered into by
and between CENECO and CURE, and the supposed benefits that our union may avail (of) under the renewed
CBA.  This was ratified by 259 of the 362 union members. CENECO and the Department of Labor and Employment,
3

Bacolod District, were furnished copies of this resolution.

However, the withdrawal from membership was denied by CENECO on February 27, 1990 under Resolution No.
90 "for the reason that the basis of withdrawal is not among the grounds covered by Board Resolution No.
5023, dated November 22, 1989 and that said request is contrary to Board Resolution No. 5033 dated December
13, 1989, ..." 4

By reason of CENECO's refusal to renegotiate a new CBA, CURE filed a petition for direct recognition or for
certification election, supported by 282 or 72% of the 388 rank-and-file employees in the bargaining unit of
CENECO.

CENECO filed a motion to dismiss on the ground that there are legal constraints to the filing of the certification
election, citing the ruling laid down by this Court in Batangas I Electric Cooperative Labor Union vs. Romeo A.
Young,  (BATANGAS case) to the effect that "employees who at the same time are members of an electric
5

cooperative are not entitled to form or join unions for purposes of collective bargaining agreement, for
certainly an owner cannot bargain with himself or his co-owners."

Labor II – 1
Med-Arbiter Felizardo T. Serapio issued an order,  granting the petition for certification election which, in effect,
6

was a denial of CENECO's motion to dismiss, and directing the holding of a certification election between CURE
and No Union.

CENECO appealed to the Department of Labor and Employment which issued the questioned order modifying the
aforestated order of the med-arbiter by directly certifying CURE as the exclusive bargaining representative of the
rank-and-file employees of CURE.

Hence, this petition.

Petitioner CENECO argues that respondent Secretary committed a grave abuse of discretion in not applying to the
present case the doctrine enunciated in the BATANGAS case that employees of an electric cooperative who at the
same time are members of the electric cooperative are prohibited from forming or joining labor unions for purposes
of a collective bargaining agreement. While CENECO recognizes the employees' right to self-organization, it avers
that this is not absolute. Thus, it opines that employees of an electric cooperative who at the same time are
members thereof are not allowed to form or join labor unions for purposes of collective bargaining.
However, petitioner does not hesitate to admit that the prohibition does not extend to employees of an electric
cooperative who are not members of the cooperative.

The issue, therefore, actually involves a determination of whether or not the employees of CENECO who
withdrew their membership from the cooperative are entitled to form or join CURE for purposes of the
negotiations for a collective bargaining agreement proposed by the latter.

As culled from the records, it is the submission of CENECO that the withdrawal from membership in the
cooperative and, as a consequence, the employees' acquisition of membership in the union cannot be
allowed for the following reasons:

1. It was made as a subterfuge or to subvert the ruling in the BATANGAS case:

2. To allow the withdrawal of the members of CENECO from the cooperative without justifiable
reason would greatly affect the objectives and goals of petitioner as an electric cooperative;

3. The Secretary of Labor, as well as the Med-Arbiter, has no jurisdiction over the issue of the withdrawal
from membership which is vested in the National Electrification Administration (NEA) which has direct
control and supervision over the operations of electric cooperatives; and

4. Assuming that the Secretary has jurisdiction, CURE failed to exhaust administrative remedies by not
referring the matter of membership withdrawal to the NEA.

The petition is destitute of merit; certiorari will not lie.

We first rule on the alleged procedural infirmities affecting the instant case. CENECO avers that the med-arbiter has
no jurisdiction to rule on the issue of withdrawal from membership of its employees in the cooperative which, it
claims, is properly vested in the NEA which has control and supervision over all electric cooperatives.

From a perusal of petitioner's motion to dismiss filed with the med-arbiter, it becomes readily apparent that the sole
basis for petitioner's motion is the illegality of the employees' membership in respondent union despite the fact that
they allegedly are still members of the cooperative. Petitioner itself adopted the aforesaid argument in seeking the
dismissal of the petition for certification election filed with the med-arbiter, and the finding made by the latter was
merely in answer to the arguments advanced by petitioner. Hence, petitioner is deemed to have submitted the issue
of membership withdrawal from the cooperative to the jurisdiction of the med-arbiter and it is now estopped from
questioning that same jurisdiction which it invoked in its motion to dismiss after obtaining an adverse ruling thereon.

Under Article 256 of the Labor Code, to have a valid certification election at least a majority of all eligible voters in
the unit must have cast their votes. It is apparent that incidental to the power of the med-arbiter to hear and decide
representation cases is the power to determine who the eligible voters are. In so doing, it is axiomatic that the med-
Labor II – 1
arbiter should determine the legality of the employees' membership in the union. In the case at bar, it obviously
becomes necessary to consider first the propriety of the employees' membership withdrawal from the cooperative
before a certification election can be had.

Lastly, it is petitioner herein who is actually questioning the propriety of the withdrawal of its members from the
cooperative. Petitioner could have brought the matter before the NEA if it wanted to and. if such remedy had really
been available, and there is nothing to prevent it from doing so. It would be absurd to fault the employees for the
neglect or laxity of petitioner in protecting its own interests.

The argument of CENECO that the withdrawal was merely to subvert the ruling of this Court in the
BATANGAS case is without merit. The case referred to merely declared that employees who are at the same time
members of the cooperative cannot join labor unions for purposes of collective bargaining. However, nowhere in
said case is it stated that member-employees are prohibited from withdrawing their membership in the
cooperative in order to join a labor union.

As discussed by the Solicitor General, Article I, Section 9 of the Articles of Incorporation and By- Laws of CENECO
provides that "any member may withdraw from membership upon compliance with such uniform terms and
conditions as the Board may prescribe." The same section provides that upon withdrawal, the member is
merely required to surrender his membership certificate and he is to be refunded his membership fee less
any obligation that he has with the cooperative. There appears to be no other condition or requirement
imposed upon a withdrawing member. Hence, there is no just cause for petitioner's denial of the withdrawal from
membership of its employees who are also members of the union. 7

The alleged board resolutions relied upon by petitioner in denying the withdrawal of the members concerned were
never presented nor their contents disclosed either before the med-arbiter or the Secretary of Labor if only to prove
the ratiocination for said denial. Furthermore, CENECO never averred non-compliance with the terms and
conditions for withdrawal, if any. It appears that the Articles of Incorporation of CENECO do not provide any ground
for withdrawal from membership which accordingly gives rise to the presumption that the same may be done at any
time and for whatever reason. In addition, membership in the cooperative is on a voluntary basis. Hence, withdrawal
therefrom cannot be restricted unnecessarily. The right to join an organization necessarily includes the equivalent
right not to join the same.

The right of the employees to self-organization is a compelling reason why their withdrawal from the
cooperative must be allowed. As pointed out by CURE, the resignation of the member- employees is an
expression of their preference for union membership over that of membership in the cooperative. The
avowed policy of the State to afford fall protection to labor and to promote the primacy of free collective bargaining
mandates that the employees' right to form and join unions for purposes of collective bargaining be accorded the
highest consideration.

Membership in an electric cooperative which merely vests in the member a right to vote during the annual
meeting becomes too trivial and insubstantial vis-a-vis the primordial and more important constitutional
right of an employee to join a union of his choice. Besides, the 390 employees of CENECO, some of whom
have never been members of the cooperative, represent a very small percentage of the cooperative's total
membership of 44,000. It is inconceivable how the withdrawal of a negligible number of members could adversely
affect the business concerns and operations of CENECO.

We rule, however, that the direct certification ordered by respondent Secretary is not proper. By virtue of
Executive Order No. 111, which became effective on March 4, 1987, the direct certification originally allowed
under Article 257 of the Labor Code has apparently been discontinued as a method of selecting the
exclusive bargaining agent of the workers. This amendment affirms the superiority of the certification election
over the direct certification which is no longer available now under the change in said provision.8

We have said that where a union has filed a petition for certification election, the mere fact that no
opposition is made does not warrant a direct certification.  In said case which has similar features to that at bar,
9

wherein the respondent Minister directly certified the union, we held that:

Labor II – 1
 ... As pointed out by petitioner in its petition, what the respondent Minister achieved in rendering the
assailed orders was to make a mockery of the procedure provided under the law for representation cases
because: ... (c) By directly certifying a Union without sufficient proof of majority representation, he
has in effect arrogated unto himself the right, vested naturally in the employee's to choose their
collective bargaining representative. (d) He has in effect imposed upon the petitioner the obligation to
negotiate with a union whose majority representation is under serious question. This is highly irregular
because while the Union enjoys the blessing of the Minister, it does not enjoy the blessing of the employees.
Petitioner is therefore under threat of being held liable for refusing to negotiate with a union whose right to
bargaining status has not been legally established.

While there may be some factual variances, the rationale therein is applicable to the present case in the sense that
it is not alone sufficient that a union has the support of the majority. What is equally important is that everyone be
given a democratic space in the bargaining unit concerned. The most effective way of determining which labor
organization can truly represent the working force is by certification election.
10

WHEREFORE, the questioned order for the direct certification of respondent CURE as the bargaining
representative of the employees of petitioner CENECO is hereby ANNULLED and SET ASIDE. The med-arbiter is
hereby ordered to conduct a certification election among the rank-and- file employees of CENECO with CURE and
No Union as the choices therein.

Labor II – 1
15.) Victoriano v Elizalde Rope Workers Union.

G.R. No. L-25246 September 12, 1974

BENJAMIN VICTORIANO, plaintiff-appellee,
vs.
ELIZALDE ROPE WORKERS' UNION and ELIZALDE ROPE FACTORY, INC., defendants, ELIZALDE ROPE
WORKERS' UNION, defendant-appellant.

Salonga, Ordonez, Yap, Sicat & Associates for plaintiff-appellee.

Cipriano Cid & Associates for defendant-appellant.

ZALDIVAR, J.:p

Appeal to this Court on purely questions of law from the decision of the Court of First Instance of Manila in its Civil Case No. 58894.

The undisputed facts that spawned the instant case follow:

Benjamin Victoriano (hereinafter referred to as Appellee), a member of the religious sect known as the
"Iglesia ni Cristo", had been in the employ of the Elizalde Rope Factory, Inc. (hereinafter referred to as
Company) since 1958. As such employee, he was a member of the Elizalde Rope Workers' Union (hereinafter
referred to as Union) which had with the Company a collective bargaining agreement containing a closed shop
provision which reads as follows:

Membership in the Union shall be required as a condition of employment for all permanent
employees workers covered by this Agreement.

The collective bargaining agreement expired on March 3, 1964 but was renewed the following day, March 4, 1964.

Under Section 4(a), paragraph 4, of Republic Act No. 875, prior to its amendment by Republic Act No. 3350,
the employer was not precluded "from making an agreement with a labor organization to require as a
condition of employment membership therein, if such labor organization is the representative of the
employees." On June 18, 1961, however, Republic Act No. 3350 was enacted, introducing an amendment to —
paragraph (4) subsection (a) of section 4 of Republic Act No. 875, as follows: ... "but such agreement shall not
cover members of any religious sects which prohibit affiliation of their members in any such labor
organization".

Being a member of a religious sect that prohibits the affiliation of its members with any labor organization,
Appellee presented his resignation to appellant Union in 1962, and when no action was taken thereon, he
reiterated his resignation on September 3, 1974. Thereupon, the Union wrote a formal letter to the Company
asking the latter to separate Appellee from the service in view of the fact that he was resigning from the
Union as a member. The management of the Company in turn notified Appellee and his counsel that unless
the Appellee could achieve a satisfactory arrangement with the Union, the Company would be constrained
to dismiss him from the service. This prompted Appellee to file an action for injunction, docketed as Civil
Case No. 58894 in the Court of First Instance of Manila to enjoin the Company and the Union from dismissing
Appellee.  In its answer, the Union invoked the "union security clause" of the collective bargaining
1

agreement; assailed the constitutionality of Republic Act No. 3350; and contended that the Court had no
jurisdiction over the case, pursuant to Republic Act No. 875, Sections 24 and 9 (d) and (e).  Upon the facts agreed 2

upon by the parties during the pre-trial conference, the Court a quo rendered its decision on August 26, 1965, the
dispositive portion of which reads:

Labor II – 1
 IN VIEW OF THE FOREGOING, judgment is rendered enjoining the defendant Elizalde Rope
Factory, Inc. from dismissing the plaintiff from his present employment and sentencing the defendant
Elizalde Rope Workers' Union to pay the plaintiff P500 for attorney's fees and the costs of this
action.
3

From this decision, the Union appealed directly to this Court on purely questions of law, assigning the following
errors:

I. That the lower court erred when it did not rule that Republic Act No. 3350 is unconstitutional.

II. That the lower court erred when it sentenced appellant herein to pay plaintiff the sum of P500 as
attorney's fees and the cost thereof.

In support of the alleged unconstitutionality of Republic Act No. 3350, the Union contented, firstly, that the Act
infringes on the fundamental right to form lawful associations; that "the very phraseology of said Republic
Act 3350, that membership in a labor organization is banned to all those belonging to such religious sect
prohibiting affiliation with any labor organization"  , "prohibits all the members of a given religious sect from
4

joining any labor union if such sect prohibits affiliations of their members thereto"  ; and, consequently, deprives
5

said members of their constitutional right to form or join lawful associations or organizations guaranteed by
the Bill of Rights, and thus becomes obnoxious to Article III, Section 1 (6) of the 1935 Constitution.  6

Secondly, the Union contended that Republic Act No. 3350 is unconstitutional for impairing the obligation of
contracts in that, while the Union is obliged to comply with its collective bargaining agreement containing a
"closed shop provision," the Act relieves the employer from its reciprocal obligation of cooperating in the
maintenance of union membership as a condition of employment; and that said Act, furthermore, impairs the
Union's rights as it deprives the union of dues from members who, under the Act, are relieved from the obligation to
continue as such members. 7

Thirdly, the Union contended that Republic Act No. 3350 discriminatorily favors those religious sects which ban their
members from joining labor unions, in violation of Article Ill, Section 1 (7) of the 1935 Constitution; and while said
Act unduly protects certain religious sects, it leaves no rights or protection to labor organizations.8

Fourthly, Republic Act No. 3350, asserted the Union, violates the constitutional provision that "no religious test shall
be required for the exercise of a civil right," in that the laborer's exercise of his civil right to join associations for
purposes not contrary to law has to be determined under the Act by his affiliation with a religious sect; that
conversely, if a worker has to sever his religious connection with a sect that prohibits membership in a labor
organization in order to be able to join a labor organization, said Act would violate religious freedom. 9

Fifthly, the Union contended that Republic Act No. 3350, violates the "equal protection of laws" clause of the
Constitution, it being a discriminately legislation, inasmuch as by exempting from the operation of closed shop
agreement the members of the "Iglesia ni Cristo", it has granted said members undue advantages over their fellow
workers, for while the Act exempts them from union obligation and liability, it nevertheless entitles them at the same
time to the enjoyment of all concessions, benefits and other emoluments that the union might secure from the
employer.  10

Sixthly, the Union contended that Republic Act No. 3350 violates the constitutional provision regarding the
promotion of social justice. 11

Appellant Union, furthermore, asserted that a "closed shop provision" in a collective bargaining agreement
cannot be considered violative of religious freedom, as to call for the amendment introduced by Republic
Act No. 3350;   and that unless Republic Act No. 3350 is declared unconstitutional, trade unionism in this
12

country would be wiped out as employers would prefer to hire or employ members of the Iglesia ni Cristo in
order to do away with labor organizations.  13

Appellee, assailing appellant's arguments, contended that Republic Act No. 3350 does not violate the right
to form lawful associations, for the right to join associations includes the right not to join or to resign from

Labor II – 1
a labor organization, if one's conscience does not allow his membership therein, and the Act has given
substance to such right by prohibiting the compulsion of workers to join labor organizations;   that said Act14

does not impair the obligation of contracts for said law formed part of, and was incorporated into, the terms of the
closed shop agreement;   that the Act does not violate the establishment of religion clause or separation of Church
15

and State, for Congress, in enacting said law, merely accommodated the religious needs of those workers whose
religion prohibits its members from joining labor unions, and balanced the collective rights of organized labor with
the constitutional right of an individual to freely exercise his chosen religion; that the constitutional right to the free
exercise of one's religion has primacy and preference over union security measures which are merely contractual   ; 16

that said Act does not violate the constitutional provision of equal protection, for the classification of workers under
the Act depending on their religious tenets is based on substantial distinction, is germane to the purpose of the law,
and applies to all the members of a given class;   that said Act, finally, does not violate the social justice policy of
17

the Constitution, for said Act was enacted precisely to equalize employment opportunities for all citizens in the midst
of the diversities of their religious beliefs." 
18

I. Before We proceed to the discussion of the first assigned error, it is necessary to premise that there are some
thoroughly established principles which must be followed in all cases where questions of constitutionality as obtains
in the instant case are involved. All presumptions are indulged in favor of constitutionality; one who attacks a statute,
alleging unconstitutionality must prove its invalidity beyond a reasonable doubt, that a law may work hardship does
not render it unconstitutional; that if any reasonable basis may be conceived which supports the statute, it will be
upheld, and the challenger must negate all possible bases; that the courts are not concerned with the wisdom,
justice, policy, or expediency of a statute; and that a liberal interpretation of the constitution in favor of the
constitutionality of legislation should be adopted. 19

1. Appellant Union's contention that Republic Act No. 3350 prohibits and bans the members of such
religious sects that forbid affiliation of their members with labor unions from joining labor unions appears
nowhere in the wording of Republic Act No. 3350; neither can the same be deduced by necessary
implication therefrom. It is not surprising, therefore, that appellant, having thus misread the Act, committed the
error of contending that said Act is obnoxious to the constitutional provision on freedom of association.

Both the Constitution and Republic Act No. 875 recognize freedom of association. Section 1 (6) of Article III of the
Constitution of 1935, as well as Section 7 of Article IV of the Constitution of 1973, provide that the right to form
associations or societies for purposes not contrary to law shall not be abridged. Section 3 of Republic Act No. 875
provides that employees shall have the right to self-organization and to form, join of assist labor organizations of
their own choosing for the purpose of collective bargaining and to engage in concerted activities for the purpose of
collective bargaining and other mutual aid or protection. What the Constitution and the Industrial Peace Act
recognize and guarantee is the "right" to form or join associations. Notwithstanding the different theories
propounded by the different schools of jurisprudence regarding the nature and contents of a "right", it can be safely
said that whatever theory one subscribes to, a right comprehends at least two broad notions, namely: first, liberty or
freedom, i.e., the absence of legal restraint, whereby an employee may act for himself without being prevented by
law; and second, power, whereby an employee may, as he pleases, join or refrain from Joining an association. It is,
therefore, the employee who should decide for himself whether he should join or not an association; and should he
choose to join, he himself makes up his mind as to which association he would join; and even after he has joined,
he still retains the liberty and the power to leave and cancel his membership with said organization at any time.   It20

is clear, therefore, that the right to join a union includes the right to abstain from joining any union.   Inasmuch as
21

what both the Constitution and the Industrial Peace Act have recognized, and guaranteed to the employee, is the
"right" to join associations of his choice, it would be absurd to say that the law also imposes, in the same breath,
upon the employee the duty to join associations. The law does not enjoin an employee to sign up with any
association.

The right to refrain from joining labor organizations recognized by Section 3 of the Industrial Peace Act is, however,
limited. The legal protection granted to such right to refrain from joining is withdrawn by operation of law,
where a labor union and an employer have agreed on a closed shop, by virtue of which the employer may
employ only member of the collective bargaining union, and the employees must continue to be members
of the union for the duration of the contract in order to keep their jobs. Thus Section 4 (a) (4) of the Industrial
Peace Act, before its amendment by Republic Act No. 3350, provides that although it would be an unfair labor
practice for an employer "to discriminate in regard to hire or tenure of employment or any term or condition of
employment to encourage or discourage membership in any labor organization" the employer is, however, not

Labor II – 1
precluded "from making an agreement with a labor organization to require as a condition of employment
membership therein, if such labor organization is the representative of the employees". By virtue, therefore, of a
closed shop agreement, before the enactment of Republic Act No. 3350, if any person, regardless of his religious
beliefs, wishes to be employed or to keep his employment, he must become a member of the collective bargaining
union. Hence, the right of said employee not to join the labor union is curtailed and withdrawn.

To that all-embracing coverage of the closed shop arrangement, Republic Act No. 3350 introduced an
exception, when it added to Section 4 (a) (4) of the Industrial Peace Act the following proviso: "but such
agreement shall not cover members of any religious sects which prohibit affiliation of their members in any
such labor organization". Republic Act No. 3350 merely excludes ipso jure from the application and
coverage of the closed shop agreement the employees belonging to any religious sects which prohibit
affiliation of their members with any labor organization. What the exception provides, therefore, is that
members of said religious sects cannot be compelled or coerced to join labor unions even when said unions have
closed shop agreements with the employers; that in spite of any closed shop agreement, members of said religious
sects cannot be refused employment or dismissed from their jobs on the sole ground that they are not members of
the collective bargaining union. It is clear, therefore, that the assailed Act, far from infringing the constitutional
provision on freedom of association, upholds and reinforces it. It does not prohibit the members of said
religious sects from affiliating with labor unions. It still leaves to said members the liberty and the power to
affiliate, or not to affiliate, with labor unions. If, notwithstanding their religious beliefs, the members of said
religious sects prefer to sign up with the labor union, they can do so. If in deference and fealty to their
religious faith, they refuse to sign up, they can do so; the law does not coerce them to join; neither does the
law prohibit them from joining; and neither may the employer or labor union compel them to join. Republic Act
No. 3350, therefore, does not violate the constitutional provision on freedom of association.

2. Appellant Union also contends that the Act is unconstitutional for impairing the obligation of its contract,
specifically, the "union security clause" embodied in its Collective Bargaining Agreement with the
Company, by virtue of which "membership in the union was required as a condition for employment for all
permanent employees workers". This agreement was already in existence at the time Republic Act No. 3350 was
enacted on June 18, 1961, and it cannot, therefore, be deemed to have been incorporated into the agreement. But
by reason of this amendment, Appellee, as well as others similarly situated, could no longer be dismissed from his
job even if he should cease to be a member, or disaffiliate from the Union, and the Company could continue
employing him notwithstanding his disaffiliation from the Union. The Act, therefore, introduced a change into the
express terms of the union security clause; the Company was partly absolved by law from the contractual obligation
it had with the Union of employing only Union members in permanent positions, It cannot be denied, therefore, that
there was indeed an impairment of said union security clause.

According to Black, any statute which introduces a change into the express terms of the contract, or its legal
construction, or its validity, or its discharge, or the remedy for its enforcement, impairs the contract. The extent of the
change is not material. It is not a question of degree or manner or cause, but of encroaching in any respect on its
obligation or dispensing with any part of its force. There is an impairment of the contract if either party is absolved by
law from its performance.   Impairment has also been predicated on laws which, without destroying contracts,
22

derogate from substantial contractual rights.  23

It should not be overlooked, however, that the prohibition to impair the obligation of contracts is not absolute and
unqualified. The prohibition is general, affording a broad outline and requiring construction to fill in the details. The
prohibition is not to be read with literal exactness like a mathematical formula, for it prohibits unreasonable
impairment only.   In spite of the constitutional prohibition, the State continues to possess authority to safeguard the
24

vital interests of its people. Legislation appropriate to safeguarding said interests may modify or abrogate contracts
already in effect.   For not only are existing laws read into contracts in order to fix the obligations as between the
25

parties, but the reservation of essential attributes of sovereign power is also read into contracts as a postulate of the
legal order. All contracts made with reference to any matter that is subject to regulation under the police
power must be understood as made in reference to the possible exercise of that power.   Otherwise, 26

important and valuable reforms may be precluded by the simple device of entering into contracts for the purpose of
doing that which otherwise may be prohibited. The policy of protecting contracts against impairment presupposes
the maintenance of a government by virtue of which contractual relations are worthwhile a government which retains
adequate authority to secure the peace and good order of society. The contract clause of the Constitution must,
therefore, be not only in harmony with, but also in subordination to, in appropriate instances, the reserved

Labor II – 1
power of the state to safeguard the vital interests of the people. It follows that not all legislations, which
have the effect of impairing a contract, are obnoxious to the constitutional prohibition as to impairment, and
a statute passed in the legitimate exercise of police power, although it incidentally destroys existing
contract rights, must be upheld by the courts. This has special application to contracts regulating relations
between capital and labor which are not merely contractual, and said labor contracts, for being impressed with
public interest, must yield to the common good.  27

In several occasions this Court declared that the prohibition against impairing the obligations of contracts has no
application to statutes relating to public subjects within the domain of the general legislative powers of the state
involving public welfare.   Thus, this Court also held that the Blue Sunday Law was not an infringement of the
28

obligation of a contract that required the employer to furnish work on Sundays to his employees, the law having
been enacted to secure the well-being and happiness of the laboring class, and being, furthermore, a legitimate
exercise of the police power.  29

In order to determine whether legislation unconstitutionally impairs contract obligations, no unchanging yardstick,
applicable at all times and under all circumstances, by which the validity of each statute may be measured or
determined, has been fashioned, but every case must be determined upon its own circumstances. Legislation
impairing the obligation of contracts can be sustained when it is enacted for the promotion of the general good of the
people, and when the means adopted to secure that end are reasonable. Both the end sought and the means
adopted must be legitimate, i.e., within the scope of the reserved power of the state construed in harmony with the
constitutional limitation of that power.  30

What then was the purpose sought to be achieved by Republic Act No. 3350? Its purpose was to insure
freedom of belief and religion, and to promote the general welfare by preventing discrimination against
those members of religious sects which prohibit their members from joining labor unions, confirming
thereby their natural, statutory and constitutional right to work, the fruits of which work are usually the only
means whereby they can maintain their own life and the life of their dependents. It cannot be gainsaid that
said purpose is legitimate.

The questioned Act also provides protection to members of said religious sects against two aggregates of group
strength from which the individual needs protection. The individual employee, at various times in his working life, is
confronted by two aggregates of power — collective labor, directed by a union, and collective capital, directed by
management. The union, an institution developed to organize labor into a collective force and thus protect the
individual employee from the power of collective capital, is, paradoxically, both the champion of employee rights,
and a new source of their frustration. Moreover, when the Union interacts with management, it produces yet a third
aggregate of group strength from which the individual also needs protection — the collective bargaining
relationship.  31

The aforementioned purpose of the amendatory law is clearly seen in the Explanatory Note to House Bill No. 5859,
which later became Republic Act No. 3350, as follows:

It would be unthinkable indeed to refuse employing a person who, on account of his religious beliefs
and convictions, cannot accept membership in a labor organization although he possesses all the
qualifications for the job. This is tantamount to punishing such person for believing in a doctrine he
has a right under the law to believe in. The law would not allow discrimination to flourish to the
detriment of those whose religion discards membership in any labor organization. Likewise, the law
would not commend the deprivation of their right to work and pursue a modest means of livelihood,
without in any manner violating their religious faith and/or belief. 
32

It cannot be denied, furthermore, that the means adopted by the Act to achieve that purpose — exempting the
members of said religious sects from coverage of union security agreements — is reasonable.

It may not be amiss to point out here that the free exercise of religious profession or belief is superior to
contract rights. In case of conflict, the latter must, therefore, yield to the former. The Supreme Court of the
United States has also declared on several occasions that the rights in the First Amendment, which include freedom
of religion, enjoy a preferred position in the constitutional system.   Religious freedom, although not unlimited, is a
33

fundamental personal right and liberty,   and has a preferred position in the hierarchy of values. Contractual rights,
34

Labor II – 1
therefore, must yield to freedom of religion. It is only where unavoidably necessary to prevent an immediate and
grave danger to the security and welfare of the community that infringement of religious freedom may be justified,
and only to the smallest extent necessary to avoid the danger.

3. In further support of its contention that Republic Act No. 3350 is unconstitutional, appellant Union
averred that said Act discriminates in favor of members of said religious sects in violation of Section 1 (7)
of Article Ill of the 1935 Constitution, and which is now Section 8 of Article IV of the 1973 Constitution,
which provides:

No law shall be made respecting an establishment of religion, or prohibiting the free exercise
thereof, and the free exercise and enjoyment of religious profession and worship, without
discrimination and preference, shall forever be allowed. No religious test shall be required for the
exercise of civil or political rights.

The constitutional provision into only prohibits legislation for the support of any religious tenets or the modes of
worship of any sect, thus forestalling compulsion by law of the acceptance of any creed or the practice of any form
of worship,   but also assures the free exercise of one's chosen form of religion within limits of utmost amplitude. It
35

has been said that the religion clauses of the Constitution are all designed to protect the broadest possible liberty of
conscience, to allow each man to believe as his conscience directs, to profess his beliefs, and to live as he believes
he ought to live, consistent with the liberty of others and with the common good.   Any legislation whose effect or
36

purpose is to impede the observance of one or all religions, or to discriminate invidiously between the religions, is
invalid, even though the burden may be characterized as being only indirect.   But if the stage regulates conduct by
37

enacting, within its power, a general law which has for its purpose and effect to advance the state's secular goals,
the statute is valid despite its indirect burden on religious observance, unless the state can accomplish its purpose
without imposing such burden.  38

In Aglipay v. Ruiz   , this Court had occasion to state that the government should not be precluded from pursuing
39

valid objectives secular in character even if the incidental result would be favorable to a religion or sect. It has
likewise been held that the statute, in order to withstand the strictures of constitutional prohibition, must have a
secular legislative purpose and a primary effect that neither advances nor inhibits religion.   Assessed by these
40

criteria, Republic Act No. 3350 cannot be said to violate the constitutional inhibition of the "no-establishment" (of
religion) clause of the Constitution.

The purpose of Republic Act No. 3350 is secular, worldly, and temporal, not spiritual or religious or holy
and eternal. It was intended to serve the secular purpose of advancing the constitutional right to the free
exercise of religion, by averting that certain persons be refused work, or be dismissed from work, or be
dispossessed of their right to work and of being impeded to pursue a modest means of livelihood, by
reason of union security agreements. To help its citizens to find gainful employment whereby they can
make a living to support themselves and their families is a valid objective of the state. In fact, the state is
enjoined, in the 1935 Constitution, to afford protection to labor, and regulate the relations between labor and capital
and industry.   More so now in the 1973 Constitution where it is mandated that "the State shall afford protection to
41

labor, promote full employment and equality in employment, ensure equal work opportunities regardless of sex, race
or creed and regulate the relation between workers and employers.  42

The primary effects of the exemption from closed shop agreements in favor of members of religious sects
that prohibit their members from affiliating with a labor organization, is the protection of said employees
against the aggregate force of the collective bargaining agreement, and relieving certain citizens of a
burden on their religious beliefs; and by eliminating to a certain extent economic insecurity due to unemployment,
which is a serious menace to the health, morals, and welfare of the people of the State, the Act also promotes the
well-being of society. It is our view that the exemption from the effects of closed shop agreement does not directly
advance, or diminish, the interests of any particular religion. Although the exemption may benefit those who are
members of religious sects that prohibit their members from joining labor unions, the benefit upon the
religious sects is merely incidental and indirect. The "establishment clause" (of religion) does not ban regulation
on conduct whose reason or effect merely happens to coincide or harmonize with the tenets of some or all
religions.   The free exercise clause of the Constitution has been interpreted to require that religious exercise be
43

preferentially aided.  44

Labor II – 1
We believe that in enacting Republic Act No. 3350, Congress acted consistently with the spirit of the constitutional
provision. It acted merely to relieve the exercise of religion, by certain persons, of a burden that is imposed by union
security agreements. It was Congress itself that imposed that burden when it enacted the Industrial Peace Act
(Republic Act 875), and, certainly, Congress, if it so deems advisable, could take away the same burden. It is certain
that not every conscience can be accommodated by all the laws of the land; but when general laws conflict with
scrupples of conscience, exemptions ought to be granted unless some "compelling state interest" intervenes.   In 45

the instant case, We see no such compelling state interest to withhold exemption.

Appellant bewails that while Republic Act No. 3350 protects members of certain religious sects, it leaves no right to,
and is silent as to the protection of, labor organizations. The purpose of Republic Act No. 3350 was not to grant
rights to labor unions. The rights of labor unions are amply provided for in Republic Act No. 875 and the new Labor
Code. As to the lamented silence of the Act regarding the rights and protection of labor unions, suffice it to say, first,
that the validity of a statute is determined by its provisions, not by its silence   ; and, second, the fact that the law
46

may work hardship does not render it unconstitutional.  47

It would not be amiss to state, regarding this matter, that to compel persons to join and remain members of a union
to keep their jobs in violation of their religious scrupples, would hurt, rather than help, labor unions, Congress has
seen it fit to exempt religious objectors lest their resistance spread to other workers, for religious objections have
contagious potentialities more than political and philosophic objections.

Furthermore, let it be noted that coerced unity and loyalty even to the country, and a fortiori to a labor — union
assuming that such unity and loyalty can be attained through coercion — is not a goal that is constitutionally
obtainable at the expense of religious liberty.   A desirable end cannot be promoted by prohibited means.
48

4. Appellants' fourth contention, that Republic Act No. 3350 violates the constitutional prohibition against
requiring a religious test for the exercise of a civil right or a political right, is not well taken. The Act does not
require as a qualification, or condition, for joining any lawful association membership in any particular religion or in
any religious sect; neither does the Act require affiliation with a religious sect that prohibits its members from joining
a labor union as a condition or qualification for withdrawing from a labor union. Joining or withdrawing from a
labor union requires a positive act. Republic Act No. 3350 only exempts members with such religious
affiliation from the coverage of closed shop agreements. So, under this Act, a religious objector is not
required to do a positive act — to exercise the right to join or to resign from the union. He is exempted ipso
jure without need of any positive act on his part. A conscientious religious objector need not perform a
positive act or exercise the right of resigning from the labor union — he is exempted from the coverage of
any closed shop agreement that a labor union may have entered into. How then can there be a religious test
required for the exercise of a right when no right need be exercised?

We have said that it was within the police power of the State to enact Republic Act No. 3350, and that its purpose
was legal and in consonance with the Constitution. It is never an illegal evasion of a constitutional provision or
prohibition to accomplish a desired result, which is lawful in itself, by discovering or following a legal way to do it.  49

5. Appellant avers as its fifth ground that Republic Act No. 3350 is a discriminatory legislation, inasmuch as it grants
to the members of certain religious sects undue advantages over other workers, thus violating Section 1 of Article III
of the 1935 Constitution which forbids the denial to any person of the equal protection of the laws.  50

The guaranty of equal protection of the laws is not a guaranty of equality in the application of the laws upon all
citizens of the state. It is not, therefore, a requirement, in order to avoid the constitutional prohibition against
inequality, that every man, woman and child should be affected alike by a statute. Equality of operation of statutes
does not mean indiscriminate operation on persons merely as such, but on persons according to the circumstances
surrounding them. It guarantees equality, not identity of rights. The Constitution does not require that things which
are different in fact be treated in law as though they were the same. The equal protection clause does not forbid
discrimination as to things that are different.   It does not prohibit legislation which is limited either in the object to
51

which it is directed or by the territory within which it is to operate.

The equal protection of the laws clause of the Constitution allows classification. Classification in law, as in the other
departments of knowledge or practice, is the grouping of things in speculation or practice because they agree with
one another in certain particulars. A law is not invalid because of simple inequality.   The very idea of classification
52

Labor II – 1
is that of inequality, so that it goes without saying that the mere fact of inequality in no manner determines the
matter of constitutionality.   All that is required of a valid classification is that it be reasonable, which means that the
53

classification should be based on substantial distinctions which make for real differences; that it must be germane to
the purpose of the law; that it must not be limited to existing conditions only; and that it must apply equally to each
member of the class.   This Court has held that the standard is satisfied if the classification or distinction is based on
54

a reasonable foundation or rational basis and is not palpably arbitrary.  55

In the exercise of its power to make classifications for the purpose of enacting laws over matters within its
jurisdiction, the state is recognized as enjoying a wide range of discretion.   It is not necessary that the classification
56

be based on scientific or marked differences of things or in their relation.   Neither is it necessary that the
57

classification be made with mathematical nicety.   Hence legislative classification may in many cases properly rest
58

on narrow distinctions,   for the equal protection guaranty does not preclude the legislature from recognizing
59

degrees of evil or harm, and legislation is addressed to evils as they may appear.

We believe that Republic Act No. 3350 satisfies the aforementioned requirements. The Act classifies employees and
workers, as to the effect and coverage of union shop security agreements, into those who by reason of their
religious beliefs and convictions cannot sign up with a labor union, and those whose religion does not prohibit
membership in labor unions. Tile classification rests on real or substantial, not merely imaginary or whimsical,
distinctions. There is such real distinction in the beliefs, feelings and sentiments of employees. Employees do not
believe in the same religious faith and different religions differ in their dogmas and cannons. Religious beliefs,
manifestations and practices, though they are found in all places, and in all times, take so many varied forms as to
be almost beyond imagination. There are many views that comprise the broad spectrum of religious beliefs among
the people. There are diverse manners in which beliefs, equally paramount in the lives of their possessors, may be
articulated. Today the country is far more heterogenous in religion than before, differences in religion do exist, and
these differences are important and should not be ignored.

Even from the phychological point of view, the classification is based on real and important differences. Religious
beliefs are not mere beliefs, mere ideas existing only in the mind, for they carry with them practical consequences
and are the motives of certain rules. of human conduct and the justification of certain acts.   Religious sentiment
60

makes a man view things and events in their relation to his God. It gives to human life its distinctive character, its
tone, its happiness or unhappiness its enjoyment or irksomeness. Usually, a strong and passionate desire is
involved in a religious belief. To certain persons, no single factor of their experience is more important to them than
their religion, or their not having any religion. Because of differences in religious belief and sentiments, a very poor
person may consider himself better than the rich, and the man who even lacks the necessities of life may be more
cheerful than the one who has all possible luxuries. Due to their religious beliefs people, like the martyrs, became
resigned to the inevitable and accepted cheerfully even the most painful and excruciating pains. Because of
differences in religious beliefs, the world has witnessed turmoil, civil strife, persecution, hatred, bloodshed and war,
generated to a large extent by members of sects who were intolerant of other religious beliefs. The classification,
introduced by Republic Act No. 3350, therefore, rests on substantial distinctions.

The classification introduced by said Act is also germane to its purpose. The purpose of the law is precisely to avoid
those who cannot, because of their religious belief, join labor unions, from being deprived of their right to work and
from being dismissed from their work because of union shop security agreements.

Republic Act No. 3350, furthermore, is not limited in its application to conditions existing at the time of its enactment.
The law does not provide that it is to be effective for a certain period of time only. It is intended to apply for all times
as long as the conditions to which the law is applicable exist. As long as there are closed shop agreements between
an employer and a labor union, and there are employees who are prohibited by their religion from affiliating with
labor unions, their exemption from the coverage of said agreements continues.

Finally, the Act applies equally to all members of said religious sects; this is evident from its provision. The fact that
the law grants a privilege to members of said religious sects cannot by itself render the Act unconstitutional, for as
We have adverted to, the Act only restores to them their freedom of association which closed shop agreements
have taken away, and puts them in the same plane as the other workers who are not prohibited by their religion
from joining labor unions. The circumstance, that the other employees, because they are differently situated, are not
granted the same privilege, does not render the law unconstitutional, for every classification allowed by the
Constitution by its nature involves inequality.
Labor II – 1
The mere fact that the legislative classification may result in actual inequality is not violative of the right to equal
protection, for every classification of persons or things for regulation by law produces inequality in some degree, but
the law is not thereby rendered invalid. A classification otherwise reasonable does not offend the constitution simply
because in practice it results in some inequality.   Anent this matter, it has been said that whenever it is apparent
61

from the scope of the law that its object is for the benefit of the public and the means by which the benefit is to be
obtained are of public character, the law will be upheld even though incidental advantage may occur to individuals
beyond those enjoyed by the general public.  62

6. Appellant's further contention that Republic Act No. 3350 violates the constitutional provision on social justice is
also baseless. Social justice is intended to promote the welfare of all the people.   Republic Act No. 3350 promotes
63

that welfare insofar as it looks after the welfare of those who, because of their religious belief, cannot join labor
unions; the Act prevents their being deprived of work and of the means of livelihood. In determining whether any
particular measure is for public advantage, it is not necessary that the entire state be directly benefited — it is
sufficient that a portion of the state be benefited thereby.

Social justice also means the adoption by the Government of measures calculated to insure economic stability of all
component elements of society, through the maintenance of a proper economic and social equilibrium in the inter-
relations of the members of the community.   Republic Act No. 3350 insures economic stability to the members of a
64

religious sect, like the Iglesia ni Cristo, who are also component elements of society, for it insures security in their
employment, notwithstanding their failure to join a labor union having a closed shop agreement with the employer.
The Act also advances the proper economic and social equilibrium between labor unions and employees who
cannot join labor unions, for it exempts the latter from the compelling necessity of joining labor unions that have
closed shop agreements and equalizes, in so far as opportunity to work is concerned, those whose religion prohibits
membership in labor unions with those whose religion does not prohibit said membership. Social justice does not
imply social equality, because social inequality will always exist as long as social relations depend on personal or
subjective proclivities. Social justice does not require legal equality because legal equality, being a relative term, is
necessarily premised on differentiations based on personal or natural conditions.   Social justice guarantees
65

equality of opportunity   , and this is precisely what Republic Act No. 3350 proposes to accomplish — it gives
66

laborers, irrespective of their religious scrupples, equal opportunity for work.

7. As its last ground, appellant contends that the amendment introduced by Republic Act No. 3350 is not called for
— in other words, the Act is not proper, necessary or desirable. Anent this matter, it has been held that a statute
which is not necessary is not, for that reason, unconstitutional; that in determining the constitutional validity of
legislation, the courts are unconcerned with issues as to the necessity for the enactment of the legislation in
question.   Courts do inquire into the wisdom of laws.   Moreover, legislatures, being chosen by the people, are
67 68

presumed to understand and correctly appreciate the needs of the people, and it may change the laws
accordingly.   The fear is entertained by appellant that unless the Act is declared unconstitutional,
69

employers will prefer employing members of religious sects that prohibit their members from joining labor
unions, and thus be a fatal blow to unionism. We do not agree. The threat to unionism will depend on the
number of employees who are members of the religious sects that control the demands of the labor market.
But there is really no occasion now to go further and anticipate problems We cannot judge with the material
now before Us. At any rate, the validity of a statute is to be determined from its general purpose and its
efficacy to accomplish the end desired, not from its effects on a particular case.   The essential basis for the
70

exercise of power, and not a mere incidental result arising from its exertion, is the criterion by which the validity of a
statute is to be measured.  71

II. We now pass on the second assignment of error, in support of which the Union argued that the decision of the
trial court ordering the Union to pay P500 for attorney's fees directly contravenes Section 24 of Republic Act No.
875, for the instant action involves an industrial dispute wherein the Union was a party, and said Union merely acted
in the exercise of its rights under the union shop provision of its existing collective bargaining contract with the
Company; that said order also contravenes Article 2208 of the Civil Code; that, furthermore, Appellee was never
actually dismissed by the defendant Company and did not therefore suffer any damage at all .  72

In refuting appellant Union's arguments, Appellee claimed that in the instant case there was really no industrial
dispute involved in the attempt to compel Appellee to maintain its membership in the union under pain of dismissal,
and that the Union, by its act, inflicted intentional harm on Appellee; that since Appellee was compelled to institute

Labor II – 1
an action to protect his right to work, appellant could legally be ordered to pay attorney's fees under Articles 1704
and 2208 of the Civil Code.  73

The second paragraph of Section 24 of Republic Act No. 875 which is relied upon by appellant provides that:

No suit, action or other proceedings shall be maintainable in any court against a labor organization
or any officer or member thereof for any act done by or on behalf of such organization in furtherance
of an industrial dispute to which it is a party, on the ground only that such act induces some other
person to break a contract of employment or that it is in restraint of trade or interferes with the trade,
business or employment of some other person or with the right of some other person to dispose of
his capital or labor. (Emphasis supplied)

That there was a labor dispute in the instant case cannot be disputed for appellant sought the discharge of
respondent by virtue of the closed shop agreement and under Section 2 (j) of Republic Act No. 875 a question
involving tenure of employment is included in the term "labor dispute".   The discharge or the act of seeking it is the
74

labor dispute itself. It being the labor dispute itself, that very same act of the Union in asking the employer to dismiss
Appellee cannot be "an act done ... in furtherance of an industrial dispute". The mere fact that appellant is a labor
union does not necessarily mean that all its acts are in furtherance of an industrial dispute.   Appellant Union,
75

therefore, cannot invoke in its favor Section 24 of Republic Act No. 875. This case is not intertwined with any unfair
labor practice case existing at the time when Appellee filed his complaint before the lower court.

Neither does Article 2208 of the Civil Code, invoked by the Union, serve as its shield. The article provides that
attorney's fees and expenses of litigation may be awarded "when the defendant's act or omission has compelled the
plaintiff ... to incur expenses to protect his interest"; and "in any other case where the court deems it just and
equitable that attorney's fees and expenses of litigation should be recovered". In the instant case, it cannot be
gainsaid that appellant Union's act in demanding Appellee's dismissal caused Appellee to incur expenses to prevent
his being dismissed from his job. Costs according to Section 1, Rule 142, of the Rules of Court, shall be allowed as
a matter of course to the prevailing party.

WHEREFORE, the instant appeal is dismissed, and the decision, dated August 26, 1965, of the Court of First
Instance of Manila, in its Civil Case No. 58894, appealed from is affirmed, with costs against appellant Union. It is so
ordered.

Labor II – 1
16.) Kapatiran v Pura Ferrer-Calleja (& NEW-ULO)

G.R. No. 82914 June 20, 1988

KAPATIRAN SA MEAT AND CANNING DIVISION (TUPAS Local Chapter No. 1027), petitioner,

vs.
THE HONORABLE BLR DIRECTOR PURA FERRER CALLEJA, MEAT AND CANNING DIVISION UNIVERSAL
ROBINA CORPORATION and MEAT AND CANNING DIVISION NEW EMPLOYEES AND WORKERS UNITED
LABOR ORGANIZATION, respondents.

Alar, Comia, Manalo and Associates for petitioner.

Danilo Bolos for respondent Robina Corporation.

RESOLUTION

GRIÑO-AQUINO, J.:

The petitioner, Kapatiran sa Meat and Canning Division TUPAS Local Chapter No. 1027) hereinafter referred to as
"TUPAS," seeks a review of the resolution dated January 27, 1988 (Annex D) of public respondent Pura Ferrer-
Calleja, Director of the Bureau of Labor Relations, dismissing its appeal from the Order dated November 17, 1987
(Annex C) of the Med-Arbiter Rasidali C. Abdullah ordering a certification election to be conducted among the
regular daily paid rank and file employees/workers of Universal Robina Corporation-Meat and Canning Division to
determine which of the contending unions:

a) Kapatiran sa Meat and Canning Division TUPAS Local Chapter No. 1027 (or "TUPAS" for brevity);

b) Meat and Canning Division New Employees and Workers United Labor Organization (or "NEW
ULO" for brevity);

c) No union.

shall be the bargaining unit of the daily wage rank and file employees in the Meat and Canning Division of the
company.

From 1984 to 1987 TUPAS was the sole and exclusive collective bargaining representative of the workers in the
Meat and Canning Division of the Universal Robina Corporation, with a 3-year collective bargaining agreement
(CBA) which was to expire on November 15, 1987.

Within the freedom period of 60 days prior to the expiration of its CBA, TUPAS filed an amended notice of strike on
September 28, 1987 as a means of pressuring the company to extend, renew, or negotiate a new CBA with it.

On October 8, 1987, the NEW ULO, composed mostly of workers belonging to the IGLESIA NI KRISTO sect,
registered as a labor union.

On October 12, 1987, the TUPAS staged a strike. ROBINA obtained an injunction against the strike, resulting in an
agreement to return to work and for the parties to negotiate a new CBA.

The next day, October 13, 1987, NEW ULO, claiming that it has "the majority of the daily wage rank and file
employees numbering 191," filed a petition for a certification election at the Bureau of Labor Relations (Annex A).

Labor II – 1
TUPAS moved to dismiss the petition for being defective in form and that the members of the NEW ULO
were mostly members of the Iglesia ni Kristo sect which three (3) years previous refused to affiliate with any
labor union. It also accused the company of using the NEW ULO to defeat TUPAS' bargaining rights (Annex B).

On November 17, 1987, the Med-Arbiter ordered the holding of a certification election within 20 days (Annex C).

TUPAS appealed to the Bureau of Labor Relations BLR. In the meantime, it was able to negotiate a new 3-year
CBA with ROBINA, which was signed on December 3, 1987 and to expire on November 15, 1990.

On January 27, 1988, respondent BLR Director Calleja dismissed the appeal (Annex D).

TUPAS' motion for reconsideration (Annex E) was denied on March 17, 1988 (Annex F). On April 30, 1988, it filed
this petition alleging that the public respondent acted in excess of her jurisdiction and with grave abuse of discretion
in affirming the Med-Arbiter's order for a certification election.

After deliberating on the petition and the documents annexed thereto, We find no merit in the Petition. The public
respondent did not err in dismissing the petitioner's appeal in BLR Case No. A-12-389-87. This Court's decision
in Victoriano vs. Elizalde Rope Workers' Union, 59 SCRA 54, upholding the right of members of the IGLESIA
NI KRISTO sect not to join a labor union for being contrary to their religious beliefs, does not bar the
members of that sect from forming their own union. The public respondent correctly observed that
the "recognition of the tenets of the sect ... should not infringe on the basic right of self-organization granted by the
constitution to workers, regardless of religious affiliation."

The fact that TUPAS was able to negotiate a new CBA with ROBINA within the 60-day freedom period of the
existing CBA, does not foreclose the right of the rival union, NEW ULO, to challenge TUPAS' claim to majority
status, by filing a timely petition for certification election on October 13, 1987 before TUPAS' old CBA expired on
November 15, 1987 and before it signed a new CBA with the company on December 3, 1987. As pointed out by
Med-Arbiter Abdullah, a "certification election is the best forum in ascertaining the majority status of the contending
unions wherein the workers themselves can freely choose their bargaining representative thru secret ballot." Since it
has not been shown that this order is tainted with unfairness, this Court will not thwart the holding of a certification
election (Associated Trade Unions [ATU] vs. Noriel, 88 SCRA 96).

WHEREFORE, the petition for certiorari is denied, with costs against the petitioner.

Labor II – 1
17.) 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.
Labor II – 1
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).

Labor II – 1
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,   and held that
1

"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
Labor II – 1
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   of the Omnibus Rules Implementing the
2

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.

Labor II – 1
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.   Under contemporary international law, such organizations are endowed with some degree of
4

international legal personality   such that they are capable of exercising specific rights, duties and powers.   They are
5 6

organized mainly as a means for conducting general international business in which the member states have an
interest.   The United Nations, for instance, is an international organization dedicated to the propagation of world
7

peace.

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

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
Labor II – 1
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.   The theory behind all three propositions is said to be
12

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.   The raison d'etre for
13

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,   Article III, Section 8,   and Article XIII, Section 3 (supra), of the 1987
14 15

Constitution; and implemented by Articles 243 and 246 of the Labor Code,   relied on by the BLR Director and by
16

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   provides that
17

"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

Labor II – 1
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.

Labor II – 1
18.) BPI v BPI Employees

G.R. No. 164301               August 10, 2010

BANK OF THE PHILIPPINE ISLANDS, Petitioner,

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

DECISION

LEONARDO-DE CASTRO, J.:

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

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

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

We find it significant to note that it is only the employer, Bank of the Philippine Islands (BPI), that brought the case
up to this Court via the instant petition for review; while the employees actually involved in the case did not pursue
the same relief, but had instead chosen in effect to acquiesce to the decision of the Court of Appeals which
effectively required them to comply with the union shop clause under the existing CBA at the time of the merger of
BPI with Far East Bank and Trust Company (FEBTC), which decision had already become final and executory as to
the aforesaid employees. By not appealing the decision of the Court of Appeals, the aforesaid employees are bound
by the said Court of Appeals’ decision to join BPI’s duly certified labor union. In view of the apparent acquiescence
of the affected FEBTC employees in the Court of Appeals’ decision, BPI should not have pursued this petition for
review. However, even assuming that BPI may do so, the same still cannot prosper.

What is before us now is a petition for review under Rule 45 of the Rules of Court of the Decision 2 dated September
30, 2003 of the Court of Appeals, as reiterated in its Resolution 3 of June 9, 2004, reversing and setting aside the
Decision4 dated November 23, 2001 of Voluntary Arbitrator Rosalina Letrondo-Montejo, in CA-G.R. SP No. 70445,
entitled BPI Employees Union-Davao Chapter-Federation of Unions in BPI Unibank v. Bank of the Philippine
Islands, et al.

The antecedent facts are as follows:

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

Labor II – 1
Pursuant to the Article and Plan of Merger, all the assets and liabilities of FEBTC were transferred to and absorbed
by BPI as the surviving corporation. FEBTC employees, including those in its different branches across the country,
were hired by petitioner as its own employees, with their status and tenure recognized and salaries and benefits
maintained.

Respondent BPI Employees Union-Davao Chapter - Federation of Unions in BPI Unibank (hereinafter the "Union,"
for brevity) is the exclusive bargaining agent of BPI’s rank and file employees in Davao City. The former FEBTC
rank-and-file employees in Davao City did not belong to any labor union at the time of the merger. Prior to the
effectivity of the merger, or on March 31, 2000, respondent Union invited said FEBTC employees to a meeting
regarding the Union Shop Clause (Article II, Section 2) of the existing CBA between petitioner BPI and respondent
Union.7

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

ARTICLE I

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

Section 2. Exclusions

Section 3. Additional Exclusions

Section 4. Copy of Contract

ARTICLE II

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

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

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

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

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

Voluntary Arbitrator Rosalina Letrondo-Montejo, in a Decision 12 dated November 23, 2001, ruled in favor of petitioner
BPI’s interpretation that the former FEBTC employees were not covered by the Union Security Clause of the CBA
between the Union and the Bank on the ground that the said employees were not new employees who were hired
and subsequently regularized, but were absorbed employees "by operation of law" because the "former employees
of FEBTC can be considered assets and liabilities of the absorbed corporation." The Voluntary Arbitrator

Labor II – 1
concluded that the former FEBTC employees could not be compelled to join the Union, as it was their constitutional
right to join or not to join any organization.

Respondent Union filed a Motion for Reconsideration, but the Voluntary Arbitrator denied the same in an Order
dated March 25, 2002.13

Dissatisfied, respondent then appealed the Voluntary Arbitrator’s decision to the Court of Appeals. In the herein
assailed Decision dated September 30, 2003, the Court of Appeals reversed and set aside the Decision of the
Voluntary Arbitrator.14 Likewise, the Court of Appeals denied herein petitioner’s Motion for Reconsideration in a
Resolution dated June 9, 2004.

The Court of Appeals pertinently ruled in its Decision:

A union-shop clause has been defined as a form of union security provision wherein non-members may be hired,
but to retain employment must become union members after a certain period.

There is no question as to the existence of the union-shop clause in the CBA between the petitioner-union and the
company. The controversy lies in its application to the "absorbed" employees.

This Court agrees with the voluntary arbitrator that the ABSORBED employees are distinct and different from NEW
employees BUT only in so far as their employment service is concerned. The distinction ends there. In the case at
bar, the absorbed employees’ length of service from its former employer is tacked with their employment with BPI.
Otherwise stated, the absorbed employees service is continuous and there is no gap in their service record.

This Court is persuaded that the similarities of "new" and "absorbed" employees far outweighs
the distinction between them. The similarities lies on the following, to wit: (a) they have a new employer; (b) new
working conditions; (c) new terms of employment and; (d) new company policy to follow. As such, they should be
considered as "new" employees for purposes of applying the provisions of the CBA regarding the "union-shop"
clause.

To rule otherwise would definitely result to a very awkward and unfair situation wherein the "absorbed" employees
shall be in a different if not, better situation than the existing BPI employees. The existing BPI employees by virtue
of the "union-shop" clause are required to pay the monthly union dues, remain as members in good standing of the
union otherwise, they shall be terminated from the company, and other union-related obligations. On the other hand,
the "absorbed" employees shall enjoy the "fruits of labor" of the petitioner-union and its members for nothing in
exchange. Certainly, this would disturb industrial peace in the company which is the paramount reason for the
existence of the CBA and the union.

The voluntary arbitrator’s interpretation of the provisions of the CBA concerning the coverage of the "union-shop"
clause is at war with the spirit and the rationale why the Labor Code itself allows the existence of such provision.

The Supreme Court in the case of Manila Mandarin Employees Union vs. NLRC (G.R. No. 76989, September 29,
1987) rule, to quote:

"This Court has held that a valid form of union security, and such a provision in a collective bargaining agreement is
not a restriction of the right of freedom of association guaranteed by the Constitution.

A closed-shop agreement is an agreement whereby an employer binds himself to hire only members of the
contracting union who must continue to remain members in good standing to keep their jobs. It is "THE MOST
PRIZED ACHIEVEMENT OF UNIONISM." IT ADDS MEMBERSHIP AND COMPULSORY DUES. By holding out to
loyal members a promise of employment in the closed-shop, it wields group solidarity." (Emphasis supplied)

Hence, the voluntary arbitrator erred in construing the CBA literally at the expense of industrial peace in the
company.

Labor II – 1
With the foregoing ruling from this Court, necessarily, the alternative prayer of the petitioner to require the individual
respondents to become members or if they refuse, for this Court to direct respondent BPI to dismiss them, follows. 15

Hence, petitioner’s present recourse, raising the following issues:

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

II

WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT THE VOLUNTARY
ARBITRATOR’S INTERPRETATION OF THE COVERAGE OF THE UNION SHOP CLAUSE IS "AT WAR
WITH THE SPIRIT AND THE RATIONALE WHY THE LABOR CODE ITSELF ALLOWS THE EXISTENCE
OF SUCH PROVISION"16

In essence, the sole issue in this case is whether or not the former FEBTC employees that were absorbed by
petitioner upon the merger between FEBTC and BPI should be covered by the Union Shop Clause found in the
existing CBA between petitioner and respondent Union.

Petitioner is of the position that the former FEBTC employees are not new employees of BPI for purposes of
applying the Union Shop Clause of the CBA, on this note, petitioner points to Section 2, Article II of the CBA, which
provides:

New employees falling within the bargaining unit as defined in Article I of this Agreement, who may hereafter be
regularly employed by the Bank shall, within thirty (30) days after they become regular employees, join the Union as
a condition of their continued employment. It is understood that membership in good standing in the Union is a
condition of their continued employment with the Bank. 17 (Emphases supplied.)

Petitioner argues that the term "new employees" in the Union Shop Clause of the CBA is qualified by the phrases
"who may hereafter be regularly employed" and "after they become regular employees" which led petitioner to
conclude that the "new employees" referred to in, and contemplated by, the Union Shop Clause of the CBA were
only those employees who were "new" to BPI, on account of having been hired initially on a temporary or
probationary status for possible regular employment at some future date. BPI argues that the FEBTC employees
absorbed by BPI cannot be considered as "new employees" of BPI for purposes of applying the Union Shop Clause
of the CBA.18

According to petitioner, the contrary interpretation made by the Court of Appeals of this particular CBA provision
ignores, or even defies, what petitioner assumes as its clear meaning and scope which allegedly contradicts the
Court’s strict and restrictive enforcement of union security agreements.

We do not agree.

Section 2, Article II of the CBA is silent as to how one becomes a "regular employee" of the BPI for the first
time. There is nothing in the said provision which requires that a "new" regular employee first undergo a temporary
or probationary status before being deemed as such under the union shop clause of the CBA.

"Union security" is a generic term which is applied to and comprehends "closed shop," "union shop,"
"maintenance of membership" or any other form of agreement which imposes upon employees the
obligation to acquire or retain union membership as a condition affecting employment. There is union shop
when all new regular employees are required to join the union within a certain period for their continued
employment. There is maintenance of membership shop when employees, who are union members as of
the effective date of the agreement, or who thereafter become members, must maintain union membership
as a condition for continued employment until they are promoted or transferred out of the bargaining unit or
Labor II – 1
the agreement is terminated. A closed-shop, on the other hand, may be defined as an enterprise in which,
by agreement between the employer and his employees or their representatives, no person may be
employed in any or certain agreed departments of the enterprise unless he or she is, becomes, and, for the
duration of the agreement, remains a member in good standing of a union entirely comprised of or of which
the employees in interest are a part.19

In the case of Liberty Flour Mills Employees v. Liberty Flour Mills, Inc.,20 we ruled that:

It is the policy of the State to promote unionism to enable the workers to negotiate with management on the
same level and with more persuasiveness than if they were to individually and independently bargain for
the improvement of their respective conditions. To this end, the Constitution guarantees to them the rights "to
self-organization, collective bargaining and negotiations and peaceful concerted actions including the right to strike
in accordance with law." There is no question that these purposes could be thwarted if every worker were to choose
to go his own separate way instead of joining his co-employees in planning collective action and presenting a united
front when they sit down to bargain with their employers. It is for this reason that the law has sanctioned stipulations
for the union shop and the closed shop as a means of encouraging the workers to join and support the labor union
of their own choice as their representative in the negotiation of their demands and the protection of their interest vis-
à-vis the employer. (Emphasis ours.)

In other words, the purpose of a union shop or other union security arrangement is to guarantee the
continued existence of the union through enforced membership for the benefit of the workers.

All employees in the bargaining unit covered by a Union Shop Clause in their CBA with management are subject to
its terms. However, under law and jurisprudence, the following kinds of employees are exempted from its
coverage, namely, employees who at the time the union shop agreement takes effect are bona fide members of a
religious organization which prohibits its members from joining labor unions on religious grounds; 21 employees
already in the service and already members of a union other than the majority at the time the union shop
agreement took effect;22 confidential employees who are excluded from the rank and file bargaining
unit;23 and employees excluded from the union shop by express terms of the agreement.

When certain employees are obliged to join a particular union as a requisite for continued employment, as in the
case of Union Security Clauses, this condition is a valid restriction of the freedom or right not to join any labor
organization because it is in favor of unionism. This Court, on occasion, has even held that a union security clause
in a CBA is not a restriction of the right of freedom of association guaranteed by the Constitution. 24

Moreover, a closed shop agreement is an agreement whereby an employer binds himself to hire only members of
the contracting union who must continue to remain members in good standing to keep their jobs. It is "the most
prized achievement of unionism." It adds membership and compulsory dues. By holding out to loyal members a
promise of employment in the closed shop, it wields group solidarity.25

Indeed, the situation of the former FEBTC employees in this case clearly does not fall within the first three
exceptions to the application of the Union Shop Clause discussed earlier. No allegation or evidence of religious
exemption or prior membership in another union or engagement as a confidential employee was presented by both
parties. The sole category therefore in which petitioner may prove its claim is the fourth recognized exception or
whether the former FEBTC employees are excluded by the express terms of the existing CBA between petitioner
and respondent.

To reiterate, petitioner insists that the term "new employees," as the same is used in the Union Shop Clause of the
CBA at issue, refers only to employees hired by BPI as non-regular employees who later qualify for regular
employment and become regular employees, and not those who, as a legal consequence of a merger, are allegedly
automatically deemed regular employees of BPI. However, the CBA does not make a distinction as to how a regular
employee attains such a status. Moreover, there is nothing in the Corporation Law and the merger agreement
mandating the automatic employment as regular employees by the surviving corporation in the merger.

It is apparent that petitioner hinges its argument that the former FEBTC employees were absorbed by BPI merely as
a legal consequence of a merger based on the characterization by the Voluntary Arbiter of these absorbed
employees as included in the "assets and liabilities" of the dissolved corporation - assets because they help the
Labor II – 1
Bank in its operation and liabilities because redundant employees may be terminated and company benefits will be
paid to them, thus reducing the Bank’s financial status. Based on this ratiocination, she ruled that the same are not
new employees of BPI as contemplated by the CBA at issue, noting that the Certificate of Filing of the Articles of
Merger and Plan of Merger between FEBTC and BPI stated that "x x x the entire assets and liabilities of FAR
EASTERN BANK & TRUST COMPANY will be transferred to and absorbed by the BANK OF THE PHILIPPINE
ISLANDS x x x (underlining supplied)."26 In sum, the Voluntary Arbiter upheld the reasoning of petitioner that the
FEBTC employees became BPI employees by "operation of law" because they are included in the term "assets and
liabilities."

Absorbed FEBTC Employees are Neither Assets nor Liabilities

In legal parlance, however, human beings are never embraced in the term "assets and liabilities." Moreover, BPI’s
absorption of former FEBTC employees was neither by operation of law nor by legal consequence of
contract. There was no government regulation or law that compelled the merger of the two banks or the absorption
of the employees of the dissolved corporation by the surviving corporation. Had there been such law or regulation,
the absorption of employees of the non-surviving entities of the merger would have been mandatory on the surviving
corporation.27 In the present case, the merger was voluntarily entered into by both banks presumably for some
mutually acceptable consideration. In fact, the Corporation Code does not also mandate the absorption of the
employees of the non-surviving corporation by the surviving corporation in the case of a merger. Section 80 of the
Corporation Code provides:

SEC. 80. Effects of merger or consolidation. – The merger or consolidation, as provided in the preceding sections
shall have the following effects:

1. The constituent corporations shall become a single corporation which, in case of merger, shall be the
surviving corporation designated in the plan of merger; and, in case of consolidation, shall be the
consolidated corporation designated in the plan of consolidation;

2. The separate existence of the constituent corporations shall cease, except that of the surviving or the
consolidated corporation;

3. The surviving or the consolidated corporation shall possess all the rights, privileges, immunities and
powers and shall be subject to all the duties and liabilities of a corporation organized under this Code;

4. The surviving or the consolidated corporation shall thereupon and thereafter possess all the rights,
privileges, immunities and franchises of each of the constituent corporations; and all property, real or
personal, and all receivables due on whatever account, including subscriptions to shares and other choses
in action, and all and every other interest of, or belonging to, or due to each constituent corporation, shall be
taken and deemed to be transferred to and vested in such surviving or consolidated corporation without
further act or deed; and

5. The surviving or the consolidated corporation shall be responsible and liable for all the liabilities and
obligations of each of the constituent corporations in the same manner as if such surviving or consolidated
corporation had itself incurred such liabilities or obligations; and any claim, action or proceeding pending by
or against any of such constituent corporations may be prosecuted by or against the surviving or
consolidated corporation, as the case may be. Neither the rights of creditors nor any lien upon the property
of any of such constituent corporations shall be impaired by such merger or consolidated.

Significantly, too, the Articles of Merger and Plan of Merger dated April 7, 2000 did not contain any specific
stipulation with respect to the employment contracts of existing personnel of the non-surviving entity which is
FEBTC. Unlike the Voluntary Arbitrator, this Court cannot uphold the reasoning that the general stipulation
regarding transfer of FEBTC assets and liabilities to BPI as set forth in the Articles of Merger necessarily includes
the transfer of all FEBTC employees into the employ of BPI and neither BPI nor the FEBTC employees allegedly
could do anything about it. Even if it is so, it does not follow that the absorbed employees should not be
subject to the terms and conditions of employment obtaining in the surviving corporation.

Labor II – 1
The rule is that unless expressly assumed, labor contracts such as employment contracts and collective bargaining
agreements are not enforceable against a transferee of an enterprise, labor contracts being in personam, thus
binding only between the parties. A labor contract merely creates an action in personam and does not create any
real right which should be respected by third parties. This conclusion draws its force from the right of an employer to
select his employees and to decide when to engage them as protected under our Constitution, and the same can
only be restricted by law through the exercise of the police power. 28

Furthermore, this Court believes that it is contrary to public policy to declare the former FEBTC employees as
forming part of the assets or liabilities of FEBTC that were transferred and absorbed by BPI in the Articles of Merger.
Assets and liabilities, in this instance, should be deemed to refer only to property rights and obligations of FEBTC
and do not include the employment contracts of its personnel. A corporation cannot unilaterally transfer its
employees to another employer like chattel. Certainly, if BPI as an employer had the right to choose who to retain
among FEBTC’s employees, FEBTC employees had the concomitant right to choose not to be absorbed by
BPI. Even though FEBTC employees had no choice or control over the merger of their employer with BPI, they had
a choice whether or not they would allow themselves to be absorbed by BPI. Certainly nothing prevented the
FEBTC’s employees from resigning or retiring and seeking employment elsewhere instead of going along with the
proposed absorption.

Employment is a personal consensual contract and absorption by BPI of a former FEBTC employee without the
consent of the employee is in violation of an individual’s freedom to contract. It would have been a different matter if
there was an express provision in the articles of merger that as a condition for the merger, BPI was being required
to assume all the employment contracts of all existing FEBTC employees with the conformity of the employees. In
the absence of such a provision in the articles of merger, then BPI clearly had the business management decision
as to whether or not employ FEBTC’s employees. FEBTC employees likewise retained the prerogative to allow
themselves to be absorbed or not; otherwise, that would be tantamount to involuntary servitude.

There appears to be no dispute that with respect to FEBTC employees that BPI chose not to employ or FEBTC
employees who chose to retire or be separated from employment instead of "being absorbed," BPI’s assumed
liability to these employees pursuant to the merger is FEBTC’s liability to them in terms of separation
pay,29 retirement pay30 or other benefits that may be due them depending on the circumstances.

Legal Consequences of Mergers

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

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

In Carver v Brien (1942) 315 Ill App 643, 43 NE2d 597, the shop work of three formerly separate railroad
corporations, which had previously operated separate facilities, was consolidated in the shops of one of the roads.
Displaced employees of the other two roads were given preference for the new jobs created in the shops of the
railroad which took over the work. A controversy arose between the employees as to whether the displaced
employees were entitled to carry with them to the new jobs the seniority rights they had accumulated with their prior
employers, that is, whether the rosters of the three corporations, for seniority purposes, should be "dovetailed" or
whether the transferring employees should go to the bottom of the roster of their new employer. Labor
representatives of the various systems involved attempted to work out an agreement which, in effect, preserved the
seniority status obtained in the prior employment on other roads, and the action was for specific performance of this
agreement against a demurring group of the original employees of the railroad which was operating the
consolidated shops. The relief sought was denied, the court saying that, absent some specific contract provision
otherwise, seniority rights were ordinarily limited to the employment in which they were earned, and concluding that
Labor II – 1
the contract for which specific performance was sought was not such a completed and binding agreement as would
support such equitable relief, since the railroad, whose concurrence in the arrangements made was essential to
their effectuation, was not a party to the agreement.

Where the provisions of a labor contract provided that in the event that a trucker absorbed the business of another
private contractor or common carrier, or was a party to a merger of lines, the seniority of the
employees absorbed or affected thereby should be determined by mutual agreement between the trucker and the
unions involved, it was held in Moore v International Brotherhood of Teamsters, etc. (1962, Ky) 356 SW2d 241, that
the trucker was not required to absorb the affected employees as well as the business, the court saying that they
could find no such meaning in the above clause, stating that it dealt only with seniority, and not with initial
employment. Unless and until the absorbing company agreed to take the employees of the company whose
business was being absorbed, no seniority problem was created, said the court, hence the provision of the contract
could have no application. Furthermore, said the court, it did not require that the absorbing company take these
employees, but only that if it did take them the question of seniority between the old and new employees would be
worked out by agreement or else be submitted to the grievance procedure. 31 (Emphasis ours.)

Indeed, from the tenor of local and foreign authorities, in voluntary mergers, absorption of the dissolved
corporation’s employees or the recognition of the absorbed employees’ service with their previous employer may be
demanded from the surviving corporation if required by provision of law or contract. The dissent of Justice Arturo D.
Brion tries to make a distinction as to the terms and conditions of employment of the absorbed employees in the
case of a corporate merger or consolidation which will, in effect, take away from corporate management the
prerogative to make purely business decisions on the hiring of employees or will give it an excuse not to apply the
CBA in force to the prejudice of its own employees and their recognized collective bargaining agent. In this regard,
we disagree with Justice Brion.

Justice Brion takes the position that because the surviving corporation continues the personality of the dissolved
corporation and acquires all the latter’s rights and obligations, it is duty-bound to absorb the dissolved corporation’s
employees, even in the absence of a stipulation in the plan of merger. He proposes that this interpretation would
provide the necessary protection to labor as it spares workers from being "left in legal limbo."

However, there are instances where an employer can validly discontinue or terminate the employment of an
employee without violating his right to security of tenure. Among others, in case of redundancy, for example,
superfluous employees may be terminated and such termination would be authorized under Article 283 of the Labor
Code.32

Moreover, assuming for the sake of argument that there is an obligation to hire or absorb all employees of the non-
surviving corporation, there is still no basis to conclude that the terms and conditions of employment under a valid
collective bargaining agreement in force in the surviving corporation should not be made to apply to the absorbed
employees.

The Corporation Code and the Subject Merger Agreement are Silent on Efficacy, Terms and Conditions of
Employment Contracts

The lack of a provision in the plan of merger regarding the transfer of employment contracts to the surviving
corporation could have very well been deliberate on the part of the parties to the merger, in order to grant the
surviving corporation the freedom to choose who among the dissolved corporation’s employees to retain, in
accordance with the surviving corporation’s business needs. If terminations, for instance due to redundancy or
labor-saving devices or to prevent losses, are done in good faith, they would be valid. The surviving corporation too
is duty-bound to protect the rights of its own employees who may be affected by the merger in terms of seniority and
other conditions of their employment due to the merger. Thus, we are not convinced that in the absence of a
stipulation in the merger plan the surviving corporation was compelled, or may be judicially compelled, to absorb all
employees under the same terms and conditions obtaining in the dissolved corporation as the surviving corporation
should also take into consideration the state of its business and its obligations to its own employees, and to their
certified collective bargaining agent or labor union.

Even assuming we accept Justice Brion’s theory that in a merger situation the surviving corporation should be
compelled to absorb the dissolved corporation’s employees as a legal consequence of the merger and as a social
Labor II – 1
justice consideration, it bears to emphasize his dissent also recognizes that the employee may choose to end his
employment at any time by voluntarily resigning. For the employee to be "absorbed" by BPI, it requires the
employees’ implied or express consent. It is because of this human element in employment contracts and the
personal, consensual nature thereof that we cannot agree that, in a merger situation, employment contracts are
automatically transferable from one entity to another in the same manner that a contract pertaining to purely
proprietary rights – such as a promissory note or a deed of sale of property – is perfectly and automatically
transferable to the surviving corporation.

That BPI is the same entity as FEBTC after the merger is but a legal fiction intended as a tool to adjudicate rights
and obligations between and among the merged corporations and the persons that deal with them. Although in a
merger it is as if there is no change in the personality of the employer, there is in reality a change in the situation of
the employee. Once an FEBTC employee is absorbed, there are presumably changes in his condition of
employment even if his previous tenure and salary rate is recognized by BPI. It is reasonable to assume that BPI
would have different rules and regulations and company practices than FEBTC and it is incumbent upon the former
FEBTC employees to obey these new rules and adapt to their new environment. Not the least of the changes in
employment condition that the absorbed FEBTC employees must face is the fact that prior to the merger they were
employees of an unorganized establishment and after the merger they became employees of a unionized company
that had an existing collective bargaining agreement with the certified union. This presupposes that the union who is
party to the collective bargaining agreement is the certified union that has, in the appropriate certification election,
been shown to represent a majority of the members of the bargaining unit.

Likewise, with respect to FEBTC employees that BPI chose to employ and who also chose to be absorbed, then due
to BPI’s blanket assumption of liabilities and obligations under the articles of merger, BPI was bound to respect the
years of service of these FEBTC employees and to pay the same, or commensurate salaries and other benefits that
these employees previously enjoyed with FEBTC.

As the Union likewise pointed out in its pleadings, there were benefits under the CBA that the former FEBTC
employees did not enjoy with their previous employer. As BPI employees, they will enjoy all these CBA benefits
upon their "absorption." Thus, although in a sense BPI is continuing FEBTC’s employment of these absorbed
employees, BPI’s employment of these absorbed employees was not under exactly the same terms and conditions
as stated in the latter’s employment contracts with FEBTC. This further strengthens the view that BPI and the former
FEBTC employees voluntarily contracted with each other for their employment in the surviving corporation.

Proper Appreciation of the Term "New Employees" Under the CBA

In any event, it is of no moment that the former FEBTC employees retained the regular status that they
possessed while working for their former employer upon their absorption by petitioner. This fact would not
remove them from the scope of the phrase "new employees" as contemplated in the Union Shop Clause of
the CBA, contrary to petitioner’s insistence that the term "new employees" only refers to those who are
initially hired as non-regular employees for possible regular employment.

The Union Shop Clause in the CBA simply states that "new employees" who during the effectivity of the CBA "may
be regularly employed" by the Bank must join the union within thirty (30) days from their regularization. There is
nothing in the said clause that limits its application to only new employees who possess non-regular status,
meaning probationary status, at the start of their employment. Petitioner likewise failed to point to any provision
in the CBA expressly excluding from the Union Shop Clause new employees who are "absorbed" as regular
employees from the beginning of their employment. What is indubitable from the Union Shop Clause is that
upon the effectivity of the CBA, petitioner’s new regular employees (regardless of the manner by which they
became employees of BPI) are required to join the Union as a condition of their continued employment.

The dissenting opinion of Justice Brion dovetails with Justice Carpio’s view only in their restrictive interpretation of
who are "new employees" under the CBA. To our dissenting colleagues, the phrase "new employees" (who are
covered by the union shop clause) should only include new employees who were hired as probationary during the
life of the CBA and were later granted regular status. They propose that the former FEBTC employees who were
deemed regular employees from the beginning of their employment with BPI should be treated as a special class of
employees and be excluded from the union shop clause.

Labor II – 1
Justice Brion himself points out that there is no clear, categorical definition of "new employee" in the CBA. In other
words, the term "new employee" as used in the union shop clause is used broadly without any qualification or
distinction. However, the Court should not uphold an interpretation of the term "new employee" based on the
general and extraneous provisions of the Corporation Code on merger that would defeat, rather than fulfill,
the purpose of the union shop clause. To reiterate, the provision of the Article 248(e) of the Labor Code in point
mandates that nothing in the said Code or any other law should stop the parties from requiring membership in a
recognized collective bargaining agent as a condition of employment.

Significantly, petitioner BPI never stretches its arguments so far as to state that the absorbed employees should be
deemed "old employees" who are not covered by the Union Shop Clause. This is not surprising.

By law and jurisprudence, a merger only becomes effective upon approval by the Securities and Exchange
Commission (SEC) of the articles of merger. In Associated Bank v. Court of Appeals, 33 we held:

The procedure to be followed is prescribed under the Corporation Code. Section 79 of said Code requires the
approval by the Securities and Exchange Commission (SEC) of the articles of merger which, in turn, must have
been duly approved by a majority of the respective stockholders of the constituent corporations. The same provision
further states that the merger shall be effective only upon the issuance by the SEC of a certificate of merger. The
effectivity date of the merger is crucial for determining when the merged or absorbed corporation ceases to exist;
and when its rights, privileges, properties as well as liabilities pass on to the surviving corporation. (Emphasis ours.)

In other words, even though BPI steps into the shoes of FEBTC as the surviving corporation, BPI does so at a
particular point in time, i.e., the effectivity of the merger upon the SEC’s issuance of a certificate of merger. In fact,
the articles of merger themselves provided that both BPI and FEBTC will continue their respective business
operations until the SEC issues the certificate of merger and in the event SEC does not issue such a certificate, they
agree to hold each other blameless for the non-consummation of the merger.

Considering the foregoing principle, BPI could have only become the employer of the FEBTC employees it absorbed
after the approval by the SEC of the merger. If the SEC did not approve the merger, BPI would not be in the position
to absorb the employees of FEBTC at all. Indeed, there is evidence on record that BPI made the assignments of its
absorbed employees in BPI effective April 10, 2000, or after the SEC’s approval of the merger. 34 In other words, BPI
became the employer of the absorbed employees only at some point after the effectivity of the merger,
notwithstanding the fact that the absorbed employees’ years of service with FEBTC were voluntarily recognized by
BPI.

Even assuming for the sake of argument that we consider the absorbed FEBTC employees as "old employees" of
BPI who are not members of any union (i.e., it is their date of hiring by FEBTC and not the date of their absorption
that is considered), this does not necessarily exclude them from the union security clause in the CBA. The CBA
subject of this case was effective from April 1, 1996 until March 31, 2001. Based on the allegations of the former
FEBTC employees themselves, there were former FEBTC employees who were hired by FEBTC after April 1,
1996 and if their date of hiring by FEBTC is considered as their date of hiring by BPI, they would undeniably be
considered "new employees" of BPI within the contemplation of the Union Shop Clause of the said CBA. Otherwise,
it would lead to the absurd situation that we would discriminate not only between new BPI employees (hired during
the life of the CBA) and former FEBTC employees (absorbed during the life of the CBA) but also among the former
FEBTC employees themselves. In other words, we would be treating employees who are exactly similarly situated
(i.e., the group of absorbed FEBTC employees) differently. This hardly satisfies the demands of equality and justice.

Petitioner limited itself to the argument that its absorbed employees do not fall within the term "new employees"
contemplated under the Union Shop Clause with the apparent objective of excluding all, and not just some, of the
former FEBTC employees from the application of the Union Shop Clause.

However, in law or even under the express terms of the CBA, there is no special class of employees called
"absorbed employees." In order for the Court to apply or not apply the Union Shop Clause, we can only
classify the former FEBTC employees as either "old" or "new." If they are not "old" employees, they are
necessarily "new" employees. If they are new employees, the Union Shop Clause did not distinguish
between new employees who are non-regular at their hiring but who subsequently become regular and new

Labor II – 1
employees who are "absorbed" as regular and permanent from the beginning of their employment. The
Union Shop Clause did not so distinguish, and so neither must we.

No Substantial Distinction Under the CBA Between Regular Employees Hired After Probationary Status and
Regular Employees Hired After the Merger

Verily, we agree with the Court of Appeals that there are no substantial differences between a newly hired non-
regular employee who was regularized weeks or months after his hiring and a new employee who was
absorbed from another bank as a regular employee pursuant to a merger, for purposes of applying the
Union Shop Clause. Both employees were hired/employed only after the CBA was signed. At the time they are
being required to join the Union, they are both already regular rank and file employees of BPI. They belong to the
same bargaining unit being represented by the Union. They both enjoy benefits that the Union was able to
secure for them under the CBA. When they both entered the employ of BPI, the CBA and the Union Shop
Clause therein were already in effect and neither of them had the opportunity to express their preference for
unionism or not. We see no cogent reason why the Union Shop Clause should not be applied equally to
these two types of new employees, for they are undeniably similarly situated.

The effect or consequence of BPI’s so-called "absorption" of former FEBTC employees should be limited to
what they actually agreed to, i.e. recognition of the FEBTC employees’ years of service, salary rate and
other benefits with their previous employer. The effect should not be stretched so far as to exempt former
FEBTC employees from the existing CBA terms, company policies and rules which apply to employees
similarly situated. If the Union Shop Clause is valid as to other new regular BPI employees, there is no reason why
the same clause would be a violation of the "absorbed" employees’ freedom of association.

Non-Application of Union Shop Clause Contrary to the Policy of the Labor Code and Inimical to Industrial
Peace

It is but fair that similarly situated employees who enjoy the same privileges of a CBA should be likewise
subject to the same obligations the CBA imposes upon them. A contrary interpretation of the Union Shop
Clause will be inimical to industrial peace and workers’ solidarity. This unfavorable situation will not be sufficiently
addressed by asking the former FEBTC employees to simply pay agency fees to the Union in lieu of union
membership, as the dissent of Justice Carpio suggests. The fact remains that other new regular employees, to
whom the "absorbed employees" should be compared, do not have the option to simply pay the agency fees and
they must join the Union or face termination.

Petitioner’s restrictive reading of the Union Shop Clause could also inadvertently open an avenue, which an
employer could readily use, in order to dilute the membership base of the certified union in the collective bargaining
unit (CBU). By entering into a voluntary merger with a non-unionized company that employs more workers, an
employer could get rid of its existing union by the simple expedient of arguing that the "absorbed employees" are not
new employees, as are commonly understood to be covered by a CBA’s union security clause. This could then lead
to a new majority within the CBU that could potentially threaten the majority status of the existing union and,
ultimately, spell its demise as the CBU’s bargaining representative. Such a dreaded but not entirely far-fetched
scenario is no different from the ingenious and creative "union-busting" schemes that corporations have fomented
throughout the years, which this Court has foiled time and again in order to preserve and protect the valued place of
labor in this jurisdiction consistent with the Constitution’s mandate of insuring social justice.

There is nothing in the Labor Code and other applicable laws or the CBA provision at issue that requires that a new
employee has to be of probationary or non-regular status at the beginning of the employment relationship. An
employer may confer upon a new employee the status of regular employment even at the onset of his engagement.
Moreover, no law prohibits an employer from voluntarily recognizing the length of service of a new employee with a
previous employer in relation to computation of benefits or seniority but it should not unduly be interpreted to
exclude them from the coverage of the CBA which is a binding contractual obligation of the employer and
employees.

Indeed, a union security clause in a CBA should be interpreted to give meaning and effect to its purpose,
which is to afford protection to the certified bargaining agent and ensure that the employer is dealing with a

Labor II – 1
union that represents the interests of the legally mandated percentage of the members of the bargaining
unit.

The union shop clause offers protection to the certified bargaining agent by ensuring that future regular
employees who (a) enter the employ of the company during the life of the CBA; (b) are deemed part of the
collective bargaining unit; and (c) whose number will affect the number of members of the collective
bargaining unit will be compelled to join the union. Such compulsion has legal effect, precisely because the
employer by voluntarily entering in to a union shop clause in a CBA with the certified bargaining agent
takes on the responsibility of dismissing the new regular employee who does not join the union.

Without the union shop clause or with the restrictive interpretation thereof as proposed in the dissenting
opinions, the company can jeopardize the majority status of the certified union by excluding from union
membership all new regular employees whom the Company will "absorb" in future mergers and all new
regular employees whom the Company hires as regular from the beginning of their employment without
undergoing a probationary period. In this manner, the Company can increase the number of members of the
collective bargaining unit and if this increase is not accompanied by a corresponding increase in union
membership, the certified union may lose its majority status and render it vulnerable to attack by another
union who wishes to represent the same bargaining unit.35

Or worse, a certified union whose membership falls below twenty percent (20%) of the total members of the
collective bargaining unit may lose its status as a legitimate labor organization altogether, even in a
situation where there is no competing union.36 In such a case, an interested party may file for the cancellation of
the union’s certificate of registration with the Bureau of Labor Relations. 37

Plainly, the restrictive interpretation of the union shop clause would place the certified union’s very existence at the
mercy and control of the employer. Relevantly, only BPI, the employer appears to be interested in pursuing
this case. The former FEBTC employees have not joined BPI in this appeal.

For the foregoing reasons, Justice Carpio’s proposal to simply require the former FEBTC to pay agency fees is
wholly inadequate to compensate the certified union for the loss of additional membership supposedly guaranteed
by compliance with the union shop clause. This is apart from the fact that treating these "absorbed employees" as a
special class of new employees does not encourage worker solidarity in the company since another class of new
employees (i.e. those whose were hired as probationary and later regularized during the life of the CBA) would not
have the option of substituting union membership with payment of agency fees.

Justice Brion, on the other hand, appears to recognize the inherent unfairness of perpetually excluding the
"absorbed" employees from the ambit of the union shop clause. He proposes that this matter be left to negotiation
by the parties in the next CBA. To our mind, however, this proposal does not sufficiently address the issue. With BPI
already taking the position that employees "absorbed" pursuant to its voluntary mergers with other banks are
exempt from the union shop clause, the chances of the said bank ever agreeing to the inclusion of such employees
in a future CBA is next to nil – more so, if BPI’s narrow interpretation of the union shop clause is sustained by this
Court.

Right of an Employee not to Join a Union is not Absolute and Must Give Way to the Collective Good of All Members
of the Bargaining Unit

The dissenting opinions place a premium on the fact that even if the former FEBTC employees are not old
employees, they nonetheless were employed as regular and permanent employees without a gap in their service.
However, an employee’s permanent and regular employment status in itself does not necessarily exempt him from
the coverage of a union shop clause.

In the past this Court has upheld even the more stringent type of union security clause, i.e., the closed shop
provision, and held that it can be made applicable to old employees who are already regular and permanent but
have chosen not to join a union. In the early case of Juat v. Court of Industrial Relations, 38 the Court held that an old
employee who had no union may be compelled to join the union even if the collective bargaining agreement (CBA)
imposing the closed shop provision was only entered into seven years after of the hiring of the said employee. To
quote from that decision:
Labor II – 1
A closed-shop agreement has been considered as one form of union security whereby only union members can be
hired and workers must remain union members as a condition of continued employment. The requirement for
employees or workers to become members of a union as a condition for employment redounds to the benefit and
advantage of said employees because by holding out to loyal members a promise of employment in the closed-shop
the union wields group solidarity. In fact, it is said that "the closed-shop contract is the most prized achievement of
unionism."

xxxx

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

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

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

In Victoriano, the issue that confronted the Court was whether or not employees who were members of the Iglesia ni
Kristo (INK) sect could be compelled to join the union under a closed shop provision, despite the fact that their
religious beliefs prohibited them from joining a union. In that case, the Court was asked to balance the constitutional
right to religious freedom against a host of other constitutional provisions including the freedom of association, the
non-establishment clause, the non-impairment of contracts clause, the equal protection clause, and the social
justice provision. In the end, the Court held that "religious freedom, although not unlimited, is a fundamental
personal right and liberty, and has a preferred position in the hierarchy of values." 42

However, Victoriano is consistent with Juat since they both affirm that the right to refrain from joining a union is not
absolute. The relevant portion of Victoriano is quoted below:

The right to refrain from joining labor organizations recognized by Section 3 of the Industrial Peace Act is, however,
limited. The legal protection granted to such right to refrain from joining is withdrawn by operation of law, where a
labor union and an employer have agreed on a closed shop, by virtue of which the employer may employ only
member of the collective bargaining union, and the employees must continue to be members of the union for the
duration of the contract in order to keep their jobs. Thus Section 4 (a) (4) of the Industrial Peace Act, before its
amendment by Republic Act No. 3350, provides that although it would be an unfair labor practice for an employer
"to discriminate in regard to hire or tenure of employment or any term or condition of employment to encourage or
discourage membership in any labor organization" the employer is, however, not precluded "from making an
agreement with a labor organization to require as a condition of employment membership therein, if such labor
organization is the representative of the employees." By virtue, therefore, of a closed shop agreement, before the
enactment of Republic Act No. 3350, if any person, regardless of his religious beliefs, wishes to be employed or to
keep his employment, he must become a member of the collective bargaining union. Hence, the right of said
employee not to join the labor union is curtailed and withdrawn. 43 (Emphases supplied.)

If Juat exemplified an exception to the rule that a person has the right not to join a union, Victoriano merely created
an exception to the exception on the ground of religious freedom.

Labor II – 1
Reyes, on the other hand, did not involve the interpretation of any union security clause. In that case, there was no
certified bargaining agent yet since the controversy arose during a certification election. In Reyes, the Court
highlighted the idea that the freedom of association included the right not to associate or join a union in resolving the
issue whether or not the votes of members of the INK sect who were part of the bargaining unit could be excluded in
the results of a certification election, simply because they were not members of the two contesting unions and were
expected to have voted for "NO UNION" in view of their religious affiliation. The Court upheld the inclusion of the
votes of the INK members since in the previous case of Victoriano we held that INK members may not be compelled
to join a union on the ground of religious freedom and even without Victoriano every employee has the right to vote
"no union" in a certification election as part of his freedom of association. However, Reyes is not authority for Justice
Carpio’s proposition that an employee who is not a member of any union may claim an exemption from an existing
union security clause because he already has regular and permanent status but simply prefers not to join a union.

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

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

It is unsurprising that significant provisions on labor protection of the 1987 Constitution are found in Article XIII on
Social Justice. The constitutional guarantee given the right to form unions 51 and the State policy to promote
unionism52 have social justice considerations. In People’s Industrial and Commercial Employees and Workers
Organization v. People’s Industrial and Commercial Corporation, 53 we recognized that "[l]abor, being the weaker in
economic power and resources than capital, deserve protection that is actually substantial and material."

The rationale for upholding the validity of union shop clauses in a CBA, even if they impinge upon the
individual employee’s right or freedom of association, is not to protect the union for the union’s sake. Laws
and jurisprudence promote unionism and afford certain protections to the certified bargaining agent in a
unionized company because a strong and effective union presumably benefits all employees in the
bargaining unit since such a union would be in a better position to demand improved benefits and
conditions of work from the employer. This is the rationale behind the State policy to promote unionism declared
in the Constitution, which was elucidated in the above-cited case of Liberty Flour Mills Employees v. Liberty Flour
Mills, Inc.54

In the case at bar, since the former FEBTC employees are deemed covered by the Union Shop Clause, they
are required to join the certified bargaining agent, which supposedly has gathered the support of the
majority of workers within the bargaining unit in the appropriate certification proceeding. Their joining the
certified union would, in fact, be in the best interests of the former FEBTC employees for it unites their
interests with the majority of employees in the bargaining unit. It encourages employee solidarity and
affords sufficient protection to the majority status of the union during the life of the CBA which are the
precisely the objectives of union security clauses, such as the Union Shop Clause involved herein. We are
indeed not being called to balance the interests of individual employees as against the State policy of promoting
unionism, since the employees, who were parties in the court below, no longer contested the adverse Court of
Appeals’ decision. Nonetheless, settled jurisprudence has already swung the balance in favor of unionism, in
recognition that ultimately the individual employee will be benefited by that policy. In the hierarchy of constitutional
values, this Court has repeatedly held that the right to abstain from joining a labor organization is subordinate to the
policy of encouraging unionism as an instrument of social justice.

Labor II – 1
Also in the dissenting opinion of Justice Carpio, he maintains that one of the dire consequences to the former
FEBTC employees who refuse to join the union is the forfeiture of their retirement benefits. This is clearly not the
case precisely because BPI expressly recognized under the merger the length of service of the absorbed
employees with FEBTC. Should some refuse to become members of the union, they may still opt to retire if they are
qualified under the law, the applicable retirement plan, or the CBA, based on their combined length of service with
FEBTC and BPI. Certainly, there is nothing in the union shop clause that should be read as to curtail an employee’s
eligibility to apply for retirement if qualified under the law, the existing retirement plan, or the CBA as the case may
be.

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

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

A final point in relation to procedural due process, the Court is not unmindful that the former FEBTC employees’
refusal to join the union and BPI’s refusal to enforce the Union Shop Clause in this instance may have been based
on the honest belief that the former FEBTC employees were not covered by said clause. In the interest of fairness,
we believe the former FEBTC employees should be given a fresh thirty (30) days from notice of finality of this
decision to join the union before the union demands BPI to terminate their employment under the Union Shop
Clause, assuming said clause has been carried over in the present CBA and there has been no material change in
the situation of the parties.

WHEREFORE, the petition is hereby DENIED, and the Decision dated September 30, 2003 of the Court of Appeals
is AFFIRMED, subject to the thirty (30) day notice requirement imposed herein. Former FEBTC employees who opt
not to become union members but who qualify for retirement shall receive their retirement benefits in accordance
with law, the applicable retirement plan, or the CBA, as the case may be.

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18.) B. Dissent on BPI, Brion

BRION, J.:

I dissent.

Out at outset, I wish to clarify what this case is all about and what it is not about.

The case is simply about the interpretation and application, in a merger situation, of union security clauses in the
petitioner’s collective bargaining agreement (CBA) with the respondent union. To be exact, the basic underlying
issue of the case is about the effects of merger on the merging corporations’ employees – an issue that arose soon
after the merger and one that is still current despite the execution of two subsequent CBAs. It is not an issue,
therefore, that simply must be resolved because it will recur, as the ponencia posits; it must be resolved because it
is a live dispute that now exists between the parties.

The case is not about the constitutional validity of union security provisions in CBAs or their application. No
constitutional issue has been raised either in the petition or in the respondent’s comment, although I invoked the
Constitution in this Dissenting Opinion for interpretative purposes. Justice Antonio T. Carpio, in his own dissent,
injects a constitutional issue by positing that the employees absorbed by the surviving corporation in the merger
have the constitutional right not to join any union, and cannot be compelled to join, under the union, security clauses
whose interpretation and application are disputed.

The Bank of the Philippine Islands (BPI or successor corporation) merged with the Far East Bank and Trust
Company (FEBTC or merged corporation) pursuant to an Article and Plan of Merger (Merger Plan) that saw all the
assets and liabilities of FEBTC transferred to, and absorbed by, BPI, with the latter as the surviving as well as the
successor corporate entity. No specific provision in the Merger Plan referred to the FEBTC employees, specifically,
what their situation would be under the merger. BPI, however, absorbed all the FEBTC employees (absorbed
employees) as its own employees with their status of employment, tenure, salaries and benefits under the FEBTC
maintained.

The BPI Employees Union–Davao Chapter Federation of Unions in BPI Unibank (the union or respondent union) is
the exclusive bargaining agent of BPI’s rank-and-file employees in Davao City. The absorbed employees in Davao
City did not belong to any labor union while they were with the FEBTC. The union now claims that the absorbed
employees whose positions fall within the bargaining unit it represents should now join the union as members
pursuant to the following provisions of the existing CBA:

ARTICLE I

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

xxxx

ARTICLE II

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

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

Labor II – 1
Some of the absorbed employees refused to join the union while BPI failed to act on the grievance filed by the union
after it had asked BPI to dismiss the refusing absorbed employees. BPI took the position that the absorbed
employees are not "new" employees who, under the terms of the union security provisions, are under obligation to
join the union to maintain their employment.

When settlement of the disagreement at the grievance machinery was not reached, the union referred the matter to
voluntary arbitration. The voluntary arbitrator ruled in favor of the refusing absorbed employees and BPI, holding
that the refusing employees are not new employees to whom the union shop provision of the CBA applies. On
appeal, the Court of Appeals reversed and set aside the voluntary arbitrator’s ruling.

The ponencia affirms the CA decision and reiterates that all absorbed employees falling within the bargaining unit
should join the union pursuant to the CBA’s union security clauses. In so ruling, the ponencia holds that:

a. The absorbed employees are "new" BPI employees to whom the union shop provision of the CBA
applies;1

b. The absorbed employees do not fall within the exceptions recognized by law and jurisprudence to be
excluded from the application of union security provisions; thus, the only issue is whether the absorbed
employees "are excluded by the express terms of the existing CBA between the petitioner and the
respondent";2

c. Unless expressly assumed, labor contracts, such as employment contracts and CBAs, are not
enforceable against the transferee of an enterprise, labor contracts being in personam, thus binding only
between the parties;3

d. BPI’s role as the employer of the former FEBTC employees was not by operation of law nor a legal
consequence of the merger agreement;4 BPI simply voluntarily hired or contracted with these absorbed
employees;5

e. It is contrary to public policy to declare the absorbed employees a part of the assets or liabilities of FEBTC
that were transferred to BPI through the Merger Plan. The transferred assets and liabilities should be
deemed to refer only to property rights and obligations of FEBTC and do not include employment contracts
of its personnel;6 and

f. The constitutional associational right not to join the union does not apply to the absorbed employees
because they fall within a collective bargaining unit and are covered by a CBA whose union security clauses
are constitutionally valid.7

I disagree with points (a) to (e) and submit in point (f) that the constitutional issue raised is not material to the
resolution of the issues raised.

Parenthetically, the non-involvement of affected employees at this level of the litigation (a new point the modified
ponencia raised) is not a stumbling block to the present petition as the ponencia now posits. In interpreting a CBA
provision, the real parties in interest are the bargaining parties – the company and the union – the agreement is
between them. Hence, it matters not that the affected employees, mere necessary parties, are not direct parties in
the present petition for review on certiorari. For ease of appreciation, I submit the following discussions topically
presented, not necessarily in the order of the ponencia’s presentation of positions as shown above.

The Merger

A basic point of disagreement with the ponencia relates to the approach in resolving the issues raised. The
ponencia appears to consider only the purely labor law aspect of the case in determining the relationships among
BPI, FEBTC and the absorbed employees. More than anything else, however, the issues before us are rooted in the
corporate merger that took place; thus, the first priority in resolving the issues before us should be to consider and
analyze the nature and consequences of the BPI-FEBTC merger – essentially a matter under the Corporation Code.
On the basis of this analysis, the application of labor law can follow.
Labor II – 1
Unlike the old Corporation Code that did not contain express provisions on mergers and consolidations, the present
law now authorizes, under Section 76,8 two or more corporations to merge under one of the participating constituent
corporations, or to consolidate into a new single corporation called the consolidated corporation. In either case, no
liquidation of the assets of the dissolved corporations takes place, and the surviving or consolidated corporation
assumes ipso jure the liabilities of the dissolved corporations, regardless of whether the creditors consented to the
merger or consolidation.9

The transaction between BPI and FEBTC was a merger under one of the modes provided under Section 76 –- i.e.,
the two corporations, BPI and FEBTC, merged with FEBTC fading away as a corporate entity and BPI surviving as
FEBTC’s successor. Section 80 of the Corporation Code10 provides for the legal effects of a merger. As applied to
BPI and FEBTC, the effects were:

a. BPI and FEBTC became a single corporation with BPI as the surviving corporation;

b. The separate corporate existence of FEBTC ceased;

c. BPI now possesses all the rights, obligations, privileges, immunities, and franchises of both BPI and
FEBTC;

d. All property, real or personal, and all receivables due on whatever choses in action, and all other interest
of, belonging to, or due to FEBTC are deemed transferred to BPI;

e. BPI becomes responsible and liable for all the liabilities and obligations of FEBTC as if it had incurred
these liabilities or obligations;

f. Any claim, action, or proceeding pending by or against FEBTC should be prosecuted by or against BPI;
and

g. Neither the rights of creditors nor any lien on the property of FEBTC is impaired by the merger.

In short, FEBTC ceased to have any legal personality, and BPI stepped into everything that was FEBTC’s, pursuant
to the law and the terms of their Merger Plan.

An overview of the whole range or levels of transfers of corporate assets and liabilities, as established by
jurisprudence, is helpful and instructive for the full appreciation of the nature of the BPI-FEBTC merger. These levels
of transfers are: (1) the assets-only level; (2) the business enterprise level; and (3) the equity level. Each has its own
impact on the participating corporations and the immediately affected parties, among them, the
employees.11 Beyond and encompassing all these levels of transfers is total corporate merger or consolidation.

The asset-only transfer affects only the corporate seller’s raw assets and properties; the purchaser is not interested
in the seller’s corporate personality – its goodwill, or in other factors affecting the business itself. In this transaction,
no complications arise affecting the employer-employee relationship, except perhaps the redundancy of employees
whose presence in the selling company is affected by the sale of the chosen assets and properties, but this is a
development completely internal to the selling corporation. 12

In the business enterprise level transaction, the purchaser’s interest goes beyond the assets and properties and
extends into the seller corporation’s whole business and "earning capability," short of the seller’s juridical
personality. Thus, a whole business is sold and purchased but the parties retain their respective juridical
personalities. In this type of transaction, employer-employee and employer liability complications arise, as can be
seen from a survey of the cases on corporate transfers that this Court has already passed upon. 13

A transaction at the equity level does not disturb the participating corporations’ separate juridical personality as both
corporations continue to remain in existence; the purchaser corporation simply buys the underlying equity of the
selling corporation which thus retains its separate corporate personality. The selling corporation continues to run its
business, but control of the business is transferred to the purchaser corporation whose control of the selling
corporation’s equity enables it to elect the members of the selling corporation’s board of directors. 14
Labor II – 1
As pointed out above, a total merger or consolidation goes way beyond all three levels of dealings in corporate
business, assets and property. In a total merger, the merged corporation transfers everything – figuratively
speaking, its "body and soul" – to the surviving corporation. This was what happened in the BPI-FEBTC merger.

Corporate Assets and Employment Contracts

A corporation possesses tangible and intangible assets and properties that, operated on and managed by the
corporation’s human resources, become an operating business. The intangibles consist, among others, of the
corporate goodwill, credits and other incorporeal rights. The human resources that the corporation relies upon to run
its business, strictly speaking, are not corporate assets because the corporation does not "own" the people running
its business. But corporations are bound to their managers and employees by various forms of contracts of service,
such as individual employment contracts, consultancies and other instruments evidencing personal service. In this
sense, a corporation has rights over the human resources it has contracted to run and serve its business. These
contractual rights, because they are exercised over those who enable the company to fulfill its goal of production,
can be classified as corporate assets. But unlike the usual assets, they are unique and special, as contracts of
personal service embody rights in personam, i.e., intransferable rights demandable by the parties only against one
another.15

An employment contract or contract of service essentially has value because it embodies work – the means
of adding value to basic raw materials and the processes for producing goods, materials and services that
become the lifeblood of corporations and, ultimately, of the nation. Viewed from this perspective, the
employment contract or contract of service is not an ordinary agreement that can be viewed in strictly
contractual sense. It embodies work and production and carries with it a very significant element of public
interest; thus, the Constitution, no less, accords full recognition and protection to workers and their contribution to
production. Section 18, Article II of the Constitution provides:

SECTION 18. The State affirms labor as a primary social economic force. It shall protect the rights of workers and
promote their welfare.

Another recognition of the value of work, production and labor to the national economy is reflected in Article XII on
National Economy and Patrimony whose Section 1 states:

The goals of the national economy are a more equitable distribution of opportunities, income, and wealth; a
sustained increase in the amount of goods and services produced by the nation for the benefit of the people; and an
expanding productivity as the key to raising the quality of life for all, especially the underprivileged.

The State shall promote industrialization and full employment based on sound agricultural development and
agrarian reform, through industries that make full and efficient use of human and natural resources, and which are
competitive in both domestic and foreign markets. However, the State shall protect Filipino enterprises against unfair
foreign competition and trade practices.

In the pursuit of these goals, all sectors of the economy and all regions of the country shall be given optimum
opportunity to develop. Private enterprises, including corporations, cooperatives, and similar collective
organizations, shall be encouraged to broaden the base of their ownership. [Emphasis supplied.]

From the point of view of labor itself, Article XIII, Section 3 commands:

The State shall afford full protection to labor, local and overseas, organized and unorganized, and promote full
employment and equality of employment opportunities for all. [Emphasis supplied.]

These constitutional statements and directives, aside from telling us to consider work, labor and employment
beyond purely contractual terms, also provide us directions on how our considerations should be made, i.e., with an
eye on the interests they represent – the individual, the corporate, and more importantly, the national.

In a corporate merger situation – where one corporation totally surrenders itself, giving up to another corporation
even the human resources that enable its business to operate – the terms of the Constitution bar us from looking at
Labor II – 1
the corporate transaction purely as a contract that should be analyzed purely on the basis of the law on contracts, in
the way the ponencia suggested. Nor can we accept as valid the ponencia’s pronouncement, apparently in line with
its purely contractual analysis, that the transfer of all assets and liabilities in a merger situation, as in this case,
refers only to FEBTC’s property rights and obligations and does not include the employment contracts of its
personnel.

To my mind, due consideration of Section 80 of the Corporation Code, the constitutionally declared policies on work,
labor and employment, and the specific FEBTC-BPI situation – i.e., a merger with complete "body and soul" transfer
of all that FEBTC embodied and possessed and where both participating banks were willing (albeit by deed, not by
their written agreement) to provide for the affected human resources by recognizing continuity of employment –
should point this Court to a declaration that in a complete merger situation where there is total takeover by one
corporation over another and there is silence in the merger agreement on what the fate of the human resource
complement shall be, the latter should not be left in legal limbo and should be properly provided for, by compelling
the surviving entity to absorb these employees. This is what Section 80 of the Corporation Code commands, as the
surviving corporation has the legal obligation to assume all the obligations and liabilities of the merged constituent
corporation.

Not to be forgotten is that the affected employees managed, operated and worked on the transferred assets and
properties as their means of livelihood; they constituted a basic component of their corporation during its existence.
In a merger and consolidation situation, they cannot be treated without consideration of the applicable constitutional
declarations and directives, or, worse, be simply disregarded. If they are so treated, it is up to this Court to read and
interpret the law so that they are treated in accordance with the legal requirements of mergers and consolidation,
read in light of the social justice, economic and social provisions of our Constitution. Hence, there is a need for the
surviving corporation to take responsibility for the affected employees and to absorb them into its workforce where
no appropriate provision for the merged corporation’s human resources component is made in the Merger Plan.

This recognition is not to objectify the workers as assets and liabilities, but to recognize – using the spirit of the law
and constitutional standards – their necessary involvement and need to be provided for in a merger situation.
Neither does this step, directly impacting on the employees’ individual employment contracts, detract from the in
personam character of these contracts. For in a merger situation, no change of employer is involved; the
change is in the internal personality of the employer rather than through the introduction of a new employer
which would have novated the contract. This conclusion proceeds from the nature of a merger as a corporate
development regulated by law and the merger’s implementation through the parties’ merger agreement.

In the context of this case, BPI’s relationship with the absorbed employees cannot be equated with a situation
involving voluntary hiring, as the ponencia posited. Note that voluntary hiring, as the basis of the
relationship, presupposes that employment with FEBTC had been terminated – a development that, as
explained above, did not take place; the employment of the absorbed employees simply continued by operation of
law, specifically by the combined operation of the Corporation Code and the Labor Code under the backdrop of the
labor and social justice provisions of the Constitution.

An individual employee can, at any time, in a consensual and in personam employment contract, walk away from it,
subject only to the adjustment of the obligations he has incurred under the contractual relationship that binds him; a
contrary rule would violate the involuntary service provision of the Constitution. 16 Ordinarily, walking away would be
an act of voluntary resignation that entitles the employee only to benefits that have been earned and accrued; a
merger situation is differentiated by the separation pay17 that the Merger Plan should at least provide under the
combined application of the Corporation Code,18 as well as the just and authorized causes for termination of
employment under the Labor Code. 19 Otherwise, the employee has the right to be secure in his tenure without loss
of seniority, benefits and level of pay.20

The above view reconciles the terms of the Constitution, the Corporation Code, and the Labor Code, and directly
conflicts with the ponencia’s views that: (1) BPI’s role as employer of the absorbed FEBTC employees was not by
operation of law or a legal consequence of the merger, but by BPI’s voluntary act of hiring the employees after the
merger; (2) the employees’ contracts are purely in personam and are binding only between the parties; and (3) it is
contrary to public policy to declare the absorbed employees to be part of the assets or liabilities of FEBTC that were
transferred to BPI under the Merger Plan since the transferred assets and liabilities should be deemed to refer only
to property rights and obligations of FEBTC and do not include the employment contracts of its personnel.
Labor II – 1
To encapsulate the discussions above in relation with the ponencia’s, BPI was the successor of FEBTC in the
latter’s employment relationships, and the succession occurred both by contract and by operation of law. The two
corporations decided to merge; necessarily, their merger – made through a merger agreement – is governed by the
Corporation Code that recognizes the merger and its terms, including the "body and soul" succession to BPI of
everything that was FEBTC’s.

This succession included FEBTC’s employment contracts, subject to the right of the employees to reject or accept
the succession because employment contracts are essentially in personam. It is immaterial that BPI’s assumption of
the role of employer was not embodied in the merger agreement; in the absence of clear agreement terms, the law
– specifically, Section 80 of the Corporation Code – takes over and governs. What appeared to be BPI’s voluntary
act of "hiring" the former FEBTC employees is legally insignificant as BPI was in fact obliged under the law to
assume the role of employer to the FEBTC employees in the absence of an agreement on how the merging parties
would treat the employment contracts and the employees they cover.

In support of its position, the ponencia cites the American Law Reports on "the consequences of voluntary mergers
on the right to employment and seniority rights" with the view that these are "persuasive and illuminating." The first
case cited is Carver v. Brien, 21 which relates to the recognition of seniority in a consolidation of operations situation.
Another is Moore v. International Brotherhood of Teamsters, 22 which refers to the absorption by a trucker of the
business of another private trucker or common carrier, and holds that the seniority of affected employees depends
on the agreement between the trucker and the unions involved.

I do not believe that these cited cases are relevant to the present case, particularly for the purposes the ponencia
cites them; these cited cases can neither be "persuasive nor illuminating" as they do not even approximate the
factual situation of the present case so that their rulings can be applied to the latter. No corporate merger was
involved in the cited cases, in the same sense as in the present case; in fact, what was involved in Carver was
merely a consolidation of operations, while Moore merely related to the absorption of the business of one
corporation by another, not to a merger. As painstakingly explained above, these are dealings in corporate interests
and properties that are lesser in extent and scope than total merger or consolidation and should be distinguished
from the latter under the terms of Section 80 of our Corporation Code. Thus, the cited cases and rulings should not
at all be considered in resolving the issues posed in the present case.

From another perspective, the differing consequences, discussed above, 23 arising from the different modes of
transfers of corporate assets and liabilities and corporate consolidations, apparently escape the ponencia. Thus, it
has no hesitation at all in citing American cases that do not at all involve fact situations equivalent to the merger
envisioned by Sections 76 and 80 of the Corporation Code. This is a fatal error, leading no less to the ponencia’s
conclusion that the issue before us is purely a labor law issue, divorced from its corporation law context.

That an employment contract is in personam cannot be disputed as this is the essence of such contract and what
this contract should be in light of the constitutional prohibition against involuntary servitude. 24 But as above pointed
out, this is not wholly and strictly how an employment contract is to be viewed under our Constitution. While these
contracts are binding only between the parties, they resonate with public interest that the Constitution and our laws
have seen fit to regulate; employment contracts translate to service which itself translates to productive work that
the economy and the nation need.

In the BPI-FEBTC situation, these employment contracts are part of the obligations that the merging parties have to
account and make provisions for under the Constitution and the Corporation Code; in the absence of any clear
agreement, these employment contracts subsist, subject to the right of the employees to reject them as they cannot
be compelled to render service but can only be made to answer in damages if the rejection constitutes a breach. 25 In
other words, in mergers and consolidations, these contracts should be held to be continuing, unless rejected by the
employees themselves or declared by the merging parties to be subject to the authorized causes for termination of
employment under Sections 282 and 283 of the Labor Code. In this sense, the merging parties’ control and
business decision on how employees shall be affected, in the same manner that the affected employees’ decision
on whether to abide by the merger or to opt out, remain unsullied. Unfortunately, this is another dimension of a
merger situation that escapes the ponencia’s short-sighted reading of corporate mergers in general, and of the
merger between BPI and FEBTC in particular.

Labor II – 1
From these perspectives, it appears clearly that the ponencia has not fully appreciated how mergers operate and
how they affect employment contracts when it viewed employment contracts as strictly contractual and binding only
between the parties, with no effective legal intervention from the law in terms of the combined operation of the
Constitution, the Corporation Code and the Labor Code.

BPI’s Assumption of Role as Employer

As soon as the BPI-FEBTC merger took effect, FEBTC completely faded out as employer and BPI succeeded to this
role. BPI’s assumption of this role is not in the sense of a novation, i.e., that a change of employer took place as the
employment contracts were transferred to BPI. As stated above, instead of the clear change or substitution of an
employer for another that would have taken place in a novated employment contract (e.g., such that would have
taken place if only a business enterprise level of transfer took place where the whole business is transferred,
accompanied by a substitution of the employer running the business), what took place in the BPI-FEBTC total
merger was an internal change; BPI succeeded to everything that was FEBTC’s, thereby assuming the latter’s
identity and role as employer. In this sense, BPI simply expanded its role as an employer to encompass the
employees who were previously identified as FEBTC employees.

The effect of this development on the internal BPI employment situation in a non-unionized environment would not
have posed any difficulty, as there would simply be an adjustment of working conditions based on the premise that
the absorbed employees would not suffer any diminution of the terms and conditions of employment under their
contracts.

Where a union is present in a merger situation, complications arise as the adjustment will not only involve the
assumption of the role of the merged corporation as employer and the non-diminution of the terms and conditions of
employment; existing terms and conditions of the relationship with the union must as well be observed and
respected. This union scenario gave rise to the present case and at its core asks: what terms and conditions of
relationship with the union must be observed in light of BPI’s expanded role as an employer.

Union presence at the workplace is generally most effective when it has a current CBA with the employer. This
agreement necessarily implies that a bargaining unit has been properly defined and delineated in the organized
portion of the employer’s establishment. In the present case, the establishment is BPI’s Davao Branch and the
defined bargaining unit covers the rank-and-file positions in the Branch. At the minimum, the absorbed employees
working within BPI’s Davao Branch who are classified as rank-and-file employees and who are not expressly
excluded from coverage should be covered by the collective bargaining unit and by the CBA. Note that this
coverage by the bargaining unit is separate from compulsory union membership which is provided under the union
security clauses discussed below. Employees may come within the coverage of the bargaining unit, but may still be
exempt from compulsory union membership under the union security clauses. 26

The CBA’s Union Security Clauses

The CBA at BPI contains two union security provisions whose respective roles are to protect and to compel union
membership within the effective term of the CBA.

The first is the Maintenance of Membership provision whose role is to protect the union’s current membership. By its
express terms, it covers and renders continued union membership compulsory for: (1) those who were already
union members at the time the CBA was signed; and (2) the new employees who will become regular during the life
of the CBA. The first classification of union members directly implies that BPI employees who were not members of
the union, at the time of the signing of the CBA, are not compelled to be union members.

Thus, on the basis of this union security clause and the compulsory membership it compels, there are three kinds of
employees at BPI, namely – (1) those who are not compelled to be union members because they were not union
members at the time the CBA was signed; (2) those who are compelled to continue membership because they were
already union members when the CBA was signed; and (3) those who, previously non-regular employees, are
compelled to be union members after they attain regular status.

Labor II – 1
As applied to the absorbed employees, the maintenance of membership clause would apply to them only if they
voluntarily joined the union after the BPI-FEBTC merger; they would thereafter have to maintain their union
membership under pain of dismissal.

The second union security provision is entitled Union Shop whose role is to compel the membership of those who
are not yet union members. To quote its direct terms, it refers to "[N]ew employees falling within the bargaining unit
as defined in Article I of this Agreement, who may hereafter be regularly employed by the Bank." 27 Strictly speaking,
this definition is defective as it speaks of new non-regular employees who are not therefore members of the
bargaining unit yet. The provision should properly read: new employees occupying positions falling within the
bargaining unit.

Read closely, this reference to "new employees" is not a definition that specifies who are new. It simply refers to
those employees whose positions fall within the bargaining unit and who are subsequently given regular status; they
must join the union as a condition of their continued employment.

By its reference to employees who are as yet on non-regular status, what is clearly a requirement for the application
of the union shop clause, as framed by this provision, is the grant of regular status. In other words, it applies to
those recently given regular employment and who, by necessary implication, were hired as non-regular employees
and were thereafter accorded regular status.

In contrast with the non-regular employees that the CBA clearly referred to, absorbed FEBTC employees did not
undergo the process of waiting for the grant of regular status; their regular employment simply continued
from FEBTC to BPI without any break because BPI only succeeded to the role of FEBTC as employer in a
merger, where the same employment was maintained and only the employer’s personality changed. Thus,
they cannot be "new" under the terms of the union security clause. For that matter, they are not even "new"
under the ordinary meaning of this word which connotes something that recently came into existence, use, or a
particular state or relation.28

Even granting the validity of the ponencia’s position that the union shop provision as written does not distinguish
between non-regular employees, who subsequently became regular, and those who were hired and immediately
granted regular status without passing through a non-regular phase, still the union security clause would not
cover the absorbed employees because they do not fall under either classification.

An intrinsic distinction exists between the absorbed employees and those who are hired as immediate regulars,
which distinction cannot simply be disregarded because it establishes how the absorbed employees came to work
for BPI. Those who are immediately hired as regulars acquire their status through the voluntary act of hiring
done within the effective term or period of the CBA. The absorbed employees, on the other hand, merely
continued the employment they started with FEBTC; they came to be BPI employees by reason of a corporate
merger that changed the personality of their employer but did not at all give them any new employment. Thus, they
are neither "new" employees nor employees who became regular only during the term of the CBA in the
way that newly regularized employees become so. They were regular employees under their present
employment long before BPI succeeded to FEBTC’s role as employer.

It may well be asked: what then is the classification under the CBA of the absorbed employees whose positions fall
within the bargaining unit? As discussed above, they cannot be new employees. In fact, they are more similar to the
"old" employees, if their continuity of service will be considered. This characterization, nevertheless, is clearly inapt
since they cannot also be treated in exactly the same way as the pre-merger BPI employees. Besides, being "old"
employees will not compel them to join the union under the maintenance of membership provision as they never
had any union membership to maintain.

Ultimately, the absorbed employees are best recognized for what they really are – a sui generis group of
employees whose classification will not be duplicated until BPI has another merger where it would be the surviving
corporation and no provision would be made to define the situation of the employees of the merged constituent
corporation. Significantly, this classification – obviously, not within the contemplation of the CBA parties when they
executed their CBA – is not contrary to, nor governed by, any of the agreed terms of the existing CBA on union
security, and thus occupies a gap that BPI, in the exercise of its management prerogative, can fill.

Labor II – 1
In the meantime, whether to join or not to join the union is a choice that these absorbed employees will have to
make after the next CBA, when their status becomes subject to the results of the collective negotiations.

In a resulting purely maintenance of membership regime, those who would not opt to join the union carry no
obligation to maintain any union membership. In a union shop regime, the absorbed employees may remain non-
union members until an agreed specified time when union membership is declared obligatory as a condition for
continued employment. With the same effect would be the stricter closed shop clause that compels management to
hire only union members. In any of these regimes, of course, compulsory membership shall depend on the terms of
the CBA on who would be subject to compulsion and how compulsion would operate. As a cautionary note to avoid
similar problems in the future, it may be best for the parties to incorporate terms expressly providing for the situation
of employees absorbed by reason of merger.

The Constitutional Question

The constitutional question, as framed by Justice Antonio T. Carpio, arises under the view that the absorbed
employees cannot be covered by the union security clause and thereby be compelled to join the union. As indicated
at the beginning of this Opinion, this question was never posed nor discussed by any of the parties and, hence, is
not a question presented for our consideration in the present case. Besides, this is a question that may only arise
when and if the absorbed employees are considered bound under the union security clauses to join the union. For
these reasons, I see no need to confront and resolve this constitutional issue.

In light of these considerations, I vote to GRANT the petition.

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18.) C.) Dissent. Carpio.

CARPIO, J.:

I dissent.

The petition calls upon this Court to review the Court of Appeals decision which reversed the decision of the
Voluntary Arbitrator. The Voluntary Arbitrator ruled that the FEBTC employees absorbed by BPI are not covered by
the union shop clause in the CBA between BPI and BPI Employees Union (Union) because said absorbed
employees are not "new employees" and they "cannot be compelled to join the Union as it is their
constitutional right to join or not to join any organization."

In its Memorandum, petitioner BPI reiterated that "the State policy of promoting unionism should not be blindly
and indiscriminately implemented at the expense of other rights as enshrined in the Constitution and the
laws." Petitioner discussed the protection of the rights of workers as provided in the Constitution and the Labor
Code. We quote the pertinent portion of petitioner’s Memorandum, to wit:

Article II, [S]ection 18 of the 1987 Constitution x x x provides:

The State affirms labor as a primary social economic force. It shall protect the rights of workers and promote their
welfare.

One of the rights sought to be protected is the right of workers to self-organization and to form, join, or
assist labor organizations of their own choosing. (Articles 3 and 243, Labor Code) In this regard, the Labor
Code also declares as a policy of the State the fostering of a free and voluntary organization of a strong and united
labor movement. (Article 211(A)(c), Labor Code)

Consequently, the Labor Code declares that it shall be unlawful for any person to restrain, coerce, discriminate
against or unduly interfere with employees and workers in their exercise of the right to self-organization, which
includes the right to form, join, or assist labor organizations for the purpose of collective bargaining through
representatives of their own choosing and to engage in lawful concerted activities for the same purpose or for their
mutual aid and protection. (Article 246, Labor Code)

In Victoriano v. Elizalde Rope Workers’ Association, et al. (G.R. No. L-25246, September 12, 1974), the Supreme
Court declared that the right to join a union includes the right to abstain from joining any union, for a right
comprehends at least two broad notions, namely: first, liberty or freedom, i.e., the absence of legal restraint,
whereby an employee may act for himself without being prevented by law; and second, power, whereby an
employee may, as he pleases, join or refrain from joining an association. In as much as what both the
Constitution and the Labor Code have recognized and guaranteed to the employee is the "right" to join
associations of his choice, it would be absurd to say that the law also imposes, in the same breath, upon
the employee the duty to join associations.

Indeed, the right to abstain from joining labor organizations may be curtailed or restricted by union security
agreements, such as the Union Shop Clause. However, being, in a sense, a derogation of the freedom or
right NOT to join any labor organization, this Honorable Court’s strict and restrictive enforcement of union
security agreements is clearly warranted and justified. (Emphasis supplied)

Respondent Union requested petitioner BPI to implement the union shop clause of the CBA against absorbed
FEBTC employees who refused to join the Union, and to terminate their employment pursuant to the union shop
clause.

BPI, independently of the absorbed FEBTC employees, has the right to challenge the constitutionality of the union
shop clause as applied to the absorbed FEBTC employees because BPI is being compelled, against its best
interests, to terminate their employment if they do not join the Union. Besides, this Court cannot adopt as part of its

Labor II – 1
jurisprudence a practice that clearly violates a fundamental constitutional right just because the aggrieved
employees gave up the fight to protect such right.

The Constitution guarantees the fundamental right of all workers to "self-organization." The right to "self-
organization" is a species of the broader constitutional right of the people "to form unions, associations, or societies
for purposes not contrary to law," which right "shall not be abridged."

The right of workers to self-organization is protected under the Labor Code which provides that workers "shall have
the right to self-organization and to form, join, or assist labor organizations of their own choosing for purpose of
collective bargaining." The Code proscribes the abridgment of this right, stating that: "It shall be unlawful for any
person to restrain, coerce, discriminate against or unduly interfere with employees and workers in their exercise of
the right to self-organization. Such right shall include the right to form, join, or assist labor organizations for the
purpose of collective bargaining through representatives of their own choosing x x x."

The right of workers to self-organization means that workers themselves voluntarily organize, without compulsion
from outside forces. "Self-organization" means voluntary association without compulsion, threat of punishment, or
threat of loss of livelihood. Workers who "self-organize" are workers who on their own volition freely and voluntarily
form or join a union. Compulsory membership is anathema to "self-organization."

The right to self-organize includes the right not to exercise such right. Freedom to associate necessarily
includes the freedom not to associate. Thus, freedom to join unions necessarily includes the freedom not to
join unions. Reyes v. Trajano cannot be any clearer on this point:

Logically, the right NOT to join, affiliate with, or assist any union, and to disaffiliate or resign from a labor
organization, is subsumed in the right to join, affiliate with, or assist any union, and to maintain membership
therein. The right to form or join a labor organization necessarily includes the right to refuse or refrain from
exercising said right. It is self-evident that just as no one should be denied the exercise of a right granted by law,
so also, no one should be compelled to exercise such a conferred right. (Emphasis supplied)

Reyes was decided on 2 June 1992 under the 1987 Constitution. Even prior to Reyes, this Court already declared
in Victoriano v. Elizalde Rope Workers’ Union, decided on 12 September 1974 under the 1973 Constitution, that:

What the Constitution and Industrial Peace Act recognize and guarantee is the ‘right’ to form or join associations.
Notwithstanding the different theories propounded by the different schools of jurisprudence regarding the nature and
contents of a ‘right,’ it can be safely said that whatever theory one subscribes to, a right comprehends at least two
broad notions, namely: first, liberty or freedom, i.e., the absence of legal restraint, whereby an employee may act for
himself without being prevented by law; second, power, whereby an employee may, as he pleases, join or refrain
from joining an association. It is therefore the employee who should decide for himself whether he should join
or not an association; and should he choose to join, he himself makes up his mind as to which association
he would join; and even after he has joined, he still retains the liberty and the power to leave and cancel his
membership with said organization at any time x x x. It is clear, therefore, that the right to join a union
includes the right to abstain from joining any union. (Citations omitted) Inasmuch as what both the
Constitution and the Industrial Peace Act have recognized, and guaranteed to the employee, is the ‘right’ to
join associations of his choice, it would be absurd to say that the law also imposes, in the same breath,
upon the employee the duty to join associations. The law does not enjoin an employee to sign up with any
association. (Emphasis supplied)

The ruling in Victoriano has been reiterated in a plethora of cases, including Basa v. Federacion Obrera de la
Industria Tabaquera y Otros Trabajadores de Filipinas (1974), Anucension v. National Labor Union
(1977), Gonzales v. Central Azucarera de Tarlac Labor Union (1985), and Knitjoy Manufacturing, Inc. v. Ferrer-
Calleja (1992). In the case of Philips Industrial Development, Inc. v. NLRC, decided on 25 June 1992, this Court
held:

x x x in holding that they are included in the bargaining unit for the rank and file employees of PIDI, the NLRC
practically forced them to become members of PEO-FFW or to be subject to its sphere of influence, it being the
certified bargaining agent for the subject bargaining unit. This violates, obstructs, impairs and impedes the

Labor II – 1
service engineers’ and the sales representatives’ constitutional right to form unions or associations and to
self-organization. (Emphasis supplied)

Thus, it is the worker who should personally decide whether or not to join a labor union. The union, the
management, the courts, and even the State cannot decide this for the worker, more so against his will.

The State encourages union membership to protect an individual employee from the power of the employer. A union
is an instrumentality utilized to achieve the objective of protecting the rights of workers. In Guijarno v. Court of
Industrial Relations, we clarified the purpose of a union:

x x x The State shall assure the rights of workers to self-organization, collective bargaining, security of tenure, and
just and humane conditions of work." (Art. II, Sec. 9 of the Revised Constitution) Where does that leave a labor
union, it may be asked. Correctly understood, it is nothing but the means of assuring that such fundamental
objectives would be achieved. It is the instrumentality through which an individual laborer who is helpless
as against a powerful employer may, through concerted effort and activity, achieve the goal of economic
well-being. That is the philosophy underlying the Industrial Peace Act. (Republic Act No. 875 (1953)) For, rightly
has it been said that workers unorganized are weak; workers organized are strong. Necessarily then, they join labor
unions. (Emphasis supplied)

To further strengthen the powers of a union, the State has allowed the inclusion of union security clauses,
including a "union shop" (the type of union security clause involved in this case), in collective bargaining agreements
(CBA). In a "union shop," employees who are not union members at the time of signing of the contract need not join
the union, but all workers hired thereafter must join. Non-members may be hired, but to retain employment must
become union members after a certain period. The ponencia points out the validity in this jurisdiction of the more
stringent union security of "closed shop" and its applicability to old employees who are non-union members at the
time of effectivity of the CBA. In a "closed shop," only union members can be hired by the company and they must
remain union members to retain employment in the company.

As explained in Guijarno, it was to "further increase the effectiveness of [unions] that a closed shop has been
allowed." However, this undertaking did not come without detrimental effects on the workers themselves, such that
in Confederated Sons of Labor v. Anakan Lumber Co., we declared that a closed shop is "so harsh that it must be
strictly construed" and that "doubts must be resolved against [it]." We also ruled in Anakan that "In order that an
employer may be deemed bound, under a collective bargaining agreement, to dismiss employees for non-union
membership, the stipulation to this effect must be so clear and unequivocal as to leave no room for doubt thereon."

Guijarno elucidated the downside of a closed shop and its compulsory membership, thus:

x x x To further increase the effectiveness of such organizations, a closed shop has been allowed. It could happen,
though, that such a stipulation which assures further weight to a labor union at the bargaining table could be utilized
against minority groups or individual members thereof. x x x Respondent Court, it would appear, was not sufficiently
alert to such a danger. What is worse, it paid no heed to the controlling doctrine which is merely a recognition of a
basic fact in life, namely, that power in a collectivity could be the means of crushing opposition and stifling the voices
of those who are in dissent. The right to join others of like persuasion is indeed valuable. An individual by himself
may feel inadequate to meet the exigencies of life or even to express his personality without the right to association
being vitalized. It could happen though that whatever group may be in control of the organization may simply ignore
his most-cherished desires and treat him as if he counts for naught. The antagonism between him and the group
becomes marked. Dissatisfaction if given expression may be labeled disloyalty. In the labor field, the union under
such circumstances may no longer be a haven of refuge, but indeed as much of a potential foe as management
itself. Precisely with the Anakan doctrine, such an undesirable eventuality has been sought to be minimized, if not
entirely avoided. x x x. (Emphasis supplied)

Justice Fernando, in his concurring opinion in Victoriano, highlighted the importance of freedom of association,
while referring to closed shop and its coercive nature with manifest disapproval, viz:

x x x Thought must be given to the freedom of association, likewise an aspect of intellectual liberty. For the
late Professor Howe a constitutionalist and in his lifetime the biographer of the great Holmes, it even partakes of the
political theory of pluralistic sovereignty. So great is the respect for the autonomy accorded voluntary
Labor II – 1
societies. Such a right implies at the very least that one can determine for himself whether or not he should
join or refrain from joining a labor organization, an institutional device for promoting the welfare of the
working man. A closed shop, on the other hand, is inherently coercive. That is why, as is unmistakably
reflected in our decisions, the latest of which is Guijarno v. Court of Industrial Relations, it is far from being
a favorite of the law. For a statutory provision then to further curtail its operation, is precisely to follow the
dictates of sound public policy. (Emphasis supplied, citations omitted)

In the United States, closed shops, which require compulsory union membership for all employees, have been
declared unlawful since 1947, while union shops, which allow old employees to remain non-union members but
require new employees to become members after a certain period, are generally allowed. Previously, closed shops,
union shops and agency shops were all permitted under Section 8(3) of the National Labor Relations Act of 1935
(NLRA), also known as the Wagner Act. But in 1947, the US Congress "reacted to widespread abuses of closed-
shop agreements by banning such arrangements" through the enactment of the Labor Management Relations Act
(LMRA), or the Taft-Hartley Act, which amended the NLRA by adding Section 8(a)(3). In National Labor Relations
Board v. General Motors Corporation, the US Supreme Court explained that the Taft-Hartley Act amendments were
intended to accomplish twin purposes, one of which is to abolish closed shop to eliminate serious abuses of
compulsory unionism.

These additions were intended to accomplish twin purposes. On the one hand, the most serious abuses of
compulsory unionism were eliminated by abolishing the closed shop. On the other hand, Congress recognized that
in the absence of a union-security provision ‘many employees sharing the benefits of what unions are able to
accomplish by collective bargaining will refuse to pay their share *741 of the cost.’ S.Rep.No.105, 80th Cong., 1st
Sess., p. 6, 1 Leg.Hist.L.M.R.A. 412. Consequently, under the new law ‘employers would still be permitted to enter
into agreements requiring all the employees in a given bargaining unit to become members 30 days after being
hired,’ but ‘expulsion from a union cannot be a ground of compulsory discharge if the worker is not delinquent in
paying his initiation fee or dues.’ S.Rep.No.105, p. 7, 1 Leg.Hist.L.M.R.A. 413. The amendments were intended only
to ‘remedy the most serious abuses of compulsory union membership and yet give employers and unions who feel
that such agreements promoted stability by eliminating ‘free riders’ the right to continue such arrangements.’ Ibid. As
far as the federal law was concerned, all employees could be required to pay their way. The bill ‘abolishes the
closed shop but permits voluntary agreements for requiring such forms of compulsory membership as the union
shop or maintenance of membership ***.’ S.Rep.No.105, p. 3, 1 Leg.Hist.L.M.R.A. 409.

Union shops and agency shops are still permitted under Section 8(a)(3) of the NLRA as amended; however, Section
14(b) authorizes States to exempt themselves from Section 8(a)(3) and to enact "right-to-work" laws prohibiting
union or agency shops. Where union shop agreements are allowed, workers may be required to belong to labor
unions as a condition of their employment, so long as such workers are required to render nothing other than
financial support to the union and so long as the unions themselves do not attempt to use union shop agreements
as vehicles for imposing ideological conformity. Thus, "membership" in unions as a condition of employment is
whittled down to its financial core.

Although United States laws and jurisprudence on closed shops and union shops, as they now stand, are different
from our own laws, it may be worthwhile to treat them with careful regard since our Labor Code and its precursor,
the Industrial Peace Act, are patterned after US labor laws. We have previously ruled that when a statute has been
adopted from another state or country and such statute has previously been construed by the courts of such state or
country, the statute is deemed to have been adopted with the construction given to it. Where our labor statutes are
based on statutes in foreign jurisdiction, the decisions of the high courts in those jurisdictions construing and
interpreting the Act are given persuasive effects in the application of Philippine law.

Union security agreements were adopted in our jurisdiction primarily to safeguard the rights of the working man.
Where utilized to achieve a contrary purpose, these union devices should be curtailed and carefully maneuvered to
remain within the periphery of labor protection.

In this case, the CBA between BPI and the BPI Employees Union contains a union shop clause requiring that "new
employees" of BPI join the Union within 30 days after they become regularized, as a condition for their continued
employment.

Labor II – 1
The ponencia points out that the absorption of FEBTC employees was purely voluntary on the part of BPI, and was
not mandated by law or by a contract between the merging entities. The ponencia holds that in the absence of a
stipulation in the plan of merger regarding the absorption of FEBTC’s employees by BPI, the latter has no obligation
to absorb or continue the employment of said FEBTC employees.

I do not agree.

Upon merger, BPI, as the surviving entity, absorbs FEBTC and continues the combined business of the two banks.
BPI assumes the legal personality of FEBTC, and automatically acquires FEBTC’s rights, privileges and powers, as
well as its liabilities and obligations. Section 80 of Batas Pambansa Blg. 68, otherwise known as "The Corporation
Code of the Philippines" enumerates the effects of merger, to wit:

1. The constituent corporations shall become a single corporation which, in case of merger, shall be the
surviving corporation designated in the plan of merger; x x x

2. The separate existence of the constituent corporations shall cease, except that of the surviving x x x
corporation;

3. The surviving x x x corporation shall possess all the rights, privileges, immunities and powers and shall be
subject to all the duties and liabilities of a corporation organized under this Code;

4. The surviving x x x corporation shall thereupon and thereafter possess all the rights, privileges,
immunities and franchises of each of the constituent corporations; and all property, real or personal,
and all receivables due on whatever account, including subscriptions to shares and other choses in action,
and all and every other interest of, or belonging to, or due to each constituent corporation, shall be deemed
transferred to and vested in such surviving x x x corporation without further act or deed; and

5. The surviving x x x corporation shall be responsible and liable for all the liabilities and obligations
of each of the constituent corporations in the same manner as if such surviving x x x corporation had
itself incurred such liabilities or obligations; and any pending claim, action or proceeding brought by or
against any of such constituent corporations may be prosecuted by or against the surviving or consolidated
corporation. The rights of creditors or liens upon the property of any of such constituent corporations shall
not be impaired by such merger. (Emphasis supplied)

Among the obligations and liabilities of FEBTC is to continue the employment of FEBTC employees. These
employees have already acquired certain employment status, tenure, salary and benefits. They are regular
employees of FEBTC. Since after the merger, BPI has continued the business of FEBTC, FEBTC’s obligation
to these employees is assumed by BPI, and BPI becomes duty-bound to continue the employment of these
FEBTC employees.

Under Article 279 of the Labor Code, regular employees acquire security of tenure, and hence, may not be
terminated by the employer except upon legal grounds. These grounds are the "just causes" enumerated under
Article 282 of the Code, which include serious misconduct or willful disobedience by the employee, gross habitual
neglect of duties, fraud or willful breach of employer’s trust, and commission of a crime; or "authorized causes"
under Article 283, which include installation of labor saving devices, redundancy, retrenchment to prevent losses,
and closing or cessation of business operations. Without any of these legal grounds, the employer cannot validly
terminate the employment of regular employees; otherwise, the employees’ right to security of tenure would be
violated.

The merger of two corporations does not authorize the surviving corporation to terminate the employees of the
absorbed corporation in the absence of just or authorized causes as provided in Articles 282 and 283 of the Labor
Code. Merger of two corporations is not one of the just or authorized causes for termination of employment. Not
even a union shop agreement is just or authorized cause to terminate a permanent employee. A union shop clause
is only a ground to terminate a probationary employee who refuses to join the union as a condition for continued
employment. Once an employee becomes permanent, he is protected by the security of tenure clause in the
Constitution, and he can be terminated only for just or authorized causes as provided by law.

Labor II – 1
The right to security of tenure of regular employees is enshrined in the Constitution. This right cannot be eroded, let
alone be forfeited except upon a clear and convincing showing of a just and lawful cause. In this case, there is no
showing that legal ground exists to warrant a termination of the FEBTC employees. Therefore, BPI is obligated to
continue FEBTC employees’ regular employment in deference to their constitutional right to security of tenure.

Meanwhile, the FEBTC employees had no choice but to accept the absorption by way of merger. A merger is a
legitimate management prerogative which cannot be opposed or rejected by the employees of the merging entities.
Hence, the absorption by BPI of the FEBTC employees was not within the FEBTC employees’ control, and
the latter had no choice but to be absorbed by BPI, unless they opted to give up their means of livelihood.

Upon the effectivity of the CBA in this case, BPI employees who were members of the Union were required to
maintain their membership as a condition for continued employment. On the other hand, the then non-union
employees of BPI were not compelled to join the Union — they were given a choice whether or not to join
the Union at no risk to their continued employment. In other words, non-union BPI employees could opt not to
join the Union and still retain their employment with BPI. Meanwhile, "new employees" or those who were hired by
BPI after the effectivity and during the life of the CBA were automatically required to join the Union within 30 days
after they were regularized.

Existing BPI employees who were non-union members were not compelled to join the Union as a condition
for their continued employment, as this would violate their fundamental constitutional right not to join a
union. This freedom of choice exercised by non-union BPI employees was in recognition of their fundamental
constitutional right to join or not to join a union which is part of their broader constitutional right to form associations.
To force these employees to join a labor union at the risk of losing their means of livelihood would violate the
Constitution.

Thus, under the CBA, the BPI employees required to acquire or maintain union membership as a condition
for their continued employment are (1) the union members at the time of the effectivity of the CBA and (2)
the "new employees" who were hired during the effectivity of the CBA. Non-union BPI employees at the
time of the effectivity of the CBA were not, and are still not, required to join the Union.

In the case of "new employees" hired by BPI during the life of the CBA, there is no violation of their constitutional
right not to join a union. At the time of their application for employment with BPI, or at the latest, at the time they
were hired by BPI, these employees knew that they were required to join the Union within 30 days upon
regularization as a condition for continued employment with BPI. In short, the employees knew beforehand that they
had to join the Union to be employed with BPI. Thus, these employees had a clear choice whether or not to be
employed with BPI, which requires that they must join the Union upon regularization.

The ponencia holds that the absorbed FEBTC employees should be considered as "new employees" of BPI, and
therefore, required to join the Union pursuant to the union shop clause of the CBA. The ponencia deprives the
absorbed employees of their fundamental constitutional right to choose whether or not to join the Union.

I cannot subscribe to this view.

The former FEBTC employees should not be considered as "new employees" of BPI. The former FEBTC employees
were absorbed by BPI immediately upon merger, leaving no gap in their employment. The employees retained their
previous employment status, tenure, salary and benefits. This clearly indicates the intention of BPI to assume and
continue the employer-employee relations of FEBTC and its employees. The FEBTC employees’ employment
remained continuous and unchanged, except that their employer, FEBTC, merged with BPI which, as the surviving
entity, continued the combined business of the two banks.

Thus, the former FEBTC employees are immediately regularized and made permanent employees of BPI. They
are not subject to any probationary period as in the case of "new employees" of BPI. The 30-day period within which
regularized "new employees" of BPI must join the Union does not apply to former FEBTC employees who are not
probationary employees but are immediately regularized as permanent employees of BPI. In short, the former
FEBTC employees are immediately given the same permanent status as old employees of BPI.

Labor II – 1
The absorbed FEBTC employees are not "new employees" who are seeking jobs for the first time. These absorbed
employees are employees who have been working with FEBTC for years, or even decades, and were only absorbed
by BPI because of the merger. Without the merger, these employees would have remained FEBTC employees
without being required to join a union to retain their employment. These absorbed employees are recognized by
BPI and even by the Union as permanent employees immediately upon their absorption by BPI because
these employees do not have to go through a probationary period. These absorbed employees are different
from the newly-hired employees of BPI, as these absorbed employees already had existing employment tenure, and
were earning a livelihood when they were told that they had to join the Union at the risk of losing their livelihood.

To require these absorbed employees to join the Union at the risk of losing their jobs is akin to forcing an existing
non-union BPI employee to join the Union on pain of termination. In the same way that an existing non-union BPI
employee is given the constitutional right to choose whether or not to join a union, an absorbed employee should be
equally given the same right. And this right must be conferred to the absorbed employee upon the effectivity of the
merger between FEBTC and BPI.

Indisputably, the right to join or not to join a Union is part of the fundamental constitutional right to form associations.
In Sta. Clara Homeowners’ Association v. Gaston, we held that, "The constitutionally guaranteed freedom of
association includes the freedom not to associate. The right to choose with whom one will associate oneself is
the very foundation and essence of that partnership. It should be noted that the provision guarantees the
right to form an association. It does not include the right to compel others to form or join one." Thus, to
compel the absorbed FEBTC employees to join the Union at the risk of losing their jobs is violative of their
constitutional freedom to associate.

To consider the former FEBTC employees not "new employees" of BPI for the purpose of the union shop clause of
the CBA does not necessarily mean that the FEBTC employees are considered "old employees" of BPI, hired by
BPI on the date that the employees were hired by FEBTC. The former FEBTC employees are not old BPI
employees. They are former FEBTC employees absorbed by BPI upon effectivity of the merger. Nevertheless, as
absorbed employees, these former FEBTC employees cannot be relegated to being "new employees" of BPI within
the contemplation of the union shop clause of the CBA.

If the absorbed employees are treated as "new employees," and they refuse to join the Union, the Union can ask
BPI to terminate their employment. And BPI can validly terminate their employment pursuant to the union shop
clause. It is well-settled that termination of employment by virtue of a union security clause embodied in a CBA is
recognized in our jurisdiction, and an employer who merely complies in good faith with the union’s request for the
dismissal of an employee pursuant to the CBA cannot be considered guilty of unfair labor practice.

Upon such termination, the absorbed employees are not entitled to separation pay under the law. Grant of
separation pay to employees dismissed pursuant to a union shop clause of a CBA is not a statutory requirement.
Worse, assuming that the absorbed employees have already reached the age of 60 years or above, as "new
employees" of BPI, they will not be entitled to retirement benefits under the law. For instance, an absorbed
employee who is 60 years old or above, but less than 65 years which is the compulsory retirement age, cannot avail
of optional retirement benefits since the law requires that the employee "has served at least five (5) years in the said
establishment." Considering that the absorbed employees are required to join the Union within 30 days from
regularization, and the law requires that probationary employment shall not exceed six months from the date the
employee started working, after which the employee shall be considered a regular employee, it may be assumed
that the absorbed employees had not yet served BPI for at least five years when required to join the Union. If, on the
other hand, the absorbed employee has already reached the compulsory retirement age of 65 years, then neither
can the employee avail of any retirement benefit since the law provides that a compulsory retiree shall be entitled to
"at least one-half (½) month salary for every year of service, a fraction of at least six (6) months being considered as
one whole year." Assuming that the absorbed employee has not yet rendered service in BPI for at least six months
when said employee reached the compulsory retirement age of 65 years, then the employee will not be entitled to
receive any retirement benefit. Thus, to consider the absorbed FEBTC employees as "new employees" of BPI
can have dire consequences on the absorbed employees who refuse to join the Union, not the least of
which is the forfeiture of benefits which should be properly accorded these employees after years, or
probably even decades, of loyal service to FEBTC.

Labor II – 1
The ponencia points to Article 248 (e) of the Labor Code which states, thus: "x x x Nothing in this Code or in any
other law shall stop the parties from requiring membership in a recognized collective bargaining agent as a condition
for employment, except those employees who are already members of another union at the time of the signing of
the collective bargaining agreement. x x x"

The above provision presupposes that the parties agreed on "requiring membership in a recognized collective
bargaining agent as a condition for employment," with the stated exception. In this case, BPI and the Union agreed
on a union shop clause concerning "new employees" only. We quote:

Section 2. Union Shop – New employees falling within the bargaining unit as defined in Article I of the
Agreement, who may hereafter be regularly employed by the Bank shall, within thirty (30) days after they become
regular employees, join the Union as a condition of their continued employment. x x x." (Emphasis in the original)

As previously discussed, the absorbed FEBTC employees are NOT and cannot be considered as "new employees"
within the contemplation of the union shop clause.

Verily, BPI and the Union never agreed on requiring the former FEBTC employees to join the Union as a condition
for their employment by BPI. On the contrary, BPI is questioning the applicability of the union shop clause to said
employees.

The ponencia states, "When certain employees are obliged to join a particular union as a requisite for continued
employment, as in the case of a Union Shop Clause, a form of discrimination or a derogation of the freedom or right
not to join any labor organization occurs but these are valid restrictions because they are in favor of unionism." In
this case, a derogation of the employees’ fundamental constitutional right not to join a union is being done without a
determination of whether the employees are in favor of unionism. Certainly, the union shop clause in a CBA cannot
prevail over the fundamental constitutional right of a worker to join or not to join a union.

Finally, the ponencia agrees with the Court of Appeals that sustaining petitioner’s position will result in an awkward
and unfair situation wherein the absorbed employees will be in a better position than the existing BPI employees,
since the latter will be required to pay monthly union dues, while the absorbed employees will "enjoy the fruits of
labor of the [union] and its members for nothing in exchange." This is not correct. Section 248(e) of the Labor Code
provides that, "Employees of an appropriate collective bargaining unit who are not members of the recognized
collective bargaining agent may be assessed a reasonable fee equivalent to the dues and other fees paid by
members of the recognized collective bargaining agent, if such non-union members accept the benefits under the
collective bargaining agreement x x x." The absorbed FEBTC employees who refuse to join the Union will not
be free riders.

We held in Holy Cross of Davao College, Inc. v. Joaquin that the collection of agency fees in an amount equivalent
to union dues and fees, from employees who are not union members, is recognized by Article 248 (e) of the Labor
Code. The employee’s acceptance of benefits resulting from a CBA justifies the deduction of agency fees from his
pay and the union’s entitlement thereto. In this aspect, the legal basis of the union’s right to agency fees is neither
contractual nor statutory, but quasi-contractual, deriving from the established principle that non-union employees
may not unjustly enrich themselves by benefiting from employment conditions negotiated by the bargaining union.

In the present case, since the absorbed FEBTC employees will pay all union dues and fees, there is no reason to
force them to join the Union except to humiliate them by trampling upon their fundamental constitutional right to join
or not to join a union. This the Court should not allow.

It is this Court’s solemn duty to implement the State policy of promoting unionism. However, this duty cannot be
done at the expense of a fundamental constitutional right of a worker. We cannot exalt union rights over and above
the freedom and right of employees to join or not to join a union.

Accordingly, I vote to GRANT the petition.

Labor II – 1
19.) General Milling Corp. v Casio
[G.R. No. 149552 : March 10, 2010]

GENERAL MILLING CORPORATION, PETITIONER, VS. ERNESTO CASIO, ROLANDO IGOT,

MARIO FAMADOR, NELSON LIM, FELICISIMO BOOC, PROCOPIO OBREGON, JR., AND
ANTONIO ANINIPOK, RESPONDENTS,

AND

VIRGILIO PINO, PAULINO CABREROS, MA. LUNA P. JUMAOAS, DOMINADOR BOOC, FIDEL
VALLE, BARTOLOME AUMAN, REMEGIO CABANTAN, LORETO GONZAGA, EDILBERTO
MENDOZA AND ANTONIO PANILAG, RESPONDENTS.

DECISION

LEONARDO-DE CASTRO, J.:

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking the reversal of
the Decision[1] dated March 30, 2001 and Resolution[2] dated July 18, 2001 of the Court of Appeals in
CA-G.R. SP No. 40280, setting aside the Voluntary Arbitration Award [3] dated August 16, 1995 of the
National Conciliation and Mediation Board (NCMB), Cebu City, in VA Case No. AC 389-01-01-95.
Voluntary Arbitrator Alice K. Canonoy-Morada (Canonoy-Morada) dismissed the Complaint filed by
respondents Ernesto Casio, Rolando Igot, Mario Famador, Nelson Lim, Felicisimo Booc, Procopio
Obregon, Jr. and Antonio Aninipok (Casio, et al.) against petitioner General Milling Corporation
(GMC) for unfair labor practice, illegal suspension, illegal dismissal, and payment of moral and
exemplary damages.

The labor union Ilaw at Buklod ng Mangagawa (IBM)-Local 31 Chapter (Local 31) was the
sole and exclusive bargaining agent of the rank and file employees of GMC in Lapu-Lapu
City. On November 30, 1991, IBM-Local 31, through its officers and board members, namely,
respondents Virgilio Pino,[4] Paulino Cabreros, Ma. Luna P. Jumaoas, Dominador Booc, Bartolome
Auman, Remegio Cabantan, Fidel Valle, Loreto Gonzaga, Edilberto Mendoza and Antonio Panilag
(Pino, et al.), entered into a Collective Bargaining Agreement (CBA) with GMC. The effectivity
of the said CBA was retroactive to August 1, 1991. [5]

The CBA contained the following union security provisions:

Section 3. MAINTENANCE OF MEMBERSHIP - All employees/workers employed by the Company

with the exception of those who are specifically excluded by law and by the terms of this
Agreement must be members in good standing of the Union within thirty (30) days upon the
signing of this agreement and shall maintain such membership in good standing thereof as a
condition of their employment or continued employment.

Section 6. The Company, upon written request of the Union, shall terminate the services of
any employee/worker who fails to fulfill the conditions set forth in Sections 3 and 4 thereof,
subject however, to the provisions of the Labor Laws of the Philippines and their Implementing Rules
and Regulations. The Union shall absolve the Company from any and all liabilities, pecuniary or
otherwise, and responsibilities to any employee or worker who is dismissed or terminated in pursuant
thereof.[6]

Casio, et al. were regular employees of GMC with daily earnings ranging from P173.75 to P201.50,
and length of service varying from eight to 25 years. [7] Casio was elected IBM-Local 31
President for a three-year term in June 1991, while his co-respondents were union shop stewards.

Labor II – 1
In a letter[8] dated February 24, 1992, Rodolfo Gabiana (Gabiana), the IBM Regional
Director for Visayas and Mindanao, furnished Casio, et al. with copies of the Affidavits of
GMC employees Basilio Inoc and Juan Potot, charging Casio, et al. with "acts inimical to
the interest of the union." Through the same letter, Gabiana gave Casio, et al. three days from
receipt thereof within which to file their answers or counter-affidavits. However, Casio, et al. refused
to acknowledge receipt of Gabiana's letter.

Subsequently, on February 29, 1992, Pino, et al., as officers and members of the IBM-Local 31,
issued a Resolution[9] expelling Casio, et al. from the union. Pertinent portions of the
Resolution are reproduced below:

Whereas, Felicisimo Booc, Rolando Igot, Procopio Obregon, Jr., Antonio Aninipok, Mario Famador,
Nelson Lim and Ernesto Casio, through Ernesto Casio have refused to acknowledge receipt of the
letter-complaint dated February 24, 1992, requiring them to file their answer[s] or counter-affidavits
as against the charge of "acts inimical to the interest of the union" and that in view of such refusal to
acknowledge receipt, a copy of said letter complaint was dropped or left in front of E. Casio;

Whereas, the three (3)[-]day period given to file their answer or counter-affidavit have already
lapsed prompting the union Board to investigate the charge ex parte;

Whereas, after such ex parte investigation the said charge has been more than adequately
substantiated by the affidavits/witnesses and documentary exhibits presented.

NOW, THEREFORE, RESOLVED as it is hereby RESOLVED, that Ernesto Casio, Felicisimo Booc,
Rolando Igot, Procopio Obregon, Jr., Antonio Aninipok, Mario Famador and Nelson Lim be expelled as
union member[s] of good standing effectively immediately.

RESOLVED FURTHER, to furnish copy of this Resolution to the GMC Management for their information
and guidance with the recommendation as it is hereby recommended to dismiss the above-named
employees from work.

Gabiana then wrote a letter[10] dated March 10, 1992, addressed to Eduardo Cabahug (Cabahug),
GMC Vice-President for Engineering and Plant Administration, informing the company of the
expulsion of Casio, et al. from the union pursuant to the Resolution dated February 29, 1992 of
IBM-Local 31 officers and board members. Gabiana likewise requested that Casio, et al. "be
immediately dismissed from their work for the interest of industrial peace in the plant."

Gabiana followed-up with another letter[11] dated March 19, 1992, inquiring from Cabahug why
Casio, et al. were still employed with GMC despite the request of IBM-Local 31 that Casio, et al. be
immediately dismissed from service pursuant to the closed shop provision in the existing CBA.
Gabiana reiterated the demand of IBM-Local 31 that GMC dismiss Casio, et al., with the warning that
failure of GMC to do so would constitute gross violation of the existing CBA and constrain the union to
file a case for unfair labor practice against GMC.

Pressured by the threatened filing of a suit for unfair labor practice, GMC acceded to Gabiana's
request to terminate the employment of Casio,  et al. GMC issued a Memorandum dated March
24, 1992 terminating the employment of Casio, et al. effective April 24, 1992 and placing the
latter under preventive suspension for the meantime.

On March 27, 1992, Casio, et al., in the name of IBM-Local 31, filed a Notice of Strike with the
NCMB-Regional Office No. VII (NCMB-RO). Casio, et al. alleged as bases for the strike the illegal
dismissal of union officers and members, discrimination, coercion, and union busting. The NCMB-RO
held conciliation proceedings, but no settlement was reached among the parties. [12]

Casio, et al. next sought recourse from the National Labor Relations Commission (NLRC)
Labor II – 1
Regional Arbitration Branch VII by filing on August 3, 1992 a Complaint against GMC and
Pino, et al. for unfair labor practice, particularly, the termination of legitimate union officers,
illegal suspension, illegal dismissal, and moral and exemplary damages. Their Complaint was
docketed as NLRC Case No. RAB-VII-08-0639-92.[13]

Finding that NLRC Case No. RAB-VII-08-0639-92 did not undergo voluntary arbitration, the Labor
Arbiter dismissed the case for lack of jurisdiction, but endorsed the same to the NCMB-RO. Prior to
undergoing voluntary arbitration before the NCMB-RO, however, the parties agreed to first submit
the case to the grievance machinery of IBM-Local 31. On September 7, 1994, Casio, et al. filed their
Complaint with Pino, the Acting President of IBM-Local 31. Pino acknowledged receipt of the
Complaint and assured Casio, et al. that they would be "seasonably notified of whatever decision
and/or action the Board may have in the instant case."[14] When the IBM-Local 31 Board failed to hold
grievance proceedings on the Complaint of Casio, et al., NCMB Voluntary Arbitrator Canonoy-Morada
assumed jurisdiction over the same. The Complaint was docketed as VA Case No. AC 389-01-01-95.

Based on the Position Papers and other documents submitted by the parties, [15] Voluntary Arbitrator
Canonoy-Morada rendered on August 16, 1995 a Voluntary Arbitration Award dismissing the
Complaint in VA Case No. AC 389-01-01-95 for lack of merit, but granting separation pay and
attorney's fees to Casio, et al. The Voluntary Arbitration Award presented the following findings: (1)
the termination by GMC of the employment of Casio, et al. was in valid compliance with the
closed shop provision in the CBA; (2) GMC had no competence to determine the good standing of
a union member; (3) Casio, et al. waived their right to due process when they refused to receive
Gabiana's letter dated February 24, 1992, which required them to submit their answer to the charges
against them; (4) the preventive suspension of Casio, et al. by GMC was an act of self-defense; and
(5) the IBM-Local 31 Resolution dated February 29, 1992 expelling Casio, et al. as union members,
also automatically ousted them as union officers.[16] The dispositive portion of the Voluntary
Arbitration Award reads:

WHEREFORE, above premises considered, this case filed by [Casio, et al.] is hereby ordered
DISMISSED for lack of merit.

Since the dismissal is not for a cause detrimental to the interest of the company, respondent General
Milling Corporation is, nonetheless, ordered to pay separation pay to all [Casio, et al.] within seven
(7) calendar days upon receipt of this order at the rate of one-half month per year of service
reckoned from the time of their employment until the date of their separation on March 24, 1992,
thus:

Employee Date Hired Rate/Month Service Total

(1/2 mo/yr of service)
Casio April 24/74 P2,636.29 x 18 years = P47,453.22
Igot May 1980 P2,472.75 x 12 years = P29,673.00
Famador Feb. 1977 P2,498.92 x 15 years = P37,483.80
Lim Aug. 1975 P2,466.21 x 17 years = P41,925.57
Booc Aug. 1978 P2,498.92 x 14 years = P34,984.88
Obregon May 1984 P2,273.23 x 08 years = P18,185.84
Aninipok Sept. 1967 P2,616.01 x 25 years = P65,400.25

The attorney's fees for [Casio, et al.'s] counsel shall be ten percent (10%) of the total amount due
them; and shall be shared proportionately by all of the same [Casio, et al.].

All other claims are hereby denied.[17]

Dissatisfied with the Voluntary Arbitration Award, Casio, et al. went to the Court of Appeals by way of
a Petition for Certiorari under Rule 65 of the Rules of Court to have said Award set aside.

Labor II – 1
The Court of Appeals granted the writ of certiorari and set aside the Voluntary Arbitration Award.
The appellate court ruled that while the dismissal of Casio, et al., was made by GMC
pursuant to a valid closed shop provision under the CBA, the company, however, failed to
observe the elementary rules of due process in implementing the said
dismissal. Consequently, Casio, et al. were entitled to reinstatement with backwages from the time
of their dismissal up to the time of their reinstatement. Nevertheless, the Court of Appeals did not
hold GMC liable to Casio, et al. for moral and exemplary damages and attorney's fees, there being no
showing that their dismissal was attended by bad faith or malice, or that the dismissal was effected
in a wanton, oppressive, or malevolent manner, given that GMC merely accommodated the request
of IBM-Local 31. The appellate court, instead, made Pino, et al. liable to Casio, et al., for moral and
exemplary damages and attorney's fees, since it was on the basis of the imputations and actuations
of Pino, et al. that Casio, et al. were illegally dismissed from employment. The Court of Appeals thus
decreed:

WHEREFORE, the assailed award is hereby SET ASIDE, and private respondent General Milling
Corporation is hereby ordered to reinstate [Casio, et al.] to their former positions without loss of
seniority rights, and to pay their full backwages, solidarily with [Pino, et al.]. Further, [Pino, et al.]
are ordered to indemnify each of [Casio, et al.] in the form of moral and exemplary damages in the
amounts of P50,000.00 and P30,000.00, respectively, and to pay attorney's fees. [18]

The Motion for Reconsideration of GMC was denied by the Court of Appeals in the Resolution dated
July 18, 2001.

Hence, GMC filed the instant Petition for Review, arguing that:

THE HONORABLE PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION

AMOUNTING TO LACK OF OR EXCESS OF JURISDICTION WHEN IT SET ASIDE THE AWARD
OF THE VOLUNTARY ARBITRATOR, AND IN AWARDING REINSTATEMENT AND FULL
BACKWAGES TO [Casio, et al.].

II

THE HONORABLE PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO

LACK OR EXCESS OF JURISDICTION WHEN IT SAID THAT PETITIONER GMC FAILED TO ACCORD DUE
PROCESS TO [Casio, et al.].

III

THE HONORABLE PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO

LACK OF OR EXCESS OF JURISDICTION WHEN IT DID NOT ABSOLVE PETITIONER GMC OF ANY
LIABILITY AND INSTEAD RULED THAT IT WAS SOLIDARILY LIABLE WITH THE UNION OFFICERS FOR
THE PAYMENT OF FULL BACKWAGES TO [Casio, et al.].

At this point, we take note that Pino, et al. did not appeal from the decision of the Court of Appeals.

GMC avers that in reviewing and reversing the findings of the Voluntary Arbitrator, the Court of
Appeals departed from the principle of conclusiveness of the trial judge's findings. GMC also claims
that the findings of the Voluntary Arbitrator as to the legality of the termination from employment of
Casio, et al. are well supported by evidence. GMC further insists that before IBP-Local 31 expelled
Casio, et al. from the union and requested GMC to dismiss Casio, et al. from service pursuant to the
closed shop provision in the CBA, IBP-Local 31 already accorded Casio, et al. due process, only that
Casio, et al. refused to avail themselves of such opportunity. GMC additionally maintains that

Labor II – 1
Casio, et al. were expelled by IBP-Local 31 for "acts inimical to the interest of the union,"
and GMC had no authority to inquire into or rule on which employee-member is or is not
loyal to the union, this being an internal affair of the union. Thus, GMC had to rely on the
presumption that Pino, et al. regularly performed their duties and functions as IBP-Local 31 officers
and board members, when the latter investigated and ruled on the charges against Casio, et al.
[19]
 GMC finally asserts that Pino, et al., the IBP-Local 31 officers and board members who
resolved to expel Casio, et al. from the union, and not GMC, should be held liable for the
reinstatement of and payment of full backwages to Casio, et al. for the company had acted in good
faith and merely complied with the closed shop provision in the CBA.

On the other hand, Casio, et al. counters that GMC failed to identify the specific pieces of evidence
supporting the findings of the Voluntary Arbitrator. Casio, et al. contends that to accord them
due process, GMC itself, as the employer, should have held proceedings distinct and
separate from those conducted by IBM-Local 31. GMC cannot justify its failure to conduct its
own inquiry using the argument that such proceedings would constitute an intrusion by the company
into the internal affairs of the union. The claim of GMC that it had acted in good faith when it
dismissed Casio, et al. from service in accordance with the closed shop provision of the CBA is
inconsistent with the failure of the company to accord the dismissed employees their right to due
process.

In general, in a "petition for review on certiorari as a mode of appeal under Rule 45 of the Rules of
Court, the petitioner can raise only questions of law - the Supreme Court is not the proper venue to
consider a factual issue as it is not a trier of facts. A departure from the general rule may be
warranted where the findings of fact of the Court of Appeals are contrary to the findings and
conclusions of the trial court [or quasi-judicial agency, as the case may be], or when the same is
unsupported by the evidence on record."[20]

Whether Casio, et al. were illegally dismissed without any valid reason is a question of fact better left
to quasi-judicial agencies to determine. In this case, the Voluntary Arbitrator was convinced that
Casio, et al. were legally dismissed; while the Court of Appeals believed the opposite, because even
though the dismissal of Casio, et al. was made by GMC pursuant to a valid closed shop provision in
the CBA, the company still failed to observe the elementary rules of due process. The Court is
therefore constrained to take a second look at the evidence on record considering that the factual
findings of the Voluntary Arbitrator and the Court of Appeals are contradictory.

There are two aspects which characterize the concept of due process under the Labor Code: one is
substantive - whether the termination of employment was based on the provision of the Labor Code
or in accordance with the prevailing jurisprudence; the other is procedural - the manner in which the
dismissal was effected.[21]

After a thorough review of the records, the Court agrees with the Court of Appeals. The
dismissal of Casio, et al. was indeed illegal, having been done without just cause and the
observance of procedural due process.

In Alabang Country Club, Inc. v. National Labor Relations Commission,[22] the Court laid down the
grounds for which an employee may be validly terminated, thus:

Under the Labor Code, an employee may be validly terminated on the following grounds: (1) just
causes under Art. 282; (2) authorized causes under Art. 283; (3) termination due to disease under
Art. 284, and (4) termination by the employee or resignation under Art. 285.

Another cause for termination is dismissal from employment due to the enforcement of the
union security clause in the CBA. x x x. (Emphasis ours.)

"Union security" is a generic term, which is applied to and comprehends "closed shop," "union shop,"
Labor II – 1
"maintenance of membership," or any other form of agreement which imposes upon employees the
obligation to acquire or retain union membership as a condition affecting employment. There is union
shop when all new regular employees are required to join the union within a certain period as a
condition for their continued employment. There is maintenance of membership shop when
employees, who are union members as of the effective date of the agreement, or who thereafter
become members, must maintain union membership as a condition for continued employment until
they are promoted or transferred out of the bargaining unit or the agreement is terminated. A closed
shop, on the other hand, may be defined as an enterprise in which, by agreement between the
employer and his employees or their representatives, no person may be employed in any or certain
agreed departments of the enterprise unless he or she is, becomes, and, for the duration of the
agreement, remains a member in good standing of a union entirely comprised of or of which the
employees in interest are a part.[23]

Union security clauses are recognized and explicitly allowed under Article 248(e) of the Labor Code,
which provides that:

Art. 248. Unfair Labor Practices of Employers. x x x

xxxx

(e) To discriminate in regard to wages, hours of work, and other terms and conditions of employment
in order to encourage or discourage membership in any labor organization. Nothing in this Code or
in any other law shall stop the parties from requiring membership in a recognized
collective bargaining agent as a condition for employment, except those employees who
are already members of another union at the time of the signing of the collective
bargaining agreement.  (Emphasis supplied.)

It is State policy to promote unionism to enable workers to negotiate with management on an even
playing field and with more persuasiveness than if they were to individually and separately bargain
with the employer. For this reason, the law has allowed stipulations for "union shop" and "closed
shop" as means of encouraging workers to join and support the union of their choice in the protection
of their rights and interest vis-Ã -vis the employer.[24]

Moreover, a stipulation in the CBA authorizing the dismissal of employees are of equal import as the
statutory provisions on dismissal under the Labor Code, since "a CBA is the law between the
company and the union and compliance therewith is mandated by the express policy to give
protection to labor."[25]

In terminating the employment of an employee by enforcing the union security clause, the employer
needs only to determine and prove that: (1) the union security clause is applicable; (2) the union is
requesting for the enforcement of the union security provision in the CBA; and (3) there is sufficient
evidence to support the decision of the union to expel the employee from the union. These requisites
constitute just cause for terminating an employee based on the union security provision of the CBA.
[26]

There is no question that in the present case, the CBA between GMC and IBM-Local 31 included a
maintenance of membership and closed shop clause as can be gleaned from Sections 3 and 6 of
Article II. IBM-Local 31, by written request, can ask GMC to terminate the employment of the
employee/worker who failed to maintain its good standing as a union member.

It is similarly undisputed that IBM-Local 31, through Gabiana, the IBM Regional Director for Visayas
and Mindanao, twice requested GMC, in the letters dated March 10 and 19, 1992, to terminate the
employment of Casio, et al. as a necessary consequence of their expulsion from the union.

It is the third requisite - that there is sufficient evidence to support the decision of IBM-
Labor II – 1
Local 31 to expel Casio, et al. - which appears to be lacking in this case.

The full text of the individual but identical termination letters, [27] served by GMC on Casio, et al., is
very revealing. They read:

To: [Employee's Name]

From: Legal Counsel
Subject: Dismissal Upon Union Request Thru
CBA Closed Shop Provision

The company is in receipt of two letters dated March 10, 1992 and March 19, 1992 respectively from
the union at the Mill in Lapulapu demanding the termination of your employment pursuant to the
closed shop provision of our existing Collective Bargaining Agreement. It appears from the
attached resolutions that you have been expelled from union membership and has thus
ceased to become a member in good standing. The resolutions are signed by the same officers
who executed and signed our existing CBA, copies of the letters and resolutions are enclosed hereto
for your reference.

The CBA in Article II provides the following:

Section 3. MAINTENANCE OF MEMBERSHIP - All employees/workers employed by the Company with

the exception of those who are specifically excluded by law and by the terms of this Agreement must
be members in good standing of the Union within thirty (30) days upon the signing of this agreement
and shall maintain such membership in good standing thereof as a condition of their employment or
continued employment.

Section 6. The Company, upon written request of the Union, shall terminate the services of any
employee/worker who fails to fulfill the conditions set forth in Sections 3 and 4 thereof, subject
however, to the provisions of the Labor Laws of the Philippines and their Implementing Rules and
Regulations. The Union shall absolve the Company from any and all liabilities, pecuniary or otherwise,
and responsibilities to any employee or worker who is dismissed or terminated in pursuant thereof.

The provisions of the CBA are clear enough. The termination of employment on the basis of the
closed shop provision of the CBA is well recognized in law and in jurisprudence.

There is no valid ground to refuse to terminate. On the other hand as pointed out in the union's
strongly demanding letter dated March 19, 1992, the company could be sued for unfair labor
practice. While we would have wanted not to accommodate the union's request, we are
left with no other option. The terms of the CBA should be respected. To refuse to enforce the CBA
would result in the breakdown of industrial peace and the end of harmonious relations between the
union and management. The company would face the collective anger and enmity of its employees
who are union members.

In the light of the union's very insistent demand, verbal and in writing and to avoid the union
accusation of "coddling" you, and considering the explicitly mandatory language of the closed shop
provision of the CBA, the company is constrained to terminate your employment, to give you ample
time to look and find another employment, and/or exert efforts to become again a member of good
standing of your union, effective April 24, 1992.

In the meantime, to prevent serious danger to the life and property of the company and of its
employees, we are placing you under preventive suspension beginning today.

It is apparent from the aforequoted letter that GMC terminated the employment of Casio, et al.
relying upon the Resolution dated February 29, 1992 of Pino, et al. expelling Casio, et al.
from IBM-Local 31; Gabiana's Letters dated March 10 and 19, 1992 demanding that GMC
Labor II – 1
terminate the employment of Casio, et al. on the basis of the closed shop clause in the CBA; and the
threat of being sued by IBM-Local 31 for unfair labor practice. The letter made no mention at all
of the evidence supporting the decision of IBM-Local 31 to expel Casio, et al. from the
union. GMC never alleged nor attempted to prove that the company actually looked into
the evidence of IBM-Local 31 for expelling Casio, et al. and made a determination on the
sufficiency thereof. Without such a determination, GMC cannot claim that it had terminated
the employment of Casio, et al. for just cause.

The failure of GMC to make a determination of the sufficiency of evidence supporting the decision of
IBM-Local 31 to expel Casio, et al. is a direct consequence of the non-observance by GMC of
procedural due process in the dismissal of employees.

As a defense, GMC contends that as an employer, its only duty was to ascertain that IBM-
Local 31 accorded Casio, et al. due process; and, it is the finding of the company that IBM-
Local 31 did give Casio, et al. the opportunity to answer the charges against them, but
they refused to avail themselves of such opportunity.

This argument is without basis.

The Court has stressed time and again that allegations must be proven by sufficient evidence
because mere allegation is definitely not evidence. [28] Once more, in Great Southern Maritime
Services Corporation. v. Acuña,[29] the Court declared:

Time and again we have ruled that in illegal dismissal cases like the present one, the onus of proving
that the employee was not dismissed or if dismissed, that the dismissal was not illegal, rests on the
employer and failure to discharge the same would mean that the dismissal is not justified and
therefore illegal. Thus, petitioners must not only rely on the weakness of respondents'
evidence but must stand on the merits of their own defense. A party alleging a critical fact
must support his allegation with substantial evidence for any decision based on
unsubstantiated allegation cannot stand as it will offend due process. x x x. (Emphasis
supplied.)

The records of this case are absolutely bereft of any supporting evidence to substantiate
the bare allegation of GMC that Casio, et al. were accorded due process by IBM-Local 31.
There is nothing on record that would indicate that IBM-Local 31 actually notified Casio, et
al. of the charges against them or that they were given the chance to explain their side. All
that was stated in the IBM-Local 31 Resolution dated February 29, 1992, expelling Casio, et al. from
the union, was that "a copy of the said letter complaint [dated February 24, 1992] was dropped or
left in front of E. Casio."[30] It was not established that said letter-complaint charging Casio, et al.
with acts inimical to the interest of the union was properly served upon Casio, that Casio willfully
refused to accept the said letter-notice, or that Casio had the authority to receive the same letter-
notice on behalf of the other employees similarly accused. It's worthy to note that Casio, et al. were
expelled only five days after the issuance of the letter-complaint against them. The Court cannot find
proof on record when the three-day period, within which Casio, et al. was supposed to file their
answer or counter-affidavits, started to run and had expired. The Court is likewise unconvinced that
the said three-day period was sufficient for Casio, et al. to prepare their defenses and evidence to
refute the serious charges against them.

Contrary to the position of GMC, the acts of Pino,  et al. as officers and board members of IBM-Local
31, in expelling Casio, et al. from the union, do not enjoy the presumption of regularity in the
performance of official duties, because the presumption applies only to public officers from the
highest to the lowest in the service of the Government, departments, bureaus, offices, and/or its
political subdivisions.[31]

Labor II – 1
More importantly, in Liberty Cotton Mills Workers Union v. Liberty Cotton Mills, Inc.,[32] the Court
issued the following reminder to employers:

The power to dismiss is a normal prerogative of the employer. However, this is not without
limitations. The employer is bound to exercise caution in terminating the services of his employees
especially so when it is made upon the request of a labor union pursuant to the Collective Bargaining
Agreement. x x x. Dismissals must not be arbitrary and capricious. Due process must be observed in
dismissing an employee because it affects not only his position but also his means of livelihood.
Employers should therefore respect and protect the rights of their employees, which include the right
to labor. x x x.

The Court reiterated in Malayang Samahan ng mga Manggagawa sa M. Greenfield v. Ramos[33] that:

While respondent company may validly dismiss the employees expelled by the union for disloyalty
under the union security clause of the collective bargaining agreement upon the recommendation by
the union, this dismissal should not be done hastily and summarily thereby eroding the employees'
right to due process, self-organization and security of tenure. The enforcement of union security
clauses is authorized by law provided such enforcement is not characterized by arbitrariness,
and always with due process. Even on the assumption that the federation had valid grounds to
expel the union officers, due process requires that these union officers be accorded a
separate hearing by respondent company.  (Emphases supplied.)

The twin requirements of notice and hearing constitute the essential elements of procedural due
process. The law requires the employer to furnish the employee sought to be dismissed with two
written notices before termination of employment can be legally effected: (1) a written notice
apprising the employee of the particular acts or omissions for which his dismissal is sought in order
to afford him an opportunity to be heard and to defend himself with the assistance of counsel, if he
desires, and (2) a subsequent notice informing the employee of the employer's decision to dismiss
him. This procedure is mandatory and its absence taints the dismissal with illegality. [34]

Irrefragably, GMC cannot dispense with the requirements of notice and hearing before
dismissing Casio, et al. even when said dismissal is pursuant to the closed shop provision
in the CBA. The rights of an employee to be informed of the charges against him and to
reasonable opportunity to present his side in a controversy with either the company or his
own union are not wiped away by a union security clause or a union shop clause in a
collective bargaining agreement. An employee is entitled to be protected not only from a
company which disregards his rights but also from his own union the leadership of which could yield
to the temptation of swift and arbitrary expulsion from membership and hence dismissal from his job.
[35]

In the case at bar, Casio, et al. did not receive any other communication from GMC, except
the written notice of termination dated March 24, 1992. GMC, by its own admission, did not
conduct a separate and independent investigation to determine the sufficiency of the
evidence supporting the expulsion of Casio, et al. by IBP-Local 31. It straight away acceded to
the demand of IBP-Local 31 to dismiss Casio, et al.

The very same circumstances took place in Liberty Cotton Mills, wherein the Court held that the
employer-company acted in bad faith in dismissing its workers without giving said workers an
opportunity to present their side in the controversy with their union, thus:

While respondent company, under the Maintenance of Membership provision of the Collective
Bargaining Agreement, is bound to dismiss any employee expelled by PAFLU for disloyalty, upon its
written request, this undertaking should not be done hastily and summarily. The company acted in
bad faith in dismissing petitioner workers without giving them the benefit of a hearing. It
did not even bother to inquire from the workers concerned and from PAFLU itself about the

Labor II – 1
cause of the expulsion of the petitioner workers. Instead, the company immediately dismissed
the workers on May 30, 1964 after its receipt of the request of PAFLU on May 29, 1964 - in a span of
only one day - stating that it had no alternative but to comply with its obligation under the Security
Agreement in the Collective Bargaining Agreement, thereby disregarding the right of the workers to
due process, self-organization and security of tenure.[36] (Emphasis ours.)

In sum, the Court finds that GMC illegally dismissed Casio, et al. because not only did GMC
fail to make a determination of the sufficiency of evidence to support the decision of IBM-
Local 31 to expel Casio, et al., but also to accord the expelled union members procedural
due process, i.e., notice and hearing, prior to the termination of their employment

Consequently, GMC cannot insist that it has no liability for the payment of backwages and damages
to Casio, et al., and that the liability for such payment should fall only upon Pino, et al., as the IBP-
Local 31 officers and board members who expelled Casio, et al. GMC completely missed the point
that the expulsion of Casio, et al. by IBP-Local 31 and the termination of employment of the same
employees by GMC, although related, are two separate and distinct acts. Despite a closed shop
provision in the CBA and the expulsion of Casio, et al. from IBP-Local 31, law and jurisprudence
imposes upon GMC the obligation to accord Casio, et al. substantive and procedural due process
before complying with the demand of IBP-Local 31 to dismiss the expelled union members from
service. The failure of GMC to carry out this obligation makes it liable for illegal dismissal of Casio, et
al.

In Malayang Samahan ng mga Manggagawa sa M. Greenfield,[37] the Court held that notwithstanding

the fact that the dismissal was at the instance of the federation and that the federation undertook to
hold the company free from any liability resulting from the dismissal of several employees, the
company may still be held liable if it was remiss in its duty to accord the would-be dismissed
employees their right to be heard on the matter.

An employee who is illegally dismissed is entitled to the twin reliefs of full backwages and
reinstatement. If reinstatement is not viable, separation pay is awarded to the employee. In
awarding separation pay to an illegally dismissed employee, in lieu of reinstatement, the amount to
be awarded shall be equivalent to one month salary for every year of service. Under Republic Act No.
6715, employees who are illegally dismissed are entitled to full backwages, inclusive of allowances
and other benefits or their monetary equivalent, computed from the time their actual compensation
was withheld from them up to the time of their actual reinstatement but if reinstatement is no longer
possible, the backwages shall be computed from the time of their illegal termination up to the finality
of the decision. Thus, Casio, et al. are entitled to backwages and separation pay considering that
reinstatement is no longer possible because the positions they previously occupied are no longer
existing, as declared by GMC. [38]

Casio, et al., having been compelled to litigate in order to seek redress for their illegal dismissal, are
entitled to the award of attorney's fees equivalent to 10% of the total monetary award. [39]

WHEREFORE, the instant petition is hereby DENIED. The assailed decision of the Court of Appeals

dated March 30, 2001 in CA-G.R. SP No. 40280 is AFFIRMED.

Labor II – 1
20.) PRI v Taneca.

G.R. No. 160828               August 9, 2010

PICOP RESOURCES, INCORPORATED (PRI), Petitioner,

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

DECISION

PERALTA, J.:

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking the reversal of the
Decision1 dated July 25, 2003 and Resolution 2 dated October 23, 2003 of the Court of Appeals in CA-G.R. SP No.
71760, setting aside the Resolutions dated October 8, 2001 3 and April 29, 20024 of the National Labor Relations
Commission in NLRC CA No. M-006309-2001 and reinstating the Decision 5 dated March 16, 2001 of the Labor
Arbiter.

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

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

Respondents were regular rank-and-file employees of PRI and bona fide members of Nagkahiusang

Mamumuo sa PRI Southern Philippines Federation of Labor (NAMAPRI-SPFL), which is the collective
bargaining agent for the rank-and-file employees of petitioner PRI.

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

The CBA contained the following union security provisions:

Article II- Union Security and Check-Off

Section 6. Maintenance of membership.

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

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

Labor II – 1
 6.3 The COMPANY, upon the written request of the UNION and after compliance with the
requirements of the New Labor Code, shall give notice of termination of services of any employee
who shall fail to fulfill the condition provided in Section 6.1 and 6.2 of this Article, but it assumes no
obligation to discharge any employee if it has reasonable grounds to believe either that membership in the
UNION was not available to the employee on the same terms and conditions generally applicable to other
members, or that membership was denied or terminated for reasons other than voluntary resignation or non-
payment of regular union dues. Separation under the Section is understood to be for cause, consequently,
the dismissed employee is not entitled to separation benefits provided under the New Labor Code and in this
AGREEMENT."7

On May 16, 2000, Atty. Proculo P. Fuentes (Atty. Fuentes) sent a letter to the management of PRI demanding
the termination of employees who allegedly campaigned for, supported and signed the Petition for
Certification Election of the Federation of Free Workers Union (FFW) during the effectivity of the CBA.
NAMAPRI-SPFL considered said act of campaigning for and signing the petition for certification election of
FFW as an act of disloyalty and a valid basis for termination for a cause in accordance with its Constitution and
By-Laws, and the terms and conditions of the CBA, specifically Article II, Sections 6.1 and 6.2 on Union Security
Clause.

In a letter dated May 23, 2000, Mr. Pascasio Trugillo requested the management of PRI to investigate those
union members who signed the Petition for Certification Election of FFW during the existence of their
CBA. NAMAPRI-SPFL, likewise, furnished PRI with machine copy of the authorization letters dated March 19, 20
and 21, 2000, which contained the names and signatures of employees.

Acting on the May 16 and May 23, 2000 letters of the NAMAPRI-SPFL, Atty. Romero A. Boniel issued a
memorandum addressed to the concerned employees to explain in writing within 72 hours why their
employment should not be terminated due to acts of disloyalty as alleged by their Union.

Within the period from May 26 to June 2, 2000, a number of employees who were served "explanation
memorandum" submitted their explanation, while some did not.

In a letter dated June 2, 2000, Atty. Boniel endorsed the explanation letters of the employees to Atty. Fuentes for
evaluation and final disposition in accordance with the CBA.

After evaluation, in a letter dated July 12, 2000, Atty. Fuentes advised the management of PRI that the Union
found the member's explanations to be unsatisfactory. He reiterated the demand for termination, but only of
46 member-employees, including respondents.

On October 16, 2000, PRI served notices of termination for causes to the 31 out of the 46 employees whom
NAMAPRIL-SPFL sought to be terminated on the ground of "acts of disloyalty" committed against it when
respondents allegedly supported and signed the Petition for Certification Election of FFW before the "freedom
period" during the effectivity of the CBA. A Notice dated October 21, 2000 was also served on the Department of
Labor and Employment Office (DOLE), Caraga Region.

Respondents then accused PRI of Unfair Labor Practice punishable under Article 248 (a), (b), (c), (d) and (e)
of the Labor Code, while Atty. Fuentes and Wilbur T. Fuentes and Pascasio Trujillo were accused of violating
Article 248 (a) and (b) of the Labor Code.

Respondents alleged that none of them ever withdrew their membership from NAMAPRI-SPFL or submitted
to PRI any union dues and check-off disauthorizations against NAMAPRI-SPFL. They claimed that they
continue to remain on record as bona fide members of NAMAPRI-SPFL. They pointed out that a patent
manifestation of one’s disloyalty would have been the explicit resignation or withdrawal of membership from the
Union accompanied by an advice to management to discontinue union dues and check-off deductions. They
insisted that mere affixation of signature on such authorization to file a petition for certification election was not per
se an act of disloyalty. They claimed that while it may be true that they signed the said authorization before the start
of the freedom period, the petition of FFW was only filed with the DOLE on May 18, 2000, or 58 days after the start
of the freedom period.

Labor II – 1
Respondents maintained that their acts of signing the authorization signifying support to the filing of a
Petition for Certification Election of FFW was merely prompted by their desire to have a certification
election among the rank-and-file employees of PRI with hopes of a CBA negotiation in due time; and not to
cause the downfall of NAMAPRI-SPFL.

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

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

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

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

WHEREFORE, premises considered, judgment is hereby entered:

1. Declaring complainants’ dismissal illegal; and

2. Ordering respondents Picop Resources Inc. (PRI) and NAMAPRI-SPFL to reinstate complainants to their
former or equivalent positions without loss of seniority rights and to jointly and solidarily pay their backwages
in the total amount of ₱420,339.30 as shown in the said Annex "A" plus damages in the amount of
₱10,000.00 each, or a total of ₱210,000.00 and attorney’s fees equivalent to 10% of the total monetary
award.

SO ORDERED.9

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

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

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

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

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

Labor II – 1
WHETHER AN EXISTING COLLECTIVELY (sic) BARGAINING AGREEMENT (CBA) CAN BE GIVEN ITS FULL
FORCE AND EFFECT IN ALL ITS TERMS AND CONDITION INCLUDING ITS UNION SECURITY CLAUSE, EVEN
BEYOND THE 5-YEAR PERIOD WHEN NO NEW CBA HAS YET BEEN ENTERED INTO.

II

WHETHER OR NOT AN HONEST ERROR IN THE INTERPRETATION AND/OR CONCLUSION OF LAW FALL
WITHIN THE AMBIT OF THE EXTRAORDINARY REMEDY OF CERTIORARI UNDER RULE 65, REVISED RULES
OF COURT.10

We will first delve on the technical issue raised.

PRI perceived a patent error in the mode of appeal elected by respondents for the purpose of assailing the decision
of the NLRC. It claimed that assuming that the NLRC erred in its judgment on the legal issues, its error, if any, is not
tantamount to abuse of discretion falling within the ambit of Rule 65.

Petitioner is mistaken.

The power of the Court of Appeals to review NLRC decisions via Rule 65 or Petition for Certiorari has been settled
as early as in our decision in St. Martin Funeral Home v. National Labor Relations Commission.11 This Court held
that the proper vehicle for such review was a Special Civil Action for Certiorari under Rule 65 of the Rules of Court,
and that this action should be filed in the Court of Appeals in strict observance of the doctrine of the hierarchy of
courts.12 Moreover, it is already settled that under Section 9 of Batas Pambansa Blg. 129, as amended by Republic
Act No. 7902[10] (An Act Expanding the Jurisdiction of the Court of Appeals, amending for the purpose of Section
Nine of Batas Pambansa Blg. 129 as amended, known as the Judiciary Reorganization Act of 1980), the Court of
Appeals – pursuant to the exercise of its original jurisdiction over Petitions for Certiorari – is specifically given the
power to pass upon the evidence, if and when necessary, to resolve factual issues. 13

We now come to the main issue of whether there was just cause to terminate the employment of respondents.

PRI argued that the dismissal of the respondents was valid and legal. It claimed to have acted in good faith
at the instance of the incumbent union pursuant to the Union Security Clause of the CBA.

Citing Article 253 of the Labor Code,14 PRI contends that as parties to the CBA, they are enjoined to keep the status
quo and continue in full force and effect the terms and conditions of the existing CBA during the 60-day period
and/or until a new agreement is reached by the parties.

Petitioner's argument is untenable.

"Union security" is a generic term, which is applied to and comprehends "closed shop," "union shop," "maintenance
of membership," or any other form of agreement which imposes upon employees the obligation to acquire or retain
union membership as a condition affecting employment. There is union shop when all new regular employees are
required to join the union within a certain period as a condition for their continued employment. There is
maintenance of membership shop when employees, who are union members as of the effective date of the
agreement, or who thereafter become members, must maintain union membership as a condition for continued
employment until they are promoted or transferred out of the bargaining unit, or the agreement is terminated. A
closed shop, on the other hand, may be defined as an enterprise in which, by agreement between the employer and
his employees or their representatives, no person may be employed in any or certain agreed departments of the
enterprise unless he or she is, becomes, and, for the duration of the agreement, remains a member in good
standing of a union entirely comprised of or of which the employees in interest are a part. 15

However, in terminating the employment of an employee by enforcing the union security clause, the
employer needs to determine and prove that: (1) the union security clause is applicable; (2) the union is
requesting for the enforcement of the union security provision in the CBA; and (3) there is sufficient
evidence to support the decision of the union to expel the employee from the union. These requisites
constitute just cause for terminating an employee based on the union security provision of the CBA.16
Labor II – 1
As to the first requisite, there is no question that the CBA between PRI and respondents included a union
security clause, specifically, a maintenance of membership as stipulated in Sections 6 of Article II, Union Security
and Check-Off. Following the same provision, PRI, upon written request from the Union, can indeed terminate the
employment of the employee who failed to maintain its good standing as a union member.

Secondly, it is likewise undisputed that NAMAPRI-SPFL, in two (2) occasions demanded from PRI, in their
letters dated May 16 and 23, 2000, to terminate the employment of respondents due to their acts of disloyalty
to the Union.

However, as to the third requisite, we find that there is no sufficient evidence to support the decision of PRI
to terminate the employment of the respondents.

PRI alleged that respondents were terminated from employment based on the alleged acts of disloyalty they
committed when they signed an authorization for the Federation of Free Workers (FFW) to file a Petition for
Certification Election among all rank-and-file employees of PRI. It contends that the acts of respondents are a
violation of the Union Security Clause, as provided in their Collective Bargaining Agreement.

We are unconvinced.

We are in consonance with the Court of Appeals when it held that the mere signing of the authorization in
support of the Petition for Certification Election of FFW on March 19, 20 and 21, or before the "freedom
period," is not sufficient ground to terminate the employment of respondents inasmuch as the petition itself
was actually filed during the freedom period. Nothing in the records would show that respondents failed to
maintain their membership in good standing in the Union. Respondents did not resign or withdraw their
membership from the Union to which they belong. Respondents continued to pay their union dues and
never joined the FFW.

Significantly, petitioner's act of dismissing respondents stemmed from the latter's act of signing an authorization
letter to file a petition for certification election as they signed it outside the freedom period. However, we are
constrained to believe that an "authorization letter to file a petition for certification election" is different
from an actual "Petition for Certification Election." Likewise, as per records, it was clear that the actual Petition
for Certification Election of FFW was filed only on May 18, 2000. 17 Thus, it was within the ambit of the freedom
period which commenced from March 21, 2000 until May 21, 2000. Strictly speaking, what is prohibited is the filing
of a petition for certification election outside the 60-day freedom period. 18 This is not the situation in this case. If
at all, the signing of the authorization to file a certification election was merely preparatory to the filing of
the petition for certification election, or an exercise of respondents’ right to self-organization.

Moreover, PRI anchored their decision to terminate respondents’ employment on Article 253 of the Labor Code
which states that "it shall be the duty of both parties to keep the status quo and to continue in full force and
effect the terms and conditions of the existing agreement during the 60-day period and/or until a new
agreement is reached by the parties." It claimed that they are still bound by the Union Security Clause of the CBA
even after the expiration of the CBA; hence, the need to terminate the employment of respondents.

Petitioner's reliance on Article 253 is misplaced.

The provision of Article 256 of the Labor Code is particularly enlightening. It reads:

Article 256. Representation issue in organized establishments. - In organized establishments, when a verified

petition questioning the majority status of the incumbent bargaining agent is filed before the Department of Labor
and Employment within the sixty-day period before the expiration of a collective bargaining agreement, the Med-
Arbiter shall automatically order an election by secret ballot when the verified petition is supported by the written
consent of at least twenty-five percent (25%) of all the employees in the bargaining unit to ascertain the will of the
employees in the appropriate bargaining unit. To have a valid election, at least a majority of all eligible voters in the
unit must have cast their votes. The labor union receiving the majority of the valid votes cast shall be certified as the
exclusive bargaining agent of all the workers in the unit. When an election which provides for three or more choices
results in no choice receiving a majority of the valid votes cast, a run-off election shall be conducted between the

Labor II – 1
labor unions receiving the two highest number of votes: Provided, That the total number of votes for all contending
unions is at least fifty per cent (50%) of the number of votes cast.

At the expiration of the freedom period, the employer shall continue to recognize the majority status of the
incumbent bargaining agent where no petition for certification election is filed.19

Applying the same provision, it can be said that while it is incumbent for the employer to continue to recognize the
majority status of the incumbent bargaining agent even after the expiration of the freedom period, they could only do
so when no petition for certification election was filed. The reason is, with a pending petition for certification, any
such agreement entered into by management with a labor organization is fraught with the risk that such a labor
union may not be chosen thereafter as the collective bargaining representative. 20 The provision for status quo is
conditioned on the fact that no certification election was filed during the freedom period. Any other view would
render nugatory the clear statutory policy to favor certification election as the means of ascertaining the true
expression of the will of the workers as to which labor organization would represent them. 21

In the instant case, four (4) petitions were filed as early as May 12, 2000. In fact, a petition for certification
election was already ordered by the Med-Arbiter of DOLE Caraga Region on August 23, 2000. 22 Therefore,
following Article 256, at the expiration of the freedom period, PRI's obligation to recognize NAMAPRI-SPFL
as the incumbent bargaining agent does not hold true when petitions for certification election were filed, as
in this case.

Moreover, the last sentence of Article 253 which provides for automatic renewal pertains only to the economic
provisions of the CBA, and does not include representational aspect of the CBA. An existing CBA cannot constitute
a bar to a filing of a petition for certification election. When there is a representational issue, the status quo provision
in so far as the need to await the creation of a new agreement will not apply. Otherwise, it will create an absurd
situation where the union members will be forced to maintain membership by virtue of the union security clause
existing under the CBA and, thereafter, support another union when filing a petition for certification election. If we
apply it, there will always be an issue of disloyalty whenever the employees exercise their right to self-organization.
The holding of a certification election is a statutory policy that should not be circumvented, 23 or compromised. 1avvphi

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

We will emphasize anew that the power to dismiss is a normal prerogative of the employer. This, however, is not
without limitations. The employer is bound to exercise caution in terminating the services of his employees
especially so when it is made upon the request of a labor union pursuant to the Collective Bargaining Agreement.
Dismissals must not be arbitrary and capricious. Due process must be observed in dismissing an employee,
because it affects not only his position but also his means of livelihood. Employers should, therefore, respect and
protect the rights of their employees, which include the right to labor. 25

An employee who is illegally dismissed is entitled to the twin reliefs of full backwages and reinstatement. If
reinstatement is not viable, separation pay is awarded to the employee. In awarding separation pay to an illegally
dismissed employee, in lieu of reinstatement, the amount to be awarded shall be equivalent to one month salary for
every year of service. Under Republic Act No. 6715, employees who are illegally dismissed are entitled to full
backwages, inclusive of allowances and other benefits, or their monetary equivalent, computed from the time their
actual compensation was withheld from them up to the time of their actual reinstatement. But if reinstatement is no
longer possible, the backwages shall be computed from the time of their illegal termination up to the finality of the
decision. Moreover, respondents, having been compelled to litigate in order to seek redress for their illegal
dismissal, are entitled to the award of attorney’s fees equivalent to 10% of the total monetary award. 26

WHEREFORE, the petition is DENIED. The Decision dated July 25, 2003 and the Resolution dated October 23,
2003 of the Court of Appeals in CA-G.R. SP No. 71760, which set aside the Resolutions dated October 8, 2001 and
Labor II – 1
April 29, 2002 of the National Labor Relations Commission in NLRC CA No. M-006309-2001, are AFFIRMED
accordingly. Respondents are hereby awarded full backwages and other allowances, without qualifications and
diminutions, computed from the time they were illegally dismissed up to the time they are actually reinstated. Let this
case be remanded to the Labor Arbiter for proper computation of the full backwages due respondents, in
accordance with Article 279 of the Labor Code, as expeditiously as possible.

Labor II – 1
21.) Oca v Trajano

G.R. No. 76189               August 8, 1991

ROBERTO M. OCA, JR., ET AL.* and PHILIPPINE TRANSPORT AND GENERAL WORKERS ORGANIZATION

(PTGWO-OCA GROUP), petitioners,
vs.
CRESENCIANO B. TRAJANO, Director of the BLR-MOLE ANDRES, L. DINGLASAN, JR., ET
AL.** and PHILIPPINE TRANSPORT AND GENERAL WORKERS ORGANIZATION (PTGWO-DINGLASAN
GROUP) and CARLOS T. RULLAMAS (PTGWO-III) respondents.

D. T. Dagum Jr. and P. T. De Quiroz for petitioners.

Isidro D. Amoroso for respondent Carlos T. Rullamas.
A.B. Serquina and Lagman for private respondents.

FERNAN, C.J.:

"United we stand, divided we fall," could very well have been the motto of the Philippine Transport and General
Workers Organization (PTGWO). Founded in the 1950's by one of the Philippine labor movement's leading pillars,
the late Roberto Oca, Sr., the labor organization encompasses a good number of affiliate unions and is one of the
founding members of the Trade Union Congress of the Philippines. But just like good things and good times, good
organizations also come to an end. This case chronicles PTGWO's story.

During the 11th PTGWO national convention held on April 22, 1979, herein private respondent Andres L.
Dinglasan, Jr. was elected National President while herein petitioner Roberto M. Oca, Jr. was elected National
Executive Vice President. Their terms of office were both for three (3) years.

On February 26, 1982, Dinglasan convened an executive board meeting to thresh out the mechanics of the
national convention of PTGWO for that year. Of the thirty three (33) voting members of the board, thirty one (31)
were present. However, before the body could agree on the date of the convention, a number of participants
questioned the qualifications of some members to sit on the board. To cut the heated argument then ensuing,
the meeting was adjourned. Thereafter, Oca and some members of the board left the conference hall.

Nonetheless, the nineteen (19) members who remained asked Dinglasan to reconvene the meeting, which he
did. This body passed, among others, a resolution to hold the national convention on April 18, 1982. On the
other hand, Oca and his group, in a special board meeting on March 19, 1982, decided to hold their
convention on April 4, 1982; thereby prompting Dinglasan and his group in their board meeting of April 1,
1982 to advance their convention date also to April 4, 1982.

Hence, on April 4, 1982, the groups of Dinglasan and Oca held their respective conventions at different
venues and elected their own set of officers.

On April 15, 1982, PTGWO and Dinglasan filed a petition with the Bureau of Labor Relations to declare the
convention and election of officers held by the Oca group as illegal, null and void. 1

Pending resolution of the dispute, PTGWO-III a group of fifteen (15) local unions headed by Carlos T. Rullamas and
identified with the Dinglasan faction, moved to intervene for the reason that its members had allegedly already
"seceded" from the camp of Dinglasan. Intervenor prayed that it be permitted to use the name PTGWO or, in the
alternative, to allow the three factions to operate independently of each other.

On May 15, 1986, herein respondent Director Cresenciano B. Trajano rendered a decision, declaring both
conventions of doubtful validity. Finding that the rift between the two (2) factions had become unbridgeable so
Labor II – 1
that a convention to unify them might not be a workable solution, respondent Director concluded that there was
no other alternative but to recognize the "sad fact that the PTGWO, once a monolithic labor confederation,
has to be split into two: PTGWO-Oca and PTGWO-Dinglasan".  He went further to say that "with the division of
2

PTGWO into Dinglasan and Oca wings on 4 April 1982, PTGWO ceased to exist as PTGWO."  On this basis, he
3

disposed thus: 4

WHEREFORE, the petition and motion above-referred to should be, as they are hereby dismissed. The
groups of Roberto M. Oca, Jr. and Andres L. Dinglasan, Jr. are hereby ordered to secure new registration
certificates as Philippine Transport and General Workers Organization PTGWO-Oca and Philippine
Transport and General Workers' Organization PTGWO-Dinglasan respectively, within thirty (30) days from
receipt of this Decision. Intervenor PTGWO-III is allowed to register as a separate labor federation under a
different name, but after compliance with the requirements of registration under the Labor Code.

SO ORDERED.

Feeling aggrieved by the decision, all the parties filed their respective motions for reconsideration. On July 22, 1986,
Director Trajano issued an Order denying the motion for reconsideration filed by Oca, Jr.  The record does not
5

indicate whether the motion for reconsideration filed by Dinglasan, Jr. and the intervenor were resolved.

Alleging grave abuse of discretion amounting to lack of jurisdiction on the part of the BLR Director, Roberto Oca, Jr.,
et al. and PTGWO-Oca are now before Us by way of this petition for certiorari.

Petitioners and private respondents both assail the conclusion reached by respondent BLR Director that
PTGWO has ceased to exist as PTGWO. Each side, however, insists on the validity of its convention, and
consequently, its right to continue using the name PTGWO and to operate under PTGWO's Registration
Permit No. 1194-MM-IP with all the privileges and benefits appurtenant thereto.

The crux of the petition hinges on the validity of either group's election of officers. On the other hand, the
latter depends upon the validity of the respective Executive Board Meetings and National Conventions
called.

Elementary is the rule that the Constitution and By-laws of an organization serve as a contract that binds its
members.  In this instance, the pertinent provisions of the Constitution and By-Laws are as follows:
1âwphi1
6

ARTICLE VII-NATIONAL CONVENTION

Section 24. DATE AND PLACE OF CONVENTION — The National Convention shall hold (sic) every three
years at a time during the first half of April, the inclusive dates, time, place to be fixed by (sic) National
Executive Board which shall be at least sixty (60) days before its holding.

Section 34. SPECIAL CONVENTIONS — On fifteen (15) days notice, special conventions may be called by
the National Executive Board, or upon petition of affiliates whose combined membership represent majority
of the entire membership of the organization as evidenced by the reports of the National Secretary to the
last Convention.

ARTICLE VIII-THE NATIONAL EXECUTIVE BOARD

Section 38. INTERIM AUTHORITY — between Conventions, supreme authority, subject to the general
policies (sic) down by the Convention, shall be exercised by the National Executive Board.

Section 39. COMPOSITION — The National Executive Board shall be composed of the National President,
lst National Executive Vice President for General Workers, 2nd National Executive Vice President for
Transport, four (4) National Vice Presidents for General Workers, four (4) National Vice Presidents for
Transport, a National Secretary, National Treasurer, ten (10) National Executive Board (sic) for General
Workers, ten (10 National Executive Board (sic) for Transport, and all the appointive officers which shall,
however, have no vote.
Labor II – 1
 Section 40. MEETINGS AND QUORUM — The National Executive Board shall normally meet immediately
after the close of the regular convention and at least once every quarter thereafter, or upon call of the
National President, at his initiative or upon petition of at least one-fourth (¼) of its members, for a special
meeting. A majority of the members of the National Executive Board shall constitute a quorum to
transact business.

Section 46. APPOINTIVE OFFICERS. — The officers to be appointed by the National President subject to
confirmation by the National Executive Board shall be:

a) Two National Assistant Secretaries, one each for Transport and General Workers;

The presence of a quorum during petitioner Oca's and respondent Dinglasan's respective Board meetings
is questionable. As found by the public respondent Director: 7

... In both meetings the quorum requirement (majority of the members of the national executive board
(Section 40, Article VIII, PTGWO Constitution)-33, elective and approximately 36, appointive (Section 39,
Article VIII in relation to section 46, Article IX, PTGWO Constitution) has not been met.

Moreover, petitioner Oca's Board Meeting and subsequent Convention were tainted with invalidity. The call
for "a special Board meeting to fix the special convention" made by the National Secretary, Johnny Oca,
was anomalous since only the National President of the Union was empowered to call a special Board
Meeting, "at his own initiative or upon petition of at least one fourth (¼) of the Board members."

Petitioner argues that section 40 of the By-Laws provides alternately and successively for:

a. The National Executive Board shall normally meet immediately after the close of the regular convention;

b. At least once every quarter thereafter;

c. Or upon call of the National President at his initiative;

d. Or upon petition of at least ¼ of its members for a special meeting. 8

Petitioner has apparently misread section 40. An analysis of the cited section shows that what alternates are the
instances when the Board shall meet, not the authority as to who can call for such meeting. It would seem that
petitioner has confused this discretionary power properly lodged in the President with that of the Secretary's
ministerial duty to "call" or inform the Board members of a forthcoming meeting. Considering the anomalous "call"
for a special meeting made by the National Secretary, matters taken up during said special meeting, such as the
calling of a national convention, are likewise tainted.

Still further, both Conventions were in violation of the sixty-day requirement imposed by section 24 of the
By-Laws. Said section clearly provides that the National Convention's dates, time and place shall be fixed
by the National Executive Board which shall be at least sixty (60) days before the holding.  As succinctly
9

found by the public respondent Labor Director: 10

... On this score alone, the validity of the conventions called by petitioner and respondents on 4 April 1982 is
subject to question. The group headed by petitioner Dinglasan fixed the final date of the convention
barely three (3) days before the holding, while respondents Oca did so only sixteen (16) days prior to
their convention.

The word used in the underscored phrase is "shall." According to Webster's Third International Dictionary of the
English Language the word "shall" means "ought to, must, ... obligation-used to express a command or exhortation,
used in laws, regulations or directives to express what is mandatory.  Thus, it was imperative for both petitioners
11

and private respondents to strictly follow the command therein with respect to the period for calling a National
Convention.

Labor II – 1
From the foregoing, it is apparent that respondent Labor Director's refusal to declare the validity of the election of
officers of either parties is not tainted with abuse of discretion. However, that part of the decision which ordered
the parties to "secure new registration certificates as Philippine Transport and General Workers
Organization PTGWO-Oca and Philippine Transport and General Workers Organization PTGWO-Dinglasan
within thirty (30) days from receipt of this decision" is without basis. No provision in the Labor Code
sanctions such an act. For the cancellation of a labor union's certificate of authority under Article 239 of the
Labor Code, the causes provided therein must be substantially proved, with the requisite notices given and
hearings held. In this case, such elementary elements of due process were not observed.

In lieu thereof, reliance should have been made on the Union Constitution and By-laws.  Sections 38 and
1âwphi1

47  provide:
12

Section 38. INTERIM AUTHORITY — Between conventions supreme authority, subject to the general
policies down (sic) by the Convention, shall be exercised by the National Executive Board.

Section 47. TERMS OF OFFICE — The elective officers shall be installed at the Convention at which they
were elected and shall serve until their successors shall have been elected and qualified and duly installed
at the next National Convention. The tenure of office of appointive officers shall expire with each national
convention and may be removed only under the provisions of Section 41, Article VIII of its Constitution.

Since we have ruled that the Conventions/Board Meetings of both petitioners and private respondents are
tainted, then it necessarily follows that the incumbent officers constituting the National Executive Board are
entitled to remain in office, until their successors have been elected, qualified and duly installed at a
National Convention.

It appears from the manifestations filed by the parties that pending resolution of this case, the two (2) factions had
been able to negotiate collective bargaining agreements with various companies. Considering that these CBA's
were entered into in good faith, each faction acting in the honest belief that it is entitled to operate as the legitimate
PTGWO and so as not to disturb the rights, benefits and privileges accorded by the CBA's to the parties therein, the
CBA's entered into by PTGWO-Dinglasan and PTGWO-Oca are recognized as valid and binding until their
respective expiry dates.

WHEREFORE, premises considered, the decision of public respondent is hereby MODIFIED. The Bureau of Labor
Relations is directed to supervise the election of officers of the Philippine Transport and General Workers
Organization within sixty (60) days from finality of this decision, without prejudice to the right of any group of workers
or unions to secede and to form their own or to affiliate with another federation. The collective bargaining
agreements entered into by PTGWO-Dinglasan and PTGWO-Oca are recognized as valid and binding until their
respective expiry dates. This decision is immediately executory. No costs.

Labor II – 1
22.) Halili v CIR

G.R. No. L-24864 April 30, l985

FORTUNATO HALILI, doing business under the name and style HALILI TRANSIT (substituted by EMILIA DE
VERA DE HALILI), petitioner
vs.
COURT OF INDUSTRIAL RELATIONS and HALILI BUS DRIVERS and CONDUCTORS UNION
(PTGWO), respondents.

G.R. No. L-27773 April 30, l985

EMILIA DE VERA VDA. DE HALILI, petitioner,

vs.
COURT OF INDUSTRIAL RELATIONS and HALILI BUS DRIVERS AND CONDUCTORS UNION
(PTGWO), respondents.

G.R. No. L-38655 April 30, l985

FELICIDAD M. TOLENTINO, et al., petitioners,

vs.
COURT OF INDUSTRIAL RELATIONS, et al., respondents.

G.R. No. L-30110 April 30, l985

EMILIA DE VERA VDA. DE HALILI petitioner,

vs.
HALILI BUS DRIVERS AND CONDUCTORS UNION-PTGWO and COURT OF INDUSTRIAL
RELATIONS, respondents.

RESOLUTION

MAKASIAR, J.:

Before Us for resolution is the urgent motion to cite Atty. Benjamin C. Pineda, Ricardo Capuno and Manila Bank
(Cubao Branch) in contempt for the alleged continued failure of aforenamed parties to comply with the temporary
mandatory restraining order issued by this Court on September 1, 1983 and with the resolution dated September
13, 1983 which again directed Atty. Pineda and union administrator Capuno to comply with the aforesaid mandatory
restraining order and which ordered the Manila Bank to transfer the funds allocated for the workers to the NLRC (p.
376, L-24864, rec.; p. 301, L027773 rec.).

The issuance of the temporary mandatory restraining order stemmed from the questioned orders of September 23,
1982 and February 9, 1983 issued by Labor Arbiter Raymundo Valenzuela in Case No. 1099-V before the NLRC
which orders respectively allowed the sale of the property awarded to satisfy or answer for the claims of the union
members in these four cases and authorized the distribution of the proceeds of the purchase.

For a better appreciation of the aforesaid motion for contempt, We must recall certain prefatory facts which the
Solicitor General has so aptly summed up. Thus:

The above-entitled cases involve disputes regarding claims for overtime of more than five
hundred bus drivers and conductors of Halili Transit. Litigation initially commenced with the
filing of a complaint for overtime with the defunct Court of Industrial Relations on August 20, 1958

Labor II – 1
 docketed as CIR Case No. 1099-V. The disputes were eventually settled when the contending
parties reached an Agreement on December 23, 1974, the pertinent portions of which are as
follows:

WHEREAS, in the face of this strong urging on the part of the Supreme Court Justices upon the
parties to put an immediate end to this case by amicable settlement, the parties repeatedly came to
conference, conscientiously explored all avenues of settlement, and finally arrived at the tentative
agreement (tentative because of the condition that the same be sanctioned by the court in the estate
case) whereby the Administratrix would transfer to the employees title to that tract of land, covered
by TCT No. 36389, containing an area of approximately 33,952 square meters, situated in the Barrio
of San Bartolome, Municipality of Caloocan, Province of Rizal, and pay in addition the cash amount
of P25,000.00 in full and final satisfaction of all the claims and causes of action of all of the
employees against the estate of Fortunato F. Halili subject of CIR Case No. 1099-V.

xxx xxx xxx

NOW, THEREFORE, for and in consideration of the foregoing and of the covenants, stipulations and
undertakings hereinafter contained, the parties have agreed as follows:

l. The UNION, its officers and members-claimants relative to CIR Case No. 1099-V, shall withdraw
and dismiss with prejudice Case No. 1099-V filed by the UNION in behalf of its members-claimants
before the Court of Industrial Relations and all its incidents thereto.

2. The ESTATE shall deliver or cause to be delivered, to the UNION the following:

(a) Deed of Transfer of a parcel of land situated in Barrio San Bartolome, Caloocan City, containing
an area of THIRTY-THREE THOUSAND NINE HUNDRED FIFTY-TWO (33,952) Square Meters,
more or less, and covered by Transfer Certificate of Title No. 35389 of the Registry of Deeds of
Rizal, to be made, upon authority and approval granted by the Court of First of Rizal, Branch IV, at
Quezon City, in Proc. No. Q-10852 in the name of the Halili Bus Drivers & Conductors Union
(PTGWO), free from any and all liens encumbrances, and any and all claims whatsoever.

(b) Negotiable Check for TWENTY-FIVE THOUSAND (P25,000.00) PESOS in the name of Domingo
D. Cabading, President of the UNION.

3. The transfer of the above-described parcel of land and receipt of the amount of P25,000.00
constitute the full and final satisfaction of the claims and award in said CIR Case No. 1099-V, as well
as any and all attorney's liens in said case, for and in consideration of which the UNION members-
claimants in CIR Case No. 1099-V by these present now and forever release and quitclaim Halili
Enterprises, Halili Transit, Fortunato F. Halili his estate, heirs and successors by reason of CIR Case
No. 1099-V, it being their intention that they be absolutely, completely and finally absolved and
released from any and all liability in said case, including attorneys' liens the transfer of the property
and payment of the amount hereinabove stated constituting for all intents and purposes a full, final
and complete settlement and satisfaction of the award in CIR Case No. 1099-V and all incidents
thereto.

4. The UNION and its undersigned officers hereby warrant that the UNION is a duly registered labor
organization and that in a special meeting called for the purpose they were duly authorized on
December 22, 1974, by all the members- claimants in CIR Case No. 1099-V to sign this
Memorandum of Agreement with Release and Quitclaim which was unanimously approved and
ratified by said members-claimants as evidenced by a Resolution dated December 22, 1974, a copy
of which is attached hereto and made a part hereof as Annex "B", and hereby jointly and severally
hold the estate and heirs of Fortunato F. Halili free and harness from, and undertake to indemnify
them for, any and all liability for any claims by members of the UNION, their heirs, assigns and
agents relating to CIR Case No. 1099-V or attorneys' liens in connection therewith (69 SCRA 509-
510).

Labor II – 1
 On January 6, 1975, pursuant to the Agreement, the administratrix of the estate of Fortunato F, Halili
executed a Deed of Conveyance of Real Property, transferring the aforementioned parcel of land to
the Halili Bus and Conductors Union (PTGWO) in trust for the members of the union claimants. The
parcel of land was eventually registered in the name of the Union on February 14, 1975. Hence, on
February 10, 1976, the contending parties moved for the dismissal of G.R. No. L-30110 and G.R.
No. L-38655, which this Honorable Court granted on February 27, 1976 (69 SCRA 505). The two
other cases, G.R. No. L-24864 and G.R. No. L- 27773, were previously disposed of on February 26,
1968 and December 28, 1970, respectively (22 SCRA 785. and 36 SCRA 522).

On August 9, 1982, the Union, through Atty. Benjamin C. Pineda, filed an urgent motion with
the Ministry of Labor and Employment (MOLE) requesting for authority to sell and dispose of
the property. The motion was granted in an order dated September 23, 1982. A prospective
buyer, the Manila Memorial Park Cemetery, inc. expressed its misgivings on the authority of
the Union to sell the property in view of sec. 66 of PD 1529 which requires no less than an order
from a court of competent jurisdiction as authority to sell property in trust. So, Atty. Pineda filed a
motion with the Supreme Court on December 1, 1982 requesting for authority to sell the
property, This Honorable Court, however, merely noted the motion in a resolution dated
December 8, 1982.

Nevertheless, Atty. Pineda, without authority from the Supreme Court but relying on the
earlier authority given him by the Ministry of Labor, filed another urgent motion with the
latter, praying that the Union be authorized to sell the lot to the Manila Memorial Park Cemetery,
Inc. and to make arrangements with it such that payment will be advanced for the real estate taxes
inclusive of penalties, attorney's lien which is equivalent to a thirty-five percent (35%) of the
total purchase price, and home developer's fee of P69,000.00. Apparently, the prospective
purchaser had decided to withdraw its objection regarding the Union's authority to sell. In an Order
dated February 9, 1983, Labor Arbiter Raymundo R. Valenzuela granted the motion. So, the
sale was finally consummated on June 7, 1983, resulting in the execution of an escrow agreement
on June 8, 1983 wherein the purchase price was deposited under escrow with the Manila Bank-
Cubao Branch. The Bank then released the amounts due the claimants in accordance with the
escrow agreement" (pp. 352- 356, L-24864 rec.).

The dispositive portion in L-24864 is re-stated hereunder:

WHEREFORE, the appealed order and resolution en banc are hereby affirmed and the Court of
Industrial Relations is hereby enjoined to make a judicial determination of the union membership of
the claimants, while the Examining Division of said court shall proceed with its computation of the
compensable hours of work rendered by, and the corresponding compensation payable to, the
drivers and conductors admitted by both parties to be union members since October 1, 1956 and
those contended by the union to be such members but disputed by the employer. No costs. So
ordered (p. 186, L-24864 rec.).

When Atty. Jose C. Espinas (herein movant and alleged original counsel for the Union) learned of the sale
and apportionment of the proceeds from past Union president Amado Lopez, he requested Labor Arbiter
Raymundo Valenzuela to allow him to look into the records of Case No. 1099-V. The latter, however, told him
that the records of the aforecited case were missing. Thereupon, Atty. Espinas requested Director Pascual Reyes of
the NLRC to locate the records (p. 356, L24864 rec.).

Hence, Atty. Espinas filed the urgent motion with prayer for a temporary mandatory restraining order on
August 26, 1983 and the supplement thereto on August 29, 1983 (pp. 215, 227, L-24864 rec.).

On August 30, 1983, the records of Case No. 1099-V were finally found and Atty. Espinas was dully informed of the
development,

The above two motions question the legality of the orders dated September 23, 1982 and February 9, 1983
issued by Labor Arbiter Raymundo Valenzuela in Case No. 1099-V before the NLRC which authorized the
sale of the awarded property and the distribution of the proceeds from such purchase.
Labor II – 1
Movants Union and counsel Espinas upon filing of the motions urgently pray of this court to:

1. Require Atty. Benjamin C. Pineda to deposit with the NLRC the amount of P712,992.00 paid to him or
deposited to his account at Manila Bank, Cubao Branch,allegedly representing 35% attorney's fees on the
sale of 33,952 square meters of the lot registered in the name of the Union;

2. Require the Halili Drivers and Conductors Union through Domingo Cabading or any of his representatives to
deposit with the NIRC the 6% alleged union expenses paid to them or similarly deposited to their account;

3. Implead with leave of court this Manila Bank Cubao Branch to require the said bank to prevent further withdrawals
of amount deposited in the name of Atty. Pineda and/or the Halili Drivers and Conductors Union or any of its officers
and to turn over any remaining deposits to the NLRC for proper disposition;

4. Should Atty. Pineda and the Union officers have already withdrawn the deposits or parts thereof, require them to
post a bond in the equivalent amounts of 35% (attorney's fee), 6% (union expenses), and 5% (broker's fee)
respectively of the total proceeds of the sale of the property, solidarity (p. 219, L-24864 rec.; p. 160, L-27773 rec.).

Likewise, and after due consideration of the merits, movants prayed that—

1. the order of Arbiter Valenzuela dated February 9, 983 be nullified insofar as it allows Atty. Pineda 35%
attorney's fees;

2. the NLRC be directed to locate the records of Case No. 1099-V or reconstitute the same and thereafter to
equitably dispose 20% as fees to all lawyers who participated in the proceedings and any excess amounts to be
again distributed to the workers; and

3. these cases be remanded to the NLRC with instructions as above-stated and that the proper penalty be imposed
on those involved and who have acted fraudulently and illegally (p. 220, L-24864 rec.; p. 165, L-27773 rec.).

The succeeding pleadings and developments which are common to all these cases are now presented
chronologically.

On August 29, 1983, Atty. Espinas, for himself and members of the respondent Union, filed a supplement to urgent
motion stating that the prayers in the urgent motion of August 26, 1983 are reiterated and praying for the nullification
of Arbiter Valenzuela's order not only on the award of attorney's fees but also on the allowance of payment of "union
obligations" not previously authorized nor approved by the NLRC (p. 227, L-24864, rec.; p. 176, L-27773 rec.).

In its resolution dated September 1, 1983, this Court impleaded the Manila Bank, Cubao Branch as party
respondent and directed the issuance of a temporary mandatory restraining order (p. 234, L-24864 rec. & p. 187, L-
27773 rec.). This Court correspondingly issued a temporary mandatory restraining order on the same date
which enjoined Atty. Benjamin C. Pineda or his agents or any person acting in his stead to deposit with the
NLRC the amount of P712,992.00 paid to him or deposited in his account at Manila Bank, Cubao Branch
allegedly representing 35% attorney's fees on the sale of 33,952 square meters of the lot registered in the name
of Halili Drivers and Conductors Union; directed the Union thru Domingo Cabading or his agents to deposit with the
NLRC 6% alleged union expenses paid to the Union or similarly deposited to its account; and ordered the NLRC
and Manila Bank, Cubao Branch, or their agents or persons in their stead not to allow withdrawals of amounts
deposited in the name of Atty. Benjamin C. Pineda and/or the Union or any of its officers (P. 235, L-24864; p. 188,
L-27773 rec.).

On September 6, 1983, respondent Union, thru Atty. Pineda, filed its comment, in compliance with the resolution of
September 1, 1983, on the urgent motion and the supplement thereto both filed by counsel Espinas, alleging therein
that the subject matter sought to be enjoined or mandated by the restraining order ceased to exist rendering the
same moot and academic, and thus praying for the dismissal of the said motion and the supplement thereto (p. 237,
L-24864 rec.; p. 191, L-27773 rec.).

Labor II – 1
On September 7, 1983, Atty. Pedro Lopez, an original associate of Atty. Espinas, filed his motion for leave to
intervene, with the submission that the lawyers involved should only divide 20% fees as per the workers' contract
and the rest refunded by Atty. Pineda and the alleged "union officers" for redistribution to the members (p. 265, L-
24864, rec.; p. 219. L-27773 rec.).

Atty. Espinas, in behalf of the workers, filed a manifestation and motion to require Atty, Pineda and the union to
comply with the temporary mandatory restraining order on September 9, 1983, with prayer that the Manila Bank be
ordered to transfer the funds allocated for the workers to the NLRC, which should be instructed to pay the workers
upon proper Identification (without prejudice to additional shares) or to mail such amounts by money order or
manager's check to the workers' addresses as furnished to the NLRC (p. 274, L-24864, rec.; p. 231, L-27773 rec.).

On September 12, 1983, petitioner filed a manifestation in compliance with the resolution of September 2, 1983
stating, among other things, that its liability had been completely extinguished with the approval of the Memorandum
of Agreement with Release and Quitclaim in L-38655 and L-30110; that said agreement operated as an absolute
and complete release of petitioner from any liability to the Union; and that petitioner had not been given any notice
of any proceedings respecting cases subsequent to the promulgation of the decisions aforestated (p. 281, L-24864,
rec.; p. 237, L-27773 rec.).

Counsel Espinas (for the workers involved) filed his reply to comments of respondent Union on September 14, 1983
praying for this Court to:

1. nullify the order of February 9, 1983 issued by Arbiter Raymundo Valenzuela in CIR Case No. 1099-V and others
connected therewith regarding the distribution of proceeds of the sale of the land belonging to the members-
claimants for lack of due process and for being contrary to law;

2. nullify the 35% attorney's fees of Atty. Benjamin Pineda as illegal and unconscionable and in disregard of other
lawyers in the case;

3. require reimbursement to the members-from the Union P101,856.00 allocated without their consent as Union
expenses; P101,856 unreceipted brokers' fees less P4,020.40 expenses for the transfer of title; to refund the 1 % of
the net proceeds, P9,596.18, for named claimants; and to secure a refund of P308,000.00 from the P712,992.00
fees of Atty. Pineda (the excess of 20% fees for all lawyers);

4. subject the balance of P404,992.00 of the remainder of Atty. Pineda's 35% fees for distribution among the three
lawyers as may be determined by the NLRC; and

5. should this Court so decides, fix the fees (p. 285, L- 24864 rec.; p. 240, L-27773 rec.).

On September 13, 1983, the Solicitor General filed his comment on the urgent motion and the supplement thereto
dated August 25, 1983 and August 29, 1983, respectively with the recommendations that (1) the orders of Arbiter
Valenzuela dated September 23, 1982 and February 9, 1983 be nullified for having been issued without due
process; (2) the case must be remanded to the NLRC for further proceedings; and (3) the temporary restraining
order issued by this Court on September 1, 1983 be maintained, pending final resolution by the NLRC (p. 351, L-
24864 rec.).

The Solicitor General, on October 6, 1983, filed his manifestation and motion in lieu of comment on the motion of
Atty. Pedro Lopez for leave to intervene in L-24864 and L-27773 (p. 360, L-24864 rec.; p. 289, L-27773 rec.).

On October 6, 1983, counsel Espinas filed his comment on the intervention of Atty. Pedro Lopez wherein he offers
no objection to the latter's intervention and states that said counsel is also entitled to attorney's fees in accordance
with his participation (p. 364, L-24864 rec.; p. 292, L-27773 rec.).

Atty. Pineda filed his comment and manifestation on October 7, 1983, in compliance with the resolution of
September 13, 1983, alleging therein that as per Retainer's Contract dated January 1, 1967, he handled Case
No. 1099-V before the Court of Industrial Relations alone. On the mandatory restraining order, Atty. Pineda

Labor II – 1
claims that as of October 4, 1983, he had a balance of P2,022.70 in his account with the Manila Bank (p. 370, L-
24864 rec.; p. 295, L-27773 rec.).

In its resolution dated October 18, 1983, this Court (1) set, aside as null and void the orders of September 23, 1982
and February 9, 1983 of Arbiter Raymundo R. Valenzuela; (2) allowed the intervention of Atty. Pedro Lopez; (3)
directed the Manila Bank (Cubao Branch), Atty. Benjamin Pineda, and the Halili Drivers and Conductors Union
through Domingo Cabading or any of his representatives, to comply with the temporary mandatory restraining order
issued on September 1, 1983 and the resolution dated September 13, 1983, within ten [10] days from receipt
thereof; and (4) remanded these cases to the NLRC for further proceedings (p. 374, L-24864 rec.; p. 299, L-27773
rec.).

The day before or on October 17, 1983, Sergio de Pedro, as representative of the workers and assisted by
Atty. Espinas, thus fided the urgent motion to cite Atty. Pineda, Ricardo Capuilo and Manila Bank (Cubao
Branch) in contempt, alleging therein that after two letters dated October 6 and October l4, l983 to the NLRC
which inquired as to whether or not compliant, with the restraining order had been made, the Commission certified
that as of October 14, 1983, no deposits had been effected by the parties so (directed (p. 376, L-24864 rec.; p.
301, L-27773 rec.).

In its manifestation and motion filed on November 2, 1983, respondent Manila Banking Corporation (Rustan-Cubao
Branch), in compliance with this Court's resolution of September 13, 1983, stated that it transmitted or paid to the
NLRC the amount of P417,380.64 under Cashier's Check No. 34084190 for the account of the Union and P2,022.70
under Cashier's Check No. 34084191 for the account of Atty. Pineda and thus prayed therein that the aforesaid
transmittals be deemed as sufficient compliance with the aforecited resolution and that the urgent motion to cite
respondents in contempt dated October 17, 1983 be considered moot and academic (p. 390, L-24864 rec.).

On November 8, 1983, respondent Atty. Pineda filed his manifestation and motion in lieu of comment in compliance
with this Court's resolution of October 20, 1983, stating that he and respondent Union thereby adopt the aforecited
manifestation and motion of respondent Manila Banking Corporation and thus prayed that since they have complied
with this Court's resolution of September 13, 1983, the urgent motion to cite them for contempt be considered moot
and academic (p. 394, L-24864 rec.; p. 310, L-27773 rec.).

On November 10, 1983, respondent Manila Banking Corporation filed another manifestation and motion in lieu of
commence, by way of compliance with the Court's resolution of October 20, 1983 with prayer that its previous
manifestation and motion dated October 28, 1983 and filed on November 2, 1983 be considered as sufficient
compliance with the resolution of September 13, 1983 which would render the urgent motion to cite respondents in
contempt moot and academic (p. 396, L-24864 rec. p. 312, L-27773 rec.).

On the foregoing manifestations and motions, representative Sergio de Pedro, with the assistance of Atty. Espinas,
filed a comment on November 16,1983 wherein he alleged that out of the P2,037,120.00 purchase price, only
Pl,940,127.29 was deposited with the Manila Bank; that Atty. Pineda has yet to return the balance of P710,969,30;
and that the Union has still to account for P111,452.18 (p. 399, L- 24864 rec.; p. 315, L-27773 rec.).

December 14, 1983, respondent Union filed its reply to Mr. de Pedro's above unsigned comment therein stating
among other things that the alleged missing amount of P96.992.71 was used for the payment of outstanding real
estate taxes on real property of said Union covered by TCT No. 205755 and that the amount of P2,022.70 only was
remitted by Manila Bank to the NLRC for the account of Atty. Pineda (p. 323, L-27773 rec.)

On December 20, 1983, Mr. de Pedro and Atty. Espinas, for the workers involved, filed their rejoinder to the
comment of Atty. Pineda and Mr. Capuno reiterating therein their plea to declare Atty. Pineda and Mr. Capuno in
contempt of court and to mete out the proper penalty (p. 328, L-27773 rec.).

The Manila Banking Corporation filed its compliance with the Court resolution of November 22, 1983 on February 3,
1984, praying that its report to the NLRC on the amount of withdrawals be considered as sufficient compliance with
the said resolution (p. 343, L-27773 rec.).

Labor II – 1
Atty. Espinas filed his comment and motion on March 15, 1984, stating among other things that as per report of the
Manila Bank to the NLRC, Atty. Pineda has not yet complied with the said order. He thus moved that Atty. Pineda be
required to post a bond on the undeposited balance in the amounts of P710,969.30 and that Mr. Capuno be also
required to post a bond before the NLRC on the undeposited balance of P52,236.04 during the pendency of the
motion for contempt (p. 373, L-27773 rec.).

On April 4, 1984, Mr. Sergio de Pedro filed his reply to the aforesaid comment of the Union administrator and Atty.
Pineda stating therein that there are still questions to be resolved on the merits before the NLRC and hence, prays
that Arbiter Antonio Tirona be required to continue hearing the merits of the case pending in the said Commission
(p. 377, L-27773 rec.).

Before We resolve the motion for contempt, certain crucial facts which have surfaced and which
precipitated Our issuance of the resolution of October 18, 1983 declaring the two questioned orders of
Arbiter Valenzuela as null and void, must be retraced.

Then Union President Amado Lopez, in a letter dated August 21, 1958, informed J.C. Espinas and Associates that
the general membership of the said Union had authorized a 20% contingent fee for the law firm based on whatever
amount would be awarded the Union (p. 267, L-24864 rec.).

Atty. Jose C. Espinas, the original counsel, established the award of 897 workers' claim in the main cases before
the defunct CIR and the Supreme Court. In L-24864, the Notice of Judgment of this Court dated February 26, 1968
was served on Messrs. J.C. Espinas & Associates (p. 188, L-24864 rec.). In L-27773, the Notice of Judgment dated
December 29, 1970 was sent to Atty. B.C. Pineda & Associates under same address-716 Puyat Bldg., Suit 404 at
Escolta, Manila (p. 147, L-27773 rec.) Note that this is the same address of Atty. J.C. Espinas & Associates.

When Atty. 'Pineda appeared for the Union in these cases, still an associate of the law firm, his appearance carried
the firm name B.C. Pineda and Associates," giving the impression that he was the principal lawyer in these cases.

Atty. Pineda joined the law firm of Atty. Espinas in 1965 when these cases were pending resolution. He always held
office in the firm's place at Puyat Building, Escolta until 1974, except in 1966 to 1967 when he transferred to the
Lakas ng Manggagawa Offices. During this one-year stint at the latter office, Atty. Pineda continued handling the
case with the arrangement that he would report the developments to the Espinas firm. When he rejoined the law firm
in 1968, he continued working on these cases and using the Puyat Building office as his address in the pleadings.

When Atty. Pineda rejoined the Espinas firm in 1968, he did not reveal to his partners (he was made the
most senior partner) that he had a retainer's contract entered into on January 1, 1967 which allegedly took
effect in 1966. He stayed with the law firm until 1974 and still did not divulge the 1967 retainer's contract.
Only the officers of the Union knew of the contract.

The alleged retainer's contract between Atty. Pineda and the Union appears anomalous and even illegal as
well as unethical considering that-

1. The contract was executed only between Atty. Pineda and the officers of the Union chosen by about 125
members only. It was not a contract with the general membership, Only 14% of the total membership of 897
was represented. This violates Article 242 (d) of the Labor Code which provides:

The members shall determine by secret ballot, after due deliberation, any question of major
policy affecting the entire membership of the organization, unless the nature of the
organization or force majeure renders such secret ballot impractical, in which case the board
of directors of the organization may make the decision in behalf of the general membership
(emphasis supplied).

2. The contingent fee of 30% for those who were still working with Halili Transit and the 45% fee for those who were
no longer working worked to the prejudice of the latter group who should and were entitled to more benefits. Thus,
too, when the alleged retainer's contract was executed in 1967, the Halili Transit had already stopped operations in

Labor II – 1
Metro Manila. By then, Atty. Pineda knew that all the workers would be out of work which would mean that the 45%
contingent fee would apply to all.

3. The contract which retroactively took effect on January 1, 1966, was executed when Atty. Espinas was still
handling the appeal of Halili Transit in the main case before the Supreme Court. Atty. Pineda would have but did not
substitute himself in place of Atty. Espinas or the law firm on the basis of such contract.

4. When Atty. Pineda filed his motion for approval of his attorney's lien with Arbiter Valenzuela on February 8, 1983,
he did not attach the retainer's contract.

5. The retainer's contract was not even notarized (p. 248, L-24864 rec.).

The Manila Memorial Park Cemetery, Inc., as the prospective buyer, initially expresses its misgivings over the
authority of the Union to sell subject property conformably with Section 66 of P.D. No. 1529, which requires an order
from a court of competent jurisdiction authorizing the sale of a property in trust. The pertinent portion of Section 66
provides:

No instruments which transfers or mortgages or in any way deals with registered land in trust shall
be registered, unless the enabling power thereto is expressly conferred in the trust instrument, or
unless a final judgment or order of a court of competent jurisdiction has construed the instrument in
favor of the power, in which case a certified copy of such judgment or order may be registered.

The decision of aforenamed purchaser to stop questioning the Union's authority to sell and the expeditious manner
by which Arbiter Valenzuela granted Atty. Pineda's motion for such authority to sell the property make the entire
transaction dubious and irregular.

Thus, without notice to the other lawyers and parties, Atty. Pineda commenced the proceeds before the NLRC with
the filing of a motion and manifestation on August 9, 1982 with Arbiter Valenzuela of the NLRC Office of the Labor
Ministry wherein he asked for authority to sell the property. On September 23, 1983 or just over a month, Arbiter
Valenzuela approved the motion per order of the same date. Notably, only Atty. Pineda and the lawyers of the
purchaser were informed of such order.

On February 4, 1983, again without notice to Atty. Espinas and Atty. Lopez, Atty. Pineda filed a motion with Arbiter
Valenzuela wherein he asked for authority to distribute the proceeds of the sale of the property. This distribution
would include his attorney's fee which was allegedly the subject of a retainer contract entered into between him and
the alleged Union officers, On February 9, 1983, or barely five days from the day the motion was filed, Arbiter
Valenzuela, without informing the other lawyers and relying exclusively on the unverified motion of Atty. Pineda (the
records of the case were not on hand), approved the said motion which authorized the appointment.

This Court, as earlier stated, nullified said orders dated September 23, 1982 and February 9, 1983 of Labor Arbiter
Valenzuela as violative of the due process clause. It is a settled rule that in administrative proceedings, or cases
coming before administrative tribunals exercising quasi-judicial powers, due process requires not only notice and
hearing, but also the consideration by the administrative tribunal of the evidence presented; the existence of
evidence to support the decision; its substantiality a decision based thereon or at least contained in the record and
disclosed to the parties; such decision by the administrative tribunal resting on its own independent consideration of
the law and facts of the controversy; and such decision acquainting the parties with the various issued involved and
the reasons therefore (Ang Tibay vs. Court, 69 Phil. 635, cited on p. 84, Philippine Constitutional Law, Fernando,
1984 ed.)

Significantly Atty. Pineda's act of filing a motion with this Court on December 1, 1982 praying for authority to sell
was by itself an admission on his part that he did not possess the authority to sell the property and that this Court
was the proper body which had the power to grant such authority. He could not and did not even wait for such valid
authority but instead previously obtained the same from the labor arbiter whom he knew was not empowered to so
authorize. Under Article 224 (a) of the Labor Code, only final decisions or awards of the NLRC, the Labor Arbiter, or
compulsory or voluntary arbitrators may be implemented or may be the subject of implementing orders by
aforenamed body or officers.

Labor II – 1
When Atty. Espinas discovered the sale of the property, he went to Arbiter Valenzuela to look into the transaction
who told him that the records of CIR Case No. 1099-V were missing. It took director Pascual Reyes of the NLRC to
locate the records.

The 45% attorney's lien on the award of those union members who were no longer working and the 30% lien on the
benefits of those who were still working as provided for in the alleged retainer's contract are very exorbitant and
unconscionable in view of Section 11, Rule VIII of Book III which explicitly provides:

Sec. 11. Attorney's fees—Attorney's fees on any judicial or administrative proceedings for the
recovery of wages shall not exceed 10% of the amount awarded. The fees may be deducted from
the total amount due the winning party.

The amount of P101,856.00 which Atty. Pineda donated to the Union and which actually corresponds to 5% of the
total 35% attorney's fees taken from the proceeds (p. 263, L-24864, rec.) appears improper since it amounts to a
rebate or commission. This amount was subsequently treated as union miscellaneous operating expenses without
the consent of the general membership.

Thus, in the case of Amalgamated Laborers' Association vs. Court of Industrial Relations (L-23467, 22 SCRA 1267
[March 27, 1968]), We declared:

We strike down the alleged oral agreement that the union president should share in the attorney's
fees. Canon 34 of Legal Ethics condemns this arrangement in terms clear and explicit. It says: 'No
division of fees for legal services is proper, except with another lawyer, based upon a division of
service or responsibility.' The union president is not the attorney for the laborers. He may seek
compensation only as such president. An agreement whereby a union president is allowed to share
in attorney's fees is immoral. Such a contract we emphatically reject. It cannot be justified.

A contingent fee contract specifying the percentage of recovery an attorney is to receive in a suit
'should be reasonable under all the circumstances of the case, including the risk and uncertainty of
the compensation, but should always be subject to the supervision of a court, as to its
reasonableness. (emphasis supplied).

A deeper scrutiny of the pleadings in L-24864 notably indicates a fraudulent or deceitful pattern in the actuations of
Atty. Pineda. Thus, in his motion for execution of judgment filed on September 18, 1965 in this case, he signed for
and in behalf of "J.C. Espinas & Associates" (p. 323, rec.). In his manifestation dated December 10, 1968, he signed
as "B.C. Pineda," lone counsel for petitioner (p. 327, rec.); and yet, he carried the address of Espinas & Associates
at 716 G. Puyat Building, Escolta.

However, in the October 29, 1968 resolution of this Court, a copy thereof was served on "Messrs. J.C. Espinas, B.C
Pineda, J.J. dela Rosa & Associates" at Puyat Building, Escolta (p. 324, rec.). In the notice of judgment dated
December 29, 1970, this Court addressed the said pleading to "Attys. B.C. Pineda & Associates with the same
Puyat Building address (p. 325, rec.). Notably also, then Union President Amado Lopez addressed his letter dated
August 21, 1958 to J.C. Espinas & Associates" wherein he informed the latter that the general membership of the
Union had authorized them a 20%, contingent fee on whatever award would be given the workers (p. 267, rec.).

The Manila Banking Corporation (Cubao Branch) has manifested that it turned over to the NLRC the amount of
P417,380.64 for the Union's account, which appears to be the balance of P950,021.76 corresponding to the net
proceeds for distribution to the workers after deducting P525,480.40, the total payments to claimants. The amount
of P417,380.64 appears lacking, since accurately computed, the balance should be P424,541,36.

However, the Union has yet to account for P101,856.00, the 5% donation or share from Atty. Pineda's attorney's fee
of 35%.

For the account of Atty. Pineda, the Manila Banking Corporation has remitted to the NLRC the amount of P2,022.70
only. This means that Atty. Pineda is still accountable for the amount of P710,969.30. He is directed to return the
amount of P712,992.00 representing the 35% attorney's fees he unlawfully received.

Labor II – 1
In view of Our resolution of October 18, 1983, which set aside as null and void the questioned orders dated
September 23, 1982 and February 9, 1983 issued by Arbiter Raymundo Valenzuela, the sale of the Union property
and the distribution of the proceeds therefrom had been effected without authority and, therefore, illegal
Consequently. Atty. Pineda and Arbiter Valenzuela become liable for their unauthorized acts,

Atty. Pineda should be cited for indirect contempt under paragraphs (b), (c) and (d) of Section 3, Rule 71 of the
Revised Rules of Court, The said paragraphs read thus:

Sec. 3. indirect contempts to be punished after charge and hearing.—

xxx xxx xxx

(b) Disobedience of or resistance to a lawful writ, process, order, judgment, or company court, or
injunction granted by a court or judge, including the act of a person who, after being dispossessed or
ejected from any real property by the judgment or process of any court of competent jurisdiction,
enters or attempts or induces another to enter into or upon such real property, for the purpose of
executing acts of ownership or possession, or in any manner disturbs the possession given to the
person adjudged to be entitled thereto;

(c) Any abuse of or any interference with the process or proceedings of a court not constituting direct
contempt under section 1 of this rule;

(d) Any improper conduct tending, directly or indirectly to impede, obstruct, or degrade the
administration of justice.

Contempt of court is a defiance of the authority, justice or dignity of the court; such conduct as tends to bring the
authority and administration of the law into disrespect or to interfere with or prejudice parties litigant or their
witnesses during litigation (12 Am. jur. 389, cited in 14 SCRA 813).

Contempt of court is defined as a disobedience to the court by acting in opposition to its authority, justice and
dignity. It signifies not only a willful disregard or disobedience of the court's orders, but such conduct as tends to
bring the authority of 'the court and the administration of law into disrepute or in some manner to impede the due
administration of justice (17 C.J.S. 4).

This Court has thus repeatedly declared that the power to punish for contempt is inherent in all courts and is
essential to the preservation of order in judicial proceedings and to the enforcement of judgments, orders, and
mandates of the court, and consequently, to the due administration of justice (Slade Perkins vs. Director of Prisons,
58 Phil. 271; In re Kelly, 35 Phil. 944; Commissioner of Immigration vs. Cloribel, 20 SCRA 1241; Montalban vs.
Canonoy, 38 SCRA 1).

In the matter of exercising the power to punish contempts, this Court enunciated in the Slade Perkins case that "the
exercise of the power to punish contempts has a twofold aspect, namely (1) the proper punishment of the guilty
party for his disrespect to the court or its order; and (2) to compel his performance of some act or duty required of
him by the court which he refuses to perform. Due to this twofold aspect of the exercise of the power to punish them,
contempts are classified as civil or criminal. A civil contempt is the failure to do something ordered to be done by a
court or a judge for the benefit of the opposing party therein; and a criminal contempt, is conduct directed against
the authority and dignity of a court or of a judge, as in unlawfully assailing or discrediting the authority or dignity of
the court or judge, or in doing a duly forbidden act. Where the punishment imposed, whether against a party to a
suit or a stranger, is wholly or primarily to protect or vindicate the dignity and power of the court, either by fine
payable to the government or by imprisonment, or both, it is deemed a judgment in a criminal case. Where the
punishment is by fine directed to be paid to a party in the nature of damages for the wrong inflicted, or by
imprisonment as a coercive measure to enforce the performance of some act for the benefit of the party or in aid of
the final judgment or decree rendered in his behalf, the contempt judgment will, if made before final decree, be
treated as in the nature of an interlocutory order, or, if made after final decree, as remedial in nature, and may be
reviewed only on appeal from the final decree, or in such other mode as is appropriate to the review of judgments in

Labor II – 1
civil cases. ... The question of whether the contempt committed is civil or criminal, does not affect the jurisdiction or
the power of a court to punish the same. ... (58 Phil. 271, 272).

For civil contempt, Section 7, Rule 71 of the Revised Rules of Court explicitly provides:

Sec. 7, Rule 71. Imprisonment until order obeyed. When the contempt consists in the omission to do
an act which is yet in the power of the accused to perform, he may be imprisoned by order of a
superior court until he performs it.

Thus, in the case of Harden vs. Director of Prisons (L-2349, 81 Phil. 741 [Oct. 22, 1948]), where petitioner was
confined in prison for contempt of court, this Court, in denying the petition and resolving the question of petitioner's
indefinite confinement, had the occasion to apply and clarify the aforequoted provision in the following tenor:

The penalty complained of is neither cruel unjust nor excessive. In Ex-parte Kemmler 136 U.S. 436,
the United States Supreme Court said that 'punishments are cruel when they involve torture or a
lingering death, but the punishment of death is not cruel, within the meaning of that word as used in
the constitution. It implies there something inhuman and barbarous, something more than the
extinguishment of life.

The punishment meted out to the petitioner is not excessive. It is suitable and adapted to its
objective; and it accords with section 7, Rule 64 of the Rules of Court which provides that "when the
contempt consists in the omission to do an act which is yet in the power of the accused to perform,
he may be imprisoned by order of a superior court until he performs it."

If the term of imprisonment in this case is indefinite and might last through the natural life of the
petitioner, yet by the terms of the sentence the way is left open for him to avoid serving any part of it
by complying with the orders of the court, and in this manner put an end to his incarceration. In these
circumstances, the judgment cannot be said to be excessive or unjust. (Davis vs. Murphy [1947],
188 P., 229- 231.) As stated in a more recent case (De Wees [1948], 210 S.W., 2d, 145-147), 'to
order that one be imprisoned for an indefinite period in a civil contempt is purely a remedial
measure. Its purpose is to coerce the contemner to do an act within his or her power to perform. He
must have the means by which he may purge himself of the contempt . The latter decision cites
Staley vs. South Jersey Realty Co., 83 N.J. Eq., 300, 90 A., 1042, 1043, in which the theory is
expressed in this language:

In a "civil contempt" the proceeding is remedial, it is a step in the case the object of
which is to coerce one party for the benefit of the other party to do or to refrain from
doing some act specified in the order of the court. Hence, if imprisonment be
ordered, it is remedial in purpose and coercive in character, and to that end must
relate to something to be done by the defendant by the doing of which he may
discharge himself. As quaintly expressed, the imprisoned man carries the keys to his
prison in his own pocket (pp. 747-748).

Likewise. American courts had long enunciated these rulings:

The commitment of one found in contempt of a court order only until the contemnor shall have
purged himself of such contempt by complying with the order is a decisive characteristic of civil
contempt. Maggio v. Zeitz, 333 US 56, 92 L. ed. 476, 68 S Ct 401.

Civil or quasi-criminal contempt is contemplated by a statute providing that if any person refused to
obey or perform any rule, order, or judgment of court, such court shall have power to fine and
imprison such person until the rule, order, or judgment shall be complied with. Evans v. Evans, 193
Miss 468, 9 So 2d. 641. (17 Am. Jur. 2d.)

Labor II – 1
The reason for the inherent power of courts to punish for contempt is that respect of the courts guarantees the
stability of the judicial institution. Without such guarantee said institution would be resting on a very shaky
foundation (Salcedo vs. Hernandez, 61 Phil. 724; Cornejo vs. Tan, 85 Phil. 722),

Likewise, Atty. Pineda should be subject to disbarment proceedings under Section 27 of Rule 138 of the Revised
Rules of Court which provides:

Sec. 27. Attorneys removed or suspended by Supreme Court on what grounds.—A member of the
bar may be removed or suspended from his office as attorney by the Supreme Court for any deceit,
malpractice, or other gross misconduct in such office, grossly immoral conduct, or by reason of his
conviction of a crime involving moral turpitude, or for any violation of the oath which he is required to
take before admission to practice, or for a willful disobedience of any lawful order of a superior court,
or for corrupt or willfully appearing as an attorney for a party to a case without authority so to do. The
practice of soliciting cases at law for the purpose of gain, either personally or through paid agents or
brokers, constitutes malpractice.

The Court may suspend or disbar a lawyer for any conduct on his part showing his unfitness for the confidence and
trust which characterize the attorney and client relations, and the practice of law before the courts, or showing such
a lack of personal honesty or of good moral character as to render him unworthy of public confidence (7 C.J.S. 733).

It is a well-settled rule that the statutory grounds for disbarment or suspension are not to be taken as a limitation on
the general power of the courts in this respect. The inherent powers of the court over its officers cannot be restricted
(In re Pelaez, 44 Phil. 567).

Finally, Atty. Pineda could be prosecuted for betrayal of trust by an attorney under Article 209 of the Revised Penal
Code. Said article provides:

Art. 209. Betrayal of must by an attorney or solicitor. Revelation of secrets.—In addition of the proper
administrative action , the penalty of prision correccional in its minimum period, or a fine ranging
from 200 to 1,000 pesos, or both shall be imposed upon any attorney-at-law or solicitor (procurador
judicial) who, by any malicious breach of professional duty or inexcusable negligence or
ignorance, shall prejudice his client, or reveal any of the secrets of the latter learned by him in his
professional capacity (emphasis supplied).

The aforequoted criminal sanction for unprofessional conduct of an attorney is without prejudice to proper
administrative action, such as disbarment or suspension of attorneys (p. 503, Criminal Law Annotated, Padilla, 1972
Ed.).

Labor Arbiter Raymundo Valenzuela should be made to answer for having acted without or beyond his authority in
proper administrative charges. He could also be prosecuted before the Tanodbayan under the provisions of the
Anti-Graft Law. Independently of his liabilities as a government officer, he could be the subject of disbarment
proceedings under Section 27, Rule 138 of the Revised Rules of Court.

Atty. Benjamin Pineda could also be held liable under Section 4(b) of R.A. No. 3019 (Anti-Graft and Corrupt
Practices Act) which makes it unlawful for any person knowingly to induce or cause any public official to commit any
of the offenses defined in Section 3 of said act. Section 3 enumerates the corrupt practices which public officers
may be prosecuted for. Atty. Pineda knowingly induced or caused Labor Arbiter Valenzuela to issue the questioned
orders without or beyond the latter's authority and to which orders the former was not entitled, considering that he
was not the sole and proper representative.

The Manila Banking Corporation (Cubao Branch) per manifestation and motion dated October 28, 1983 and
reiterated on November 10, 1983, had transmitted to the NLRC the remaining balance of P417,380.64 and
P2,022.70 for the account of the Union and Atty. Pineda, respectively. This turnover of the aforecited amounts is a
sufficient compliance with Our restraining order and resolution of September 13, 1983 and hence, the Manila
Banking Corporation can no longer be liable for contempt of court.

Labor II – 1
Very recently, on August 23, 1984, respondent Union, thru Acting Administrator Ricardo Capuno, filed its motion to
drop Halili Bus Drivers and Conductors Union from the contempt charge in view of these reasons:

1. The Manila Bank has already turned over to the NLRC the amount of P59,716.14 which represents the remaining
balance of 5% earmarked for Union expenses incurred in the case aside from the amounts deposited in escrow for
the workers. The amount of P42,140.00 was spent legitimately by the Union for administration purposes relative to
the subject property. The Union asserts that it is ready and willing to account for all expenses and withdrawals from
the bank before the NLRC.

2. The alleged 5% donation of Atty. Pineda to the Union taken from the 35% attorneys' fees was given to and
received by then President Domingo Cabading alone, who thereafter left for the United States.

3. The 1% allocated for unknown claimants or those not previously listed in the amount of P9,596.18 can easily be
accounted for by the Union before the NLRC.

In the same motion, Mr. Capuno clarifies that with regard to attorneys' fees, Atty. Pineda made the Union officers
believe that he would be the one to pay the fees of Attys. Espinas and Lopez for which reason, the 35% increased
fees was approved by the Union's board in good faith. The Union likewise confirms that Atty. Pineda came into the
picture only when he was assigned by Atty. Espinas in, 1965 to execute the CIR decision which, thru Atty. Espinas
handling, was upheld by this Court in L-24864 in 1968. The Union officers were aware that Atty. Espinas was the
principal counsel even after Atty. Pineda's assignment. They also knew of the original contract for 20% attorney's
fees which was increased to 35% by Atty. Pineda upon the arrangement that with the increase, he would answer for
the payment of Attys. Espinas and Lopez' fees and for necessary representation expenses (p. 450, L-24864 rec.).

Acting on the aforesaid motion, this Court in its resolution of August 28, 1964, dropped the Union and its officers
from the within contempt charge (p. 455, L-24864 rec.).

WHEREFORE, ATTY. BENJAMIN PINEDA IS HEREBY FOUND GUILTY OF INDIRECT CONTEMPT OF COURT
FOR WHICH HE IS HEREBY SENTENCED TO IMPRISONMENT IN THE MANILA CITY JAIL UNTIL THE
ORDERS OF THIS COURT DATED SEPTEMBER 1 AND SEPTEMBER 13, 1983 ARE COMPLIED WITH.

ATTY. BENJAMIN PINEDA IS ALSO DIRECTED TO SHOW CAUSE WHY HE SHOULD NOT BE DISBARRED
UNDER RULE 138 OF THE REVISED RULES OF COURT.

LET COPIES OF THIS RESOLUTION AND THE RESOLUTION OF OCTOBER 18, 1983 BE FURNISHED THE
MINISTRY OF LABOR AND THE TANODBAYAN FOR APPROPRIATE ACTION.

Labor II – 1
23.) Toncino v Ferrer-Calleja

G.R. No. 78131 January 20, 1988

EDUARDO TANCINCO, OSCAR E. BARTOLO, DANIEL DE LEON, EDDIE POE, VIRGILIO SAN PEDRO, MA.
LUISA QUIBIN, FE MUDLONG and HENRY MADRIAGA, petitioners,
vs.
DIRECTOR PURA FERRER-CALLEJA, EDWIN LACANILAO, BOYET DALMACIO, JOSEFINO ESGUERRA,
TESSIE GATCHALIAN, LITO CUDIA and DING PAGAYON, respondents.

GANCAYCO, J.:

This special civil action for certiorari seeks to annul the Resolution of February 12, 1987 and the Decision of December 10, 1986 of the Bureau of Labor
Relations * in BLR Case No. A922186, setting aside the order of July 25, 1986 which decreed the inclusion and counting of the 56 segregated votes for the
determination of the results of the election of officers of Imperial Textile Mills Inc. Monthly Employees Association (ITM-MEA).

Private respondents are the prime organizers of ITM-MEA. While said respondents were preparing to file a
petition for direct certification of the Union as the sole and exclusive bargaining agent of ITM's bargaining
unit, the union's Vice-President, Carlos Dalmacio was promoted to the position of Department Head,
thereby disqualifying him for union membership. Said incident, among others led to a strike spearheaded by
Lacanilao group, respondents herein. Another group however, led by herein petitioners staged a strike
inside the company premises. After four (4) days the strike was settled. On May 10, 1986 an agreement was
entered into by the representatives of the management, Lacanilao group and the Tancinco group the
relevant terms of which are as follows:

"1. That all monthly-paid employees shall be United under one union, the ITM Monthly
Employees Association (ITM-MEA), to be affiliated with ANGLO;

2. That the management of ITM recognizes ANGLO as the sole and exclusive bargaining agent
of all the monthly-paid employees;

3. That an election of union officers shall be held on 26 May l986, from 8:00 a.m. to 5:00 p.m.;

4. That the last day of filing of candidacy shall be on l9 May l986 at 4:00 p.m.;

5. That a final pre-election conference to finalize the list of qualified voters shall be held on 19 May
1986, at 5:00 p.m.;"  1

On May 19, 1986, a pre-election conference was held, but the parties failed to agree on the list of voters. During
the May 21, 1986 pre-election conference attended by MOLE officers, ANGLO through its National Secretary, a
certain Mr. Cornelio A. Sy made a unilateral ruling excluding some 56 employees consisting of the Manila
office employees, members of Iglesia ni Kristo, non-time card employees, drivers of Mrs. Salazar and the
cooperative employees of Mrs. Salazar. Prior to the holding of the election of union officers petitioners,   through 2

a letter addressed to the Election Supervisor, MOLE San Fernando Pampanga, protested said ruling but no action
was taken. On May 26, 1986, the election of officers was conducted under the supervision of MOLE wherein the
56 employees in question participated but whose votes were segregated without being counted. Lacanilao's
group won. Lacanilao garnered 119 votes with a margin of three (3) votes over Tancinco prompting
petitioners to make a protest. Thereafter, petitioners filed a formal protest with the Ministry of Labor
Regional Office in San Fernando, Pampanga   claiming that the determination of the qualification of the 56
3

votes is beyond the competence of ANGLO. Private respondents maintain the contrary on the premise that
definition of union's membership is solely within their jurisdiction.

On the basis of the position papers submitted by the parties MOLE's Med Arbiter   issued an order dated July 25, 4

1986 directing the opening and counting of the segregated votes.   From the said order private respondents
5

Labor II – 1
appealed to the Bureau of Labor Relations (BLR) justifying the disenfranchisement of the 56 votes. Private
respondents categorized the challenged voters into four groups namely, the Manila Employees, that they are
personal employees of Mr. Lee; the Iglesia ni Kristo, that allowing them to vote will be anomalous since it is their
policy not to participate in any form of union activities; the non-time card employees, that they are managerial
employees; and the employees of the cooperative as non-ITM employees.   On December 10, 1986, BLR rendered
6

a decision   holding the exclusion of the 56 employees as arbitrary, whimsical, and wanting in legal basis   but
7 8

set aside the challenged order of July 26, 1986 on the ground that 51 ** of 56 challenged voters were not yet
union members at the time of the election per April 24, 1986 list submitted before the Bureau. 9 The decision
directed among others the proclamation of Lacanilao's group as the duly elected officers and for ITM-MEA to absorb
in the bargaining unit the challenged voters unless proven to be managerial employees. 10 Petitioners' motion for
reconsideration was likewise denied.

Dissatisfied with the turn of events narrated above petitioners elevated the case to this Court by way of the instant
petition for certiorari under Rule 65 of the Rules of Court. Petitioners allege that public respondent director of Labor
Relations committed grave abuse of discretion in ordering the Med-Arbiter to disregard the 56 segregated votes and
proclaim private respondents as the duly elected officers of ITM-MEA whereas said respondent ruled that the
grounds relied upon by ANGLO for the exclusion of voters are arbitrary, whimsical and without legal basis.

The petition is impressed with merit. The record of the case shows that public respondent categorically
declared as arbitrary, whimsical and without legal basis the grounds   relied upon by ANGLO in disenfranchising the
11

56 voters in question. However, despite said finding public respondent ruled to set aside the Resolution of July 25,
1986 of the Med-Arbiter based on its own findings   that 51 of the 56 disenfranchised voters were not yet union
12

members at the time of the election of union officers on May 26, 1986 on the ground that their names do not
appear in the records of the Union submitted to the Labor Organization Division of the Bureau of Labor on
April 24, 1986.

The finding does not have a leg to stand on. Submission of the employees names with the BLR as qualified
members of the union is not a condition sine qua non to enable said members to vote in the election of
union's officers. It finds no support in fact and in law. Per public respondent's findings, the April 24, 1986 list
consists of 158 union members only   wherein 51 of the 56 challenged voters' names do not appear. Adopting
13

however a rough estimate of a total number of union members who cast their votes of some 333   and excluding
14

therefrom the 56 challenged votes, if the list is to be the basis as to who the union members are then public
respondent should have also disqualified some 175 of the 333 voters. It is true that under article 242(c) of the
Labor Code, as amended, only members of the union can participate in the election of union officers. The
question however of eligibility to vote may be determined through the use of the applicable payroll period
and employee's status during the applicable payroll period. The payroll of the month next preceding the
labor dispute in case of regular employees   and the payroll period at or near the peak of operations in case
15

of employees in seasonal industries.  16

In the case before Us, considering that none of the parties insisted on the use of the payroll period-list as
voting list and considering further that the 51 remaining employees were correctly ruled to be qualified for
membership, their act of joining the election by casting their votes on May 26, 1986 after the May 10, 1986
agreement is a clear manifestation of their intention to join the union. They must therefore be
considered ipso facto members thereof Said employees having exercised their right to unionism by joining
ITM-MEA their decision is paramount. Their names could not have been included in the list of employee
submitted on April 24, 1986 to the Bureau of Labor for the agreement to join the union was entered into only
on May 10, 1986. Indeed the election was supervised by the Department of Labor where said 56 members were
allowed to vote. Private respondents never challenged their right to vote then.

The Solicitor General in his manifestation agreed with petitioners that public respondent committed a grave abuse of
discretion in deciding the issue on the basis of the records of membership of the union as of April 24, 1986 when
this issue was not put forward in the appeal.

It is however the position of private respondents that since a collective bargaining agreement (CBA) has been
concluded between the local union and ITM management the determination of the legal question raised herein may
not serve the purpose which the union envisions and may destroy the cordial relations existing between the
management and the union.
Labor II – 1
We do not agree. Existence of a CBA and cordial relationship developed between the union and the management
should not be a justification to frustrate the decision of the union members as to who should properly represent them
in the bargaining unit. Neither may the inclusion and counting of the 56 segregated votes serve to disturb the
existing relationship with management as feared by herein private respondents. Respondents themselves pointed
out that petitioners joined the negotiating panel in the recently concluded CBA. This fact alone is conclusive against
herein petitioners and hence will estop them later if ever, from questioning the CBA which petitioners concurred
with. Furthermore, the inclusion and counting of the 56 segregated votes would not necessarily mean success in
favor of herein petitioners as feared by private respondents herein. Otherwise, could this be the very reason behind
their fears why they made it a point to nullify said votes?

WHEREFORE, premises considered, the petition for certiorari is GRANTED. The temporary restraining order
issued by this Court on May 13, 1987 is hereby made permanent. The questioned Resolution of February 12, 1987
and the Decision of December 10, 1986 are hereby set aside for being null and void and the Order of July 25, 1986
of the Mediator Arbiter is hereby declared immediately executory.

Labor II – 1
24.) Palacol v. Ferrer-Caleja

G.R. No. 85333 February 26, 1990

CARMELITO L. PALACOL, ET AL., petitioners,

vs.
PURA FERRER-CALLEJA, Director of the Bureau of Labor Relations, MANILA CCBPI SALES FORCE UNION,
and COCA-COLA BOTTLERS (PHILIPPINES), INC., respondents.

Wellington B. Lachica for petitioners.

Adolpho M. Guerzon for respondent Union.

GANCAYCO, J.:

Can a special assessment be validly deducted by a labor union from the lump-sum pay of its members, granted
under a collective bargaining agreement (CBA), notwithstanding a subsequent disauthorization of the same by a
majority of the union members? This is the main issue for resolution in the instant petition for certiorari.

As gleaned from the records of the case, the pertinent facts are as follows:

On October 12, 1987, the respondent Manila CCBPI Sales Force Union (hereinafter referred to as the Union),
as the collective bargaining agent of all regular salesmen, regular helpers, and relief helpers of the Manila
Plant and Metro Manila Sales Office of the respondent Coca-Cola Bottlers (Philippines), Inc. (hereinafter
referred to as the Company) concluded a new collective bargaining agreement with the latter.   Among the
1

compensation benefits granted to the employees was a general salary increase to be given in lump sum
including recomputation of actual commissions earned based on the new rates of increase.

On the same day, the president of the Union submitted to the Company the ratification by the union
members of the new CBA and authorization for the Company to deduct union dues equivalent to P10.00
every payday or P20.00 every month and, in addition, 10% by way of special assessment, from the CBA lump-
sum pay granted to the union members. The last one among the aforementioned is the subject of the instant
petition.

As embodied in the Board Resolution of the Union dated September 29, 1987, the purpose of the special
assessment sought to be levied is "to put up a cooperative and credit union; purchase vehicles and other
items needed for the benefit of the officers and the general membership; and for the payment for services
rendered by union officers, consultants and others."   There was also an additional proviso stating that the
2

"matter of allocation ... shall be at the discretion of our incumbent Union President."

This "Authorization and CBA Ratification" was obtained by the Union through a secret referendum held in
separate local membership meetings on various dates.   The total membership of the Union was about 800. Of
3

this number, 672 members originally authorized the 10% special assessment, while 173 opposed the same.  4

Subsequently however, one hundred seventy (170) members of the Union submitted documents to the Company
stating that although they have ratified the new CBA, they are withdrawing or disauthorizing the deduction of any
amount from their CBA lump sum. Later, 185 other union members submitted similar documents expressing the
same intent. These members, numbering 355 in all (170 + 185), added to the original oppositors of 173, turned the
tide in favor of disauthorization for the special assessment, with a total of 528 objectors and a remainder of 272
supporters. 5

Labor II – 1
On account of the above-mentioned disauthorization, the Company, being in a quandary as to whom to remit
the payment of the questioned amount, filed an action for interpleader with the Bureau of Labor Relations in
order to resolve the conflicting claims of the parties concerned. Petitioners, who are regular rank-and-file employees
of the Company and bona fide members of the Union, filed a motion/complaint for intervention therein in two groups
of 161 and 94, respectively. They claimed to be among those union members who either did not sign any individual
written authorization, or having signed one, subsequently withdrew or retracted their signatures therefrom.

Petitioners assailed the 10% special assessment as a violation of Article 241(o) in relation to Article 222(b)
of the Labor Code. Article 222(b) provides as follows:

ART. 222. Appearances and Fees. —

xxx xxx xxx

(b) No attorney's fees, negotiation fees or similar charges of any kind arising from
any collective bargaining negotiations or conclusion of the collective agreement shall
be imposed on any individual member of the contracting union; Provided, however,
that attorney's fees may be charged against union funds in an amount to be agreed
upon by the parties. Any contract, agreement or arrangement of any sort to the
contrary shall be null and void.

On the other hand, Article 241(o) mandates that:

ART. 241. Rights and conditions of membership in a labor organization. —

xxx xxx xxx

(o) Other than for mandatory activities under the Code, no special assessments,
attorney's fees, negotiation fees or any other extraordinary fees may be checked off
from any amount due to an employee without an individual written authorization duly
signed by the employee. The authorization should specifically state the amount,
purpose and beneficiary of the deduction;

As authority for their contention, petitioners cited Galvadores v. Trajano,   wherein it was ruled that no check-offs
6

from any amount due employees may be effected without individual written authorizations duly signed by the
employees specifically stating the amount, purpose, and beneficiary of the deduction.

In its answer, the Union countered that the deductions not only have the popular indorsement and approval
of the general membership, but likewise complied with the legal requirements of Article 241 (n) and (o) of
the Labor Code in that the board resolution of the Union imposing the questioned special assessment had
been duly approved in a general membership meeting and that the collection of a special fund for labor
education and research is mandated.

Article 241(n) of the Labor Code states that —

ART. 241. Rights and conditions of membership in a labor organization. —

xxx xxx xxx

(n) No special assessment or other extraordinary fees may be levied upon the members of a
labor organization unless authorized by a written resolution of a majority of all the members
at a general membership meeting duly called for the purpose. The secretary of the organization
shall record the minutes of the meeting including the list of all members present, the votes cast, the
purpose of the special assessment or fees and the recipient of such assessments or fees. The
record shall be attested to by the president;

Labor II – 1
Med-Arbiter Manases T. Cruz ruled in favor of petitioners in an order dated February 15, 1988 whereby he directed
the Company to remit the amount it had kept in trust directly to the rank-and-file personnel without delay.

On appeal to the Bureau of Labor Relations, however, the order of the Med-Arbiter was reversed and set aside by
the respondent-Director in a resolution dated August 19, 1988 upholding the claim of the Union that the special
assessment is authorized under Article 241 (n) of the Labor Code, and that the Union has complied with the
requirements therein.

Hence, the instant petition.

Petitioners allege that the respondent-Director committed a grave abuse of discretion amounting to lack or excess of
jurisdiction when she held Article 241 (n) of the Labor Code to be the applicable provision instead of Article 222(b) in
relation to Article 241(o) of the same law.

According to petitioners, a cursory examination and comparison of the two provisions of Article 241 reveals that
paragraph (n) cannot prevail over paragraph (o). The reason advanced is that a special assessment is not a matter
of major policy affecting the entire union membership but is one which concerns the individual rights of union
members.

Petitioners further assert that assuming arguendo that Article 241(n) should prevail over paragraph (o), the
Union has nevertheless failed to comply with the procedure to legitimize the questioned special
assessment by: (1) presenting mere minutes of local membership meetings instead of a written resolution; (2)
failing to call a general membership meeting; (3) having the minutes of three (3) local membership meetings
recorded by a union director, and not by the union secretary as required; (4) failing to have the list of members
present included in the minutes of the meetings; and (5) failing to present a record of the votes cast.   Petitioners
7

concluded their argument by citing Galvadores.

After a careful review of the records of this case, We are convinced that the deduction of the 10% special
assessment by the Union was not made in accordance with the requirements provided by law.

Petitioners are correct in citing the ruling of this Court in Galvadores which is applicable to the instant case. The
principle "that employees are protected by law from unwarranted practices that diminish their compensation without
their knownledge and consent"   is in accord with the constitutional principle of the State affording full protection to
8

labor. 
9

The respondent-Union brushed aside the defects pointed out by petitioners in the manner of compliance with the
legal requirements as "insignificant technicalities." On the contrary, the failure of the Union to comply strictly
with the requirements set out by the law invalidates the questioned special assessment. Substantial
compliance is not enough in view of the fact that the special assessment will diminish the compensation of
the union members. Their express consent is required, and this consent must be obtained in accordance
with the steps outlined by law, which must be followed to the letter. No shortcuts are allowed.

The applicable provisions are clear. The Union itself admits that both paragraphs (n) and (o) of Article 241
apply. Paragraph (n) refers to "levy" while paragraph (o) refers to "check-off" of a special assessment. Both
provisions must be complied with. Under paragraph (n), the Union must submit to the Company a written
resolution of a majority of all the members at a general membership meeting duly called for the purpose. In
addition, the secretary of the organization must record the minutes of the meeting which, in turn, must
include, among others, the list of all the members present as well as the votes cast.

As earlier outlined by petitioners, the Union obviously failed to comply with the requirements of paragraph (n).
It held local membership meetings on separate occasions, on different dates and at various venues,
contrary to the express requirement that there must be a general membership meeting. The contention of the
Union that "the local membership meetings are precisely the very general meetings required by law"   is untenable
10

because the law would not have specified a general membership meeting had the legislative intent been to allow
local meetings in lieu of the latter.

Labor II – 1
It submitted only minutes of the local membership meetings when what is required is a written resolution
adopted at the general meeting. Worse still, the minutes of three of those local meetings held were recorded
by a union director and not by the union secretary. The minutes submitted to the Company contained no list of
the members present and no record of the votes cast. Since it is quite evident that the Union did not comply with the
law at every turn, the only conclusion that may be made therefrom is that there was no valid levy of the special
assessment pursuant to paragraph (n) of Article 241 of the Labor Code.

Paragraph (o) on the other hand requires an individual written authorization duly signed by every employee
in order that a special assessment may be validly checked-off. Even assuming that the special assessment
was validly levied pursuant to paragraph (n), and granting that individual written authorizations were
obtained by the Union, nevertheless there can be no valid check-off considering that the majority of the
union members had already withdrawn their individual authorizations. A withdrawal of individual
authorizations is equivalent to no authorization at all. Hence, the ruling in Galvadores that "no check-offs from
any amounts due employees may be effected without an individual written authorization signed by the employees ...
" is applicable.

The Union points out, however, that said disauthorizations are not valid for being collective in form, as they are
"mere bunches of randomly procured signatures, under loose sheets of paper."   The contention deserves no merit
11

for the simple reason that the documents containing the disauthorizations have the signatures of the union
members. The Court finds these retractions to be valid. There is nothing in the law which requires that the
disauthorization must be in individual form.

Moreover, it is well-settled that "all doubts in the implementation and interpretation of the provisions of the Labor
Code ... shall be resolved in favor of labor."  And as previously stated, labor in this case refers to the union
12

members, as employees of the Company. Their mere desire to establish a separate bargaining unit, albeit
unproven, cannot be construed against them in relation to the legality of the questioned special assessment. On the
contrary, the same may even be taken to reflect their dissatisfaction with their bargaining representative, the
respondent-Union, as shown by the circumstances of the instant petition, and with good reason.

The Med-Arbiter correctly ruled in his Order that:

The mandate of the majority rank and file have (sic) to be respected considering they are the ones
directly affected and the realities of the high standards of survival nowadays. To ignore the mandate
of the rank and file would enure to destabilizing industrial peace and harmony within the rank and file
and the employer's fold, which we cannot countenance.

Moreover, it will be recalled that precisely union dues are collected from the union members to be
spent for the purposes alluded to by respondent. There is no reason shown that the regular union
dues being now implemented is not sufficient for the alleged expenses. Furthermore, the rank and
file have spoken in withdrawing their consent to the special assessment, believing that their regular
union dues are adequate for the purposes stated by the respondent. Thus, the rank and file having
spoken and, as we have earlier mentioned, their sentiments should be respected.

Of the stated purposes of the special assessment, as embodied in the board resolution of the Union, only the
collection of a special fund for labor and education research is mandated, as correctly pointed out by the Union. The
two other purposes, namely, the purchase of vehicles and other items for the benefit of the union officers and the
general membership, and the payment of services rendered by union officers, consultants and others, should be
supported by the regular union dues, there being no showing that the latter are not sufficient to cover the same.

The last stated purpose is contended by petitioners to fall under the coverage of Article 222 (b) of the Labor Code.
The contention is impressed with merit. Article 222 (b) prohibits attorney's fees, negotiations fees and similar
charges arising out of the conclusion of a collective bargaining agreement from being imposed on any
individual union member. The collection of the special assessment partly for the payment for services
rendered by union officers, consultants and others may not be in the category of "attorney's fees or
negotiations fees." But there is no question that it is an exaction which falls within the category of a "similar
charge," and, therefore, within the coverage of the prohibition in the aforementioned article. There is an
additional proviso giving the Union President unlimited discretion to allocate the proceeds of the special
Labor II – 1
assessment. Such a proviso may open the door to abuse by the officers of the Union considering that the total
amount of the special assessment is quite considerable — P1,027,694.33 collected from those union members who
originally authorized the deduction, and P1,267,863.39 from those who did not authorize the same, or subsequently
retracted their authorizations.   The former amount had already been remitted to the Union, while the latter is being
13

held in trust by the Company.

The Court, therefore, stakes down the questioned special assessment for being a violation of Article 241,
paragraphs (n) and (o), and Article 222 (b) of the Labor Code.

WHEREFORE, the instant petition is hereby GRANTED. The Order of the Director of the Bureau of Labor
Relations dated August 19, 1988 is hereby REVERSED and SET ASIDE, while the order of the Med-Arbiter dated
February 17, 1988 is reinstated, and the respondent Coca-Cola Bottlers (Philippines), Inc. is hereby ordered to
immediately remit the amount of P1,267,863.39 to the respective union members from whom the said amount was
withheld. No pronouncement as to costs. This decision is immediately executory.

Labor II – 1
25.) Rance v. NLRC

G.R. No. L-68147 June 30, 1988

AMADA RANCE, MERCEDES LACUESTA, MELBA GUTIERREZ, ESTER FELONGCO, CATALINO

ARAGONES, CONSOLACION DE LA ROSA, AMANCIA GAY, EDUARDO MENDOZA, ET AL., petitioners,
vs.
THE NATIONAL LABOR RELATIONS COMMISSION, POLYBAG MANUFACTURING CORPORATION,
VIRGINIA MALLARI, JOHNNY LEE, ROMAS VILLAMIN, POLYBAG WORKERS UNION, PONCIANO
FERNANDEZ, AND ANTONIO ANTIQUERA, respondents.

PARAS, J.:

A review of the records shows that a Collective Bargaining Agreement was entered into on April 30, 1981 by and
between respondents Polybag Manufacturing Corporation and Polybag Workers Union which provides among
others:

ARTICLE V

UNION SECURITY

Any employee within the bargaining agreement who is a member of the union at the time of the
effectivity of this agreement or becomes a member of the UNION thereafter, shall during the
term thereof or any extention, continue to be a member in good standing of the UNION as a
condition of continued employment in the COMPANY.

Any employee hired during the effectivity of this agreement shall, within 30 days after becoming
regular join the UNION and continue to be a member in good standing thereof as a condition of
continued employment in the COMPANY.

On the basis of a board resolution of the UNION, the COMPANY shall dismiss from the service
any member of the UNION who loses his membership in good standing either by resignation
therefrom or expulsion therefrom for any of the following causes:

1. Disloyalty to the UNION;

2. Commission of acts inimical to the interest of the UNION;

3. Failure and refusal to pay UNION dues and other assessments;

4. Conviction for any offense or crime; or

5. Organizing and/or joining another labor organization claiming jurisdiction similar to that of the
UNION.

Provided, however, that in case expulsion proceedings are instituted against any member of the
UNION, pending such proceedings, the COMPANY, on the basis of a board resolution of the
UNION, shall suspend the member concerned; and provided further, that the UNION, jointly and
severally with the officers and members of the board voting for the dismissal or suspension, shall
hold and render the COMPANY, its executive, owners, and officers free from any and all claims and
liabilities. (Rollo, p. 64).

Labor II – 1
Petitioners herein were among the members of the respondent union who were expelled by the latter
for disloyalty in that they allegedly joined the NAFLU — a large federation. Because of the expulsion,
petitioners were dismissed by respondent Corporation. Petitioners sued for reinstatement and backwages
stating their dismissal was without due process. Losing both in the decisions of the Labor Arbiter and the
National Labor Relations Commission (NLRC), they elevated their cause to the Supreme Court.

Respondent Polybag Workers Union as already stated expelled 125 members on the ground of disloyalty and
acts inimical to the interests of the Union (Resolution No. 84, series of 1982, Rollo, p. 16) based on the findings and
recommendations of the panel of investigators. Both the Labor Arbiter and the NLRC found the Collective
Bargaining Agreement and the "Union Security Clause" valid and considered the termination of the petitioners
justified thereunder, for having committed an act of disloyalty to the Polybag Workers Union by having affiliated
with and having joined the NAFLU, another labor union claiming jurisdiction similar to the former, while still
members of respondent union (Rollo, pp. 45-46).

Among the disputed portions of the NLRC decision is its finding that it has been substantially proven that the
petitioners committed acts of disloyalty to their union as a consequence of the filing by NAFLU for and in their behalf
of the complaint in question (Rollo, p. 46).

Petitioners insist that their expulsion from the Union and consequent dismissal from employment have no
basis whether factual or legal, because they did not in fact affiliate themselves with another Union, the
NAFLU. On the contrary, they claim that there is a connivance between respondents Company and Union in their
illegal dismissal in order to avoid the payment of separation pay by respondent company.

Petitioners' contention that they did not authorize NAFLU to file NLRC-AB Case No. 6-4275-82 for them is
borne out by the records which show that they did not sign the complaint, neither did they sign any
document of membership application with NAFLU (Rollo, p. 323). Significantly, none of private respondents was
able to present any evidence to the contrary except for one employee who admitted having authorized NAFLU to file
the complaint but only for the purpose of questioning the funds of the Union (Rollo, p. 216).

Placed in proper perspective, the mere act of seeking help from the NAFLU cannot constitute disloyalty as
contemplated in the Collective Bargaining Agreement. At most it was an act of self-preservation of workers
who, driven to desperation found shelter in the NAFLU who took the cudgels for them.

It will be recalled that 460 employees were temporarily laid off; some were laid-off as early as March 22, 1982
although the actual official announcement and notice of the intended shutdown was made only on May 27, 1982
(Rollo, p. 151). The laid-off employees did not receive any separation pay because as alleged by respondent
company their dismissal was due to serious business reverses suffered by it. The only aid offered by the company
which was offered when the disgruntled employees began to discuss among themselves their plight, was a 1/2 sack
of rice monthly and P 50.00 weekly. Most of the employees did not avail themselves of the aid as those who
did were allegedly made to sign blank papers. To aggravate matters, petitioners complained that their pleas
for their union officers to fight for their right to reinstatement, fell on deaf ears. Their union leaders
continued working and were not among those laid-off, which explains the lack of positive action on the part
of the latter to help or even sympathize with the plight of the members. All they could offer was a statement
"marunong pa kayo sa may-ari ng kumpanya" ("you know more than the company owners") (Rollo, p. 80). Under
the circumutances, petitioners cannot be blamed for seeking help wherever it could be found.

In fact even assuming that petitioners did authorize NAFLU to file the action for them, it would have been pointless
because NAFLU cannot file an action for members of another union. The proper remedy would be to drop the union
as party to the action and place the names of the employees instead (Lakas v. Marcelo Enterprises, 118 SCRA 422
[1982]) as what appears to have been done in this case before the Court.

Petitioners claim that the NLRC erred in ruling that the expulsion proceeding conducted by the Union was
in accordance with its by-laws. Respondent Union had notified and summoned herein petitioners to appear and
explain why they should not be expelled from the union for having joined and affiliated with NAFLU.

Petitioners contend that the requisites of due process were not complied with in that, there was no impartial
tribunal or union body vested with authority to conduct the disciplinary proceeding under the union
Labor II – 1
constitution and by-laws, and, that complainants were not furnished notice of the charge against them, nor
timely notices of the hearings on the same (Rollo, p. 48).

According to the minutes of the special meeting of the Board of Directors of respondent Union held on September
14, 1982, the Chairman of the Board of Directors showed the members of the board, copies of the minutes of the
investigation proceedings of each individual member, together with a consolidated list of Union members found
guilty as charged and recommended for expulsion as members of the respondent Union. The Board members
examined the minutes and the list (Rollo, p. 219).

It is to be noted, however, that only two (2) of the expelled petitioners appeared before the investigation panel
(Rollo, pp. 203, 235). Most of the petitioners boycotted the investigation proceedings. They alleged that most of
them did not receive the notice of summons from respondent Union because they were in the provinces.
This fact was not disproved by private respondents who were able to present only a sample copy of proof of service,
Annex "14" (Rollo, p. 215). Petitioners further claim that they had no Idea that they were charged with
disloyalty; those who came were not only threatened with persecution but also made to write the answers to
questions as dictated to them by the Union and company representatives. These untoward incidents prompted
petitioners to request for a general investigation with all the petitioners present but their request was ignored by the
panel of investigators (Rollo, pp. 280, 307). Again, these allegations were not denied by private respondents.

In any event, even if petitioners who were complainants in NLRC-AB Case No. 6-4275-82 appeared in the
supposed investigation proceedings to answer the charge of disloyalty against them, it could not have
altered the fact that the proceedings were violative of the elementary rule of justice and fair play. The Board
of Directors of respondent union would have acted as prosecutor, investigator and judge at the same time.
The proceeding would have been a farce under the circumstances (Lit Employees Association v. Court of
Industrial Relations, 116 SCRA 459 [1982] citing Kapisanan ng Mga Manggagawa sa MRR v. Rafael Hernandez, 20
SCRA 109). The filing of the charge of disloyalty against petitioners was instigated by the Chairman of the Board of
Directors and Acting Union President, Ponciano Fernandez, in the special meeting of the members of the Board of
Directors as convened by the Union President on August 16, 1982 (Rollo, p. 213). The Panel of Investigators
created under the Board's Resolution No. 83, s. 1982 was composed of the Chairman of the Board, Ponciano
Fernandez, and two (2) members of the Board, Samson Yap and Carmen Garcia (Rollo, p. 214). It is the same
Board that expelled its 125 members in its Resolution No. 84, s. of 1982 (Rollo, p. 219).

All told, it is obvious, that in the absence of any full blown investigation of the expelled members of the
Union by an impartial body, there is no basis for respondent Union's accusations.

It is the policy of the state to assure the right of workers to "security of tenure" (Article XIII, Sec. 3 of the New
Constitution, Section 9, Article II of the 1973 Constitution). The guarantee is an act of social justice. When a person
has no property, his job may possibly be his only possession or means of livelihood. Therefore, he should be
protected against any arbitrary deprivation of his job. Article 280 of the Labor Code has construed security of tenure
as meaning that "the employer shall not terminate the services of an employee except for a just cause or when
authorized by" the code (Bundoc v. People's Bank and Trust Company, 103 SCRA 599 [1981]). Dismissal is not
justified for being arbitrary where the workers were denied due process (Reyes v. Philippine Duplicators, Inc., 109
SCRA 489 [1981] and a clear denial of due process, or constitutional right must be safeguarded against at all times,
(De Leon v. National Labor Relations Commission, 100 SCRA 691 [1980]). This is especially true in the case at bar
where there were 125 workers mostly heads or sole breadwinners of their respective families.

Time and again, this Court has reminded employers that while the power to dismiss is a normal prerogative of the
employer, the same is not without limitations. The employer is bound to exercise caution in terminating the services
of his employees especially so when it is made upon the request of a labor union pursuant to the Collective
Bargaining Agreement, as in the instant case. Dismissals must not be arbitrary and capricious. Due process must be
observed in dismissing an employee because it affects not only his position but also his means of livelihood.
Employers should, therefore, respect and protect the rights of their employees, which include the right to labor
(Liberty Cotton Mills Workers Union v. Liberty Cotton Mills, Inc., 90 SCRA 393 [1979], Resolution).

In the case at bar, the scandalous haste with which respondent corporation dismissed 125 employees lends
credence to the claim that there was connivance between respondent corporation and respondent Union. It is

Labor II – 1
evident that private respondents were in bad faith in dismissing petitioners. They, the private respondents, are guilty
of unfair labor practice.

PREMISES CONSIDERED, (1) the decision of respondent National Labor Relations Commission in NLRC-NCR-11-
6881-82 dated April 26, 1984 is REVERSED and SET ASIDE; and (2) respondent corporation is ordered: (1) to
reinstate petitioners to their former positions without reduction in rank, seniority and salary; (b) to pay petitioners
three-year backwages, without any reduction or qualification, jointly and solidarily with respondent Union; and (c) to
pay petitioners exemplary damages of P500.00 each. Where reinstatement is no longer feasible, respondent
corporation and respondent union are solidarily ordered to pay, considering their length of service their
corresponding separation pay and other benefits to which they are entitled under the law.

Labor II – 1
26.) Aldovino v. NLRC

G.R. No. 121189. November 16, 1998

GAUDENCIO A. ALDOVINO, ANACLETO G. PIMENTEL and AG & P UNITED RANK AND FILE
ASSOCIATION, Petitioners, v. NATIONAL LABOR RELATIONS COMMISSION and ATLANTIC
GULF AND PACIFIC COMPANY OF MANILA, INC., Respondents.

DECISION

BELLOSILLO, J.:

This petition for certiorari mainly concerns the application of the principle of res judicata in the
resolution of the instant labor dispute.

Petitioner Anacleto G. Pimentel started work as a lay-out man on 25 April 1985 assigned at AG & P
San Roque, Bauan, Batangas, while petitioner Gaudencio A. Aldovino was hired in June 1989 as an
electrician at the AG & P Batangas Marine and Fabrication Yard (BMFY) in Bauan, Batangas.1 Pimentel
and Aldovino acquired the status of regular employees on 1 December 1990 and 1 February 1991,
respectively, and became members in good standing of the employees' union, herein
petitioner United Rank and File Association (URFA), then the recognized and exclusive
collective bargaining agent for all regular rank-and-file employees of AG & P.2 cräläwvirtualibräry

On 25 July 1991, Luis I. Villanueva, president of AG & P, issued Presidential Directive No.
0191 enumerating emergency measures to be implemented by the company "to stave off the
devastating impact" of its severe losses. Among these plans was the temporary layoff of forty
percent (40%) of the existing complement in all its corporate and divisional support units. 3 By the
following month, respondent company began to lay off seven hundred five (705) rank-and-file
employees and eighty-four (84) staff and managerial personnel. This forced URFA to file a notice
of strike with the National Conciliation and Mediation Board (NCMB) of the Department of Labor and
Employment (DOLE).4 cräläwvirtualibräry

On 13 August 1991, at a conciliatory conference held before the NCMB, AG & P and URFA agreed to
submit for voluntary arbitration the issue of the temporary layoffs.5 cräläwvirtualibräry

Meanwhile, the AG & P Supervisors' Union, an unrecognized union seeking recognition as the
bargaining agent for supervisory personnel, waged a strike in all operating divisions of respondent
company in Metro Manila to protest the layoffs. This union was later on joined by the Lakas ng
Manggagawa sa AG & P - National Federation of Labor Chapter (LAKAS-NFL), another unrecognized
union for workers, particularly the company's project employees. 6 cräläwvirtualibräry

On 7 September 1991, an agreement ending the strike was reached by AG & P and the three
unions of AG & P, namely, petitioner URFA, the Supervisors' Union and LAKAS-NFL. The covenant
outlined the financial assistance to be extended by AG & P to all laid-off employees during
the 6-month layoff period. The employees were given the option to request payment of
separation pay and/or other cash benefits in case they would not be recalled, or to extend
their temporary layoff status until the company could hire them.7 Ten (10) days later, or on
17 September 1991, petitioners Aldovino and Pimentel were served separate notices of
temporary layoff. Both received temporary financial assistance equivalent to two (2) months
basic pay in accordance with the 7 September 1991 agreement. 8 cräläwvirtualibräry

Labor II – 1
On 7 January 1992, Voluntary Arbitrator Romeo B. Batino upheld the right of respondent
company to temporarily lay off its employees upon his finding that AG & P's claim of
severe financial losses due to adverse business conditions was duly substantiated.9 cräläwvirtualibräry

On 9 February 1993, after applying anew for work at the AG & P, Pimentel was rehired at a
reduced salary as a project or contractual employee assigned at the company's Flour Daniel-
Enron Project.10cräläwvirtualibräry

In 1994 Aldovino and Pimentel instituted separate but similar complaints against AG & P
for unfair labor practice, illegal layoff, illegal dismissal and non-payment of CBA increases
and benefits. They prayed for reinstatement with back wages, interests, CBA wage increases,
benefits and attorney's fees. The two (2) cases were thereafter consolidated. 11 cräläwvirtualibräry

On 12 August 1994, finding that the complainants were illegally dismissed, Labor Arbiter Ernesto
S. Dinopol rendered a decision12 in the two (2) cases ordering AG & P to reinstate Aldovino
and Pimentel as regular employees and to pay back wages and attorney's fees. He explained that
the financial situation of AG & P was not bleak as was pictured in its position paper, which
was why the extended temporary layoff status of Aldovino and Pimentel was unjustified and "akin to
illegal dismissal." The Labor Arbiter however rejected the charge of unfair labor practice and the
claims for damages and other monetary benefits for lack of evidence.

AG & P appealed to the NLRC protesting that the issue of the validity of the temporary
layoff had already been decided in its favor by a voluntary arbitrator, hence, was res
judicata.13 Aldovino and Pimentel also appealed, although partially, questioning the Labor Arbiter's
computation of their back wages and the denial of their claim for CBA increases and benefits.14 cräläwvirtualibräry

Resolving the appeal on 18 February 1995,15 the NLRC set aside the 12 August 1994 decision of the
Labor Arbiter and agreed with AG & P that the principle of res judicata was applicable in
petitioners' case, citing the decision of Voluntary Arbitrator Batino which upheld the validity of the 17
September 1991 temporary layoffs. It also alluded to its decision in Revidad v. AG & P of
Manila promulgated on 14 July 199316 which already established the law of the case. In its resolution
of 30 March 1995, the NLRC denied reconsideration. Hence this recourse.

Petitioners argue that: (a) since the requisite of identity of parties, subject matter and causes of
action is lacking in the instant case, the doctrine of res judicata cannot attach; (b) the NLRC
misapplied Art. 286 of the Labor Code because at the time AG & P asked petitioners if they were
willing to extend their layoff status, there was yet no resumption of operations in the particular work
unit or area to which they were previously assigned; (c) an extension of the six-month temporary
layoff period operates as a constructive dismissal; and, (d) the NLRC should have affirmed the Labor
Arbiter's finding of illegal dismissal and rectified the award of back wages by computing them as of
the time petitioners were illegally laid off and not from the lapse of the 6-month layoff period as
ruled by the Labor Arbiter.

The petition lacks merit. For res judicata to apply (a) the former judgment must be final; (b) the
court which rendered it had jurisdiction over the subject matter and the parties; (c) it must be a
judgment on the merits; and, (d) there must be as between the first and second actions identity of
parties, subject matter and causes of action.17 Petitioners insist that the last requisite of
identity of parties, subject matter and causes of action in the case before the voluntary
arbitrator and the petition now before us is absent. They argue that they cannot be bound
by the 7 January 1992 decision of Voluntary Arbitrator Batino inasmuch as that case
involved only their union URFA on one hand, and AG & P on the other.

Labor II – 1
The above argument is specious. It cannot be denied that both petitioners were bona fide
members of URFA when the case was under voluntary arbitration. In Davao Free Workers
Front v. Court of Industrial Relations, this Court ruled18 -

The detail that the number and names of the striking members of petitioner union were not specified
in the decision nor in the complaint is of no consequence x x x It is the function precisely of a
labor union such as petitioner to carry the representation of its members particularly
against the employer's unfair labor practices against it and its members and to file an
action for their benefit and behalf without joining them and to avoid the cumbersome
procedure of joining each and every member as a separate party x x x x

The right of URFA as a legitimate labor union to represent its members is expressly
guaranteed under Art. 242 of the Labor Code.19 This right, however, does not deprive its
individual members of their concomitant right to file a case in their own names, nor of
their right to withdraw from any case filed by the union in their behalf. More importantly,
the individual member may seasonably exercise his option to withdraw from a case filed
by his union if he does not want to be bound thereby. In Philippine Land-Air-Sea Labor Union
(PLASLU), Inc. v. CIR,20 this Court ruled that only those members of the petitioning union who
did not signify their intention to withdraw from the case before its trial and judgment on
the merits are bound by the outcome of the case. Since it has not been shown that
Aldovino and Pimentel withdrew from the case undergoing voluntary arbitration, it stands
to reason that both are bound by the decision rendered thereon. This obtaining, there is no
doubting the identity of parties between the arbitrated case and that brought by
petitioners before the Labor Arbiter. Hence we reiterate -

With respect to the aspect of identity of parties, it has been repeatedly stressed that this requirement
is satisfied if the two actions are substantially between the same parties which means that the
parties in both cases need not be physically identical provided that there is privity between the
parties x x x x21
cräläwvirtualibräry

As regards identity of subject matter and causes of action, our ruling in Revidad v. NLRC22 stands.
That case was for illegal dismissal relative to the 17 September 1991 layoff by AG & P of its
employee Revidad and his co-employees Aldovino and Pimentel, contending that the arbitration
proceeding under Voluntary Arbitrator Batino involved only the 13 August 1991 layoff and did not
cover those subsequently effected. There we pronounced -

We are not, however, in accord with the findings of public respondent that the subject of voluntary
arbitration proceedings was the September 17, 1991 lay-off of herein petitioners, which allegedly
was the one and only lay-off effected by AG & P. Private respondent AG & P does not deny nor
controvert the allegation in the position paper submitted by the AG & P - URFA with the voluntary
arbitrator that the AG & P management started the actual implementation of the company's
Presidential Directive No. 0191 on August 3, 1991 by effecting the temporary lay-off of more than
705 employees. Thus, the layoff of herein petitioners on September 17, 1991 cannot be validly
asserted as the only lay-off subject of the aforementioned voluntary arbitration proceedings.

On the contrary, it is more logical to conclude from the evidence on record that there could have
possibly been not just one or two separate and unrelated terminations because what was actually
involved here was a continuing process or correlated series of temporary layoffs implemented by
private respondent on the basis of its president's directive for retrenchment by reason of the financial
reverses being suffered by the company.23 cräläwvirtualibräry

It must be noted that in the instant case no appeal was taken from the 7 January 1992 decision of
Voluntary Arbitrator Batino who on the validity of the temporary layoffs found for management. It is
a matter of fact that even prior to this arbitral decision an agreement had already been signed on 7

Labor II – 1
September 1991 between AG & P and its three (3) unions, which included URFA to which petitioners
belonged, under which financial assistance for each laid-off employee was provided. Both Aldovino
and Pimentel availed themselves of this assistance after their respective layoffs. This certainly shows
that the decision of Voluntary Arbitrator Batino was not confined only to the initial layoff effected in
August 1991 but to all the layoffs subsequently made. Thus, when his decision attained finality, as
there was no appeal, it became the "law of the case." Subsequently, in Zebra Security Agency and
Allied Services v. NLRC,24 we explained -

More specifically, [law of the case] means that whatever is once irrevocably established as the
controlling legal rule of decision between the same parties in the same case continues to be the law
of the case, whether correct on general principles or not, so long as the facts on which such decision
was predicated continue to be the facts of the case before the court x x x x

Petitioners are now barred by prior judgment from raising in this case the same issue of
the legality of their layoffs. The test to determine whether there is identity of causes of action is
to ascertain whether the same evidence necessary to sustain the second action would have been
sufficient to authorize a recovery in the first, even if the forms or nature of the two actions be
different.25 For NLRC to allow Aldovino and Pimentel to prove that they were illegally
dismissed as a result of the extended layoff period would be to relitigate the validity and
reasonableness of the retrenchment program of AG & P, a matter already resolved by
Voluntary Arbitrator Batino and likewise settled in Revidad. It is to the interest of the public
that there should be an end to litigation by the same parties and their privies over a subject once
fully and fairly adjudicated.26 Interest republicae ut sit finis litium.

There being no grave abuse of discretion on the part of public respondent NLRC in its application of
the principle of res judicata, all the other arguments of petitioners have become academic, hence,
need no longer be resolved.

Both petitioners having received their separation pay by way of financial assistance under the
agreement of 7 September 1991 and Pimentel rehired thereafter, nothing more remains to be
resolved.

WHEREFORE, this petition is DISMISSED. The questioned Resolutions of the National Labor
Relations Commission dated 18 February 1995 and 30 March 1995 are AFFIRMED.

Labor II – 1
27.) Producer’s Bank v NLRC

G.R. No. 118069 November 16, 1998

PRODUCERS BANK OF THE PHILIPPINES, (now First Philippine International

Bank), Petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and PRODUCERS BANK
EMPLOYEES ASSOCIATION, Respondents.

ROMERO, J.:

Initially, this action was resolved in petitioner's favor with the dismissal of private respondent's
complaint for unfair labor practice and violation of the CBA against the former by Labor Arbiter
Jovencio Mayon. 1 Upon appeal to the National Labor Relations Commission (NLRC), the decision of
the Labor Arbiter was reversed and instead a judgment was rendered in favor of the private
respondent. Dismayed, petitioner is now before us seeking the reversal of the NLRC's decision.

The facts are quite simple.

Prefatorily, at the time the instant controversy started, petitioner was placed by the then Central
Bank of the Philippines (now Bangko Sentral ng Pilipinas) under a conservator for the
purpose of protecting its assets. 2 It appears that when the private respondents sought the
implementation of Section I, Article XI of the CBA regarding the retirement plan and Section
4, Article X thereof, pertaining to uniform allowance, the acting conservator of the petitioner
expressed her objection to such plan, resulting in an impasse between the petitioner bank and
the private respondent union. The deadlock continued for at least six months when the private
respondent, to resolve the issue, decided to file a case against the petitioner for unfair
labor practice and for flagrant violation of the CBA provisions.

As stated earlier, the Labor Arbiter dismissed private respondent's complaint, on this premise:

Considering that the Bank is under conservatorship program under which the bank is under the
rule of a conservator, the latter is under no compulsion to implement the resolutions issued by
the LMRC. If he finds that the enforcement of the resolutions would not redound for the best interest
of the Bank in accordance with the conservatorship program, he may not be faulted by such inaction
or action.

Undaunted by the initial setback, private respondent union interposed an appeal before the NLRC.
The NLRC, after reviewing the arguments of both parties, reversed the findings of the
Labor Arbiter, thus:

Not only is the worker protected by the Labor Code, he is likewise protected by other laws (Civil
Code) and social legislations the source of which is the no less than the Constitution itself. To adhere
first to the interest of the company to the prejudice of the workers can never be allowed or tolerated
as the interest of the working masses is the paramount concern of the government.

Consequently, the NLRC ordered the petitioner to implement the provisions of the CBA which
were disallowed by the conservator. 3

The issue need not detain us at length. The NLRC's finding deserves our concurrence.

In a similar case involving the petitioner and the acts of its conservator,  4 we already ruled that:
Labor II – 1
In the third place, while admittedly, the Central Bank law gives vast and far-reaching
powers to the conservator of a bank, it must be pointed out that such powers must be
related to the "(preservation of) the assets of the bank, (the reorganization of) the
management thereof and (the restoration of) its viability." Such powers, enormous and extensive as
they are, cannot extend to the post-facto repudiation of perfected transactions, otherwise
they would infringe against the non-impairment clause of the Constitution. If the legislature itself
cannot revoke an existing valid contract, how can it delegate such non-existent powers to the
conservator under Section 28-A of said law?

Obviously, therefore, Section 28-A merely gives the conservator power to revoke contracts that are,
under existing law, deemed to be defective - i.e., void, voidable, unenforceable or rescissible. Hence,
the conservator merely takes the place of a bank's board of directors. What the said board cannot do
- such as repudiating a contract validly entered into under the doctrine of implied authority - the
conservator cannot do either. Ineluctably, his power is not unilateral and he cannot simply
repudiate valid obligations of the Bank. His authority would be only to bring court actions to
assail such contracts - as he has already done so in the instant case. A contrary understanding of the
law would simply not be permitted by the Constitution. Neither by common sense. To rule otherwise
would be to enable a failing bank to become solvent, at the expense of third parties, by simply
getting the conservator to unilaterally revoke all previous dealings which had one way or another
come to be considered unfavorable to the Bank, yielding nothing to perfected contractual rights nor
vested interests of the third parties who had dealt with the Bank.

Prescinding from the rationalization that a conservator cannot rescind a valid and existing
contract and that the CBA is the law between the contracting parties,  5 it is obvious that
the conservator had no authority whatsoever to disallow the implementation of Article XI,
Section 1 and Article X, Section 4 of the CBA, especially considering that the ideals of social
justice and protection of labor are guaranteed not only by the Labor Code, but more importantly by
the fundamental law of the land.

It bears repeating that apart from the non-impairment clause, what is also well-settled, to
the point of being trite, is the principle that when the conflicting interests of labor and
capital are weighed on the scales of social justice, the dominant influence of the latter must be
counter-balanced by the sympathy and compassion the law must accord the under-privileged
worker. 6

Next, petitioner insists that both the Labor Arbiter and the NLRC have no jurisdiction to entertain the
complaint of the private respondent, 7 asserting that the issue was cognizable by the voluntary
arbitrator pursuant to Article 261 of the Labor Code.

Granting that both the Labor Arbiter and the NLRC indeed had no jurisdiction over the issue,
petitioner cannot anymore plead such procedural flaw under the principle of estoppel.  8 It appears
that in the proceedings before the Labor Arbiter, it vigorously argued its defense and prayed for
alternative relief. In fact, in its position paper 9 and reply, 10 the issue concerning the Labor Arbiter's
lack of jurisdiction was not raised by the petitioner. Moreover, in its answer 11 to the memorandum of
appeal filed by the private respondents before the NLRC, petitioner was again silent regarding the
issue of jurisdiction on the part of the NLRC to decide the appeal. It was only when the decision of
the NLRC was unfavorable that it raised the issue of jurisdiction.

Petitioner should bear the consequence of its act. It cannot be allowed to profit from its own omission
to the damage and prejudice of the private respondent. As we declared in Ilocos Sur Electric
Cooperative, Inc. v. NLRC: 12

. . . . Petitioners did not question the jurisdiction of the Labor Arbiter either in a motion to dismiss or
in their answer. In fact, petitioners participated in the proceedings before the Labor Arbiter, as well

Labor II – 1
as in the NLRC to which they appealed the Labor Arbiter's decision. It has been consistently held by
this Court that while jurisdiction may be assailed at any stage, a party's active participation in the
proceedings before a court without jurisdiction will estop such party from assailing such lack of it. It
is an undesirable practice of a party participating in the proceedings and submitting his case for
decision and then accepting the judgment, only if favorable, and attacking it for lack of jurisdiction,
when adverse.

Finally, petitioner asserts since the employees have retired, as a consequence of which no
employee-employer relationship exists anymore between it and the employees, private
respondent no longer had the personality to file the complaint for them. 13

Petitioner's contention in untenable. Retirement results from a voluntary agreement between the
employer and the employee whereby the latter after reaching a certain age agrees to sever his
employment with the former. 14 The very essence of retirement is the termination of the employer-
employee relationship.

Hence, the retirement of an employee does not, in itself, affect his employment status
especially when it involves all rights and benefits due to him, since these must be
protected as though there had been no interruption of service. It must be borne in mind that
the retirement scheme was part of the employment package and the benefits to be derived
therefrom constituted, as it were, a continuing consideration for services rendered, as well
as an effective inducement for remaining with the corporation. It is intended to help the
employee enjoy the remaining years of his life, releasing him from the burden of worrying for his
financial support, and are a form of reward for his loyalty. 15

When the retired employees were requesting that their retirement benefits be granted,
they were not pleading for generosity but were merely demanding that their rights, as
embodied in the CBA, be recognized. Thus, when an employee has retired but his benefits
under the law or the CBA have not yet been given, he still retains, for the purpose of
prosecuting his claims, the status of an employee entitled to the protection of the Labor
Code, one of which is the protection of the labor union. In Esso Philippines, Inc. v. Malayang
Manggagawa sa Esso (MME), 16 we recognized that while the individual complainants are the
real party m interest in issues involving monetary claims and benefits, the union, however,
is not denied its right to sue on behalf of its members, thus:

We see no legal impediments to considering this particular matter of retirement benefits to be within
the ambit of Our consistent holding that when it comes to individual benefits accruing to
members of a union from a favorable final judgment of any court, the members themselves
become the real parties in interest and it is for them, rather than for the union, to accept
or reject individually the fruits of the litigation. In the case at bar, the representations of the
MME which may result in prejudice to the interests of any of its individual members in the final
judgment being sought to be executed should yield to the individual decisions of the said members
themselves, who are free to choose whichever position suits their conscience.

WHEREFORE, in view of the foregoing, the instant petition is DISMISSED and the decision of the
National Labor Relations Commission dated August 31, 1994 is AFFIRMED. Costs against petitioner.

Labor II – 1
28.) Gabriel v Secretary
[G.R. No. 115949. March 16, 2000.]

EVANGELINE J. GABRIEL, TERESITA C. LUALHATI, EVELYN SIA, RODOLFO EUGENIO,

ISAGANI MAKISIG, and DEMETRIO SALAS, Petitioners, v. THE HONORABLE SECRETARY OF
LABOR AND EMPLOYMENT and SIMEON SARMIENTO, JESUS CARLOS MARTINEZ III,
ALBERT NAPIAL, MARVIN ALMACIN, ROGELIO MATEO, GLENN SIAPNO, EMILIANO CUETO,
SALOME ATIENZA, NORMA V. GO, JUDITH DUDANG, MONINA DIZON, EUSEBIO ROMERO,
ISAGANI MORALES, ELISEO BUENAVENTURA, CLEMENTE AGCAMARAN, CARMELITA
NOLASCO, JOVITA FERI, LULU ACOSTA, CAROL LAZARO, NIDA ARRIZA, ROMAN BERNARDO,
DOMINGO B. MACALDO, EUGENE PIDLAOAN, MA. SOCORRO T. ANGOB, JOSEPHINE
ALVAREZ, LOURDES FERRER, JACQUILINE BAQUIRAN, GRACIA R. ESCUADRO, KRISTINA
HERNANDEZ, LOURDES IBEAS, MACARIO GARCIA, BILLY TECSON, ALEX RECTO III,
LEBRUDO, JOSE RICAFORTE, RODOLFO MORADA, TERESA AMADO, ROSITA TRINIDAD,
JEANETTE ONG, VICTORINO LAS-AY, RANIEL DAYAO, OSCAR SANTOS, CRISTINA SALAVER,
VICTORIA ARINO, A.H. SAJO, MICHAEL BIETE, RED RP, GLORIA JUAT, ETHELINDA
CASILAN, FAMER DIPASUPIL, MA. HIDELISA POMER, MA. CHARLOTTE TAWATAO, GRACE
REYES, ERNIE COLINA, ZENAIDA MENDOZA, PAULITA ADORABLE, BERNARDO MADUMBA,
NESTOR NAVARRO, EASTER YAP, ALMA LIM, FELISA YU, TIMOTEO GANASTRA, REVELITA
CARTAJENAS, ANGELITO CABUAL, ROBERTA TAN, DOMINADOR TAPO, GRACE LIM,
GADIANE JEMIE, CHRISTHDY DAUD, BENEDICTO ACOSTA, JESUSA ACOSTA, MA. AVELINA
ARYAP, EVELYN BENITEZ, ESTERITA CHU, EVANGELINE CHU, BETTY CINCO, RICARDO
CONNEJO, MANULITO EVALO, FRANCIS LEONIDA, GREGORIO NOBLEZA, RODOLFO
RIVERAL, ELSA SIA, CLARA SUGBO, EDGARDO TABAO, MANUEL VELOSO, MARLYN YU,
ABSALON BUENA, WILFREDO PUERTO, FLORENTINA PINGOL, MARILOU DAR, FE MORALES,
MALEN BELLO, LORENA TAMAYO, CESAR LIM, PAUL BALTAZAR, ALFREDO GAYAGAS,
DUMAGUETE EMPLOYEES, CEBU EMPLOYEES, OZAMIZ EMPLOYEES, TACLOBAN EMPLOYEES
AND ALL OTHER SOLIDBANK UNION MEMBERS, Respondents.

DECISION

QUISUMBING, J.:

Before us is a special civil action for certiorari seeking to reverse partially the Order 1 of public
respondent dated June 3, 1994, in Case No. OS-MA A-8-170-92, which ruled that the workers
through their union should be made to shoulder the expenses incurred for the professional services of
a lawyer in connection with the collective bargaining negotiations and that the reimbursement for the
deductions from the workers should be charged to the union’s general fund or account. chanrobles virtual lawlibrary

The records show the following factual antecedents: chanrob1es virtual 1aw library

Petitioners comprise the Executive Board of the SolidBank Union, the duly recognized
collective bargaining agent for the rank and file employees of Solid Bank Corporation.
Private respondents are members of said union.

Sometime in October 1991, the union’s Executive Board decided to retain anew the service of
Atty. Ignacio P. Lacsina (now deceased) as union counsel in connection with the negotiations
for a new Collective Bargaining Agreement (CBA). Accordingly, on October 19, 1991, the board
called a general membership meeting for the purpose. At the said meeting, the majority of all
union members approved and signed a resolution confirming the decision of the executive
board to engage the services of Atty. Lacsina as union counsel.

Labor II – 1
As approved, the resolution provided that ten percent (10%) of the total economic benefits
that may be secured through the negotiations be given to Atty. Lacsina as attorney’s fees.
It also contained an authorization for SolidBank Corporation to check-off said attorney’s
fees from the first lump sum payment of benefits to the employees under the new CBA and
to turn over said amount to Atty. Lacsina and/or his duly authorized representative. 2

The new CBA was signed on February 21, 1992. The bank then, on request of the union, made
payroll deductions for attorney’s fees from the CBA benefits paid to the union members in
accordance with the abovementioned resolution.

On October 2, 1992, private respondents instituted a complaint against the petitioners and
the union counsel before the Department of Labor and Employment (DOLE) for illegal
deduction of attorney’s fees as well as for quantification of the benefits in the 1992 CBA. 3
Petitioners, in response, moved for the dismissal of the complaint citing litis pendentia, forum
shopping and failure to state a cause of action as their grounds. 4

On April 22, 1993, Med-Arbiter Paterno Adap of the DOLE- NCR issued the following Order: jgc:chanrobles.com.ph

"WHEREFORE, premises considered, the Respondents Union Officers and Counsel are hereby directed
to immediately return or refund to the Complainants the illegally deducted amount of attorney’s fees
from the package of benefits due herein complainants under the aforesaid new CBA.

"Furthermore, Complainants are directed to pay five percent (5%) of the total amount to be refunded
or returned by the Respondent Union Officers and Counsel to them in favor of Atty. Armando D.
Morales, as attorney’s fees, in accordance with Section II, Rule VIII of Book II (sic) of the Omnibus
Rules Implementing the Labor Code." 5

On appeal, the Secretary of Labor rendered a Resolution 6 dated December 27, 1993, stating: jgc:chanrobles.com.ph

"WHEREFORE, the appeal of respondents Evangeline Gabriel, et. al., is hereby partially granted and
the Order of the Med-Arbiter dated 22 April 1993 is hereby modified as follows: (1) that the ordered
refund shall be limited to those union members who have not signified their conformity to
the check-off of attorney’s fees; and (2) the directive on the payment of 5% attorney’s fees
should be deleted for lack of basis.

SO ORDERED." 7

On Motion for Reconsideration, public respondent affirmed the said Order with modification that the
union’s counsel be dropped as a party litigant and that the workers through their union should be
made to shoulder the expenses incurred for the attorney’s services. Accordingly, the reimbursement
should be charged to the union’s general fund/account. 8

Hence, the present petition seeking to partially annul the above-cited order of the public respondent
for being allegedly tainted with grave abuse of discretion amounting to lack of jurisdiction.
chanrobles virtuallawlibrary

The sole issue for consideration is, did the public respondent act with grave abuse of discretion in
issuing the challenged order?

Petitioners argue that the General Membership Resolution authorizing the bank to check-
off attorney’s fee from the first lump sum payment of the benefits to the employees under
the new CBA satisfies the legal requirements for such assessment. 9 Private respondents,
on the other hand, claim that the check-off provision in question is illegal because it was
never submitted for approval at a general membership meeting called for the purpose and
that it failed to meet the formalities mandated by the Labor Code. 10

Labor II – 1
In check-off, the employer, on agreement with the Union, or on prior authorization from
employees, deducts union dues or agency fees from the latter’s wages and remits them
directly to the union. 11 It assures continuous funding for the labor organization. As this
Court has acknowledged, the system of check-off is primarily for the benefit of the union
and only indirectly for the individual employees. 12

The pertinent legal provisions on check-offs are found in Article 222 (b) and Article 241 (o) of the
Labor Code.

Article 222 (b) states: jgc:chanrobles.com.ph

"No attorney’s fees, negotiation fees or similar charges of any kind arising from any collective
bargaining negotiations or conclusions of the collective agreement shall be imposed on any individual
member of the contracting union: Provided, however, that attorney’s fees may be charged against
union funds in an amount to be agreed upon by the parties. Any contract, agreement or arrangement
of any sort to the contrary shall be null and void." (Emphasis ours)

Article 241 (o) provides: jgc:chanrobles.com.ph

"Other than for mandatory activities under the Code, no special assessment, attorney’s fees,
negotiation fees or any other extraordinary fees may be checked off from any amount due to an
employee without an individual written authorization duly signed by the employee. The authorization
should specifically state the amount, purpose and beneficiary of the deduction." (Emphasis ours.)

Article 241 has three (3) requisites for the validity of the special assessment for union’s
incidental expenses, attorney’s fees and representation expenses. These are: 1)
authorization by a written resolution of the majority of all the members at the general
membership meeting called for the purpose; (2) secretary’s record of the minutes of the
meeting; and (3) individual written authorization for check off duly signed by the
employees concerned.

Clearly, attorney’s fees may not be deducted or checked off from any amount due to an employee
without his written consent.

After a thorough review of the records, we find that the General Membership Resolution of
October 19, 1991 of the SolidBank Union did not satisfy the requirements laid down by law
and jurisprudence for the validity of the ten percent (10%) special assessment for union’s
incidental expenses, attorney’s fees and representation expenses. There were no
individual written check off authorizations by the employees concerned and so the assessment
cannot be legally deducted by their employer.

Even as early as February 1990, in the case of Palacol v. Ferrer-Calleja 13 we said that the express
consent of employees is required, and this consent must be obtained in accordance with
the steps outlined by law, which must be followed to the letter. No shortcuts are allowed. In
Stellar Industrial Services, Inc. v. NLRC 14 we reiterated that a written individual authorization duly
signed by the employee concerned is a condition sine qua non for such deduction. chanrobles.com : virtuallawlibrary

These pronouncements are also in accord with the recent ruling of this Court in the case of ABS-CBN
Supervisors Employees Union Members v. ABS-CBN Broadcasting Corporation, et. al., 15 which
provides: jgc:chanrobles.com.ph

"Premises studiedly considered, we are of the irresistible conclusion and, so find that the ruling in
BPIEU-ALU v. NLRC that (1) the prohibition against attorney’s fees in Article 222, paragraph
(b) of the Labor Code applies only when the payment of attorney’s fees is effected through
forced contributions from the workers; and (2) that no deduction must be take from the
Labor II – 1
workers who did not sign the check-off authorization, applies to the case under consideration."
(Emphasis ours.)

We likewise ruled in Bank of the Philippine Islands Employees Union-Association Labor Union (BPIEU-
ALU) v. NLRC, 16

". . . the afore-cited provision (Article 222 (b) of the Labor Code) as prohibiting the
payment of attorney’s fees only when it is effected through forced contributions from
workers from their own funds as distinguished from the union funds. The purpose of the
provision is to prevent imposition on the workers of the duty to individually contribute
their respective shares in the fee to be paid the attorney for his services on behalf of the
union in its negotiations with management. The obligation to pay the attorney’s fees
belongs to the union and cannot be shunted to the workers as their direct responsibility.
Neither the lawyer nor the union itself may require the individual worker to assume the
obligation to pay attorney’s fees from their own pockets. So categorical is this intent that
the law makes it clear that any agreement to the contrary shall be null and void ab initio."
(Emphasis ours.)

From all the foregoing, we are of the considered view that public respondent did not act with grave
abuse of discretion in ruling that the workers through their union should be made to shoulder the
expenses incurred for the services of a lawyer. And accordingly the reimbursement should be
charged to the union’s general fund or account. No deduction can be made from the salaries of the
concerned employees other than those mandated by law.

WHEREFORE, the petition is DENIED. The assailed Order dated June 3, 1994, of respondent
Secretary of Labor signed by Undersecretary Bienvenido E. Laguesma is AFFIRMED. No
pronouncement as to costs.

Labor II – 1
29.) Diamonon v DOLE
[G.R. No. 108951. March 7, 2000.]

JESUS B. DIAMONON, Petitioner, v. DEPARTMENT OF LABOR AND EMPLOYMENT; HON.

BIENVENIDO E. LAGUESMA, as the undersecretary of Labor; MANASES 1 T. CRUZ, in his
capacity as the Med-Arbiter; ATTY. ZOILO DE LA CRUZ, JR., and MEMBERS OF THE
NATIONAL CONGRESS OF UNIONS IN THE SUGAR INDUSTRY OF THE PHILIPPINES
(NACUSIP) and PHILIPPINE AGRICULTURAL COMMERCIAL AND INDUSTRIAL WORKER’S
UNION (PACIWU), Respondents.

DECISION

DE LEON, JR., J.:

Before us is a petition for certiorari seeking to annul the twin Orders dated December 29, 1992 2 and
January 25, 1993 3 of public respondent Bienvenido E. Laguesma, acting then as Undersecretary,
now the Secretary, of the Department of Labor and Employment (DOLE), in his affirmance of the
dismissal 4 by the Med-Arbiter of the complaint for unauthorized and illegal disbursement of union
funds filed by petitioner Jesus B. Diamonon against private respondent Atty. Zoilo V. de la Cruz and
Sofia P. Mana-ay.

The facts of the case are the following: chanroblesvirtual|awlibrary

Petitioner served as the National Executive Vice President of the National Congress of Unions
in the Sugar Industry of the Philippines (NACUSIP) and Vice President for Luzon of the Philippine
Agricultural, Commercial and Industrial Workers Union (PACIWU).

In a letter dated March 23, 1991, petitioner learned of his removal from the positions he held
in both unions in a resolution approved during a meeting of the National Executive Boards
of both unions. 7

On April 22, 1991, petitioner sought reconsideration of the resolution on his removal. At the same
time, he initiated a complaint (hereafter referred to as FIRST) before the DOLE against the
National President of NACUSIP and PACIWU, private respondent Atty. Zoilo V. de la Cruz, Jr.,
and the members of the National Executive Boards of NACUSIP and PACIWU questioning the
validity of his removal from the positions he held in the two unions.

While the FIRST case was pending with the Med-Arbiter, petitioner filed on May 16, 1991 a
second complaint 10 (hereafter referred to as SECOND) against private respondent Atty. Zoilo V.
de la Cruz, Jr., and the National Treasurer of NACUSIP and PACIWU, Sofia P. Mana-ay. He accused
them of three (3) offenses, namely: (a) wanton violation of the Constitution and By-Laws of
both organizations, NACUSIP and PACIWU; (b) unauthorized and illegal disbursements of
union funds of both organizations; (c) and abuse of authority as national officers of both
organizations.

On August 2, 1991, an Order 11 was issued in the FIRST case declaring that petitioner’s
removal from the positions he held is null and void. Private respondents appealed 12 this
decision to the public respondent DOLE.

In view of the pendency of their appeal in the FIRST case, private respondents filed a Motion to
Dismiss 13 dated October 21, 1991 in the SECOND case.

Labor II – 1
In an Order 14 dated November 5, 1991, the Med-Arbiter dismissed the SECOND case on the
ground of lack of personality of petitioner to file the complaint in view of his removal from
the offices he held.

On December 27, 1991, public respondent Laguesma, acting as the then Undersecretary of DOLE,
decided on the FIRST case on appeal and issued a Resolution 15 which affirmed the assailed Order
dated August 2, 1991 declaring as null and void petitioner’s removal from the positions he held.

In view of the adverse Order dated November 5, 1991 dismissing the SECOND case, petitioner
appealed 16 to the public respondent DOLE. Public respondent Laguesma, issued the
assailed Order 17 dated December 29, 1992, holding that petitioner’s failure to show in his
complaint that the administrative remedies provided for in the constitution and by-laws of
both unions, have been exhausted or such remedies are not available, was fatal to
petitioner’s cause. 18 Resultantly, he affirmed 19 the dismissal of the complaint.

Petitioner sought 20 reconsideration of the Order dated December 29, 1992. However, public
respondent in his Order 21 dated January 25, 1993 denied petitioner’s motion for reconsideration.

Hence, this petition. chanrobles. com : virtuallawlibrary

Petitioner anchors his petition on two (2) grounds, to wit: chanrob1es virtual 1aw library

"I.

PUBLIC RESPONDENT HONORABLE BIENVENIDO V. LAGUESMA HAS ACTED WITH GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT DISMISS [sic] THE
APPEAL INTERPOSED FROM THE ORDER OF THE MED ARBITER MENESIS [sic] T. CRUZ, AND WHEN
IT DENIED THE MOTION FOR RECONSIDERATION ON FLIMSY GROUNDS.

II.

THE CASE OF THE PETITIONER IS QUITE MERITORIOUS AND TO DISREGARD THE SAME WOULD [sic]
TANTAMOUNT TO WILLFULLY [sic] CLOSING OUR EYES TO AVOID SEEING AND REALIZING THE
NAKED TRUTH." 22

Petitioner emphatically stresses that the only issue on appeal before the DOLE was
petitioner’s alleged lack of personality to file the complaint. When public respondent
"switched" the ground for dismissal of the complaint from "lack of personality of the
[petitioner] to file the complaint" to "non-exhaustion of administrative remedies," he
staunchly claims that the latter committed grave abuse of discretion amounting to lack or
excess of jurisdiction. 23 For, in doing so, the challenged orders "went outside the issues and
purported to adjudicate something upon which the parties were not heard." 24

The petition lacks merit.

Generally, an appellate court may only pass upon errors assigned. 25 However, this rule is not
without exceptions. 26 In the following instances, 27 the Supreme Court ruled that an appellate court
is accorded a broad discretionary power to waive the lack of assignment of errors and consider errors
not assigned: chanrob1es virtual 1aw library

(a) Grounds not assigned as errors but affecting the jurisdiction of the court over the subject matter;

(b) Matters not assigned as errors on appeal but are evidently plain or clerical errors within
Labor II – 1
contemplation of law;

(c) Matters not assigned as errors on appeal but consideration of which is necessary in arriving at a
just decision and complete resolution of the case or to serve the interests of a justice or to avoid
dispensing piecemeal justice;

(d) Matters not specifically assigned as errors on appeal but raised in the trial court and are matters
of record having some bearing on the issue submitted which the parties failed to raise or which the
lower court ignored;

(e) Matters not assigned as errors on appeal but closely related to an error assigned;

(f) Matters not assigned as errors on appeal but upon which the determination of a question properly
assigned, is dependent.

There is no reason why this rule should not apply to administrative bodies as well, like the case
before us, for the instant controversy falls squarely under the exceptions to the general rule.

In the instant case, not only did petitioner fail to comply with Section 2, Rule VIII, Book V of the
Implementing Rules and Regulations of the Labor Code as amended 28 but also the record reveals
that neither did he exhaust the remedies set forth by the Constitution and by-laws of both
unions. In the National Convention of PACIWU and NACUSIP held on August 10 and 11,
1991, respectively, nothing was heard of petitioner’s complaint against private
respondents on the latter’s alleged unauthorized and illegal disbursement of union funds.
In fact, what the National Convention resolved was to approve and adopt the resolution of
the National Executive Board removing petitioner from the positions he held. His failure to
seek recourse before the National Convention on his complaint against private
respondents taints his action with prematurity.

When the Constitution and by-laws of both unions dictated the remedy for intra-union
dispute, such as petitioner’s complaint against private respondents for unauthorized or illegal
disbursement of unions funds, this should be resorted to before recourse can be made to the
appropriate administrative or judicial body, not only to give the grievance machinery or
appeals’ body of the union the opportunity to decide the matter by itself, but also to
prevent unnecessary and premature resort to administrative or judicial bodies. Thus, a
party with an administrative remedy must not merely initiate the prescribed administrative procedure
to obtain relief, but also pursue it to its appropriate conclusion before seeking judicial intervention.
31 This rule clearly applies to the instant case. The underlying principle of the rule on
exhaustion of administrative remedies rests on the presumption that when the
administrative body, or grievance machinery, as in this case, is afforded a chance to pass
upon the matter, it will decide the same correctly. 32 Petitioner’s premature invocation of
public respondent’s intervention is fatal to his cause of action. 33

Evidently, when petitioner brought before the DOLE his complaint charging private respondents with
unauthorized and illegal disbursement of union funds, he overlooked or deliberately ignored the fact
that the same is clearly dismissible for non-exhaustion of administrative remedies. Thus, public
respondent Bienvenido E. Laguesma, in dismissing petitioner’s complaint, committed no grave abuse
of discretion.

WHEREFORE, the petition is hereby DISMISSED, and the twin Orders dated December 29, 1992 and
January 25, 1993 by public respondent Bienvenido E. Laguesma affirming dismissal of the complaint
dated May 15, 1991 filed by petitioner against private respondents are AFFIRMED. No costs.

Labor II – 1
30.) Verceles v BLR-DOLE

G.R. No. 152322             February 15, 2005

ERNESTO C. VERCELES, DIOSDADO F. TRINIDAD, SALVADOR G. BLANCIA, ROSEMARIE DE LUMBAN,

FELICITAS F. RAMOS, MIGUEL TEAÑO, JAIME BAUTISTA and FIDEL ACERO, as Officers of the University
of the East Employees’ Association, petitioners,
vs.
BUREAU OF LABOR RELATIONS-DEPARTMENT OF LABOR AND EMPLOYMENT, DEPARTMENT OF LABOR
AND EMPLOYMENT-NATIONAL CAPITAL REGION, RODEL E. DALUPAN, EFREN J. DE OCAMPO, PROCESO
TOTTO, JR., ELIZABETH ALARCA, ELVIRA S. MANALO, and RICARDO UY, respondents.

DECISION

CHICO-NAZARIO, J.:

Before Us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, assailing the
Decision and Resolution rendered by the Court of Appeals, dated 24 October 2001 and 15 February 2002,
1  2 

respectively.

The Facts

Private respondents Rodel E. Dalupan, Efren J. De Ocampo, Proceso Totto, Jr., Elizabeth Alarca, and Elvira S.
Manalo are members of the University of the East Employees’ Association (UEEA). On 15 September 1997,
they each received a Memorandum from the UEEA charging them with spreading false rumors and creating
disinformation among the members of the said association. They were given seventy-two hours from receipt of the
Memorandum to submit their Answer. 3

The acts of the respondents allegedly fall under General Assembly Resolution No. 4, Series of 1979, to wit:

1. Circulating false rumors about the progress of the negotiations for collective bargaining;

2. Creating distrust or loss of trust and confidence of members in the Association;

3. Creating dissension among the members;

4. Circulating false rumors about the work of the Association or sabotaging the same;

5. Withholding from the Association and/or members material information as to their rightful entitlement to
benefits and/or money claims;

6. Acting as a spy against the Association or divulging confidential matters to persons not entitled thereto;

7. Such other offenses, which may injure or disrupt the functions of the Association. 4

Through a collective reply dated 19 September 1997, private respondents denied the allegations. Thereafter, on 23
September 1997, they sent a letter dated 22 September 1997 to the Chairman and Members of UEEA’s Disciplinary
Committee, informing them that the Memorandum of 15 September 1997 was vague and without legal basis,
therefore, no intelligent answer may be made by them. They likewise stated that any sanction that will be imposed
by the committee would be violative of their right to due process.5

The Disciplinary Committee issued another Memorandum, dated 24 September 1997, giving the respondents
another seventy-two hours from receipt within which to properly reply, explaining that the collective reply letter

Labor II – 1
and supplemental answer which were earlier submitted were not responsive to the first Memorandum. Their failure
would be construed as an admission of the truthfulness and veracity of the charges. 6

On 01 October 1997, the respondents issued a denial for the second time, and inquired from the Disciplinary
Committee as to whether they were being formally charged. 7

On 09 October 1997, Ernesto Verceles, in his capacity as president of the association, through a Memorandum,
informed Rodel Dalupan, et al., that their membership in the association has been suspended and shall take
effect immediately upon receipt thereof. Verceles said he was acting upon the disciplinary committee’s finding of
a prima facie case against them. Respondent Ricardo Uy also received a similar memorandum on 03 November
8 

1997. 9

On 01 December 1997, a complaint for illegal suspension, willful and unlawful violation of UEEA
10 

constitution and by-laws, refusal to render financial and other reports, deliberate refusal to call general and
special meetings, illegal holdover of terms and damages was filed by the respondents against herein
petitioners Ernesto C. Verceles, Diosdado F. Trinidad, Salvador G. Blancia, Rosemarie De Lumban, Felicitas
Ramos, Miguel Teaño, Jaime Bautista and Fidel Acero before the Department of Labor and Employment, National
Capital Region (DOLE-NCR).

A few days after the filing of the complaint, i.e., on 10 December 1997, a resolution was passed by UEEA
11 

which reads as follows:

RESOLUTION

WHEREAS, the Association has gone thru a most arduous, difficult, and trying times in working to obtain the best
terms and conditions of employment for its members, specifically for the period 1992 to 1996;

WHEREAS, said difficulties are in the form of near strikes, cases with the Department of Labor and Employment
and its agencies, as well as with the Supreme Court;

WHEREAS, the general membership (has) shown exceptional patience and perseverance and generally (had)
demonstrated full trust and confidence in the Association officers and accordingly approved the manner and/or
actions undertaken in pursuing said difficult task of arriving at a most beneficial agreement for the general
membership;

NOW, THEREFORE, be it resolved as it is hereby resolved that:

...

b) the general membership reiterate its loyalty to the Association and commends the Association officers for their
effort expended in working for the benefit of the whole membership.

APPROVED.

Manila. 10 December 1997.

On 22 November 1999, a decision was rendered by Regional Director Maximo B. Lim, adverse to petitioners,
12 

the dispositive portion of which reads:

WHEREFORE, premises considered, respondent[s] [are] hereby ordered:

1. to immediately lift suspension imposed upon the complainants;

Labor II – 1
 2. to hold a general membership meeting wherein they (respondents) make open and available the
union’s/association’s books of accounts and other documents pertaining to the union funds [and] thereby
explain the financial status of the union;

3. to regularly conduct special and general membership meetings in accordance with the union’s constitution
and by-laws;

4. to immediately hold/conduct an election of officers in accordance with the union’s constitution and by-
laws.

Accordingly, the claims of complainants for damages [are] hereby ordered dismissed for lack of jurisdiction.

However, within ten (10) days upon receipt of this Order, the complainants are hereby directed to submit a written
report whether or not the respondents had complied with this Order.

The petitioners appealed to the Bureau of Labor Relations of the Department of Labor and Employment (BLR-
DOLE). During the pendency of this appeal, or on 07 April 2000, an election of officers was held by the UEEA. The
appeal, however, was dismissed for lack of merit in a Resolution dated 22 September 2000, the decretal portion of
13 

which reads:

WHEREFORE, the appeal is hereby DISMISSED for lack of merit and the decision dated 22 (November) 1999 of
Regional Director Maximo B. Lim, DOLE-NCR, is AFFIRMED.

Meanwhile, Resolution No. 8, Series of 2000, was passed by the UEEA, wherein the members allegedly
reiterated their support and approval of the acts and collateral actions of the officers. 14

A Motion for Reconsideration was filed by the petitioners with the BLR-DOLE, but was denied in a
15 

Resolution dated 15 January 2001.

16 

A special civil action for certiorari was thereafter filed before the Court of Appeals citing grave abuse of discretion
17 

amounting to lack or excess of jurisdiction. In a Resolution dated 22 February 2001, the Court of Appeals dismissed
18 

the petition outright for failure to comply with the provisions of Section 1, Rule 65 in relation to Section 3, Rule 46 of
the 1997 Rules of Civil Procedure. A Motion for Reconsideration was filed which was granted in a Resolution dated
19  20 

24 April 2001, thus, reinstating the petition.1awphi1.nét

On 24 October 2001, the Court of Appeals rendered a Decision dismissing the petition, the dispositive portion of
21 

which reads:

WHEREFORE, premises considered, the instant petition is DENIED DUE COURSE and DISMISSED for lack of
merit. No pronouncement as to costs.

A Motion for Reconsideration was thereafter filed by the petitioners. In a Resolution dated 15 February 2002, the
22  23 

Court of Appeals modified its earlier decision. The decretal portion of which states:

WHEREFORE, the questioned decision of this court is MODIFIED. The 22 September 2000 and 15 January 2001
resolutions of the BLR insofar as they affirmed the part of the 22 November 1999 decision of the Regional Director
of DOLE-NCR ordering the immediate holding of election are HEREBY ANNULLED AND SET ASIDE. All the other
aspects of the assailed Resolutions are AFFIRMED.

Not satisfied, the petitioners filed a petition for review on certiorari before this Court.
24 

The Issues

The petitioners raise the following issues:

Labor II – 1
 1. WHETHER OR NOT THERE IS REVERSIBLE ERROR IN THE COURT OF APPEALS’ UPHOLDING
THE DOLE-NCR AND BLR-DOLE DECISIONS BASED ONLY ON THE COMPLAINT AND ANSWER;

2. WHETHER OR NOT IT IS REVERSIBLE ERROR FOR THE COURT OF APPEALS TO HOLD THE
ELECTION OF APRIL 7, 2000 AS INVALID AND A NULLITY;

3. WHETHER OR NOT IT IS REVERSIBLE ERROR TO UPHOLD BLR-DOLE’S FINDING THAT THE

SUSPENSION WAS ILLEGAL; and

4. WHETHER OR NOT THE ALLEGED NON-HOLDING OF MEETINGS AND ALLEGED NON-

SUBMISSION OF REPORTS ARE MOOT AND ACADEMIC, AND WHETHER THE DECISION TO HOLD
MEETINGS AND SUBMIT REPORTS CONTRADICT AND OVERRIDE THE SOVEREIGN WILL OF THE
MAJORITY. 25

The Court’s Rulings

We shall discuss the issues in seriatim.

First Issue: was the court a quo correct in upholding the DOLE-NCR and BLR-DOLE decisions based only on the
complaint and answer?

Petitioners contend that the complaint filed by the private respondents in DOLE-NCR was a mere recital of bare,
self serving and unsubstantiated allegations. Both parties did not submit position papers, and the DOLE-NCR
resolved the case based only on the complaint and answer. Also, by failing to submit a reply to the answer, private
respondents, in effect admitted the petitioners’ controversion of the charges. They further argue that the private
26 

respondents did not exhaust administrative remedies and that the requirement of support by at least 30% of
the members of the association pursuant to Section 1, Rule XIV, Article I, Department Order No. 9 of DOLE,
was not complied with. 27

Private respondents, on the other hand, assert that the records show that despite their failure to submit their
position papers, they nonetheless moved that the case be resolved by DOLE-NCR based on the complaint, answer
and available exhibits or annexes integrated with the aforesaid pleadings. The principle of non-exhaustion of
28 

administrative remedies that would warrant the dismissal of the case should not operate against them
because they were deprived of their right to due process when they were indefinitely suspended without the
benefit of a formal charge which is sufficient in form and substance. The respondents also point out that the
29 

thirty percent (30%) support requirement pursuant to Section 1, Rule XIV, Article I, Department Order No. 9, is not
applicable to them because their complaint was primordially predicated on their suspension while the rest of the
causes of action were mere collateral consequences of the principal cause of action. 30

It is worthy to note that the BLR-DOLE, in its Resolution dated 22 September 2000, underscored the negligence of
herein petitioners not only in the submission of their pleadings but also in attending the hearings called for the
purpose. Even the Court of Appeals, in its decision, made this observation, thus:
31 

It is apparent, however, that petitioners were to blame for their predicament. They repeatedly failed to appear in a
series of conferences scheduled by the DOLE-NCR, asked for resetting of hearings, and requested for extension of
time to file its answer. Hence, when they again did not attend a hearing on a date they themselves asked for, private
respondents (complainants therein) moved for the submission of the case based on their complaint, position paper
and annexes attached thereto.

When DOLE-NCR directed the parties to submit their respective position papers, petitioners again moved for
extension of time to file the same. When another notice was given to the parties to comply with the directive,
petitioners prayed for another extension of time. (Private respondents, however, reiterated their earlier motion to
have the case resolved based on available pleadings.) After six (6) months or so, petitioners finally filed not their
position paper but their answer. 32

Labor II – 1
The Court of Appeals was justified in upholding the DOLE-NCR and BLR-DOLE decisions based on the complaint
and answer. We cannot accept petitioners’ line of reasoning that since no position papers were submitted, no
decision may be made by the adjudicating body. As ruled by Regional Director Maximo B. Lim in his decision, the
complaint and the answer thereto were adopted as the parties’ position papers. Thereafter, the case shall be
deemed submitted for resolution. 33

Labor laws mandate the speedy disposition of cases, with the least attention to technicalities but without sacrificing
the fundamental requisites of due process. The essence of due process is simply an opportunity to be heard. In
34  35 

this case, it cannot be said that there was a denial of due process on the part of the petitioners because they were
given all the chances to refute the allegations of the private respondents, and the delay in the proceedings before
the DOLE-NCR was clearly attributable to them.

The argument that there was failure to exhaust administrative remedies cannot be sustained. One of the
instances when the rule of exhaustion of administrative remedies may be disregarded is when there is a
violation of due process. In this case, the respondents have chronicled from the very beginning that they
36 

were indefinitely suspended without the benefit of a formal charge sufficient in form and substance.
Therefore, the rule on exhaustion of administrative remedies cannot squarely apply to them.

On the matter concerning the 30% support requirement needed to report violations of rights and conditions of union
membership, as found in the last paragraph of Article 241 of the Labor Code, we likewise cannot sanction the
37 

petitioners. We have already made our pronouncement in the case of Rodriguez v. Director, Bureau of Labor
Relations that the 30% requirement is not mandatory. In this case, the Court, speaking through Chief Justice
38 

Andres R. Narvasa, held in part:

39 

The respondent Director’s ruling, however, that the assent of 30% of the union membership, mentioned in Article
242 of the Labor Code, was mandatory and essential to the filing of a complaint for any violation of rights and
conditions of membership in a labor organization (such as the arbitrary and oppressive increase of union dues here
complained of), cannot be affirmed and will be reversed. The very article relied upon militates against the
proposition. It states that a report of a violation of rights and conditions of membership in a labor
organization may be made by "(a)t least thirty percent (30%) of all the members of a union or any member or
members specially concerned." The use of the permissive "may" in the provision at once negates the notion
that the assent of 30% of all the members is mandatory. More decisive is the fact that the provision
expressly declares that the report may be made, alternatively by "any member or members specially
concerned." And further confirmation that the assent of 30% of the union members is not a factor in the acquisition
of jurisdiction by the Bureau of Labor Relations is furnished by Article 226 of the same Labor Code, which grants
original and exclusive jurisdiction to the Bureau, and the Labor Relations Division in the Regional Offices of the
Department of Labor, over "all inter-union and intra-union conflicts, and all disputes, grievances or problems arising
from or affecting labor management relations," making no reference whatsoever to any such 30%-support
requirement. Indeed, the officials mentioned are given the power to act "on all inter-union and intra-union conflicts
(1) " upon request of either or both parties" as well as (2) "at their own initiative."

Second Issue: was the election held on 07 April 2000 valid or a nullity?

This issue arose from the fact that the original decision of the DOLE-NCR dated 22 November 1999, ordered
petitioners, among other things, to "immediately hold/conduct an election of officers . . ." Petitioners, it must be
recalled, appealed from the DOLE-NCR decision to the BLR-DOLE. During the pendency of the appeal, however,
an election of officers was held on 07 April 2000. Subsequently, the BLR-DOLE affirmed the decision of the DOLE-
NCR, but with the pronouncement that ". . . the supposed election conducted on (07) April 2000 is null and void and
cannot produce legal effects adverse to appellants." 40

The petitioners contend that since the election was held on 07 April 2000, and the original complaint before the
DOLE-NCR was filed on 01 December 1997, the former could not have been the subject of the complaint. There
was, according to petitioners, reversible error in the BLR-DOLE’s adding to the DOLE-NCR’s decision, the
nullification of the 07 April 2000 election. The BLR–DOLE should have limited itself to affirming, modifying or setting
aside and canceling the provisions of the dispositive portion of the DOLE-NCR’s decision which was subject of the
appeal. The election was held because the term of the petitioners (extended for five years under Republic Act No.

Labor II – 1
6715 ) expired on 07 April 2000. As amended by Republic Act 6715, paragraph (c) of Article 241 of the Labor Code
41 

now reads:

(c) The members shall directly elect their officers in the local union, as well as their national officers in the national
union or federation to which they or their local union is affiliated, by secret ballots at intervals of five (5) years.

It just so happened that the holding of the election coincided with the DOLE-NCR decision. 42

The private respondents, in answer to this, point out that the 07 April 2000 election, as appearing in the 22
September 2000 Resolution of the BLR-DOLE, was set aside not on the flimsy reason that there was no complaint
to invalidate it, but due to the appeal of the petitioners questioning the BLR-DOLE’s order. The appeal effectively
suspended the effect of the DOLE-NCR Regional Director’s order for the immediate holding of election of officers in
accordance with the union’s constitution and by-laws. 43

On this matter, the Court of Appeals made the following observation:

Consequently, the Regional Director of DOLE-NCR erred in ordering the immediate holding of election of officers of
UEEA, and the Bureau of Labor Relations (BLR)-Department of Labor and Employment, insofar as it affirmed this
particular order, committed an act amounting to grave abuse of discretion.

Nonetheless, despite of this finding, the election of UEEA officers on 7 April 2000 cannot acquire a semblance of
legality. First, it was conducted pursuant to the aforesaid (erroneous) order of the Regional Director as manifested
by the petitioners. Second, it was purposely done to pre-empt the resolution of the case by the BLR and to deprive
private respondents their substantial right to participate in the election. Third, petitioners cannot be allowed to take
an inconsistent position to later on claim that the election of 7 April 2000 was held because it was already due while
previously declaring that it was made in line with the order of the Regional Director, for this would go against the
principle of fair play.

Thus, while the BLR was wrong in affirming the order of the Regional Director for the immediate holding of election,
it was right in nullifying the 7 April 2000 UEEA election of officers. It was simply improper for the petitioners to
implement the said order which was then one of the subjects of their appeal in the BLR. To hold otherwise would be
to dispossess the BLR of its inherent power to control the conduct of the proceedings of cases pending before it for
resolution. 44

Based on the prevailing facts of this case, we affirm the foregoing findings of the court a quo. We cannot hold the
election of 07 April 2000 valid as this would make us condone an iniquitous act. Said election was perceptibly done
to hinder any resolution or decision that would be made by BLR-DOLE. The Regional Director indeed ordered the
immediate holding of an election in its Order dated 22 November 1999. The records show that the petitioners
questioned this order of the Regional Director before the BLR-DOLE by way of appeal, and yet, they conducted the
45 

election, allegedly because it was due under Republic Act No. 6715. Why this was done by the petitioners escapes
us. But as rightfully observed by the BLR-DOLE:

. . . Indeed, it is obvious that the general membership meeting and election of officers was done purposely to pre-
empt our resolution of this case and, more importantly, the participation of appellees in the election. This cannot be
tolerated. 46

Third Issue: was the indefinite suspension of the private respondents illegal?

We rule in the affirmative.

The petitioners posit the theory that the records do not support the findings of the BLR-DOLE that no investigation
was conducted making the suspension illegal because of lack of due process.

It is best to remind the petitioners that this Court, as we have held in a long line of decisions, is not a trier of
facts. The instant case is a petition for review on certiorari where only questions of law may be raised. The
47  48 

exceptions to this rule find no application here. This being the case, the findings of fact of the DOLE-NCR and the
49 

Labor II – 1
BLR-DOLE as affirmed by the Court of Appeals to the effect that no investigation was conducted, shall not be
disturbed. As properly held by the court a quo:

Petitioners have failed to show that the findings of facts and conclusions of law of both the DOLE-NCR and BLR-
DOLE were arrived at with grave abuse of discretion or without substantial evidence. A careful review of the
pleadings before Us reveals that the decision and resolutions of the concerned agencies were correctly anchored in
law and on substantial evidence. 50

Fourth Issue: is the non-holding of meetings and non-submission of reports by the petitioners moot and academic,
and whether the decision to hold meetings and submit reports contradict and override the sovereign will of the
majority?

We do not believe so.

This issue was precipitated by the Court of Appeals decision affirming the order of DOLE Regional Director Maximo
B. Lim for the petitioners to hold a general membership meeting wherein they make open and available the
union’s/association’s books of accounts and other documents pertaining to the union funds, and to regularly conduct
special and general membership meetings in accordance with the union’s constitution and by-laws. It is to be
51 

recalled that the private respondents, when they filed a complaint before the DOLE-NCR also complained of
petitioners’ refusal to render financial and other reports, and deliberate refusal to call general and special meetings.

Petitioners do not hide the fact that they belatedly submitted their financial reports and the minutes of their meetings
to the DOLE. The issue of belatedly submitting these reports, according to the petitioners, had been rendered moot
and academic by their eventual compliance. Besides, this has been the practice of the association. Moreover, the
52 

petitioners likewise maintain that the passage of General Assembly Resolution No. 10 dated 10 December 1997
and Resolution No. 8, Series of 2000, following the application of the principle that the sovereign majority rules,
cured any liability that may have been brought about by their belated actions. 53 
1awphi1.nét

As found by the Court of Appeals, the financial statements for the years 1995 up to 1997 were submitted to DOLE-
NCR only on 06 February 1998 while that for the year 1998 was submitted only on 16 March 1999. The last
54 

association’s meeting was conducted on 21 April 1995, and the copy of the minutes thereon was submitted to BLR-
DOLE only on 24 February 1998.

The passage of General Assembly Resolution No. 10 dated 10 December 1997 and Resolution No. 8, Series of
2000, which supposedly cured the lapses committed by the association’s officers and reiterated the approval of the
55 

general membership of the acts and collateral actions of the association’s officers cannot redeem the petitioners
from their predicament. The obligation to hold meetings and render financial reports is mandated by UEEA’s
constitution and by-laws. This fact was never denied by the petitioners. Their eventual compliance, as what
happened in this case, shall not release them from the obligation to accomplish these things in the future.

Prompt compliance in rendering financial reports together with the holding of regular meetings with the submission
of the minutes thereon with the BLR-DOLE and DOLE-NCR shall negate any suspicion of dishonesty on the part of
UEEA’s officers. This is not only true with UEEA, but likewise with other unions/associations, as this matter is
imbued with public interest. Undeniably, transparency in the official undertakings of union officers will bolster
genuine trade unionism in the country.

WHEREFORE, in view of all the foregoing, the Decision and Resolution of the Court of Appeals subjects of the
instant case, are affirmed. Costs against the petitioners.

Labor II – 1
31.) Diokno v Cacdac

[G.R. NO. 168475 : July 4, 2007]

EMILIO E. DIOKNO, VICENTE R. ALCANTARA, ANTONIO Z. VERGARA, JR., DANTE M. TONG,

JAIME C. MENDOZA, ROMEO M. MACAPULAY, ROBERTO M. MASIGLAT, LEANDRO C.
ATIENZA, ROMULO AQUINO, JESUS SAMIA, GAUDENCIO CAMIT, DANTE PARAO, ALBERTO
MABUGAT, EDGARDO VILLANUEVA, JR., FRANCISCO ESCOTO, EDGARDO SEVILLA, FELICITO
MACASAET, and JOSE Z. TULLO, Petitioners, v. HON. HANS LEO J. CACDAC, in his capacity as
Director of the Bureau of Labor Relations, DOLE, MANILA, MED-ARBITER TRANQUILINO C.
REYES, EDGARDO DAYA, PABLO LUCAS, LEANDRO M. TABILOG, REYNALDO ESPIRITU, JOSE
VITO, ANTONIO DE LUNA, ARMANDO YALUNG, EDWIN LAYUG, NARDS PABILONA,
REYNALDO REYES, EVANGELINE ESCALL, ALBERTO ALCANTARA, ROGELIO CERVITILLO,
MARCELINO MORELOS, FAUSTINO ERMINO, JIMMY S. ONG, ALFREDO ESCALL, NARDITO C.
ALVAREZ, JAIME T. VALERIANO, JOHNSON S. REYES, GAUDENCIO JIMENEZ, JR., GAVINO R.
VIDANES, ARNALDO G. TAYAO, BONIFACIO F. CIRUJANO, EDGARDO G. CADVONA, MAXIMO
A. CAOC, JOSE O. MACLIT, JR., LUZMINDO D. ACORDA, JR., LEMUEL R. RAGASA, and GIL G.
DE VERA, Respondents.

DECISION

CHICO-NAZARIO, J.:

This is a Petition for Review on Certiorari under Rule 45 of the 1997 Revised Rules of Civil Procedure,
seeking the nullification of the Decision 1 and Resolution2 of the Court of Appeals in CA-G.R. SP No.
83061, dated 17 June 2004 and 10 June 2005, respectively, which dismissed petitioners' Petition
for Certiorari and denied their Motion for Reconsideration thereon.

The Facts

The First Line Association of Meralco Supervisory Employees (FLAMES) is a legitimate labor
organization which is the supervisory union of Meralco. Petitioners and private
respondents are members of FLAMES.

On 1 April 2003, the FLAMES Executive Board created the Committee on Election (COMELEC)
for the conduct of its union elections scheduled on 7 May 2003.3 The COMELEC was composed
of petitioner Dante M. Tong as its chairman, and petitioners Jaime C. Mendoza and Romeo M.
Macapulay as members. Subsequently, private respondents Jimmy S. Ong, Nardito C. Alvarez,
Alfredo J. Escall, and Jaime T. Valeriano filed their respective certificates of candidacy. On 12
April 2003, the COMELEC rejected Jimmy S. Ong's candidacy on the ground that he was not a
member of FLAMES. Meanwhile, the certificates of candidacy of Nardito C. Alvarez, Alfredo
J. Escall, and Jaime T. Valeriano were similarly rejected on the basis of the exclusion of
their department from the scope of the existing collective bargaining agreement (CBA).
The employees assigned to the aforesaid department are allegedly deemed disqualified from
membership in the union for being confidential employees.

On 24 April 2003, private respondents Jimmy S. Ong, Nardito C. Alvarez, Alfredo J. Escall, Jaime T.
Valeriano (Ong, et al.), and a certain Leandro M. Tabilog filed a Petition4 before the Med-
Arbitration Unit of the Department of Labor and Employment (DOLE). They prayed, inter
alia, for the nullification of the order of the COMELEC which disallowed their
candidacy.5 They further prayed that petitioners be directed to render an accounting of funds with
full and detailed disclosure of expenditures and financial transactions; and that a representative from

Labor II – 1
the Bureau of Labor Relations (BLR) be designated to act as chairman of the COMELEC in lieu of
petitioner Dante M. Tong.6

On 30 April 2003, DOLE-NCR Regional Director Alex E. Maraan issued an Order 7 directing DOLE
personnel to observe the conduct of the FLAMES election on 7 May 2003.8

On 2 May 2003, petitioners filed a Petition9 with the COMELEC seeking the disqualification of
private respondents Edgardo Daya, Pablo Lucas, Leandro Tabilog, Reynaldo Espiritu, Jose Vito,
Antonio de Luna, Armando Yalung, Edwin Layug, Nards Pabilona, Reynaldo Reyes, Evangeline Escall,
Alberto Alcantara, Rogelio Cervitillo, Marcelino Morelos, and Faustino Ermino (Daya, et al.).
Petitioners alleged that Daya, et al., allowed themselves to be assisted by non-union
members, and committed acts of disloyalty which are inimical to the interest of FLAMES. In
their campaign, they allegedly colluded with the officers of the Meralco Savings and Loan
Association (MESALA) and the Meralco Mutual Aid and Benefits Association (MEMABA) and
exerted undue influence on the members of FLAMES.

On 6 May 2003, the COMELEC issued a Decision,10 declaring Daya, et al., officially

disqualified to run and/or to participate in the 7 May 2003 FLAMES elections. The COMELEC also
resolved to exclude their names from the list of candidates in the polls or precincts, and further
declared that any vote cast in their favor shall not be counted. According to the COMELEC, Daya, et
al., violated Article IV, Section 4(a)(6)11 of the FLAMES Constitution and By-Laws (CBL) by allowing
non-members to aid them in their campaign. Their acts of solicitation for support from non-union
members were deemed inimical to the interest of FLAMES.

On 7 May 2003, the COMELEC proclaimed the following candidates, including some of herein
petitioners as winners of the elections, to wit12 :
chanrobles virtual law library

NAME
Emilio E. Diokno
Vicente P. Alcantara
Antonio Z. Vergara, Jr.
Alberto L. Mabugat
Roberto D. Masiglat, Jr.
Leandro C. Atienza
Felito C. Macasaet
Edgardo R. Villanueva
Romulo C. Aquino
Jesus D. Samia Asst.
Gaudencio C. Camit
Rodante B. [Parao]
Jose Z. Tullo
Bernardo C. Sevilla
Francis B. Escoto
POSITION
President
Executive Vice President - External
Executive Vice President - Internal
Vice-President - Organizing
Vice-President - Education
Vice-President - Chief Steward
Secretary
Asst. Secretary
Treasurer
Treasurer
Auditor
Asst. Auditor
Central Coordinator
North Coordinator
South Coordinator

On 8 May 2003, private respondents Daya, et al., along with Ong, et al., filed with the Med-
Arbitration Unit of the DOLE-NCR, a Petition13 to: a) Nullify Order of Disqualification; b)
Nullify Election Proceedings and Counting of Votes; c) Declare Failure of Election; and d)
Declare Holding of New Election to be Controlled and Supervised by the DOLE. The Petition was
docketed as Case No. NCR-OD-0304-002-LRD.

Labor II – 1
On 14 May 2003, another group led by private respondent Gaudencio Jimenez, Jr., along with private
respondents Johnson S. Reyes, Gavino R. Vidanes, Arnaldo G. Tayao, Bonifacio F. Cirujano, Edgardo
G. Cadavona, Maximo A. Caoc, Jose O. Maclit, Jr., Luzmindo D. Acorda, Jr., Lemuel R. Ragasa and Gil
G. de Vera (Jimenez, et al.) filed a Petition with the Med-Arbitration Unit of the DOLE-NCR against
petitioners to nullify the 7 May 2003 election on the ground that the same was not free, orderly, and
peaceful. It was docketed as Case No. NCR-OD-0305-004-LRD, which was subsequently consolidated
with the Petition of Daya, et al. and the earlier Petition of Ong, et al.

Meanwhile, the records show that a subsequent election was held on 30 June 2004, which was
participated in and won by herein private respondents Daya, et al. The validity of the 30
June 2004 elections was assailed by herein petitioners before the DOLE 14 and taken to the
Court of Appeals in CA-G.R. SP No. 88264 on certiorari, which case does not concern us in the instant
Petition. The Court of Appeals, in the aforesaid case, rendered a Decision 15 dated 12 January 2007,
upholding the validity of the 30 June 2004 elections, and the declaration of herein private
respondents Daya, et al., as the duly elected winners therein.

The Decision of the Med-Arbiter

On 7 July 2003, Med-Arbiter Tranquilino B. Reyes, Jr. issued a Decision 16 in favor of private
respondents, Daya, et al. However, the petition of Jimenez, et al., was dismissed because it was
premature, it appearing that the COMELEC had not yet resolved their protest prior to their resort to
the Med-Arbiter. Finally, the Petition of Ong, et al., seeking to declare themselves as bona fide
members of FLAMES was ordered dismissed.

The Med-Arbiter noted in his decision that during a conference which was held on 15 May 2003, the
parties agreed that the issue anent the qualifications of private respondents Ong, et al. had been
rendered moot and academic.17

The Med-Arbiter reversed the disqualification imposed by the COMELEC against private
respondents Daya, et al. He said that the COMELEC accepted all the allegations of petitioners against
private respondents Daya, et al., sans evidence to substantiate the same. Moreover, he found that
the COMELEC erred in relying on Article IV, Section 4(a) (6) of the CBL as basis for their
disqualification. The Med-Arbiter read the aforesaid provision to refer to the dismissal and/or
expulsion of a member from FLAMES, but not to the disqualification of a member as a candidate in a
union election. He rationalized that the COMELEC cannot disqualify a candidate on the same grounds
for expulsion of members, which power is vested by the CBL on the Executive Board. The Med-Arbiter
also held that there was a denial of due process because the COMELEC failed to receive private
respondents Daya, et al.'s motion for reconsideration of the order of their disqualification. The
COMELEC was also found to have refused to receive their written protest in violation of the union's
CBL.18

Lastly, the Med-Arbiter defended his jurisdiction over the case. He concluded that even as the
election of union officers is an internal affair of the union, his office has the right to inquire into the
merits and conduct of the election when its jurisdiction is sought.19

The decretal portion of the Med-Arbiter's Decision states, viz:

WHEREFORE, premises considered, the [P]etition to Nullify the Order of Disqualification; Nullify
Election proceedings and counting of Votes; and Declare a Failure of Elections is hereby granted. The
disqualification of [private respondent] Ed[gardo] Daya, et al., is hereby considered as null and void.
Perforce, the election of union officers of FLAMES on May 7, 2003 is declared a failure and a new
election is ordered conducted under the supervision of the Department of Labor and Employment.

Labor II – 1
The [P]etition to conduct an accounting of union funds and to stop the release of funds to [petitioner]
Diokno, et al., is ordered dismissed for lack of merit.

And the Petition to Declare [private respondents] Jimmy Ong, Alfredo [E]scall, Nardito Alvarez, and
Jaime Valeriano as members of FLAMES is hereby ordered dismissed for lack of merit.

The [P]etition to Nullify the election filed by [private respondents] Gaudencio Jimenez, et al., is
likewise ordered dismissed.20

Aggrieved, petitioners filed an appeal before the Director of the BLR.

The Ruling of the BLR Director

On 3 December 2003, the Director of the BLR issued a Resolution,21 affirming in toto the
assailed Decision of the Med-Arbiter.

Public respondent Director Hans Leo J. Cacdac ruled, inter alia, that the COMELEC's reliance on
Article IV, Section 4(a) (6) of the CBL, as a ground for disqualifying private respondents Daya, et al.,
was premature. He echoed the interpretation of the Med-Arbiter that the COMELEC erroneously
resorted to the aforecited provision which refers to the expulsion of a member from the union on
valid grounds and with due process, along with the requisite 2/3 vote of the Executive Board. Hence,
the COMELEC cut short the expulsion proceedings in disqualifying private respondents Daya, et
al.22 The BLR Director further held that the case involves a question of disqualification on account of
the alleged commission by private respondents Daya, et al., of illegal campaign acts, which acts were
not specifically mentioned in the guidelines for the conduct of election as issued by the COMELEC.
Likewise, on the alleged refusal of private respondents Daya, et al., to submit to the jurisdiction of
the COMELEC by failing to file a petition to nullify its order of disqualification, the BLR Director
deemed the same as an exception to the rule on exhaustion of administrative remedies. Thus:

By themselves, such acts could not be taken as repugnant of COMELEC's authority. Sensing that they
were prejudiced by the disqualification order, it was only incumbent upon [private respondents Daya,
et al.] to seek remedy before a body, which they thought has a more objective perspective over the
situation. In short, they opted to bypass the administrative remedies within the union. Such a move
could not be taken against [private respondents Daya, et al.] considering that non-exhaustion of
administrative remedies is justified in instances where it would practically amount to a denial of
justice, or would be illusory or vain, as in the present controversy. 23

The BLR Director disposed in this wise:

WHEREFORE, the appeal is DISMISSED for lack of merit. The Decision of Med-Arbiter Tranquilino B.
Reyes, DOLE-NCR, dated 7 July 2003 is AFFIRMED in its entirety.

Let the records of this case be returned to the DOLE-NCR for the immediate conduct of election of
officers of the First Line Association of Meralco Supervisory Employees (FLAMES) under the
supervision of DOLE-NCR personnel.24

Subsequently, petitioners sought a reversal of the 3 December 2003 Resolution, but the BLR Director
issued a Resolution dated 10 February 2003,25 refusing to reverse his earlier Resolution for lack of
merit.

Petitioners elevated the case to the Court of Appeals via a Petition for Certiorari.

The Ruling of the Court of Appeals

Labor II – 1
The Court of Appeals found petitioners' appeal to be bereft of merit.

The appellate court held that the provision relied upon by the COMELEC concerns the dismissal
and/or expulsion of union members, which power is vested in the FLAMES' Executive Board, and not
the COMELEC. It affirmed the finding of the BLR Director that the COMELEC, in disqualifying private
respondents Daya, et al., committed a procedural shortcut. It held:

Without the requisite two-thirds (2/3) vote of the Executive Board dismissing and/or expelling private
respondents for acts contemplated thereunder, the COMELEC was clearly violating the union's
constitution and bylaws (sic) by utilizing the aforequoted provision in its said May 6, 2003 decision
and, in the process, arrogating unto itself a power it did not possess. As the document embodying
the covenant between a union and its members and the fundamental law governing the members'
rights and obligations, it goes without saying that the constitution and bylaws (sic) should be upheld
for as long as they are not contrary to law, good morals or public policy. 26

On the matter of the failure of private respondents Daya, et al. to come up with 30 percent (30%)
members' support in filing the Petition to Nullify the COMELEC's Decision before the Med-Arbiter, the
Court of Appeals said that the petition did not involve the entire membership of FLAMES, so there
was no need to comply with the aforesaid requirement. Furthermore, the appellate court applied the
exception to the rule on exhaustion of administrative remedies on the ground, inter alia, that resort
to such a remedy would have been futile, illusory or vain. 27 Indeed, the Court of Appeals emphasized
that private respondents Daya, et al., were directed by the COMELEC to file their Answer to the
petition for their disqualification only on 5 May 2003. Private respondents Daya, et al., filed their
Answer on 6 May 2003. On the same day, the COMELEC issued its Decision disqualifying them. A day
after, the 7 May 2003 election was held. The Court of Appeals further stressed that private
respondents Daya, et al.'s efforts to have their disqualification reconsidered were rebuffed by the
COMELEC; hence, they were left with no choice but to seek the intervention of the BLR, 28 which was
declared to have jurisdiction over intra-union disputes even at its own initiative under Article 226 29 of
the Labor Code.

Petitioners sought a reconsideration of the 17 June 2004 Decision of the Court of Appeals, but the
same was denied in a Resolution30 dated 10 June 2005.

Hence, the instant Petition.

At the outset, petitioners contend that the instant Petition falls under the exceptions to the rule that
the Supreme Court is not a trier of facts. They implore this Court to make factual determination
anent the conduct of the 7 May 2003 elections. They also question the jurisdiction of the BLR
on the case at bar because of the failure of private respondents Daya, et al., to exhaust
administrative remedies within the union. It is the stance of petitioner that Article 226 31 of the
Labor Code which grants power to the BLR to resolve inter-union and intra-union disputes is dead
law, and has been amended by Section 14 of Republic Act No. 6715, whereby the conciliation,
mediation and voluntary arbitration functions of the BLR had been transferred to the National
Conciliation and Mediation Board.

Petitioners similarly assert that the 7 May 2003 election was conducted in a clean, honest, and
orderly manner, and that private respondents, some of whom are not bona fide members of FLAMES,
were validly disqualified by the COMELEC from running in the election. They also rehashed their
argument that non-members of the union were allowed by private respondents Daya, et al., to
participate in the affair. They challenge the finding of the BLR Director that the reliance by the
COMELEC on Article IV, Section 4(a)(6) of the CBL, was premature. Petitioners insist that the
COMELEC had the sole and exclusive power to pass upon the qualification of any candidate, and
therefore, it has the correlative power to disqualify any candidate in accordance with its guidelines.

Labor II – 1
For their part, private respondents Daya, et al., maintain that the Petition they filed before
the DOLE-NCR Med-Arbiter questioning the disqualification order of the COMELEC and
seeking the nullification of the 7 May 2003 election involves an intra-union dispute which
is within the jurisdiction of the BLR. They further claim that the COMELEC, in disqualifying them,
mistakenly relied on a provision in the FLAMES' CBL that addresses the expulsion of members from
the union, and no expulsion proceedings were held against them. Finally, they underscore the finding
of the appellate court that there was disenfranchisement among the general membership of FLAMES
due to their wrongful disqualification which restricted the members' choices of candidates. They
reiterate the conclusion of the Court of Appeals that had the COMELEC tabulated the votes cast in
their favor, there would have been, at least, a basis for the declaration that they lost in the elections.

Issues

Petitioners attribute to the Court of Appeals several errors to substantiate their Petition. 32 They all
boil down, though, to the question of whether the Court of Appeals committed grave abuse of
discretion when it affirmed the jurisdiction of the BLR to take cognizance of the case and
then upheld the ruling of the BLR Director and Med-Arbiter, nullifying the COMELEC's order
of disqualification of private respondents Daya et al., and annulling the 7 May 2003
FLAMES elections.

The Court's Ruling

The Petition is devoid of merit.

We affirm the finding of the Court of Appeals upholding the jurisdiction of the BLR. Article
226 of the Labor Code is hereunder reproduced, to wit:

ART. 226. BUREAU OF LABOR RELATIONS. - The Bureau of Labor Relations and the Labor
Relations Divisions in the regional offices of the Department of Labor shall have original
and exclusive authority to act, at their own initiative or upon request of either or both
parties, on all inter-union and intra-union conflicts, and all disputes, grievances or problems
arising from or affecting labor-management relations in all workplaces whether agricultural or
nonagricultural, except those arising from the implementation or interpretation of collective
bargaining agreements which shall be the subject of grievance procedure and/or voluntary
arbitration.

The Bureau shall have fifteen (15) working days to act on labor cases before it, subject to extension
by agreement of the parties.

The amendment to Article 226, as couched in Republic Act No. 6715, 33 which is relied upon by
petitioners in arguing that the BLR had been divested of its jurisdiction, simply reads, thus:

Sec. 14. The second paragraph of Article 226 of the same Code is likewise hereby amended to read
as follows:

"The Bureau shall have fifteen (15) calendar days to act on labor cases before it, subject to extension
by agreement of the parties."

This Court in Bautista v. Court of Appeals, 34 interpreting Article 226 of the Labor Code, was explicit in
declaring that the BLR has the original and exclusive jurisdiction on all inter-union and intra-
union conflicts. We said that since Article 226 of the Labor Code has declared that the BLR shall
have original and exclusive authority to act on all inter-union and intra-union conflicts, there should
be no more doubt as to its jurisdiction. As defined, an intra-union conflict would refer to a
conflict within or inside a labor union, while an inter-union controversy or dispute is one
Labor II – 1
occurring or carried on between or among unions.35 More specifically, an intra-union dispute is
defined under Section (z), Rule I of the Rules Implementing Book V of the Labor Code, viz:

(z) "Intra-Union Dispute" refers to any conflict between and among union members, and
includes all disputes or grievances arising from any violation of or disagreement over any
provision of the constitution and by-laws of a union, including cases arising from
chartering or affiliation of labor organizations or from any violation of the rights and
conditions of union membership provided for in the Code.

The controversy in the case at bar is an intra-union dispute. There is no question that this
is one which involves a dispute within or inside FLAMES, a labor union. At issue is the
propriety of the disqualification of private respondents Daya, et al., by the FLAMES COMELEC in the 7
May 2003 elections. It must also be stressed that even as the dispute involves allegations that
private respondents Daya, et al., sought the help of non-members of the union in their election
campaign to the detriment of FLAMES, the same does not detract from the real character of the
controversy. It remains as one which involves the grievance over the constitution and
bylaws of a union, and it is a controversy involving members of the union. Moreover, the
non-members of the union who were alleged to have aided private respondents Daya, et al., are not
parties in the case. We are, therefore, unable to understand petitioners' persistence in placing the
controversy outside of the jurisdiction of the BLR. The law is very clear. It requires no further
interpretation. The Petition which was initiated by private respondents Daya, et al., before the BLR
was properly within its cognizance, it being an intra-union dispute. Indubitably, when private
respondents Daya, et al., brought the case to the BLR, it was an invocation of the power and
authority of the BLR to act on an intra-union conflict.

After having settled the jurisdiction of the BLR, we proceed to determine if petitioners correctly
raised the argument that private respondents Daya, et al., prematurely sought the BLR's
jurisdiction on the ground that they failed to exhaust administrative remedies within the
union. On this matter, we affirm the findings of the Court of Appeals which upheld the application by
the BLR Director of the exception to the rule of exhaustion of administrative remedies.

In this regard, this Court is emphatic that "before a party is allowed to seek the intervention of the
court, it is a pre-condition that he should have availed of all the means of administrative processes
afforded him. Hence, if a remedy within the administrative machinery can still be resorted to by
giving the administrative officer concerned every opportunity to decide on a matter that comes within
his jurisdiction when such remedy should be exhausted first before the court's judicial power can be
sought. The premature invocation of court's judicial intervention is fatal to one's cause of action." 36

Verily, there are exceptions to the applicability of the doctrine. 37 Among the established
exceptions are: 1) when the question raised is purely legal; 2) when the administrative
body is in estoppel; 3) when the act complained of is patently illegal; 4) when there is
urgent need for judicial intervention; 5) when the claim involved is small; 6) when
irreparable damage will be suffered; 7) when there is no other plain, speedy, and adequate
remedy; 8) when strong public interest is involved; 9) when the subject of the proceeding
is private land; 10) in quo warranto proceedings; 38 and 11) where the facts show that
there was a violation of due process.39 As aptly determined by the BLR Director, private
respondents Daya, et al., were prejudiced by the disqualification order of the COMELEC.
They endeavored to seek reconsideration, but the COMELEC failed to act thereon. 40 The
COMELEC was also found to have refused to receive their written protest. 41 The foregoing
facts sustain the finding that private respondents Daya, et al., were deprived of due
process. Hence, it becomes incumbent upon private respondents Daya, et al., to seek the
aid of the BLR. To insist on the contrary is to render their exhaustion of remedies within
the union as illusory and vain.42 These antecedent circumstances convince this Court that
there was proper application by the Med-Arbiter of the exception to the rule of exhaustion

Labor II – 1
of administrative remedies, as affirmed by the BLR Director, and upheld by the Court of
Appeals.

We cannot accept, and the Court of Appeals rightfully rejected, the contention of petitioners that the
private respondents Daya, et al.'s complaint filed before the Med-Arbiter failed to comply with the
jurisdictional requirement because it was not supported by at least thirty percent (30%) of the
members of the union. Section 1 of Rule XIV of the Implementing Rules of Book V mandates the
thirty percent (30%) requirement only in cases where the issue involves the entire membership of
the union, which is clearly not the case before us. The issue is obviously limited to the disqualification
from participation in the elections by particular union members.

Having resolved the jurisdictional cobwebs in the instant case, it is now apt for this Court to address
the issue anent the disqualification of private respondents and the conduct of the 7 May 2003
elections.

On this matter, petitioners want this Court to consider the instant case as an exception to the rule
that the Supreme Court is not a trier of facts; hence, importuning that we make findings of fact
anew. It bears stressing that in a Petition for Review on Certiorari, the scope of this Court's judicial
review of decisions of the Court of Appeals is generally confined only to errors of law, 43 and questions
of fact are not entertained. We elucidated on our fidelity to this rule, and we said:

Thus, only questions of law may be brought by the parties and passed upon by this Court in the
exercise of its power to review. Also, judicial review by this Court does not extend to a reevaluation
of the sufficiency of the evidence upon which the proper labor tribunal has based its determination. 44

It is aphoristic that a re-examination of factual findings cannot be done through a Petition for Review
on Certiorari under Rule 45 of the Rules of Court because as earlier stated, this Court is not a trier of
facts; it reviews only questions of law.45 The Supreme Court is not duty-bound to analyze and weigh
again the evidence considered in the proceedings below. 46 This is already outside the province of the
instant Petition for Certiorari. While there may be exceptions to this rule, petitioners miserably failed
to show why the exceptions should be applied here. With greater force must this rule be applied in
the instant case where the factual findings of the Med-Arbiter were affirmed by the BLR Director, and
then, finally, by the Court of Appeals. The findings below had sufficient bases both in fact and in law.
The uniform conclusion was that private respondents Daya, et al., were wrongfully disqualified by the
COMELEC; consequently, the FLAMES election should be annulled.

On the issue of disqualification, there was a blatant misapplication by the COMELEC of the FLAMES'
CBL. As has been established ad nauseam, the provision47 relied upon by the COMELEC in
disqualifying private respondents Daya, et al., applies to a case of expulsion of members from the
union.

In full, Article IV, Section 4 (a) (6) of the FLAMES' CBL, provides, to wit:

Section 4(a). Any member may be DISMISSED and/or EXPELLED from the UNION, after due process
and investigation, by a two-thirds (2/3) vote of the Executive Board, for any of the following causes:

xxx

(6) Acting in a manner harmful to the interest and welfare of the UNION and/or its MEMBERS.48

We highlight five points, thus:

First, Article IV, Section 4(a)(6) of the FLAMES' CBL, embraces exclusively the case of dismissal
and/or expulsion of members from the union. Even a cursory reading of the provision does not tell us
Labor II – 1
that the same is to be automatically or directly applied in the disqualification of a candidate from
union elections, which is the matter at bar. It cannot be denied that the COMELEC erroneously relied
on Article IV, Section 4(a)(6) because the same does not contemplate the situation of private
respondents Daya, et al. The latter are not sought to be expelled or dismissed by the Executive
Board. They were brought before the COMELEC to be disqualified as candidates in the 7 May 2003
elections.

Second, the aforecited provision evidently enunciates with clarity the procedural course that should
be taken to dismiss and expel a member from FLAMES. The CBL is succinct in stating that the
dismissal and expulsion of a member from the union should be after due process and investigation,
the same to be exercised by two-thirds (2/3) vote of the Executive Board for any of the
causes49 mentioned therein. The unmistakable directive is that in cases of expulsion and dismissal,
due process must be observed as laid down in the CBL.

Third, nevertheless, even if we maintain a lenient stance and consider the applicability of Article IV,
Section 4(a)(6) in the disqualification of private respondents Daya, et al., from the elections of 7 May
2003, still, the disqualification made by the COMELEC pursuant to the subject provision was a rank
disregard of the clear due process requirement embodied therein. Nowhere do we find that private
respondents Daya, et al. were investigated by the Executive Board. Neither do we see the
observance of the voting requirement as regards private respondents Daya, et al. In all respects,
they were denied due process. chanrobles virtual law library

Fourth, the Court of Appeals, the BLR Director, and the Med-Arbiter uniformly found that due process
was wanting in the disqualification order of the COMELEC. We are in accord with their conclusion. If,
indeed, there was a violation by private respondents Daya, et al., of the FLAMES' CBL that could be a
ground for their expulsion and/or dismissal from the union, which in turn could possibly be made a
ground for their disqualification from the elections, the procedural requirements for their expulsion
should have been observed. In any event, therefore, whether the case involves dismissal and/or
expulsion from the union or disqualification from the elections, the proper procedure must be
observed. The disqualification ruled by the COMELEC against private respondents Daya, et al., must
not be allowed to abridge a clear procedural policy established in the FLAMES' CBL. If we uphold the
COMELEC, we are countenancing a clear case of denial of due process which is anathema to the
Constitution of the Philippines which safeguards the right to due process.

Fifth, from another angle, the erroneous disqualification of private respondents Daya, et al.,
constituted a case of disenfranchisement on the part of the member-voters of FLAMES. By wrongfully
excluding them from the 7 May 2003 elections, the options afforded to the union members were
clipped. Hence, the mandate of the union cannot be said to have been rightfully determined. The
factual irregularities in the FLAMES elections clearly provide proper bases for the annulment of the
union elections of 7 May 2003.

On a final note, as it appears that the question of the qualifications of private respondents Ong, et al.
had been rendered moot and academic,50 we do not find any reason for this Court to rule on the
matter. As borne out by the records, the question had been laid to rest even when the case was still
before the Med-Arbiter.51

WHEREFORE, the Petition is DENIED. The Decision of the Court of Appeals dated 17 June 2004,
and its Resolution dated 10 June 2005 in CA-G.R. SP No. 83061 are AFFIRMED. Costs against
petitioners.

Labor II – 1
 32.) G.R. No. 167291 : January 12, 2011

PRINCE TRANSPORT, INC. and MR. RENATO CLAROS, Petitioners, v. DIOSDADO GARCIA,

LUISITO GARCIA, RODANTE ROMERO, REX BARTOLOME, FELICIANO GASCO, JR., DANILO
ROJO, EDGAR SANFUEGO, AMADO GALANTO, EUTIQUIO LUGTU, JOEL GRAMATICA, MIEL
CERVANTES, TERESITA CABANES, ROE DELA CRUZ, RICHELO BALIDOY, VILMA PORRAS,
MIGUELITO SALCEDO, CRISTINA GARCIA, MARIO NAZARENO, DINDO TORRES, ESMAEL
RAMBOYONG, ROBETO* MANO, ROGELIO BAGAWISAN, ARIEL SNACHEZ, ESTAQULO
VILLAREAL, NELSON MONTERO, GLORIA ORANTE, HARRY TOCA, PABLITO MACASAET and
RONALD GARCITA, Respondents.

DECISION

PERALTA, J.:

Before the Court is a petition for review on certiorari  under Rule 45 of the Rules of Court praying for
the annulment of the Decision1  and Resolution2  of the Court of Appeals (CA) dated December 20,
cralaw cralaw

2004 and February 24, 2005, respectively, in CA-G.R. SP No. 80953. The assailed Decision reversed
and set aside the Resolutions dated May 30, 2003 3  and September 26, 20034  of the National Labor
cralaw cralaw

Relations Commission (NLRC) in CA No. 029059-01,while the disputed Resolution denied petitioners'
Motion for Reconsideration.

The present petition arose from various complaints filed by herein respondents charging
petitioners with illegal dismissal, unfair labor practice and illegal deductions and praying for
the award of premium pay for holiday and rest day, holiday pay, service leave pay, 13 th month pay,
moral and exemplary damages and attorney's fees.

Respondents alleged in their respective position papers and other related pleadings that
they were employees of Prince Transport, Inc. (PTI), a company engaged in the business of
transporting passengers by land; respondents were hired either as drivers, conductors,
mechanics or inspectors, except for respondent Diosdado Garcia (Garcia), who was assigned as
Operations Manager; in addition to their regular monthly income, respondents also received
commissions equivalent to 8 to 10% of their wages; sometime in October 1997, the said
commissions were reduced to 7 to 9%; this led respondents and other employees of PTI to hold a
series of meetings to discuss the protection of their interests as employees; these meetings led
petitioner Renato Claros, who is the president of PTI, to suspect that respondents are
about to form a union; he made known to Garcia his objection to the formation of a union; in
December 1997, PTI employees requested for a cash advance, but the same was denied by
management which resulted in demoralization on the employees' ranks; later, PTI acceded to the
request of some, but not all, of the employees; the foregoing circumstances led respondents
to form a union for their mutual aid and protection; in order to block the continued formation of the
union, PTI caused the transfer of all union members and sympathizers to one of its sub-
companies, Lubas Transport (Lubas); despite such transfer, the schedule of drivers and
conductors, as well as their company identification cards, were issued by PTI; the daily
time records, tickets and reports of the respondents were also filed at the PTI office; and,
all claims for salaries were transacted at the same office; later, the business of Lubas
deteriorated because of the refusal of PTI to maintain and repair the units being used therein,
which resulted in the virtual stoppage of its operations and respondents' loss of employment.

Petitioners, on the other hand, denied the material allegations of the complaints contending that
herein respondents were no longer their employees, since they all transferred to Lubas at their own
request; petitioners have nothing to do with the management and operations of Lubas as well as the
control and supervision of the latter's employees; petitioners were not aware of the existence of any

Labor II – 1
union in their company and came to know of the same only in June 1998 when they were served a
copy of the summons in the petition for certification election filed by the union; that before the union
was registered on April 15, 1998, the complaint subject of the present petition was already filed; that
the real motive in the filing of the complaints was because PTI asked respondents to vacate the
bunkhouse where they (respondents) and their respective families were staying because PTI wanted
to renovate the same.

Subsequently, the complaints filed by respondents were consolidated.

On October 25, 2000, the Labor Arbiter rendered a Decision,5  the dispositive portion of which reads cralaw

as follows:  chanrob1esvirtwallawlibrary

WHEREFORE, judgment is hereby rendered:  chanrob1esvirtwallawlibrary

1. Dismissing the complaints for Unfair Labor Practice, non-payment of holiday pay and holiday
premium, service incentive leave pay and 13 th month pay;  chanroblesvirtualawlibrary

Dismissing the complaint of Edgardo Belda for refund of boundary-hulog;  chanroblesvirtualawlibrary

2. Dismissing the complaint for illegal dismissal against the respondents Prince Transport, Inc. and/or
Prince Transport Phils. Corporation, Roberto Buenaventura, Rory Bayona, Ailee Avenue, Nerissa Uy,
Mario Feranil and Peter Buentiempo;  chanroblesvirtualawlibrary

3. Declaring that the complainants named below are illegally dismissed by Lubas Transport; ordering
said Lubas Transport to pay backwages and separation pay in lieu of reinstatement in the following
amount:  chanrob1esvirtwallawlibrary

Complainants Backwages Separation Pay

 
Complainants  Backwages  Separation Pay
            (1) Diosdado Garcia               P222,348.70                P79,456.00
(2) Feliciano Gasco, Jr.              203,350.00                 54,600.00
            (3) Pablito Macasaet                  145,250.00                 13,000.00
            (4) Esmael Ramboyong              221,500.00                 30,000.00
            (5) Joel Gramatica                      221,500.00                 60,000.00
            (6) Amado Galanto                    130,725.00                 29,250.00
            (7) Miel Cervantes                     265,800.00                 60,000.00
            (8) Roberto Mano                      221,500.00                 50,000.00
            (9) Roe dela Cruz                       265,800.00                 60,000.00
            (10) Richelo Balidoy                  130,725.00                 29,250.00
            (11) Vilma Porras                       221,500.00                 70,000.00
            (12) Miguelito Salcedo              265,800.00                 60,000.00
            (13) Cristina Garcia                    130,725.00                 35,100.00
            (14) Luisito Garcia                     145,250.00                 19,500.00
            (15) Rogelio Bagawisan             265,800.00                 60,000.00
(16) Rodante H. Romero           221,500.00                 60,000.00
            (17) Dindo Torres                      265,800.00                 50,000.00
            (18) Edgar Sanfuego                  221,500.00                 40,000.00
            (19) Ronald Gacita                    221,500.00                 40,000.00
            (20) Harry Toca                          174,300.00                 23,400.00
            (21) Amado Galanto                  130,725.00                 17,550.00
Labor II – 1
             (22) Teresita Cabañes                 130,725.00                 17,550.00
            (23) Rex Bartolome                   301,500.00                 30,000.00
            (24) Mario Nazareno                  221,500.00                 30,000.00
            (25) Eustaquio Villareal             145,250.00                 19,500.00 
            (26) Ariel Sanchez                     265,800.00                 60,000.00
            (27) Gloria Orante                      263,100.00                 60,000.00
            (28) Nelson Montero                  264,600.00                 60,000.00
            (29) Rizal Beato                         295,000.00                 40,000.00
            (30) Eutiquio Lugtu                   354,000.00                 48,000.00
            (31) Warlito Dickensomn          295,000.00                 40,000.00
            (32) Edgardo Belda                   354,000.00                 84,000.00
            (33) Tita Go                               295,000.00                 70,000.00
            (34) Alex Lodor                         295,000.00                 50,000.00
            (35) Glenda Arguilles                295,000.00                 40,000.00
            (36) Erwin Luces                       354,000.00                 48,000.00
            (37) Jesse Celle                          354,000.00                 48,000.00
            (38) Roy Adorable                     295,000.00                 40,000.00
            (39) Marlon Bangcoro                295,000.00                 40,000.00
            (40)Edgardo Bangcoro              354,000.00                 36,000.00
   chanroblesvirtualawlibrary

4. Ordering Lubas Transport to pay attorney's fees equivalent to ten (10%) of the total monetary
award; and

6. Ordering the dismissal of the claim for moral and exemplary damages for lack merit.

SO ORDERED.6 cralawredlaw

The Labor Arbiter ruled that petitioners are not guilty of unfair labor practice in the absence of
evidence to show that they violated respondents' right to self-organization. The Labor Arbiter also
held that Lubas is the respondents' employer and that it (Lubas) is an entity which is separate,
distinct and independent from PTI. Nonetheless, the Labor Arbiter found that Lubas is guilty of
illegally dismissing respondents from their employment.

Respondents filed a Partial Appeal with the NLRC praying, among others, that PTI should also be held
equally liable as Lubas.

In a Resolution dated May 30, 2003, the NLRC modified the Decision of the Labor Arbiter and
disposed as follows:  chanrob1esvirtwallawlibrary

WHEREFORE, premises considered, the appeal is hereby PARTIALLY GRANTED. Accordingly, the

Decision appealed from is SUSTAINED subject to the modification that Complainant-Appellant
Edgardo Belda deserves refund of his boundary-hulog in the amount of P 446,862.00; and that
Complainants-Appellants Danilo Rojo and Danilo Laurel should be included in the computation of
Complainants-Appellants claim as follows:  chanrob1esvirtwallawlibrary

Complainants  Backwages  Separation Pay

41. Danilo Rojo           P355,560.00                P48,000.00
42. Danilo Laurel        P357,960.00                P72,000.00

As regards all other aspects, the Decision appealed from is SUSTAINED.

Labor II – 1
SO ORDERED.7 cralawredlaw

Respondents filed a Motion for Reconsideration, but the NLRC denied it in its Resolution 8  dated cralaw

September 26, 2003.

Respondents then filed a special civil action for certiorari with the CA assailing the Decision and
Resolution of the NLRC.

On December 20, 2004, the CA rendered the herein assailed Decision which granted respondents'
petition. The CA ruled that petitioners are guilty of unfair labor practice; that Lubas is a mere
instrumentality, agent conduit or adjunct of PTI; and that petitioners' act of transferring respondents'
employment to Lubas is indicative of their intent to frustrate the efforts of respondents to organize
themselves into a union. Accordingly, the CA disposed of the case as follows:  chanrob1esvirtwallawlibrary

WHEREFORE , the Petition for Certiorari is hereby GRANTED. Accordingly, the subject decision is
hereby REVERSED and SET ASIDE and another one ENTERED finding the respondents guilty of unfair
labor practice and ordering them to reinstate the petitioners to their former positions without loss of
seniority rights and with full backwages.

With respect to the portion ordering the inclusion of Danilo Rojo and Danilo Laurel in the computation
of petitioner's claim for backwages and with respect to the portion ordering the refund of Edgardo
Belda's boundary-hulog in the amount of P 446,862.00, the NLRC decision is affirmed and
maintained.

SO ORDERED.9 cralawredlaw

Petitioners filed a Motion for Reconsideration, but the CA denied it via its Resolution10  dated February cralaw

24, 2005.

Hence, the instant petition for review on certiorari based on the following grounds:  chanrob1esvirtwallawlibrary

THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN GIVING DUE COURSE TO
THE RESPONDENTS' PETITION FOR CERTIORARI

1. THE COURT OF APPEALS SHOULD HAVE RESPECTED THE FINDINGS OF THE LABOR ARBITER AND
AFFIRMED BY THE NLRC

2. ONLY ONE PETITIONER EXECUTED AND VERIFIED THE PETITION

3. THE COURT OF APPEALS SHOULD NOT HAVE GIVEN DUE COURSE TO THE PETITION WITH
RESPECT TO RESPONDENTS REX BARTOLOME, FELICIANO GASCO, DANILO ROJO, EUTIQUIO LUGTU,
AND NELSON MONTERO AS THEY FAILED TO FILE AN APPEAL TO THE NLRC

THE COURT OF APPEALS SERIOUSLY ERRED IN DECLARING THAT PETITIONERS PRINCE TRANSPORT,
INC. AND MR. RENATO CLAROS AND LUBAS TRANSPORT ARE ONE AND THE SAME CORPORATION
AND THUS, LIABLE IN SOLIDUM TO RESPONDENTS.

Labor II – 1
THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN ORDERING THE
REINSTATEMENT OF RESPONDENTS TO THEIR PREVIOUS POSITION WHEN IT IS NOT ONE OF THE
ISSUES RAISED IN RESPONDENTS' PETITION FOR CERTIORARI.11 cralawredlaw

Petitioners assert that factual findings of agencies exercising quasi-judicial functions like the NLRC
are accorded not only respect but even finality; that the CA should have outrightly dismissed the
petition filed before it because in certiorari proceedings under Rule 65 of the Rules of Court it is not
within the province of the CA to evaluate the sufficiency of evidence upon which the NLRC based its
determination, the inquiry being limited essentially to whether or not said tribunal has acted without
or in excess of its jurisdiction or with grave abuse of discretion. Petitioners assert that the CA can
only pass upon the factual findings of the NLRC if they are not supported by evidence on record, or if
the impugned judgment is based on misapprehension of facts - which circumstances are not present
in this case. Petitioners also emphasize that the NLRC and the Labor Arbiter concurred in their factual
findings which were based on substantial evidence and, therefore, should have been accorded great
weight and respect by the CA.

Respondents, on the other hand, aver that the CA neither exceeded its jurisdiction nor committed
error in re-evaluating the NLRC's factual findings since such findings are not in accord with the
evidence on record and the applicable law or jurisprudence.

The Court agrees with respondents.

The power of the CA to review NLRC decisions via  a petition for certiorari under Rule 65 of the Rules
of Court has been settled as early as this Court's decision in St. Martin Funeral Homes v. NLRC.12  In cralaw

said case, the Court held that the proper vehicle for such review is a special civil action
for certiorari under Rule 65 of the said Rules, and that the case should be filed with the CA in strict
observance of the doctrine of hierarchy of courts. Moreover, it is already settled that under Section 9
of Batas Pambansa Blg. 129, as amended by Republic Act No. 7902, the CA - pursuant to the
exercise of its original jurisdiction over petitions forcertiorari - is specifically given the power to pass
upon the evidence, if and when necessary, to resolve factual issues. 13  Section 9 clearly states: 
cralaw chanrob1esvirtwallawlibrary

xxx

The Court of Appeals shall have the power to try cases and conduct hearings, receive evidence and
perform any and all acts necessary to resolve factual issues raised in cases falling within its original
and appellate jurisdiction, including the power to grant and conduct new trials or further proceedings.
xxx

However, equally settled is the rule that factual findings of labor officials, who are deemed to have
acquired expertise in matters within their jurisdiction, are generally accorded not only respect but
even finality by the courts when supported by substantial evidence, i.e., the amount of relevant
evidence which a reasonable mind might accept as adequate to justify a conclusion. 14  But these cralaw

findings are not infallible. When there is a showing that they were arrived at arbitrarily or in
disregard of the evidence on record, they may be examined by the courts. 15  The CA can grant the
cralaw

petition for certiorari if it finds that the NLRC, in its assailed decision or resolution, made a factual
finding not supported by substantial evidence. 16  It is within the jurisdiction of the CA, whose
cralaw

jurisdiction over labor cases has been expanded to review the findings of the NLRC. 17 cralawredlaw

In this case, the NLRC sustained the factual findings of the Labor Arbiter. Thus, these findings are
generally binding on the appellate court, unless there was a showing that they were arrived at
arbitrarily or in disregard of the evidence on record. In respondents' petition for certiorari with the
CA, these factual findings were reexamined and reversed by the appellate court on the ground that
they were not in accord with credible evidence presented in this case. To determine if the CA's

Labor II – 1
reexamination of factual findings and reversal of the NLRC decision are proper and with sufficient
basis, it is incumbent upon this Court to make its own evaluation of the evidence on record. 18 cralawredlaw

After a thorough review of the records at hand, the Court finds that the CA did not commit error in
arriving at its own findings and conclusions for reasons to be discussed hereunder.

Firstly, petitioners posit that the petition filed with the CA is fatally defective, because the attached
verification and certificate against forum shopping was signed only by respondent Garcia.

The Court does not agree.

While the general rule is that the certificate of non-forum shopping must be signed by all the
plaintiffs in a case and the signature of only one of them is insufficient, the Court has stressed that
the rules on forum shopping, which were designed to promote and facilitate the orderly
administration of justice, should not be interpreted with such absolute literalness as to subvert its
own ultimate and legitimate objective.19  Strict compliance with the provision regarding the certificate
cralaw

of non-forum shopping underscores its mandatory nature in that the certification cannot be
altogether dispensed with or its requirements completely disregarded. 20  It does not, however,
cralaw

prohibit substantial compliance therewith under justifiable circumstances, considering especially that
although it is obligatory, it is not jurisdictional.21 cralawredlaw

In a number of cases, the Court has consistently held that when all the petitioners share a common
interest and invoke a common cause of action or defense, the signature of only one of them in the
certification against forum shopping substantially complies with the rules. 22  In the present case,
cralaw

there is no question that respondents share a common interest and invoke a common cause of
action. Hence, the signature of respondent Garcia is a sufficient compliance with the rule governing
certificates of non-forum shopping. In the first place, some of the respondents actually executed a
Special Power of Attorney authorizing Garcia as their attorney-in-fact in filing a petition
for certiorari with the CA.23
cralawredlaw

The Court, likewise, does not agree with petitioners' argument that the CA should not have given due
course to the petition filed before it with respect to some of the respondents, considering that these
respondents did not sign the verification attached to the Memorandum of Partial Appeal earlier filed
with the NLRC. Petitioners assert that the decision of the Labor Arbiter has become final and
executory with respect to these respondents and, as a consequence, they are barred from filing a
petition for certiorari with the CA.

With respect to the absence of some of the workers' signatures in the verification, the verification
requirement is deemed substantially complied with when some of the parties who undoubtedly have
sufficient knowledge and belief to swear to the truth of the allegations in the petition had signed the
same. Such verification is deemed a sufficient assurance that the matters alleged in the petition have
been made in good faith or are true and correct, and not merely speculative. Moreover, respondents'
Partial Appeal shows that the appeal stipulated as complainants-appellants "Rizal Beato, et al.",
meaning that there were more than one appellant who were all workers of petitioners.

In any case, the settled rule is that a pleading which is required by the Rules of Court to be verified,
may be given due course even without a verification if the circumstances warrant the suspension of
the rules in the interest of justice.24  Indeed, the absence of a verification is not jurisdictional, but
cralaw

only a formal defect, which does not of itself justify a court in refusing to allow and act on a
case.25  Hence, the failure of some of the respondents to sign the verification attached to their
cralaw

Memorandum of Appeal filed with the NLRC is not fatal to their cause of action.

Petitioners also contend that the CA erred in applying the doctrine of piercing the corporate veil with
respect to Lubas, because the said doctrine is applicable only to corporations and Lubas is not a
Labor II – 1
corporation but a single proprietorship; that Lubas had been found by the Labor Arbiter and the NLRC
to have a personality which is separate and distinct from that of PTI; that PTI had no hand in the
management and operation as well as control and supervision of the employees of Lubas.

The Court is not persuaded.

On the contrary, the Court agrees with the CA that Lubas is a mere agent, conduit or adjunct of PTI.
A settled formulation of the doctrine of piercing the corporate veil is that when two business
enterprises are owned, conducted and controlled by the same parties, both law and equity will, when
necessary to protect the rights of third parties, disregard the legal fiction that these two entities are
distinct and treat them as identical or as one and the same. 26  In the present case, it may be true
cralaw

that Lubas is a single proprietorship and not a corporation. However, petitioners' attempt to isolate
themselves from and hide behind the supposed separate and distinct personality of Lubas so as to
evade their liabilities is precisely what the classical doctrine of piercing the veil of corporate entity
seeks to prevent and remedy.

Thus, the Court agrees with the observations of the CA, to wit:  chanrob1esvirtwallawlibrary

As correctly pointed out by petitioners, if Lubas were truly a separate entity, how come that it was
Prince Transport who made the decision to transfer its employees to the former? Besides, Prince
Transport never regarded Lubas Transport as a separate entity. In the aforesaid letter, it referred to
said entity as "Lubas operations." Moreover, in said letter, it did not transfer the employees; it
"assigned" them. Lastly, the existing funds and 201 file of the employees were turned over not to a
new company but a "new management."27 cralawredlaw

The Court also agrees with respondents that if Lubas is indeed an entity separate and independent
from PTI why is it that the latter decides which employees shall work in the former?

What is telling is the fact that in a memorandum issued by PTI, dated January 22, 1998, petitioner
company admitted that Lubas is one of its sub-companies.28  In addition, PTI, in its letters to its
cralaw

employees who were transferred to Lubas, referred to the latter as its "New City Operations Bus." 29 cralawredlaw

Moreover, petitioners failed to refute the contention of respondents that despite the latter's transfer
to Lubas of their daily time records, reports, daily income remittances of conductors, schedule of
drivers and conductors were all made, performed, filed and kept at the office of PTI. In fact,
respondents' identification cards bear the name of PTI.

It may not be amiss to point out at this juncture that in two separate illegal dismissal cases involving
different groups of employees transferred by PTI to other companies, the Labor Arbiter handling the
cases found that these companies and PTI are one and the same entity; thus, making them solidarily
liable for the payment of backwages and other money claims awarded to the complainants therein. 30 cralawredlaw

Petitioners likewise aver that the CA erred and committed grave abuse of discretion when it ordered
petitioners to reinstate respondents to their former positions, considering that the issue of
reinstatement was never brought up before it and respondents never questioned the award of
separation pay to them.

The Court is not persuaded.

It is clear from the complaints filed by respondents that they are seeking reinstatement. 31 cralawredlaw

In any case, Section 2 (c), Rule 7 of the Rules of Court provides that a pleading shall specify the
relief sought, but may add a general prayer for such further or other reliefs as may be deemed just
and equitable. Under this rule, a court can grant the relief warranted by the allegation and the proof
Labor II – 1
even if it is not specifically sought by the injured party; the inclusion of a general prayer may justify
the grant of a remedy different from or together with the specific remedy sought, if the facts alleged
in the complaint and the evidence introduced so warrant. 32 cralawredlaw

Moreover, in BPI Family Bank v. Buenaventura,33  this Court ruled that the general prayer is broad
cralaw

enough "to justify extension of a remedy different from or together with the specific remedy sought."
Even without the prayer for a specific remedy, proper relief may be granted by the court if the facts
alleged in the complaint and the evidence introduced so warrant. The court shall grant relief
warranted by the allegations and the proof even if no such relief is prayed for. The prayer in the
complaint for other reliefs equitable and just in the premises justifies the grant of a relief not
otherwise specifically prayed for. 34  In the instant case, aside from their specific prayer for
cralaw

reinstatement, respondents, in their separate complaints, prayed for such reliefs which are deemed
just and equitable.

As to whether petitioners are guilty of unfair labor practice, the Court finds no cogent
reason to depart from the findings of the CA that respondents' transfer of work
assignments to Lubas was designed by petitioners as a subterfuge to foil the former's right
to organize themselves into a union. Under Article 248 (a) and (e) of the Labor Code, an
employer is guilty of unfair labor practice if it interferes with, restrains or coerces its
employees in the exercise of their right to self-organization or if it discriminates in regard
to wages, hours of work and other terms and conditions of employment in order to
encourage or discourage membership in any labor organization.

Indeed, evidence of petitioners' unfair labor practice is shown by the established fact that, after
respondents' transfer to Lubas, petitioners left them high and dry insofar as the operations of Lubas
was concerned. The Court finds no error in the findings and conclusion of the CA that petitioners
"withheld the necessary financial and logistic support such as spare parts, and repair and
maintenance of the transferred buses until only two units remained in running condition." This left
respondents virtually jobless.

WHEREFORE , the instant petition is denied. The assailed Decision and Resolution of the Court of
Appeals, dated December 20, 2004 and February 24, 2005, respectively, in CA-G.R. SP No. 80953,
are AFFIRMED.

Labor II – 1
 33.) [G.R. Nos. 178222-23 : September 29, 2010]

MANILA MINING CORP. EMPLOYEES ASSOCIATION-FEDERATION OF FREE WORKERS

CHAPTER, SAMUEL G. ZUÑIGA, IN HIS CAPACITY AS PRESIDENT, PETITIONERS, VS.
MANILA MINING CORP. AND/OR ARTEMIO F. DISINI, PRESIDENT, RENE F. CHANYUNGCO,
(SVP-TREASURER), RODOLFO S. MIRANDA, (VP-CONTROLLER), VIRGILIO MEDINA (VP),
ATTY. CRISANTO MARTINEZ (HRD), NIGEL TAMLYN (RESIDENT MANAGER), BRYAN YAP
(VP), FELIPE YAP (CHAIRMAN OF THE BOARD), AND THE NATIONAL LABOR RELATIONS
COMMISSION (FIRST DIVISION), RESPONDENTS.

DECISION

PEREZ, J.:

This petition for review on certiorari seeks a reversal of the 30 June 2006 Decision[1] of the Court of
Appeals in CA-G.R. SP No. 86073 and its Resolution [2] in the same case dated 30 May 2007.

Respondent Manila Mining Corporation (MMC) is a publicly-listed corporation engaged in large-

scale mining for gold and copper ore. MMC is required by law to maintain a tailings
containment facility to store the waste material generated by its mining operations.  Consequently,
MMC constructed several tailings dams to treat and store its waste materials.  One of these
dams was Tailings Pond No. 7 (TP No. 7), which was constructed in 1993 and was operated under
a permit issued by the Department of Environment and Natural Resources (DENR), through its
Environmental Management Bureau (EMB) in Butuan City, Agusan del Norte. [3]

On 10 January 2000, eleven (11) rank-and-file employees of MMC, who later became
complainants before the labor arbiter, attended the organizational meeting of MMC-Makati
Employees Association-Federation of Free Workers Chapter (Union).  On 3 March 2000, the
Union filed with the Department of Labor and Employment (DOLE) all the requirements for its
registration.  The Union acquired its legitimate registration status on 30 March 2000. 
Subsequently, it submitted letters to MMC relating its intention to bargain collectively. On 11
July 2001, the Union submitted its Collective Bargaining Agreement (CBA) proposal to MMC.

Upon expiration of the tailings permit on 25 July 2001, DENR-EMB did not issue a
permanent permit due to the inability of MMC to secure an Environmental Compliance
Certificate (ECC).  An essential component of an ECC is social acceptability or the consent of the
residents in the community to allow TP No. 7 to operate, which MMC failed to obtain. [4]  Hence, it
was compelled to temporarily shut down its mining operations, resulting in the temporary
lay-off of more than 400 employees in the mine site.

On 30 July 2001, MMC called for the suspension of negotiations on the CBA with the Union
until resumption of mining operations.[5]

Among the employees laid-off, complainants Samuel Zuñiga, Myrna Maquio, Doroteo Torre,
Arsenio Mark Perez, Edmundo Galvez, Diana Ruth Rellores, Jonathan Araneta, Teresita Lagman,
Reynaldo Anzures, Gerardo Opena, and Edwin Tuazon, together with the Union filed a complaint
before the labor arbiter[6] on even date praying for reinstatement, recognition of the Union as
the sole and exclusive representative of its rank-and-file employees, and payment of moral and
exemplary damages and attorney's fees.[7]

In their Position Paper,[8] complainants challenged the validity of their lay-off on the averment
that MMC was not suffering from business losses. They alleged that MMC did not want to bargain
collectively with the Union, so that instead of submitting their counterproposal to the CBA,
MMC decided to terminate all union officers and active members.  Petitioners questioned the
timing of their lay-off, and alleged that first, there was no showing that cost-cutting measures were
Labor II – 1
taken by MMC; second, no criteria were employed in choosing which employees to lay-off; and third,
the individuals laid-off were those who signed the attendance sheet of the union organizational
meeting. Petitioners likewise claimed that they were denied due process because they were not given
a 30-day notice informing them of the lay-off.  Neither was the DOLE informed of this lay-off, as
mandated by law.[9]

Respondents justified the temporary lay-off as bona fide in character and a valid management
prerogative pending the issuance of the permit to continuously operate TP No. 7.

The labor arbiter ruled in favor of MMC and held that the temporary shutdown of the mining
operation, as well as the temporary lay-off of the employees, is valid. [10]

On appeal, the National Labor Relations Commission (NLRC) modified the judgment of the labor
arbiter and ordered the payment of separation pay equivalent to one month pay for every year of
service.  It ratiocinated that the temporary lay-off, which exceeded more than six (6) months, had
the effect of severance of the employer-employee relationship.  The dispositive portion of the
Decision read:

WHEREFORE, the assailed decision is, as it is hereby, Vacated and Set Aside and a new one entered
ordering respondent Manila Mining Corporation to pay the individual complainants their separation
pay computed as follows:

1. Samuel G. [Z]uñiga From Feb. 1, 1995 to  

July 27, 2001 = 7 yrs.  
P14,300/mo.  
P14,300 x 7 yrs. x ½ P 50,050.00 

2. Myrna Maquio From March 1992 to  

July 27, 2001 = 9 yrs.  
P14,000/mo.  
P14,000 x 9 yrs. x ½ P 63,000.00 

3. Doroteo J. Torre From July 1983 to  

July 27, 2001 = 18 yrs.  
P10,000/mo.  
P10,000 x 18 yrs. x ½ P 90,000.00 

4. Arsenio Mark M. Perez From June 1996 to  

July 27, 2001 = 5 yrs.  
P9,500/mo.  
P9,500 x 5 yrs. x ½ P 23,750.00 

5. Edmundo M. Galvez From June 1997 to  

July 27, 2001 = 4 yrs.  
P9,500/mo.  
P9,500 x 4 yrs. x ½ P 19,000.00 
6. Jonathan Araneta From March 1992 to  
July 27, 2001 = 9 yrs.  
P15,500/mo.  
P15,500 x 9 yrs. x ½ P 69,750.00 

7. Teresita D. Lagman From August 1980 to  

July 27, 2001 = 20 yrs.  
Labor II – 1
 P10,900/mo.  
P10,900 x 20 yrs. x ½ P109,000.00 

8. Gerardo Opena From October 1997 to  

July 27, 2001 = 4 yrs.  
P8,250/mo.  
P8,250 x 4 yrs. x ½ P 16,500.00 

9. Edwin Tuazon From August 1994 to  

July 27, 2001 = 8 yrs.  
P7,000/mo.  
P7,000 x 8 yrs. x ½ P 28,000.00 
GRAND TOTAL P469,050.00 

In addition respondent company is hereby ordered to pay  attorney's fees to complainants equivalent
to 10% of the award. [11]

In an Order[12] dated 31 May 2004, the NLRC affirmed its Resolution.

Dissatisfied, both parties separately filed their petitions for certiorari with the Court of Appeals,
docketed as CA-G.R. SP No. 86073 and CA G.R. SP No. 86163.

The two petitions were consolidated upon motion by MMC in a Resolution dated 3 February 2005.

In its Decision dated 30 June 2006, the Court of Appeals modified the NLRC ruling, thus:

WHEREFORE, the instant petition is partially GRANTED and the challenged Resolution dated August
29, 2003 of public respondent National Labor Relations Commission in NLRC NCR CA No. 033111-(CA
No. 033111-02) is MODIFIED insofar as it holds MMC liable to pay the Union attorney's fees
equivalent to 10% of the award, which portion of the questioned decision is now SET ASIDE.

The  monetary award of separation pay is maintained, but is MODIFIED from one (1) month pay for
every year of service to ONE-HALF (1/2) MONTH PAY for every year of service, a fraction of at least
six (6) months being considered as one (1) whole year. [13]

Both parties filed their respective motions for reconsideration but in a Resolution dated 30 May 2007,
the Court of Appeals denied the motions for lack of merit. [14]

Only the Union elevated the case to this Court via the instant petition for review on certiorari.  The
Union attributes bad faith on the part of MMC in implementing the temporary lay-off
resulting in the complainants' constructive dismissal.  The Union alleges that the failure to
obtain a permit to operate TP No. 7 is largely due to failure on the part of MMC to comply
with the DENR-EMB's conditions.[15]

The Union claims that the temporary lay-off was effected without any proper notice to the DOLE as
mandated by Article 283 of the Labor Code.  It further maintains that MMC did not observe the
jurisprudential criteria in the selection of the employees to be laid-off. [16]

The Union insists that MMC is guilty of unfair labor practice when it unilaterally suspended
the negotiation for a CBA.  The Union avers that the lay-off and subsequent termination of
complainants were due to the formation of the union at MMC.[17]

MMC defends the temporary lay-off of the employees as valid and done in the exercise of
management prerogative.  It concedes that upon expiration of the 6-month period, coupled with

Labor II – 1
losses suffered by MMC, the complainants were constructively dismissed.  However, MMC takes
exception to the application of Article 286 of the Labor Code in that the 6-month period cannot and
will not apply to the instant case in order to consider the employees terminated and to support the
payment of separation pay.  MMC explains that the 6-month period does not refer to a situation
where the employer does not have any control over the nature, extent and period of the temporary
suspension of operations.  MMC adds that the suspension of MMC's operations is left primarily to the
discretion of the DENR-EMB, which has the authority to issue MMC's permit to operate TP No. 7. [18]

MMC further submits that where the closure is due to serious business losses, such as in this case
where the aggregate losses amounted to over P880,000,000.00, the law does not impose any
obligation upon the employer to pay separation benefits. [19]

With respect to the charge of unfair labor practice, MMC avers that it merely deferred
responding to the Union's letter-proposal until the resumption of its mining operations.  It
went to claim further that the employment relationship between the parties was
suspended at the time the request to bargain was made.[20]

The issue of MMC's temporary suspension of business operations resulting in the temporary lay-off of
some of its employees was squarely addressed by the labor tribunals and the Court of Appeals.  They
sustained in unison the validity of the temporary suspension, as well as the temporary lay-off.

We agree.  The lay-off is neither illegal nor can it be considered as unfair labor practice.

Despite all efforts exerted by MMC, it did not succeed in obtaining the consent of the
residents of the community where the tailings pond would operate, one of the conditions
imposed by DENR-EMB in granting its application for a permanent permit.  It is precisely
MMC's faultless failure to secure a permit which caused the temporary shutdown of its
mining operations.  As aptly put by the Court of Appeals:

The evidence on record indeed clearly shows that MMC's suspension of its mining operations was
bonafide and the reason for such suspension was supported by substantial evidence.  MMC cannot
conduct mining operations without a tailings disposal system.  For this purpose, MMC operates TP No.
7 under a valid permit from the Department of Environment and Natural Resources (DENR) through
its Environmental Management Bureau (EMB).  In fact, a "Temporary Authority to Construct and
Operate" was issued on January 25, 2001 in favor of MMC valid for a period of six (6) months or until
July 25, 2001.  The NLRC did not dispute MMC's claim that it had timely filed an application for
renewal of its permit to operate TP No. 7 but that the renewal permit was not immediately
released by the DENR-EMB, hence, MMC was compelled to temporarily shutdown its milling
and mining operations.  Here, it is once apparent that the suspension of MMC's mining
operations was not due to its fault nor was it necessitated by financial reasons.  Such
suspension was brought about by the non-issuance of a permit for the continued operation of TP No.
7 without which MMC cannot resume its milling and mining operations.  x x x.[21] [Emphasis
supplied.]

Unfair labor practice cannot be imputed to MMC since, as ruled by the Court of Appeals, the call of
MMC for a suspension of the CBA negotiations cannot be equated to "refusal to bargain."

Article 252 of the Labor Code defines the phrase "duty to bargain collectively," to wit:

ARTICLE 252. Meaning of duty to bargain collectively. - The duty to bargain collectively means
the performance of a mutual obligation to meet and convene promptly and expeditiously in good faith
for the purpose of negotiating an agreement with respect to wages, hours of work and all other terms
and conditions of employment including proposals for adjusting any grievances or questions arising
under such agreements [and executing a contract incorporating such agreements] if requested by

Labor II – 1
either party but such duty does not compel any party to agree to a proposal or to make any
concession.

For a charge of unfair labor practice to prosper, it must be shown that the employer was
motivated by ill-will, bad faith or fraud, or was oppressive to labor.  The employer must have
acted in a manner contrary to morals, good customs, or public policy causing social humiliation,
wounded feelings or grave anxiety.  While the law makes it an obligation for the employer and
the employees to bargain collectively with each other, such compulsion does not include
the commitment to precipitately accept or agree to the proposals of the other. All it
contemplates is that both parties should approach the negotiation with an open mind and
make reasonable effort to reach a common ground of agreement.[22]

The Union based its contention on the letter request by MMC for the suspension of the
collective bargaining negotiations until it resumes operations. [23]  Verily, it cannot be said
that MMC deliberately avoided the negotiation.  It merely sought a suspension and in fact,
even expressed its willingness to negotiate once the mining operations resume. There was
valid reliance on the suspension of mining operations for the suspension, in turn, of the
CBA negotiation. The Union failed to prove bad faith in MMC's actuations.

Even as we declare the validity of the lay-off, we cannot say that MMC has no obligation at all to the
laid-off employees. The validity of its act of suspending its operations does not excuse it from paying
separation pay.

MMC seeks refuge in Article 286 which provides:

ART. 286. When employment not deemed terminated.  ─ The bona fide suspension of the
operation of a business or undertaking for a period not exceeding six (6) months, or the fulfillment
by the employee of a military or civic duty shall not terminate employment. In all such cases, the
employer shall reinstate the employee to his former position without loss of seniority rights if he
indicates his desire to resume his work not later than one (1) month from the resumption of
operations of his employer or from his relief from the military or civic duty.

Article 286 of the Labor Code allows the bona fide suspension of operations for a period not
exceeding six (6) months.  During the suspension, an employee is not deemed terminated.  As a
matter of fact, the employee is entitled to be reinstated once the employer resumes operations within
the 6-month period.  However, Article 286 is silent with respect to the rights of the employee if the
suspension of operations lasts for more than 6 months. Thus is bred the issue regarding the
responsibility of MMC toward its employees.

MMC subscribes to the view that for purposes of determining employer responsibility, an employment
should likewise not be deemed terminated, should the suspension of operation go beyond six (6)
months as long as the continued suspension is due, as in this case, to a cause beyond the control of
the employer.

We disagree.

As correctly elucidated upon by the Court of Appeals:

We observe that MMC was forced by the circumstances, hence, it resorted to a temporary suspension
of its mining and milling operations.  It is clear that MMC had no choice.  It would be well to reiterate
at this juncture that the reason for such suspension cannot be attributed to DENR-EMB. It is thus,
evident, that the MMC declared temporary suspension of operations to avert further losses. [24]

The decision to suspend operation ultimately lies with the employer, who in its desire to avert
possible financial losses, declares, as here, suspension of operations.
Labor II – 1
Article 283 of the Labor Code applies to MMC and it provides:

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

Said provision is emphatic that an employee, who was dismissed due to cessation of business
operation, is entitled to the separation pay equivalent to one (1) month pay or at least one-half (1/2)
month pay for every year of service, whichever is higher.  And it is jurisprudential that separation
pay should also be paid to employees even if the closure or cessation of operations is not due to
losses.[25]

The Court is not impressed with the claim that actual severe financial losses exempt MMC from
paying separation benefits to complainants.  In the first place, MMC did not appeal the decision of the
Court of Appeals which affirmed the NLRC's award of separation pay to complainants.  MMC's failure
had the effect of making the awards final so that MMC could no longer seek any other affirmative
relief.  In the second place, the non-issuance of a permit forced MMC to permanently cease its
business operations, as confirmed by the Court of Appeals.  Under Article 283, the employer can
lawfully close shop anytime as long as cessation of or withdrawal from business operations is bona
fide in character and not impelled by a motive to defeat or circumvent the tenurial rights of
employees, and as long as he pays his employees their termination pay in the amount corresponding
to their length of service.[26]  The cessation of operations, in the case at bar is of such nature.  It was
proven that MMC stopped its operations precisely due to failure to secure permit to operate a tailings
pond. Separation pay must nonetheless be given to the separated employees.

Finding no cogent reason to disturb its ruling, we affirm the Decision of the Court of Appeals.

BASED ON THE FOREGOING, the petition is DENIED.  The Decision of the Court of Appeals
is AFFIRMED. No costs.

Labor II – 1
 34.) G.R. No. 186605 : November 17, 2010

CENTRAL AZUCARERA DE BAIS EMPLOYEES UNION-NFL [CABEU-NFL], represented by its

President, PABLITO SAGURAN, Petitioner, v. CENTRAL AZUCARERA DE BAIS, INC. [CAB],
represented by its President, ANTONIO STEVEN L. CHAN, Respondent.

DECISION

MENDOZA, J.:

Before this Court is a petition for review on Certiorari under Rule 45 of the Rules of Court filed by
petitioner Central Azucarera De Bais Employees Union-National Federation of Labor (CABEU-NFL) seeking
to reverse and set aside: (1) the September 26, 2008 Decision[1] of the Court of Appeals (CA), in CA-G.R.
SP No. 03238, which reversed the July 18, 2007 Decision[2] and September 28, 2007 Resolution[3] of the
National Labor Relations Commission (NLRC) and reinstated the July 13, 2006 Decision[4] of the Labor
Arbiter (LA); and (2) its January 21, 2009 Resolution[5] denying the Motion for Reconsideration of CABEU-
NFL.

THE FACTS

Respondent Central Azucarera De Bais, Inc. (CAB) is a corporation duly organized and existing under the
laws of the Philippines. It is represented by its President, Antonio Steven L. Chan (Chan), in this
proceeding.

CABEU-NFL is a duly registered labor union and a certified bargaining agent of the CAB rank-and-file
employees, represented by its President, Pablito Saguran (Saguran).  cra

On January 19, 2004, CABEU-NFL sent CAB a proposed Collective Bargaining Agreement (CBA)[6]
seeking increases in the daily wage and vacation and sick leave benefits of the monthly
employees and the grant of leave benefits and 13th month pay to seasonal workers.

On March 27, 2004, CAB responded with a counter-proposal[7] to the effect that the production
bonus incentive and special production bonus and incentives be maintained. In addition,
respondent CAB agreed to execute a pro-rated increase of wages every time the government
would mandate an increase in the minimum wage. CAB, however, did not agree to grant
additional and separate Christmas bonuses.

On May 21, 2004, CAB received an Amended Union Proposal[8] sent by CABEU-NFL reducing its
previous demand regarding wages and bonuses. CAB, however, maintained its position on the
matter. Thus, the collective bargaining negotiations resulted in a deadlock.

On account of the impasse, “CABEU-NFL filed a Notice of Strike with the National Conciliation and
Mediation Board (NCMB).craThe NCMB then assumed conciliatory-mediation jurisdiction and summoned
the parties to conciliation conferences.”[9]
cralaw

In its June 2, 2005 Letter sent to CAB[10] (letter-request), CABEU-NFL requested copies of CAB’s
annual financial statements from 2001 to 2004 and asked for the resumption of conciliation
meetings.

CAB replied through its June 14, 2005 Letter[11] (letter-response) to NCMB Regional Director of
Dumaguete City Isidro Cepeda, which reads: chanroblesvirtuallawlibrary

At the outset, it observed that the letter signed by Mr. Pablito Saguran who is no longer an
employee of the Central for he was one of those lawfully terminated due to an authorized cause
x  x  x.

More importantly, the declared purpose of the requested conciliation meeting has already
been rendered moot and academic because: (1) the Union which Mr. Saguran purportedly
represents has already lost its majority status by reason of the disauthorization and
withdrawal of support thereto by more than 90% of the rank and file employees in the
bargaining unit of Central sometime in January, 2005, and (2) the workers themselves, acting
Labor II – 1
 as principal, after disauthorizing the previous agent CABEU-NFL have organized
themselves into a new Union known as Central Azucarera de Bais Employees Labor
Association (CABELA) and after obtaining their registration certificate and making due
representation that it is a duly organized union representing almost all the rank and file workers in
the Central, had concluded a new collective bargaining agreement with the Central on April
21, 2005 in Dumaguete City. The aforesaid CBA had been duly ratified by the rank and file workers
constituting 91% of the collective bargaining unit x  x  x.

Clearly, therefore, the request for further conciliation conference will serve no lawful and practical
purpose. In view of the foregoing, and for the sake of continued industrial peace prevailing in the Central,
we beseech the Honorable Office to disregard the aforesaid request.

It appears that the NCMB failed to act on the letter-response of CAB. Neither did it convene CAB and
CABEU-NFL to continue the negotiations between them.

Reacting from the letter-response of CAB, CABEU-NFL filed a Complaint for Unfair Labor
Practice[12] for the former’s refusal to bargain with it.

On July 13, 2006, the LA dismissed the complaint.[13] Pertinent portions of the LA decision read: chanroblesvirtuallawlibrary

The procedure in the discharge of the duty to bargain collectively is provided for in Article 250 of
the Labor Code: (1) the party who desires to negotiate an agreement shall serve a written notice
upon the other party with a statement of proposals; (2) the other party shall make a reply thereto
not later than ten (10) days from receipt of notice; (3) if the dispute is unsettled resulting in a
deadlock, the NCMB shall intervene upon the request or at its own initiative and call the parties to
conciliation Meeting x  x  x (4) if the NCMB fails to effect an agreement, the Board shall exert all
efforts to settle disputes amicably and encourage the parties to submit their case to a voluntary
arbitrator; (5) the parties may also go on strike or declare a lockout as the case may be after
complying with legal requirements. Subject, of course, to the plenary power of the Secretary of
Labor and Employment to assume jurisdiction over the dispute or to certify the same to the NLRC
for compulsory arbitration.

In the case at bar, the record shows that respondent CAB replied to the complainant Union’s CBA
proposals with its own set of counterproposals x  x  x. Likewise, respondent CAB responded to the
Union’s subsequent counterproposals x  x  x. Record further shows that respondent CAB
participated in a series of CBA negotiations conducted by the parties at the plant level as well as in
the conciliation/mediation proceedings conducted by the NCMB. Unfortunately, both exercises
resulted in a deadlock.

At this juncture it cannot be said, therefore, that respondent CAB refused to negotiate or that it
violated its duty to bargain collectively in light of its active participation in the past CBA
negotiations at the plant level as well as in the NCMB. x  x  x

x  x  x

We do not agree that respondent CAB committed an unfair labor practice act in questioning the
capacity of Mr. Pablito Saguran to represent complainant union in the CBA negotiations because
Mr. Pablito Saguran was no longer an employee of respondent CAB at that time having been
separated from employment on the ground of redundancy and having received the corresponding
separation benefits. x  x  x.

So also, we do not find respondent CAB guilty of unfair labor practice by its act of writing the NCMB
Director in a letter dated June 24, 2005, stating its legal position on complainant’s request for
further conciliation to the effect that since almost [all] of the rank and file employees, the
principals in a principal-agent relationship, have withdrawn their support to the complainant union
and that in fact they have already organized themselves into a DOLE-registered labor union known
as CABELA, any further conciliation will serve no lawful and practical purpose. x  x  x.

At this juncture, it was incumbent upon the NCMB to make a ruling on the request of the
complainant union as well as upon the corresponding comment of respondent CAB. If the NCMB

Labor II – 1
 chose not to pursue further negotiation between the parties, respondent CAB should not be faulted
therefor. x  x  x.

Under the facts obtaining, when the conciliation/mediation by the NCMB has not been officially
concluded, we find the instant complaint for unfair labor practice not only without merit but also
premature.

WHEREFORE, foregoing considered, the case is hereby DISMISSED for lack of merit.

SO ORDERED.

On appeal, the NLRC in its July 18, 2007 Decision[14] reversed the LA’s decision and found CAB
guilty of unfair labor practice. The NLRC explained:
chanroblesvirtuallawlibrary

The issue to be resolved is whether or not respondent company committed an unfair labor practice
for violation of its duty to bargain collectively in good faith.

x  x  x

The important event to discuss in the instant case is respondent’s act of concluding a CBA with
CABELA. As gleaned from respondent’s letter to NCMB dated June 14, 2005, it concluded a CBA
with CABELA because they opined that complainant lost its majority status in January 2005 when
90% of the rank-and-file employees disauthorized and withdrew their support to complainant.
These rank-and-file employees who withdrew their support, organized and formed CABELA. In fine,
respondent believed that CABELA enjoyed the majority status of CABELA since it was supported by
90% of all employees in the bargaining unit.

In resolving the issue of whether respondent’s act of concluding a CBA with CABELA is warranted
under the circumstances is to examine the validity of such act. The mechanics of collective
bargaining are set in motion only when the following jurisdictional preconditions are present,
namely: 1) possession of the status of majority representation of the employees’ representative in
accordance with any of the means of selection and designation provided for by the Labor Code, 2)
proof of majority representation, and 3) a demand to bargain under Article 250, par. (a) of the
Labor Code x  x  x.

In the instant case, it is undeniable that complainant is the certified collective bargaining agent of
the regular workers and seasonal employees of Respondent. Its status as such was determined in a
certification election conducted by the Department of Labor and Employment (DOLE).craAs such,
there was no reason for respondent to deal and negotiate with CABELA since the latter does not
have such status of majority representation. x  x  x.

X  x  x. Based on this premise, respondent violated its duty to bargain with complainant when
during the pendency of the conciliation proceedings before the NCMB it concluded a CBA with
another union as a consequence, it refused to resume negotiation with complainant upon the
latter’s demand.

With respect to respondent’s observation that the request for conciliation meeting was signed by
one who is not eligible and authorized to represent any union with the company since he is no
longer an employee, suffice it to state that at the time the request was made, such employee has
questioned the validity of his dismissal with then NLRC. X  x  x.

Respondent’s failure to act on the request of the complainant to resume negotiation for no valid
reason constitutes unfair labor practice. Consequently, the proposed CBA as amended should be
imposed to Respondent.

WHEREFORE, premises considered, the appealed Decision is REVERSED and SET ASIDE. Another
one is entered declaring that respondent Central Azucarera de Bais is guilty of unfair labor practice.
As such, the proposed CBA of Complainant, as amended is imposed to respondent Central
Azucarera de Bais.

SO ORDERED.

Labor II – 1
CAB moved for a reconsideration but the motion was denied by the NLRC in its resolution dated
September 28, 2007.[15] cralaw

Unsatisfied, CAB elevated the matter to the CA by way of a petition for Certiorari under Rule 65 alleging
grave abuse of discretion on the part of the NLRC in reversing the LA decision and issuing the questioned
resolution.

On September 26, 2008, the CA found CAB’s petition meritorious and reversed the NLRC decision
and resolution. The CA pointed out: chanroblesvirtuallawlibrary

x  x  x

First. This Court has acquired jurisdiction over the person of private respondent CABEU-NFL.
Through its counsel of record, CABEU-NFL already filed its extensive comment on the instant
petition. Hence, it is now useless to contend that it was denied notice of the same and the
opportunity to be heard on it. x  x  x.

x  x  x

Second. Petitioner CAB was not shown to have violated the rule requiring parties to certify in their
initiatory pleadings against forum shopping. Private respondent CABEU-NFL alleges in its comment
that the two cases are pending before this Court: CA-G.R. No. 03132 and CA-G.R. No. 03017
involving the same parties as in the case at bar. Unfortunately, CABEU-NFL did not explain how the
issues in those pending cases are related to or similar to those involved in this proceeding. x  x  x.

x  x  x

Third.

x  x  x

In the case at bar, private respondent CABEU-NFL failed in its burden of proof to present
substantial evidence to support the allegation of unfair labor practice. The assailed Decision and
Resolution of public respondent referred merely to two (2) circumstances which allegedly support
the conclusion that the presumption of good faith had been rebutted and that bad faith was extant
in petitioner’s actions. To recall, these circumstances are: (a) the execution of a supposed
collective bargaining agreement with another labor union, CABELA; and (b) CAB’s sending of the
letter dated June 14, 2005 to NCMB seeking to call off the collective bargaining negotiations.
These, however, are not enough to ascribe the very serious offense of unfair labor practice upon
petitioner. x  x  x.

x  x  x

x  x  x petitioner CAB was not scuttling the ongoing negotiations towards a new collective
bargaining agreement. It was simply propounding a position to the NCMB for the latter to rule on.
That the negotiations did not push through was not the result of CAB management’s intransigence
because there was none – at least so far as the case record confirms. There is nothing that
establishes petitioner’s predetermined resolve not to budge from an initial position – perhaps
stubbornness of some ambiguous sort but not the absence of good faith to pursue collective
bargaining. x  x  x.

x  x  x

WHEREFORE, the instant petition is GRANTED. The assailed Decision dated July 18, 2007 and
Resolution dated September 28, 2007 of public respondent National Labor Relations Commission in
NLRC Case No. V-000002-07 are REVERSED and SET ASIDE. The Decision dated July 13, 2006 in
NLRC RAB VII Case No. 07-0104-2005-D entitled ‘Central Azucarera de Bais Employees Union-NFL
(CABEU-NFL), represented by Pablito Saguran, Complainant, versus, (CAB) and/or Steven Chan as
Owner and Roberto de la Rosa as Manager, respondents’ of Labor Arbiter Fructuoso T. Villarin IV is
REINSTATED and AFFIRMED IN TOTO. Costs of suit de oficio.

SO ORDERED.
Labor II – 1
CABEU-NFL moved for a reconsideration but its motion was denied by the CA in its Resolution dated
January 21, 2009.[16] cralaw

Hence this petition.

In its Memorandum,[17] CABEU-NFL raised the following: chanroblesvirtuallawlibrary

ISSUES

I) WHETHER OF NOT THE COURT OF APPEALS VIOLATED THE CONSTITUTIONAL RIGHTS OF

PETITIONER WHEN THE HONORABLE COURT OF APPEALS REVERSED THE FINDINGS OF THE
NATIONAL LABOR RELATIONS COMMISSION (NLRC) WHICH HELD RESPONDENT GUILTY OF
UNFAIR LABOR PRACTICE.[18] cralaw

II) WHETHER OR NOT THE COURT OF APPEALS VIOLATED THE CONSTITUTIONAL RIGHTS OF THE
PETITIONER WHEN IT GAVE DUE COURSE TO RESPONDENT’S PETITION
FOR CERTIORARI WITHOUT COMPLYING WITH THE JURISDICTIONAL REQUIREMENTS UNDER RULE
65, SECTION 1 AND SUPREME COURT CIRCULAR NO. 04-94, ON CERTIFICATION ON NON-FORUM
SHOPPING.[19] cralaw

In sum, the petition raises three (3) issues for the Court’s consideration which are whether or not the CA
erred: (1) in giving due course to the petition for Certiorari despite service of the copy of the petition to
CABEU-NFL’s counsel and not to itself ; (2) in giving due course to the petition for  Certiorari despite the
failure of CAB to indicate the address of CABEU-NFL in the petition; and (3) in absolving CAB of unfair
labor practice.

CABEU-NFL insists that the CA erred in giving due course to the petition for Certiorari because respondent
CAB served a copy of its CA petition to CABEU-NFL’s counsel and not to CABEU-NFL itself. CABEU-NFL,
likewise, harps on the failure of CAB to indicate CABEU-NFL’s full address in the said petition as required in
petitions for Certiorari, citing Section 1, Rule 65[20] in relation to Section 3, Rule 46.[21]
cralaw

Ultimately, CABEU-NFL aggressively asserts that CAB is guilty of unfair labor practice on the
ground of its refusal to bargain collectively. CABEU-NFL claims to be the duly certified
bargaining agent of the CAB rank-and-file employees such that it requested to bargain through
a letter-request which was subsequently turned down by CAB in its letter-response. Anchored
on the admission in the CAB letter-response of a supposed CBA with CABELA, CABEU-NFL
charges that such act constitutes a violation of CAB’s duty to bargain collectively under Article
253 of the Labor Code[22] and consequently an act of unfair labor practice prohibited under
Article 248 (g) of the Labor Code.[23] CABEU-NFLalso submits that CAB violated the prohibition
against forum shopping when it filed its petition in the CA. CABEU-NFL claims that the failure of CAB’s
counsel to disclose to the CA the pendency of CA-G.R. SP No. 033132 and CA-G.R. SP No. 03017
constituted forum shopping, a sufficient ground to dismiss the said petition.

In its Memorandum,[24] CAB claims that service of the copy of the petition for Certiorari to CABEU-NFL’s
counsel was sufficient. It vehemently denies its alleged failure to indicate CABEU-NFL’s name and address
in its petition. CAB also stresses that CA-G.R. SP No. 033132 and CA-G.R. SP No. 03017 “were initiated
exclusively by members of CABEU and by CABEU itself, respectively, and not by CAB.”[25] CAB further
argues that there was no identity of issues or causes of action between the two abovementioned cases
and this case.

On the issue of unfair labor practice, CAB counters that in view of the disassociation of more than
90% of rank-and-file workers from CABEU-NFL, it was constrained to negotiate and conclude in
good faith a new CBA with CABELA, the newly established union by workers who disassociated
from CABEU-NFL. CAB emphasizes that it declined further negotiations with CABEU-NFL in good
faith because to continue with it would serve no practical purpose. Considering that the NCMB has
yet to resolve CAB’s query in its letter-response, CAB was left without any choice but accede to the
demands of CABELA. In concluding a CBA with CABELA, CAB claims that it acted in the best interest of the
rank-and-file workers which belied bad faith.

THE COURT’S RULING

Labor II – 1
The petition lacks merit.

On the technical issues, CABEU-NFL’s insistence that service of the copy of the CA petition should have
been made to it, rather than to its counsel, is unavailing.

On the matter of service, Section 1, Rule 65 in relation to Section 3, Rule 46 of the Rules of Court, clearly
provides that in a petition filed originally in the CA, the petitioner is required to serve a copy of the
petition on the adverse party before its filing. If the adverse party appears by counsel, service shall be
made on such counsel pursuant to Section 2, Rule 13.[26] cralaw

With respect to the alleged failure of CAB to indicate the address of CABEU-NFL in the CA petition, it
appears that CABEU-NFL is misleading the Court. A perusal of the petition[27] filed before the CA reveals
that CAB indeed indicated both the name[28] and address[29] of CABEU-NFL. Moreover, the indication in
said petition by CAB that CABEU-NFL could be served with court processes through its counsel was
substantial compliance with the Rules.[30] cralaw

The Court, likewise, cannot sustain CABEU-NFL’s contention on forum shopping against CAB.

By forum shopping, a party initiates two or more actions in separate tribunals, grounded on the same
cause, hoping that one or the other tribunal would favorably dispose of the matter. The elements of forum
shopping are: (1) identity of parties, or at least such parties as would represent the same interest in both
actions; (2) identity of rights asserted and relief prayed for, the relief being founded on the same facts;
and (3) identity of the two preceding particulars such that any judgment rendered in the other action will,
regardless of which party is successful, amount to res judicata in the action under consideration.[31] cralaw

In the case at bench, CABEU-NFL merely raised the fact of the pendency of CA-G.R. SP No. 033132 and
CA-G.R. SP No. 03017 in its comment on the petition for Certiorari[32] filed before the CA without
demonstrating any similarity in the causes of action between the said cases and the present case. The CA,
citing the ruling in T’boli Agro-Industrial Development, Inc. v. Solilapsi[33] as authority, points out
that:chanroblesvirtuallawlibrary

This Court cannot take judicial notice of what CA-G.R. No. 03132 and CA-G.R. No. 03017 involve
because: chanroblesvirtuallawlibrary

“As a general rule, courts are not authorized to take judicial notice in the adjudication of cases
pending before them of the contents of other cases even when such cases have been tried or are
pending in the same court and notwithstanding the fact that both cases may have been tried or are
actually pending before the same judge. Courts may be required to take judicial notice of the
decisions of the appellate courts but not of the decisions of the coordinate trial courts, or even of a
decision or the facts involved in another case tried by the same court itself, unless the parties
introduce the same in evidence or the court, as a matter of convenience, decides to do so. Besides,
judicial notice of matters which ought to be known to judges because of their judicial functions is
only discretionary upon the court. It is not mandatory.”

In the absence of evidence to show that the issues involved in these cases are the same, this Court cannot
give credence to private respondent’s claim of forum shopping.

The Court now proceeds to determine whether or not respondent CAB was guilty of acts constituting unfair
labor practice by refusing to bargain collectively.

The Court rules in the negative.

CAB is being accused of violating its duty to bargain collectively supposedly because of its act in
concluding a CBA with CABELA, another union in the bargaining unit, and its failure to resume negotiations
with CABEU-NFL.

The concept of unfair labor practice is provided in Article 247 of the Labor Code which states: chanroblesvirtuallawlibrary

Article 247. Concept of Unfair Labor Practice and Procedure for Prosecution thereof. -- Unfair labor
practices violate the constitutional right of workers and employees to self-organization, are inimical
to the legitimate interests of both labor and management, including their right to bargain

Labor II – 1
 collectively and otherwise deal with each other in an atmosphere of freedom and mutual respect,
disrupt industrial peace and hinder the promotion of healthy and stable labor-management
relations.

x  x  x

The Labor Code, likewise, enumerates the acts constituting unfair labor practices of the employer, thus: chanroblesvirtuallawlibrary

Article 248. Unfair Labor Practices of Employers.––It shall be unlawful for an employer to commit
any of the following unfair labor practice: chanroblesvirtuallawlibrary

x  x  x

(g) To violate the duty to bargain collectively as prescribed by this Code.

For a charge of unfair labor practice to prosper, it must be shown that CAB was
motivated by ill will, “bad faith, or fraud, or was oppressive to labor, or done in a
manner contrary to morals, good customs, or public policy, and, of course, that
social humiliation, wounded feelings or grave anxiety resulted x  x  x” in
suspending negotiations with CABEU-NFL. Notably, CAB believed that CABEU-NFL
was no longer the representative of the workers.[34] It just wanted to foster industrial
peace by bowing to the wishes of the overwhelming majority of its rank and file workers and
by negotiating and concluding in good faith a CBA with CABELA.”[35] Such actions of CAB
are nowhere tantamount to anti-unionism, the evil sought to be punished in cases of unfair
labor practices.

Furthermore, basic is the principle that good faith is presumed and he who alleges bad faith has the duty
to prove the same. By imputing bad faith to the actuations of CAB, CABEU-NFL has the burden of proof to
present substantial evidence to support the allegation of unfair labor practice.[36] Apparently, CABEU-NFL
refers only to the circumstances mentioned in the letter-response, namely, the execution of the supposed
CBA between CAB and CABELA and the request to suspend the negotiations, to conclude that bad faith
attended CAB’s actions. The Court is of the view that CABEU-NFL, in simply relying on the said letter-
response, failed to substantiate its claim of unfair labor practice to rebut the presumption of good faith.

Moreover, as correctly determined by the LA, the filing of the complaint for unfair labor practice was
premature inasmuch as the issue of collective bargaining is still pending before the NCMB.

In the resolution of labor cases, this Court has always been guided by the State policy enshrined in the
Constitution that the rights of workers and the promotion of their welfare shall be protected. The Court is,
likewise, guided by the goal of attaining industrial peace by the proper application of the law. Thus, it
cannot favor one party, be it labor or management, in arriving at a just solution to a controversy if the
party has no valid support to its claims. It is not within this Court’s power to rule beyond the ambit of the
law.[37]cralaw

WHEREFORE, the petition is DENIED.

Labor II – 1
35.) G.R. No. 174912               July 24, 2013

BPI EMPLOYEES UNION-DAVAO CITY-FUBU (BPIEU-DAVAO CITY-FUBU), Petitioner,

vs.
BANK OF THE PHILIPPINE ISLANDS (BPI), and BPI OFFICERS CLARO M. REYES, CECIL CONANAN and
GEMMA VELEZ, Respondents.

DECISION

MENDOZA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, assailing
the April 5, 2006 Decision1 and August 17, 2006 Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 74595
affirming the December 21, 20013 and August 23, 20024 Resolutions of the National Labor Relations Commission
(NLRC) in declaring as valid and legal the action of respondent Bank of the Philippine Islands-Davao City (BPI-
Davao) in contracting out certain functions to BPI Operations Management Corporation (BOMC).

The Factual Antecedents

BOMC, which was created pursuant to Central Bank5 Circular No. 1388, Series of 1993 (CBP Circular No. 1388,
1993), and primarily engaged in providing and/or handling support services for banks and other financial
institutions, is a subsidiary of the Bank of Philippine Islands (BPI) operating and functioning as an entirely
separate and distinct entity.

A service agreement between BPI and BOMC was initially implemented in BPI’s Metro Manila branches. In this
agreement, BOMC undertook to provide services such as check clearing, delivery of bank statements, fund
transfers, card production, operations accounting and control, and cash servicing, conformably with BSP
Circular No. 1388. Not a single BPI employee was displaced and those performing the functions, which were
transferred to BOMC, were given other assignments.

The Manila chapter of BPI Employees Union (BPIEU-Metro ManilaFUBU) then filed a complaint for unfair labor
practice (ULP). The Labor Arbiter (LA) decided the case in favor of the union. The decision was, however, reversed
on appeal by the NLRC. BPIEU-Metro Manila-FUBU filed a petition for certiorari before the CA which denied it,
holding that BPI transferred the employees in the affected departments in the pursuit of its legitimate business. The
employees were neither demoted nor were their salaries, benefits and other privileges diminished.6

On January 1, 1996, the service agreement was likewise implemented in Davao City. Later, a merger between
BPI and Far East Bank and Trust Company (FEBTC) took effect on April 10, 2000 with BPI as the surviving
corporation. Thereafter, BPI’s cashiering function and FEBTC’s cashiering, distribution and bookkeeping
functions were handled by BOMC. Consequently, twelve (12) former FEBTC employees were transferred to
BOMC to complete the latter’s service complement.

BPI Davao’s rank and file collective bargaining agent, BPI Employees Union-Davao City-FUBU (Union),
objected to the transfer of the functions and the twelve (12) personnel to BOMC contending that the
functions rightfully belonged to the BPI employees and that the Union was deprived of membership of
former FEBTC personnel who, by virtue of the merger, would have formed part of the bargaining unit represented by
the Union pursuant to its union shop provision in the CBA.7

The Union then filed a formal protest on June 14, 2000 addressed to BPI Vice Presidents Claro M. Reyes and Cecil
Conanan reiterating its objection. It requested the BPI management to submit the BOMC issue to the grievance
procedure under the CBA, but BPI did not consider it as "grievable." Instead, BPI proposed a Labor Management
Conference (LMC) between the parties.8

During the LMC, BPI invoked management prerogative stating that the creation of the BOMC was to preserve
more jobs and to designate it as an agency to place employees where they were most needed. On the other hand,
Labor II – 1
the Union charged that BOMC undermined the existence of the union since it reduced or divided the
bargaining unit. While BOMC employees perform BPI functions, they were beyond the bargaining unit’s coverage.
In contracting out FEBTC functions to BOMC, BPI effectively deprived the union of the membership of
employees handling said functions as well as curtailed the right of those employees to join the union.

Thereafter, the Union demanded that the matter be submitted to the grievance machinery as the resort to the LMC
was unsuccessful. As BPI allegedly ignored the demand, the Union filed a notice of strike before the National
Conciliation and Mediation Board (NCMB) on the following grounds:

a) Contracting out services/functions performed by union members that interfered with, restrained and/or
coerced the employees in the exercise of their right to self-organization;

b) Violation of duty to bargain; and

c) Union busting.9

BPI then filed a petition for assumption of jurisdiction/certification with the Secretary of the Department of
Labor and Employment (DOLE), who subsequently issued an order certifying the labor dispute to the NLRC
for compulsory arbitration. The DOLE Secretary directed the parties to cease and desist from committing any act
that might exacerbate the situation.

On October 27, 2000, a hearing was conducted. Thereafter, the parties were required to submit their respective
position papers. On November 29, 2000, the Union filed its Urgent Omnibus Motion to Cease and Desist with a
prayer that BPI-Davao and/or Mr. Claro M. Reyes and Mr. Cecil Conanan be held in contempt for the following
alleged acts of BPI:

1. The Bank created a Task Force Committee on November 20, 2000 composed of six (6) former FEBTC
employees to handle the Cashiering, Distributing, Clearing, Tellering and Accounting functions of the former
FEBTC branches but the "task force" conducts its business at the office of the BOMC using the latter’s
equipment and facilities.

2. On November 27, 2000, the bank integrated the clearing operations of the BPI and the FEBTC. The
clearing function of BPI, then solely handled by the BPI Processing Center prior to the labor dispute, is now
encroached upon by the BOMC because with the merger, differences between BPI and FEBTC operations
were diminished or deleted. What the bank did was simply to get the total of all clearing transactions under
BPI but the BOMC employees process the clearing of checks at the Clearing House as to checks coming
from former FEBTC branches. Prior to the labor dispute, the run-up and distribution of the checks of BPI
were returned to the BPI processing center, now all checks whether of BPI or of FEBTC were brought to the
BOMC. Since the clearing operations were previously done by the BPI processing center with BPI
employees, said function should be performed by BPI employees and not by BOMC. 10

On December 21, 2001, the NLRC came out with a resolution upholding the validity of the service agreement
between BPI and BOMC and dismissing the charge of ULP. It ruled that the engagement by BPI of BOMC to
undertake some of its activities was clearly a valid exercise of its management prerogative.11 It further stated
that the spinning off by BPI to BOMC of certain services and functions did not interfere with, restrain or coerce
employees in the exercise of their right to self-organization. 12 The Union did not present even an iota of evidence
showing that BPI had terminated employees, who were its members. In fact, BPI exerted utmost diligence, care and
effort to see to it that no union member was terminated. 13 The NLRC also stressed that Department Order (D.O.) No.
10 series of 1997, strongly relied upon by the Union, did not apply in this case as BSP Circular No. 1388, series of
1993, was the applicable rule.

After the denial of its motion for reconsideration, the Union elevated its grievance to the CA via a petition for
certiorari under Rule 65. The CA, however, affirmed the NLRC’s December 21, 2001 Resolution with modification
that the enumeration of functions listed under BSP Circular No. 1388 in the said resolution be deleted. The CA
noted at the outset that the petition must be dismissed as it merely touched on factual matters which were beyond
the ambit of the remedy availed of.14 Be that as it may, the CA found that the factual findings of the NLRC were

Labor II – 1
supported by substantial evidence and, thus, entitled to great respect and finality. To the CA, the NLRC did not act
with grave abuse of discretion as to merit the reversal of the resolution. 15

Furthermore, the CA ratiocinated that, considering the ramifications of the corporate merger, it was well within BPI’s
prerogatives "to determine what additional tasks should be performed, who should best perform it and what should
be done to meet the exigencies of business."16 It pointed out that the Union did not, by the mere fact of the merger,
become the bargaining agent of the merged employees 17 as the Union’s right to represent said employees did not
arise until it was chosen by them.18

As to the applicability of D.O. No. 10, the CA agreed with the NLRC that the said order did not apply as BPI, being a
commercial bank, its transactions were subject to the rules and regulations of the BSP.

Not satisfied, the Union filed a motion for reconsideration which was, however, denied by the CA. 1âwphi1

Hence, the present petition with the following

ASSIGNMENT OF ERRORS:

A. THE PETITION BEFORE THE COURT OF APPEALS INVOLVED QUESTIONS OF LAW AND ITS
DECISION DID NOT ADDRESS THE ISSUE OF WHETHER BPI’S ACT OF OUTSOURCING FUNCTIONS
FORMERLY PERFORMED BY UNION MEMBERS VIOLATES THE CBA.

B. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT DOLE DEPARTMENT ORDER
NO. 10 DOES NOT APPLY IN THIS CASE.

The Union is of the position that the outsourcing of jobs included in the existing bargaining unit to BOMC is
a breach of the union-shop agreement in the CBA. In transferring the former employees of FEBTC to BOMC
instead of absorbing them in BPI as the surviving corporation in the merger, the number of positions
covered by the bargaining unit was decreased, resulting in the reduction of the Union’s membership. For
the Union, BPI’s act of arbitrarily outsourcing functions formerly performed by the Union members and, in
fact, transferring a number of its members beyond the ambit of the Union, is a violation of the CBA and
interfered with the employees’ right to self organization. The Union insists that the CBA covers the agreement
with respect, not only to wages and hours of work, but to all other terms and conditions of work. The union shop
clause, being part of these conditions, states that the regular employees belonging to the bargaining unit, including
those absorbed by way of the corporate merger, were required to join the bargaining union "as a condition for
employment." Simply put, the transfer of former FEBTC employees to BOMC removed them from the
coverage of unionized establishment. While the Union admitted that BPI has the prerogative to determine what
should be done to meet the exigencies of business in accordance with the case of Sime Darby Pilipinas, Inc. v.
NLRC,19 it insisted that the exercise of management prerogative is not absolute, thus, requiring good faith and
adherence to the law and the CBA. Citing the case of Shell Oil Workers’ Union v. Shell Company of the Philippines,
Ltd.,20 the Union claims that it is unfair labor practice for an employer to outsource the positions in the existing
bargaining unit.

Position of BPI-Davao

For its part, BPI defended the validity of its service agreement with BOMC on three (3) grounds: 1] that it was
pursuant to the prevailing law at that time, CBP Circular No. 1388; 2] that the creation of BOMC was within
management prerogatives intended to streamline the operations and provide focus for BPI’s core activities; and 3]
that the Union recognized, in its CBA, the exclusive right and prerogative of BPI to conduct the management
and operation of its business.21

BPI argues that the case of Shell Oil Workers’ Union v. Shell Company of the Philippines, Ltd., 22 cited by the Union,
is not on all fours with the present case. In said case, the company dissolved its security guard section and replaced
it with an outside agency, claiming that such act was a valid exercise of management prerogative. The Court,
however, ruled against the said outsourcing because there was an express assurance in the CBA that the security
guard section would continue to exist. Having failed to reserve its right to effect a dissolution, the company’s act of

Labor II – 1
outsourcing and transferring security guards was invalidated by the Court, ruling that the unfair labor practice strike
called by the Union did have the impression of validity. In contrast, there is no provision in the CBA between BPI
and the Union expressly stipulating the continued existence of any position within the bargaining unit. For
BPI, the absence of this peculiar fact is enough reason to prevent the application of Shell to this case.

BPI likewise invokes settled jurisprudence,23 where the Court upheld the acts of management to contract out certain
functions held by employees, and even notably those held by union members. In these cases, the decision to
outsource certain functions was a justifiable business judgment which deserved no judicial interference. The only
requisite of this act is good faith on the part of the employer and the absence of malicious and arbitrary action in the
outsourcing of functions to BOMC.

On the issue of the alleged curtailment of the right of the employees to self-organization, BPI refutes the Union’s
allegation that ULP was committed when the number of positions in the bargaining was reduced. It cites as correct
the CA ruling that the representation of the Union’s prospective members is contingent on the choice of the
employee, that is, whether or not to join the Union. Hence, it was premature for the Union to claim that the rights of
its prospective members to self-organize were restrained by the transfer of the former FEBTC employees to BOMC.

The Court’s Ruling

In essence, the primordial issue in this case is whether or not the act of BPI to outsource the cashiering,
distribution and bookkeeping functions to BOMC is in conformity with the law and the existing CBA.
Particularly in dispute is the validity of the transfer of twelve (12) former FEBTC employees to BOMC,
instead of being absorbed in BPI after the corporate merger. The Union claims that a union shop agreement is
stipulated in the existing CBA. It is unfair labor practice for employer to outsource the positions in the existing
bargaining unit, citing the case of Shell Oil

Workers’ Union v. Shell Company of the Philippines, Ltd. 24

The Union’s reliance on the Shell Case is misplaced. The rule now is covered by Article 261 of the Labor Code,
which took effect on November 1, 1974. 25 Article 261 provides:

ART. 261. Jurisdiction of Voluntary Arbitrators or panel of Voluntary Arbitrators. – x x x Accordingly, violations of a
Collective Bargaining Agreement, except those which are gross in character, shall no longer be treated as
unfair labor practice and shall be resolved as grievances under the Collective Bargaining Agreement. For
purposes of this article, gross violations of Collective Bargaining Agreement shall mean flagrant and/or malicious
refusal to comply with the economic provisions of such agreement. [Emphases supplied]

Clearly, only gross violations of the economic provisions of the CBA are treated as ULP. Otherwise, they
are mere grievances.

In the present case, the alleged violation of the union shop agreement in the CBA, even assuming it was
malicious and flagrant, is not a violation of an economic provision in the agreement. The provisions relied
upon by the Union were those articles referring to the recognition of the union as the sole and exclusive bargaining
representative of all rank-and-file employees, as well as the articles on union security, specifically, the maintenance
of membership in good standing as a condition for continued employment and the union shop clause. 26 It failed to
take into consideration its recognition of the bank’s exclusive rights and prerogatives, likewise provided in
the CBA, which included the hiring of employees, promotion, transfers, and dismissals for just cause and
the maintenance of order, discipline and efficiency in its operations.27

The Union, however, insists that jobs being outsourced to BOMC were included in the existing bargaining unit, thus,
resulting in a reduction of a number of positions in such unit. The reduction interfered with the employees’ right to
self-organization because the power of a union primarily depends on its strength in number.28

It is incomprehensible how the "reduction of positions in the collective bargaining unit" interferes with the
employees’ right to self-organization because the employees themselves were neither transferred nor
dismissed from the service. As the NLRC clearly stated:

Labor II – 1
In the case at hand, the union has not presented even an iota of evidence that petitioner bank has started to
terminate certain employees, members of the union. In fact, what appears is that the Bank has exerted
utmost diligence, care and effort to see to it that no union member has been terminated. In the process of the
consolidation or merger of the two banks which resulted in increased diversification of functions, some of these non-
banking functions were merely transferred to the BOMC without affecting the union membership. 29

BPI stresses that not a single employee or union member was or would be dislocated or terminated from
their employment as a result of the Service Agreement.30 Neither had it resulted in any diminution of salaries and
benefits nor led to any reduction of union membership.31

As far as the twelve (12) former FEBTC employees are concerned, the Union failed to substantially prove
that their transfer, made to complete BOMC’s service complement, was motivated by ill will, anti-unionism
or bad faith so as to affect or interfere with the employees’ right to self-organization.

It is to be emphasized that contracting out of services is not illegal perse.  It is an exercise of business
1âwphi1

judgment or management prerogative. Absent proof that the management acted in a malicious or arbitrary
manner, the Court will not interfere with the exercise of judgment by an employer. 32 In this case, bad faith
cannot be attributed to BPI because its actions were authorized by CBP Circular No. 1388, Series of
199333 issued by the Monetary Board of the then Central Bank of the Philippines (now Bangko Sentral ng Pilipinas).
The circular covered amendments in Book I of the Manual of Regulations for Banks and Other Financial
Intermediaries, particularly on the matter of bank service contracts. A finding of ULP necessarily requires the
alleging party to prove it with substantial evidence. Unfortunately, the Union failed to discharge this burden.

Much has been said about the applicability of D.O. No. 10. Both the NLRC and the CA agreed with BPI that the said
order does not apply. With BPI, as a commercial bank, its transactions are subject to the rules and regulations of the
governing agency which is the Bangko Sentral ng Pilipinas. 34 The Union insists that D.O. No. 10 should prevail.

The Court is of the view, however, that there is no conflict between D.O. No. 10 and CBP Circular No. 1388. In fact,
they complement each other.

Consistent with the maxim, interpretare et concordare leges legibus est optimus interpretandi modus, a statute
should be construed not only to be consistent with itself but also to harmonize with other laws on the same subject
matter, as to form a complete, coherent and intelligible system of jurisprudence. 35 The seemingly conflicting
provisions of a law or of two laws must be harmonized to render each effective. 36 It is only when harmonization is
impossible that resort must be made to choosing which law to apply. 37

In the case at bench, the Union submits that while the Central Bank regulates banking, the Labor Code and its
implementing rules regulate the employment relationship. To this, the Court agrees. The fact that banks are of a
specialized industry must, however, be taken into account. The competence in determining which banking functions
may or may not be outsourced lies with the BSP. This does not mean that banks can simply outsource banking
functions allowed by the BSP through its circulars, without giving regard to the guidelines set forth under D.O. No.
10 issued by the DOLE.

While D.O. No. 10, Series of 1997, enumerates the permissible contracting or subcontracting activities, it is to be
observed that, particularly in Sec. 6(d) invoked by the Union, the provision is general in character – "x x x Works or
services not directly related or not integral to the main business or operation of the principal… x x x." This does not
limit or prohibit the appropriate government agency, such as the BSP, to issue rules, regulations or circulars to
further and specifically determine the permissible services to be contracted out. CBP Circular No.
138838 enumerated functions which are ancillary to the business of banks, hence, allowed to be outsourced. Thus,
sanctioned by said circular, BPI outsourced the cashiering (i.e., cash-delivery and deposit pick-up) and accounting
requirements of its Davao City branches.39 The Union even described the extent of BPI’s actual and intended
contracting out to BOMC as follows:

"As an initiatory move, the functions of the Cashiering Unit of the Processing Center of BPI, handled by its regular
rank and file employees who are members of the Union, xxx [were] transferred to BOMC with the Accounting
Department as next in line. The Distributing, Clearing and Bookkeeping functions of the Processing Center of the
former FEBTC were likewise contracted out to BOMC."40
Labor II – 1
Thus, the subject functions appear to be not in any way directly related to the core activities of banks. They are
functions in a processing center of BPI which does not handle or manage deposit transactions. Clearly, the functions
outsourced are not inherent banking functions, and, thus, are well within the permissible services under the circular.

The Court agrees with BPI that D.O. No. 10 is but a guide to determine what functions may be contracted out,
subject to the rules and established jurisprudence on legitimate job contracting and prohibited labor-only
contracting.41 Even if the Court considers D.O. No. 10 only, BPI would still be within the bounds of D.O. No. 10 when
it contracted out the subject functions. This is because the subject functions were not related or not integral to the
main business or operation of the principal which is the lending of funds obtained in the form of deposits. 42 From the
very definition of "banks" as provided under the General Banking Law, it can easily be discerned that banks perform
only two (2) main or basic functions – deposit and loan functions. Thus, cashiering, distribution and bookkeeping are
but ancillary functions whose outsourcing is sanctioned under CBP Circular No. 1388 as well as D.O. No. 10. Even
BPI itself recognizes that deposit and loan functions cannot be legally contracted out as they are directly related or
integral to the main business or operation of banks. The CBP's Manual of Regulations has even categorically stated
and emphasized on the prohibition against outsourcing inherent banking functions, which refer to any contract
between the bank and a service provider for the latter to supply, or any act whereby the latter supplies, the
manpower to service the deposit transactions of the former. 43

In one case, the Court held that it is management prerogative to farm out any of its activities, regardless of whether
such activity is peripheral or core in nature. 44 What is of primordial importance is that the service agreement
does not violate the employee's right to security of tenure and payment of benefits to which he is entitled
under the law. Furthermore, the outsourcing must not squarely fall under labor-only contracting where the
contractor or sub-contractor merely recruits, supplies or places workers to perform a job, work or service for a
principal or if any of the following elements are present:

i) The contractor or subcontractor does not have substantial capital or investment which relates to the job,
work or service to be performed and the employees recruited, supplied or placed by such contractor or
subcontractor are performing activities which are directly related to the main business of the principal; or

ii) The contractor does not exercise the right to control over the performance of the work of the contractual
employee.45

WHEREFORE, the petition is DENIED.

Labor II – 1
36.) G.R. No. 175002               February 18, 2013

PEPSI-COLA PRODUCTS PHILIPPINES, INC., Petitioner,

vs.
ANECITO MOLON, AUGUSTO TECSON, JONATHAN VILLONES, BIENVENIDO LAGARTOS, JAIME CADION,
EDUARDO TROYO, RODULFO MENDIGO, AURELIO MORALITA, ESTANISLAO MARTINEZ, REYNALDO
VASQUEZ, ORLANDO GUANTERO, EUTROPIO MERCADO, FRANCISCO GABON, ROLANDO ARANDIA,
REYNALDO TALBO, ANTONIO DEVARAS, HONORATO ABARCA, SALVADOR MAQUILAN, REYNALDO
ANDUYAN, VICENTE CINCO, FELIX RAPIZ, ROBERTO CATAROS, ROMEO DOROTAN, RODOLFO ARROPE,
DANILO CASILAN, and SAUNDER SANTIAGO REMANDABAN III, Respondents.

DECISION

PERLAS-BERNABE, J.:

Assailed in this Petition for Review on Certiorari1 are the March 31, 2006 Decision2 and September 18, 2006
Resolution3 of the Court of Appeals (CA) in CA-G.R. S.P. No. 82354 which reversed and set aside the September
11, 2002 Decision4 of the National Labor Relations Commission (NLRC) in NLRC Certified Case No. V-000001-
2000.5 The assailed CA issuances declared the illegality of respondents’ retrenchment as well as held petitioner
guilty of unfair labor practice (ULP), among others.

The Facts

Petitioner Pepsi-Cola Products Philippines, Inc. (Pepsi) is a domestic corporation engaged in the manufacturing,
bottling and distribution of soft drink products. In view of its business, Pepsi operates plants all over the Philippines,
one of which is located in Sto. Niño, Tanauan, Leyte (Tanauan Plant).

Respondents, on the other hand, are members of the Leyte Pepsi-Cola Employees Union-Associated Labor
Union (LEPCEU-ALU), a legitimate labor organization composed of rank-and-file employees in Pepsi's
Tanauan Plant, duly registered with the Department of Labor and Employment (DOLE) Regional Office No. 8. 6

In 1999, Pepsi adopted a company-wide retrenchment program denominated as Corporate Rightsizing

Program.7 To commence with its program, it sent a notice of retrenchment to the DOLE8 as well as individual notices
to the affected employees informing them of their termination from work.9 Subsequently, on July 13, 1999, Pepsi
notified the DOLE of the initial batch of forty-seven (47) workers to be retrenched.10 Among these employees
were six (6) elected officers and twenty-nine (29) active members of the LEPCEU-ALU, including herein
respondents.11

On July 19, 1999, LEPCEU-ALU filed a Notice of Strike before the National Conciliation and Mediation Board
(NCMB) due to Pepsi’s alleged acts of union busting/ULP.12 It claimed that Pepsi’s adoption of the
retrenchment program was designed solely to bust their union so that come freedom period, Pepsi’s
company union, the Leyte Pepsi-Cola Employees Union-Union de Obreros de Filipinas #49 (LEPCEU-UOEF#49) –
which was also the incumbent bargaining union at that time – would garner the majority vote to retain its
exclusive bargaining status.13 Hence, on July 23, 1999, LEPCEU-ALU went on strike.14

On July 27, 1999, Pepsi filed before the NLRC a petition to declare the strike illegal with a prayer for the loss of
employment status of union leaders and some union members. 15 On even date, then DOLE Secretary Bienvenido
A. Laguesma certified the labor dispute to the NLRC for compulsory arbitration.16 A return-to-work order was
also issued.17

Incidentally, one of the respondents, respondent Saunder Santiago Remandaban III (Remandaban), failed to report
for work within twenty-four (24) hours from receipt of the said order. Because of this, he was served with a notice of
loss of employment status (dated July 30, 1999) which he challenged before the NLRC, asserting that his absence
on that day was justified because he had to consult a physician regarding the persistent and excruciating pain of the
inner side of his right foot.18
Labor II – 1
Eventually, Pepsi and LEPCEU-ALU agreed to settle their labor dispute arising from the company’s
retrenchment program and thus, executed the Agreement dated September 17, 1999 which contained the
following stipulations:

1. The union will receive 100% of the separation pay based on the employees’ basic salary and the
remaining 50% shall be released by Management after the necessary deductions are made from the
concerned employees;

2. Both parties agree that the release of these benefits is without prejudice to the filing of the case
by the Union with the National Labor Relations Commission;

3. The Union undertakes to sign the Quitclaim but subject to the 2nd paragraph of this Agreement.19

Pursuant thereto, respondents signed individual release and quitclaim forms in September 1999 (September
1999 quitclaims)20 stating that Pepsi would be released and discharged from any action arising from their
employment. Notwithstanding the foregoing, respondents21 still filed separate complaints for illegal dismissal
with the NLRC.22

The NLRC Ruling

On September 11, 2002, the NLRC rendered a Decision23 in NLRC Certified Case No. V-000001-2000. Among the
cases subsumed and consolidated therein are the following with the pertinent dispositions involving herein
respondents:

(1) In NCMB RBVIII-NS-0710-99 and NCMB-RBVIIINS-07-14-99, the NLRC absolved Pepsi of the charge

of union busting/ULP as it was not shown that it (Pepsi) had any design to bust the union; 24

(2) In NLRC Case No. 7-0301-99, the NLRC declared LEPCEU-ALU’s July 23, 1999 strike as illegal for
having been conducted without legal authority since LEPCEU-ALU was not the certified bargaining agent of
the company. It was also observed that LEPCEU-ALU failed to comply with the seven (7)-day strike vote
notice requirement. However, the NLRC denied Pepsi’s prayer to declare loss of employment status of the
union officers and members who participated in the strike for its failure to sufficiently establish the identity of
the culpable union officers as well as their illegal acts;25

(3) In NLRC RAB VIII Case No. 9-0459-00, the NLRC ordered Pepsi to reinstate Remandaban to his former
position without loss of seniority rights but without backwages considering the lack of evidence showing that
he willfully intended to disregard the July 27, 1999 return-to-work order; 26

and

(4) In NLRC RAB VIII Case Nos. 9-0432-99 to 9-0458-99, the NLRC dismissed respondents’ complaints for
illegal dismissal for having been finally settled by the parties through the execution of quitclaim documents
by the respondents in favor of Pepsi.27

Respondents moved for reconsideration, mainly alleging that the NLRC erred when it declared that Pepsi’s
retrenchment program was valid. 28 The motion was, however, denied by the NLRC in its Resolution dated
September 15, 2003.29

Aggrieved, respondents filed a petition for certiorari before the CA,30 imputing grave abuse of discretion on the part
of the NLRC when it upheld the validity of their retrenchment. They argued that the fact that Pepsi hired new
employees as replacements right after retrenching forty-seven (47) of its workers negated the latter’s claim of
financial losses.31 In any event, the evidence was inadequate to prove that Pepsi did suffer from any economic or
financial loss to legitimize its conduct of retrenchment.32

In opposition, Pepsi pointed out that the respondents failed to assail the NLRC’s finding that the controversy was not
about the validity of the retrenchment program but only about the underlying conflict regarding the selection of the
Labor II – 1
employees to be retrenched;33 hence, the latter fact should only remain at issue. Further, it claimed that its
financial/business losses were sufficiently substantiated by the audited financial statements and other related
evidence it submitted.34

The CA Ruling

On March 31, 2006, the CA issued a Decision35 which reversed and set aside the NLRC’s ruling.

It observed that Pepsi could not have been in good faith when it retrenched the respondents given that they were
chosen because of their union membership with LEPCEU-ALU. In this accord, it ruled that the subject retrenchment
was invalid because there was no showing that Pepsi employed fair and reasonable criteria in ascertaining who
among its employees would be retrenched. 36

Moreover, the CA held that Pepsi was guilty of ULP in the form of union busting as its retrenchment scheme only
served to defeat LEPCEUALU’s right to self-organization. It also pointed out that the fact that Pepsi hired twenty-six
(26) replacements and sixty-five (65) new employees right after they were retrenched contravenes Pepsi’s claim that
the retrenchment was necessary to prevent further losses.37

Further, the CA pronounced that the respondents’ signing of the individual release and quitclaims did not have the
effect of settling all issues between them and Pepsi considering that the same should have been read in conjunction
with the September 17, 1999 Agreement.38

Finally, the CA upheld the validity of LEPCEU-ALU’s July 23, 1999 strike, ruling that LEPCEU-ALU "was sure to be
the certified collective bargaining agent in the event that a certification election will be conducted" and thus, was
authorized to conduct the aforesaid strike.39 It added that there was no need for LEPCEU-ALU to comply with the
fifteen (15) day cooling off period requirement given that the July 23, 1999 strike was conducted on account of union
busting.40 In support thereof, the CA noted41 that in a related case involving the same retrenchment incident
affecting, however, other members of LEPCEU-ALU – entitled "George C. Beraya, Arsenio B. Mercado, Romulo A.
Orongan, Pio V. Dado and Primo C. Palana v. Pepsi Cola Products Philippines, Inc. (PCPPI), Pres. Jorge G. Sevilla
and Area GM Edgar D. Del Mar" (Beraya)42 – the NLRC issued a Decision dated November 24, 200343 finding Pepsi
guilty of union busting/ULP. Notably, in Beraya, the NLRC ruled that Pepsi’s retrenchment program and the
consequent dismissal of the retrenched employees were valid. 44

Dissatisfied with the CA’s ruling, Pepsi moved for reconsideration which was, however, denied by the CA in its
September 18, 2006 Resolution. 45 Hence, the instant petition.

Issues Before the Court

As culled from the records, the following issues have been raised for the Court’s resolution: (1) whether the CA may
reverse the factual findings of the NLRC; (2) whether respondents’ retrenchment was valid; (3) whether Pepsi
committed ULP in the form of union busting; (4) whether respondents’ execution of quitclaims amounted to a
final settlement of the case; and (5) whether Remandaban was illegally dismissed.

The Court’s Ruling

The petition is meritorious.

A. Appellate Court’s Evaluation

of the NLRC’s Findings

Pepsi contends that the CA erred in evaluating and examining anew the evidence and in making its own finding of
facts when the findings of the NLRC have been fully supported by substantial evidence. It therefore claims that the
validity of the corporate rightsizing program, integrity and binding effect of the executed quitclaims as well as the
issues relating to union busting and ULP constitute factual matters which have already been resolved by the NLRC
and are now beyond the authority of the CA to pass upon on certiorari.

Labor II – 1
In contrast, respondents aver that the CA was clothed with ample authority to review the factual findings and
conclusions of the NLRC, especially in this case where the latter misappreciated the factual circumstances and
misapplied the law.

Pepsi’s arguments are untenable.

Parenthetically, in a special civil action for certiorari, the CA is authorized to make its own factual determination
when it finds that the NLRC gravely abused its discretion in overlooking or disregarding evidence which are material
to the controversy. The Court, in turn, has the same authority to sift through the factual findings of both the CA and
the NLRC in the event of their conflict. Thus, in Plastimer Industrial Corporation v. Gopo,46 the Court explained:

In a special civil action for certiorari, the Court of Appeals has ample authority to make its own factual determination.
Thus, the Court of Appeals can grant a petition for certiorari when it finds that the NLRC committed grave abuse of
discretion by disregarding evidence material to the controversy. To make this finding, the Court of Appeals
necessarily has to look at the evidence and make its own factual determination. In the same manner, this Court is
not precluded from reviewing the factual issues when there are conflicting findings by the Labor Arbiter, the NLRC
and the Court of Appeals. x x x x (Citations omitted.)

In this light, given the conflicting findings of the CA and NLRC in this case, the Court finds it necessary to examine
the same in order to resolve the substantive issues.

Separately, it must be pointed out that the CA erred in resolving the issues pertaining to LEPCEU-ALU’s July 23,
1999 strike in its March 31, 2006 Decision47 and September 18, 2006 Resolution 48 (in CA-G.R. SP No. 82354)
considering that the parties therein – now, the respondents in this case – do not have any legal interest in the said
issue. To be clear, NLRCRAB VIII Case Nos. 9-0432-99 to 9-0458-99 are the cases which involve herein
respondents; their concern in those cases was the illegality of their retrenchment. On the other hand, the strike issue
was threshed out in RAB Case No. VIII-7-0301-99 which involved other members of LEPCEU-ALU. Although all
these cases were subsumed under NLRC Certified Case No. V-000001-2000, the legality of the July 23, 1999
strike was not raised by the respondents in NLRC-RAB VIII Case Nos. 9-0432-99 to 9-0458-99. In view of these
incidents, given that the CA has taken cognizance of a matter (i.e., the legality of the strike) where the parties (i.e.,
respondents) are devoid of any legal interest, the Court sees no reason to perpetuate the misstep and delve upon
the same.

B. Validity of Retrenchment

Retrenchment is defined as the termination of employment initiated by the employer through no fault of the
employee and without prejudice to the latter, resorted by management during periods of business recession,
industrial depression or seasonal fluctuations or during lulls over shortage of materials. It is a reduction in
manpower, a measure utilized by an employer to minimize business losses incurred in the operation of its
business.49

Under Article 297 of the Labor Code,50 retrenchment is one of the authorized causes to validly terminate an
employment. It reads:

ART. 297. Closure of Establishment and Reduction of Personnel. – The employer may also terminate the
employment of any employee due to the installation of labor saving devices, redundancy, retrenchment to
prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for
the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the Ministry
of Labor and Employment at least one (1) month before the intended date thereof. In case of termination due to the
installation of labor saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay
equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is
higher. In case of retrenchment to prevent losses and in cases of closure or cessation of operations of
establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be
equivalent to one (1) month pay or to at least one-half (1/2) month pay for every year of service, whichever is higher.
A fraction of at least six (6) months shall be considered one (1) whole year. (Emphasis supplied.)

Labor II – 1
As may be gleaned from the afore-cited provision, to properly effect a retrenchment, the employer must: (a) serve a
written notice both to the employees and to the DOLE at least one (1) month prior to the intended date of
retrenchment; and (b) pay the retrenched employees separation pay equivalent to one (1) month pay or at least
one-half (½) month pay for every year of service, whichever is higher.

Essentially, the prerogative of an employer to retrench its employees must be exercised only as a last resort,
considering that it will lead to the loss of the employees' livelihood. It is justified only when all other less drastic
means have been tried and found insufficient or inadequate. 51 Corollary thereto, the employer must prove the
requirements for a valid retrenchment by clear and convincing evidence; otherwise, said ground for termination
would be susceptible to abuse by scheming employers who might be merely feigning losses or reverses in their
business ventures in order to ease out employees. 52 These requirements are:

(1) That retrenchment is reasonably necessary and likely to prevent business losses which, if already
incurred, are not merely de minimis, but substantial, serious, actual and real, or if only expected, are
reasonably imminent as perceived objectively and in good faith by the employer;

(2) That the employer served written notice both to the employees and to the Department of Labor and
Employment at least one month prior to the intended date of retrenchment;

(3) That the employer pays the retrenched employees separation pay equivalent to one (1) month pay or at
least one-half (½) month pay for every year of service, whichever is higher;

(4) That the employer exercises its prerogative to retrench employees in good faith for the advancement of
its interest and not to defeat or circumvent the employees’ right to security of tenure; and

(5) That the employer used fair and reasonable criteria in ascertaining who would be dismissed and who
would be retained among the employees, such as status, efficiency, seniority, physical fitness, age, and
financial hardship for certain workers.53

In due regard of these requisites, the Court observes that Pepsi had validly implemented its retrenchment
program:

(1) Records disclose that both the CA and the NLRC had already determined that Pepsi complied with the
requirements of substantial loss and due notice to both the DOLE and the workers to be retrenched. The
pertinent portion of the CA’s March 31, 2006 Decision reads:

In the present action, the NLRC held that PEPSI-COLA’s financial statements are substantial evidence which carry
great credibility and reliability viewed in light of the financial crisis that hit the country which saw multinational
corporations closing shops and walking away, or adapting [sic] their own corporate rightsizing program. Since these
findings are supported by evidence submitted before the NLRC, we resolve to respect the same. x x x x The notice
requirement was also complied with by PEPSI-COLA when it served notice of the corporate rightsizing program to
the DOLE and to the fourteen (14) employees who will be affected thereby at least one (1) month prior to the date of
retrenchment. (Citations omitted) 54

It is axiomatic that absent any clear showing of abuse, arbitrariness or capriciousness, the findings of fact by the
NLRC, especially when affirmed by the CA – as in this case – are binding and conclusive upon the Court. 55 Thus,
given that there lies no discretionary abuse with respect to the foregoing findings, the Court sees no reason to
deviate from the same.

(2) Records also show that the respondents had already been paid the requisite separation pay as evidenced by the
September 1999 quitclaims signed by them. Effectively, the said quitclaims serve inter alia the purpose of
acknowledging receipt of their respective separation pays.56 Appositely, respondents never questioned that
separation pay arising from their retrenchment was indeed paid by Pepsi to them. As such, the foregoing fact is now
deemed conclusive.

Labor II – 1
(3) Contrary to the CA’s observation that Pepsi had singled out members of the LEPCEU-ALU in implementing its
retrenchment program,57 records reveal that the members of the company union (i.e., LEPCEUUOEF#49) were
likewise among those retrenched. 58

Also, as aptly pointed out by the NLRC, Pepsi’s Corporate Rightsizing Program was a company-wide program
which had already been implemented in its other plants in Bacolod, Iloilo, Davao, General Santos and
Zamboanga.59 Consequently, given the general applicability of its retrenchment program, Pepsi could not have
intended to decimate LEPCEUALU’s membership, much less impinge upon its right to self-organization,
when it employed the same.

In fact, it is apropos to mention that Pepsi and its employees entered into a collective bargaining agreement on
October 17, 1995 which contained a union shop clause requiring membership in LEPCEU-UOEF#49, the incumbent
bargaining union, as a condition for continued employment. In this regard, Pepsi had all the reasons to assume that
all employees in the bargaining unit were all members of LEPCEU-UOEF#49; otherwise, the latter would have
already lost their employment. In other words, Pepsi need not implement a retrenchment program just to get rid of
LEPCEU-ALU members considering that the union shop clause already gave it ample justification to terminate them.
It is then hardly believable that union affiliations were even considered by Pepsi in the selection of the employees to
be retrenched.60

Moreover, it must be underscored that Pepsi’s management exerted conscious efforts to incorporate
employee participation during the implementation of its retrenchment program. Records indicate that Pepsi
had initiated sit-downs with its employees to review the criteria on which the selection of who to be
retrenched would be based. This is evidenced by the report of NCMB Region VIII Director Juanito Geonzon
which states that "[Pepsi’s] [m]anagement conceded on the proposal to review the criteria and to sit down
for more positive steps to resolve the issue." 61

Lastly, the allegation that the retrenchment program was a mere subterfuge to dismiss the respondents considering
Pepsi’s subsequent hiring of replacement workers cannot be given credence for lack of sufficient evidence to
support the same.

Verily, the foregoing incidents clearly negate the claim that the retrenchment was undertaken by Pepsi in bad faith.

(5) On the final requirement of fair and reasonable criteria for determining who would or would not be dismissed,
records indicate that Pepsi did proceed to implement its rightsizing program based on fair and reasonable criteria
recommended by the company supervisors.62

Therefore, as all the requisites for a valid retrenchment are extant, the Court finds Pepsi’s rightsizing program and
the consequent dismissal of respondents in accord with law.

At this juncture, it is noteworthy to mention that in the related case of Beraya – which involved the same
retrenchment incident affecting the respondents, although litigated by other LEPCEU-ALU employees – the NLRC in
a Decision dated November 24, 2003 had already pronounced that Pepsi’s retrenchment program was
valid.63 Subsequently, the petitioners in Beraya elevated the case via petition for certiorari to the CA64 which was,
however, denied in a Decision dated November 28, 2006. 65 They appealed the said ruling to the Court66 which was
equally denied through the Resolutions dated April 24, 2008 67 and August 4, 2008.68 The fact that the validity of the
same Pepsi retrenchment program had already been passed upon and thereafter sustained in a related case, albeit
involving different parties, behooves the Court to accord a similar disposition and thus, finally uphold the legality of
the said program altogether.

C. Union Busting and ULP

Under Article 276(c) of the Labor Code, there is union busting when the existence of the union is threatened by the
employer’s act of dismissing the former’s officers who have been duly-elected in accordance with its constitution and
by-laws.69

Labor II – 1
On the other hand, the term unfair labor practice refers to that gamut of offenses defined in the Labor Code 70 which,
at their core, violates the constitutional right of workers and employees to self-organization,71 with the sole exception
of Article 257(f) (previously Article 248[f]).72 As explained in the case of Philcom Employees Union v. Philippine
Global Communications:73

Unfair labor practice refers to acts that violate the workers' right to organize. The prohibited acts are related to
the workers' right to selforganization and to the observance of a CBA. Without that element, the acts, no matter how
unfair, are not unfair labor practices. The only exception is Article 248(f) [now Article 257(f)]. (Emphasis and
underscoring supplied)

Mindful of their nature, the Court finds it difficult to attribute any act of union busting or ULP on the part of
Pepsi considering that it retrenched its employees in good faith. As earlier discussed, Pepsi tried to sit-
down with its employees to arrive at mutually beneficial criteria which would have been adopted for their
intended retrenchment. In the same vein, Pepsi’s cooperation during the NCMB-supervised conciliation
conferences can also be gleaned from the records. Furthermore, the fact that Pepsi’s rightsizing program
was implemented on a company-wide basis dilutes respondents’ claim that Pepsi’s retrenchment scheme
was calculated to stymie its union activities, much less diminish its constituency. Therefore, absent any
perceived threat to LEPCEU-ALU’s existence or a violation of respondents’ right to self-organization – as
demonstrated by the foregoing actuations –Pepsi cannot be said to have committed union busting or ULP
in this case.

D. Execution of Quitclaims

A waiver or quitclaim is a valid and binding agreement between the parties, provided that it constitutes a credible
and reasonable settlement and the one accomplishing it has done so voluntarily and with a full understanding of its
import.74 The applicable provision is Article 232 of the Labor Code which reads in part:

ART. 232. Compromise Agreements. — Any compromise settlement, including those involving labor standard laws,
voluntarily agreed upon by the parties with the assistance of the Bureau or the regional office of the Department of
Labor, shall be final and binding upon the parties. x x x (Emphasis and underscoring supplied)

In Olaybar v. National Labor Relations Commission, 75 the Court, recognizing the conclusiveness of compromise
settlements as a means to end labor disputes, held that Article 2037 of the Civil Code, which provides that "[a]
compromise has upon the parties the effect and authority of res judicata," applies suppletorily to labor cases even if
the compromise is not judicially approved.76

In the present case, Pepsi claims that respondents have long been precluded from filing cases before the NLRC to
assail their retrenchment due to their execution of the September 1999 quitclaims. In this regard, Pepsi advances
the position that all issues arising from the foregoing must now be considered as conclusively settled by the parties.

The Court is unconvinced.

As correctly observed by the CA, the September 1999 quitclaims must be read in conjunction with the September
17, 1999 Agreement, to wit:

2. Both parties agree that the release of these benefits is without prejudice to the filing of the case by the Union
with the National Labor Relations Commission;

3. The Union undertakes to sign the Quitclaim but subject to the 2nd paragraph of this Agreement. x x x
(Emphasis and underscoring supplied) 77

The language of the September 17, 1999 Agreement is straightforward. The use of the term "subject" in the 3rd
clause of the said agreement clearly means that the signing of the quitclaim documents was without prejudice to the
filing of a case with the NLRC. Hence, when respondents signed the September 1999 quitclaims, they did so with
the reasonable impression that that they were not precluded from instituting a subsequent action with the NLRC.

Labor II – 1
Accordingly, it cannot be said that the signing of the September 1999 quitclaims was tantamount to a full and final
settlement between Pepsi and respondents.

E. Dismissal of Remandaban

An illegally dismissed employee is entitled to either reinstatement, if viable, or separation pay if reinstatement is no
longer viable, and backwages.78 In certain cases, however, the Court has ordered the reinstatement of the employee
without backwages considering the fact that (1) the dismissal of the employee would be too harsh a penalty; and (2)
the employer was in good faith in terminating the employee. For instance, in the case of Cruz v. Minister of Labor
and Employment79 the Court ruled as follows:

The Court is convinced that petitioner's guilt was substantially established.  Nevertheless, we agree with respondent
1âwphi1

Minister's order of reinstating petitioner without backwages instead of dismissal which may be too drastic. Denial
of backwages would sufficiently penalize her for her infractions. The bank officials acted in good faith. They
should be exempt from the burden of paying backwages. The good faith of the employer, when clear under the
circumstances, may preclude or diminish recovery of backwages. Only employees discriminately dismissed
are entitled to backpay. x x x (Emphasis and underscoring supplied)

Likewise, in the case of Itogon-Suyoc Mines, Inc. v. National Labor Relations Commission,80 the Court pronounced
that "the ends of social and compassionate justice would therefore be served if private respondent is reinstated but
without backwages in view of petitioner's good faith." The factual similarity of these cases to Remandaban’s
situation deems it appropriate to render the same disposition.

As may be gathered from the September 11, 2002 NLRC Decision, while Remandaban was remiss in properly
informing Pepsi of his intended absence, the NLRC ruled that the penalty of dismissal would have been too harsh
for his infractions considering that his failure to report to work was clearly prompted by a medical emergency and not
by any intention to defy the July 27, 1999 return-to-work order. 81 On the other hand, Pepsi's good faith is supported
by the NLRC's finding that "the return-to-work-order of the Secretary was taken lightly by .Remandaban." 82 In this
regard, considering Remandaban 's ostensible dereliction of the said order, Pepsi could not be blamed for sending
him a notice of termination and eventually proceeding to dismiss him. At any rate, it must be hoted that while Pepsi
impleaded Remandaban as party to the case, it failed to challenge the NLRC ruling ordering his reinstateme:ot to
his former position without backwages. As such, the foregoing issue is now settled with finality.

All told, the NLRC's directive to reinstate Remandaban without backwages is upheld.

WHEREFORE, the petition is GRANTED. The assailed March 31, 2006 Decision and September 18, 2006
Resolution of the Court of Appeals in CA-G.R. S.P. No. 82354 are hereby REVERSED and SET
ASIDE. Accordingly, the September 11, 2002 Decision of the National Labor Relations Commission is
hereby REINSTATED insofar as (1) it dismissed subsumed cases NLRC-RAB VIII Case Nos. 9-0432-99 to 9-0458-
99 and; (2) ordered the reinstatement of respondent Saunder Santiago Remandaban III without loss of seniority
rights but without backwages in NLRC-RAB VIII Case No. 9-0459-99.

Labor II – 1
37.) G.R. No. 198783               April 15, 2013

ROYAL PLANT WORKERS UNION, Petitioner,

vs.
COCA-COLA BOTTLERS PHILIPPINES, INC.-CEBU PLANT, Respondent.

DECISION

MENDOZA, J.:

Assailed in this petition is the May 24, 2011 Decision1 and the September 2, 2011 Resolution 2 of the Court of
Appeals (CA) in CA-G.R. SP No. 05200, entitled Coca-Cola Bottlers Philippines, Inc.-Cebu Plant v. Royal Plant
Workers Union, which nullified and set aside the June 11, 2010 Decision 3 of the Voluntary Arbitration Panel
(Arbitration Committee) in a case involving the removal of chairs in the bottling plant of Coca-Cola Bottlers
Philippines, Inc. (CCBPI).

The Factual and Procedural

Antecedents

The factual and procedural antecedents have been accurately recited in the May 24, 2011 CA decision as follows:

Petitioner Coca-Cola Bottlers Philippines, Inc. (CCBPI) is a domestic corporation engaged in the manufacture,
sale and distribution of softdrink products. It has several bottling plants all over the country, one of which is located
in Cebu City. Under the employ of each bottling plant are bottling operators. In the case of the plant in Cebu City,
there are 20 bottling operators who work for its Bottling Line 1 while there are 12-14 bottling operators who man its
Bottling Line 2. All of them are male and they are members of herein respondent Royal Plant Workers Union
(ROPWU).

The bottling operators work in two shifts. The first shift is from 8 a.m. to 5 p.m. and the second shift is from 5 p.m. up
to the time production operations is finished. Thus, the second shift varies and may end beyond eight (8) hours.
However, the bottling operators are compensated with overtime pay if the shift extends beyond eight (8) hours. For
Bottling Line 1, 10 bottling operators work for each shift while 6 to 7 bottling operators work for each shift for Bottling
Line 2.

Each shift has rotations of work time and break time. Prior to September 2008, the rotation is this: after two and a
half (2 ½) hours of work, the bottling operators are given a 30-minute break and this goes on until the shift ends. In
September 2008 and up to the present, the rotation has changed and bottling operators are now given a 30-minute
break after one and one half (1 ½) hours of work.

In 1974, the bottling operators of then Bottling Line 2 were provided with chairs upon their request. In 1988, the
bottling operators of then Bottling Line 1 followed suit and asked to be provided also with chairs. Their request was
likewise granted. Sometime in September 2008, the chairs provided for the operators were removed pursuant to a
national directive of petitioner. This directive is in line with the "I Operate, I Maintain, I Clean" program of petitioner
for bottling operators, wherein every bottling operator is given the responsibility to keep the machinery and
equipment assigned to him clean and safe. The program reinforces the task of bottling operators to constantly move
about in the performance of their duties and responsibilities.

With this task of moving constantly to check on the machinery and equipment assigned to him, a bottling operator
does not need a chair anymore, hence, petitioner’s directive to remove them. Furthermore, CCBPI rationalized that
the removal of the chairs is implemented so that the bottling operators will avoid sleeping, thus, prevent injuries to
their persons. As bottling operators are working with machines which consist of moving parts, it is imperative that
they should not fall asleep as to do so would expose them to hazards and injuries. In addition, sleeping will hamper
the efficient flow of operations as the bottling operators would be unable to perform their duties competently.

Labor II – 1
The bottling operators took issue with the removal of the chairs. Through the representation of herein
respondent, they initiated the grievance machinery of the Collective Bargaining Agreement (CBA) in
November 2008. Even after exhausting the remedies contained in the grievance machinery, the parties were still at
a deadlock with petitioner still insisting on the removal of the chairs and respondent still against such measure. As
such, respondent sent a Notice to Arbitrate, dated 16 July 2009, to petitioner stating its position to submit
the issue on the removal of the chairs for arbitration. Nevertheless, before submitting to arbitration the issue,
both parties availed of the conciliation/mediation proceedings before the National Conciliation and Mediation Board
(NCMB) Regional Branch No. VII. They failed to arrive at an amicable settlement.

Thus, the process of arbitration continued and the parties appointed the chairperson and members of the Arbitration
Committee as outlined in the CBA. Petitioner and respondent respectively appointed as members to the Arbitration
Committee Mr. Raul A. Kapuno, Jr. and Mr. Luis Ruiz while they both chose Atty. Alice Morada as chairperson
thereof. They then executed a Submission Agreement which was accepted by the Arbitration Committee on 01
October 2009. As contained in the Submission Agreement, the sole issue for arbitration is whether the removal
of chairs of the operators assigned at the production/manufacturing line while performing their duties and
responsibilities is valid or not.

Both parties submitted their position papers and other subsequent pleadings in amplification of their respective
stands. Petitioner argued that the removal of the chairs is valid as it is a legitimate exercise of management
prerogative, it does not violate the Labor Code and it does not violate the CBA it contracted with respondent. On the
other hand, respondent espoused the contrary view. It contended that the bottling operators have been performing
their assigned duties satisfactorily with the presence of the chairs; the removal of the chairs constitutes a violation of
the Occupational Health and Safety Standards, the policy of the State to assure the right of workers to just and
humane conditions of work as stated in Article 3 of the Labor Code and the Global Workplace Rights Policy.

Ruling of the Arbtration Committee

On June 11, 2010, the Arbitration Committee rendered a decision in favor of the Royal Plant Workers Union
(the Union) and against CCBPI, the dispositive portion of which reads, as follows:

Wherefore, the undersigned rules in favor of ROPWU declaring that the removal of the operators chairs is not valid.
CCBPI is hereby ordered to restore the same for the use of the operators as before their removal in 2008. 4

The Arbitration Committee ruled, among others, that the use of chairs by the operators had been a company
practice for 34 years in Bottling Line 2, from 1974 to 2008, and 20 years in Bottling Line 1, from 1988 to 2008; that
the use of the chairs by the operators constituted a company practice favorable to the Union; that it ripened into a
benefit after it had been enjoyed by it; that any benefit being enjoyed by the employees could not be reduced,
diminished, discontinued, or eliminated by the employer in accordance with Article 100 of the Labor Code, which
prohibited the diminution or elimination by the employer of the employees’ benefit; and that jurisprudence had not
laid down any rule requiring a specific minimum number of years before a benefit would constitute a voluntary
company practice which could not be unilaterally withdrawn by the employer.

The Arbitration Committee further stated that, although the removal of the chairs was done in good faith, CCBPI
failed to present evidence regarding instances of sleeping while on duty. There were no specific details as to the
number of incidents of sleeping on duty, who were involved, when these incidents happened, and what actions were
taken. There was no evidence either of any accident or injury in the many years that the bottling operators used
chairs. To the Arbitration Committee, it was puzzling why it took 34 and 20 years for CCBPI to be so solicitous of the
bottling operators’ safety that it removed their chairs so that they would not fall asleep and injure themselves.

Finally, the Arbitration Committee was of the view that, contrary to CCBPI’s position, line efficiency was the result of
many factors and it could not be attributed solely to one such as the removal of the chairs.

Not contented with the Arbitration Committee’s decision, CCBPI filed a petition for review under Rule 43 before the
CA.

Ruling of the CA

Labor II – 1
On May 24, 2011, the CA rendered a contrasting decision which nullified and set aside the decision of the
Arbitration Committee. The dispositive portion of the CA decision reads:

WHEREFORE, premises considered, the petition is hereby GRANTED and the Decision, dated 11 June 2010, of the
Arbitration Committee in AC389-VII-09-10-2009D is NULLIFIED and SET ASIDE. A new one is entered in its stead
SUSTAINING the removal of the chairs of the bottling operators from the manufacturing/production line. 5

The CA held, among others, that the removal of the chairs from the manufacturing/production lines by CCBPI is
within the province of management prerogatives; that it was part of its inherent right to control and manage its
enterprise effectively; and that since it was the employer’s discretion to constantly develop measures or means to
optimize the efficiency of its employees and to keep its machineries and equipment in the best of conditions, it was
only appropriate that it should be given wide latitude in exercising it.

The CA stated that CCBPI complied with the conditions of a valid exercise of a management prerogative when it
decided to remove the chairs used by the bottling operators in the manufacturing/production lines. The removal of
the chairs was solely motivated by the best intentions for both the Union and CCBPI, in line with the "I Operate, I
Maintain, I Clean" program for bottling operators, wherein every bottling operator was given the responsibility to
keep the machinery and equipment assigned to him clean and safe. The program would reinforce the task of
bottling operators to constantly move about in the performance of their duties and responsibilities. Without the
chairs, the bottling operators could efficiently supervise these machineries’ operations and maintenance. It would
also be beneficial for them because the working time before the break in each rotation for each shift was
substantially reduced from two and a half hours (2 ½ ) to one and a half hours (1 ½) before the 30-minute break.
This scheme was clearly advantageous to the bottling operators as the number of resting periods was increased.
CCBPI had the best intentions in removing the chairs because some bottling operators had the propensity to fall
asleep while on the job and sleeping on the job ran the risk of injury exposure and removing them reduced the risk.

The CA added that the decision of CCBPI to remove the chairs was not done for the purpose of defeating or
circumventing the rights of its employees under the special laws, the Collective Bargaining Agreement (CBA) or the
general principles of justice and fair play. It opined that the principles of justice and fair play were not violated
because, when the chairs were removed, there was a commensurate reduction of the working time for each rotation
in each shift. The provision of chairs for the bottling operators was never part of the CBAs contracted between the
Union and CCBPI. The chairs were not provided as a benefit because such matter was dependent upon the
exigencies of the work of the bottling operators. As such, CCBPI could withdraw this provision if it was not
necessary in the exigencies of the work, if it was not contributing to the efficiency of the bottling operators or if it
would expose them to some hazards. Lastly, the CA explained that the provision of chairs to the bottling operators
cannot be covered by Article 100 of the Labor Code on elimination or diminution of benefits because the employee’s
benefits referred to therein mainly involved monetary considerations or privileges converted to their monetary
equivalent.

Disgruntled with the adverse CA decision, the Union has come to this Court praying for its reversal on the following
GROUNDS

THAT WITH DUE RESPECT, THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN HOLDING
THAT A PETITION FOR REVIEW UNDER RULE 43 OF THE RULES OF COURT IS THE PROPER REMEDY OF
CHALLENGING BEFORE SAID COURT THE DECISION OF THE VOLUNTARY ARBITRATOR OR PANEL OF
VOLUNTARY ARBITRATORS UNDER THE LABOR CODE.

II

THAT WITH DUE RESPECT, THE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION IN NULLIFYING
AND SETTING ASIDE THE DECISION OF THE PANEL OF VOLUNTARY ARBITRATORS WHICH DECLARED AS
NOT VALID THE REMOVAL OF THE CHAIRS OF THE OPERATORS IN THE MANUFACTURING AND/OR
PRODUCTION LINE.

Labor II – 1
In advocacy of its positions, the Union argues that the proper remedy in challenging the decision of the Arbitration
Committee before the CA is a petition for certiorari under Rule 65. The petition for review under Rule 43 resorted to
by CCBPI should have been dismissed for being an improper remedy. The Union points out that the parties agreed
to submit the unresolved grievance involving the removal of chairs to voluntary arbitration pursuant to the provisions
of Article V of the existing CBA. Hence, the assailed decision of the Arbitration Committee is a judgment or final
order issued under the Labor Code of the Philippines. Section 2, Rule 43 of the 1997 Rules of Civil Procedure,
expressly states that the said rule does not cover cases under the Labor Code of the Philippines. The judgments or
final orders of the Voluntary Arbitrator or Panel of Voluntary Arbitrators are governed by the provisions of Articles
260, 261, 262, 262-A, and 262-B of the Labor Code of the Philippines.

On the substantive aspect, the Union argues that there is no connection between CCBPI’s "I Operate, I Maintain, I
Clean" program and the removal of the chairs because the implementation of the program was in 2006 and the
removal of the chairs was done in 2008. The 30-minute break is part of an operator’s working hours and does not
make any difference. The frequency of the break period is not advantageous to the operators because it cannot
compensate for the time they are made to stand throughout their working time. The bottling operators get tired and
exhausted after their tour of duty even with chairs around. How much more if the chairs are removed?

The Union further claims that management prerogatives are not absolute but subject to certain limitations found in
law, a collective bargaining agreement, or general principles of fair play and justice. The operators have been
performing their assigned duties and responsibilities satisfactorily for thirty (30) years using chairs. There is no
record of poor performance because the operators are sitting all the time. There is no single incident when the
attention of an operator was called for failure to carry out his assigned tasks. CCBPI has not submitted any evidence
to prove that the performance of the operators was poor before the removal of the chairs and that it has improved
after the chairs were removed. The presence of chairs for more than 30 years made the operators awake and alert
as they could relax from time to time. There are sanctions for those caught sleeping while on duty. Before the
removal of the chairs, the efficiency of the operators was much better and there was no recorded accident. After the
removal of the chairs, the efficiency of the operators diminished considerably, resulting in the drastic decline of line
efficiency.

Finally, the Union asserts that the removal of the chairs constitutes violation of the Occupational Health and Safety
Standards, which provide that every company shall keep and maintain its workplace free from hazards that are likely
to cause physical harm to the workers or damage to property. The removal of the chairs constitutes a violation of the
State policy to assure the right of workers to a just and humane condition of work pursuant to Article 3 of the Labor
Code and of CCBPI’s Global Workplace Rights Policy. Hence, the unilateral withdrawal, elimination or removal of
the chairs, which have been in existence for more than 30 years, constitutes a violation of existing practice.

The respondent’s position

CCBPI reiterates the ruling of the CA that a petition for review under Rule 43 of the Rules of Court was the proper
remedy to question the decision of the Arbitration Committee. It likewise echoes the ruling of the CA that the
removal of the chairs was a legitimate exercise of management prerogative; that it was done not to harm the bottling
operators but for the purpose of optimizing their efficiency and CCBPI’s machineries and equipment; and that the
exercise of its management prerogative was done in good faith and not for the purpose of circumventing the rights
of the employees under the special laws, the CBA or the general principles of justice and fair play.

The Court’s Ruling

The decision in this case rests on the resolution of two basic questions. First, is an appeal to the CA via a petition for
review under Rule 43 of the 1997 Rules of Civil Procedure a proper remedy to question the decision of the
Arbitration Committee? Second, was the removal of the bottling operators’ chairs from CCBPI’s
production/manufacturing lines a valid exercise of a management prerogative?

The Court sustains the ruling of the CA on both issues.

Regarding the first issue, the Union insists that the CA erred in ruling that the recourse taken by CCBPI in appealing
the decision of the Arbitration Committee was proper. It argues that the proper remedy in challenging the decision of

Labor II – 1
the Voluntary Arbitrator before the CA is by filing a petition for certiorari under Rule 65 of the Rules of Court, not a
petition for review under Rule 43.

CCBPI counters that the CA was correct in ruling that the recourse it took in appealing the decision of the Arbitration
Committee to the CA via a petition for review under Rule 43 of the Rules of Court was proper and in conformity with
the rules and prevailing jurisprudence.

A Petition for Review

under Rule 43 is the

proper remedy

CCBPI is correct. This procedural issue being debated upon is not novel. The Court has already ruled in a number
of cases that a decision or award of a voluntary arbitrator is appealable to the CA via a petition for review under
Rule 43. The recent case of Samahan Ng Mga Manggagawa Sa Hyatt (SAMASAH-NUWHRAIN) v. Hon. Voluntary
Arbitrator Buenaventura C. Magsalin and Hotel Enterprises of the Philippines 6 reiterated the well-settled doctrine on
this issue, to wit:

In the case of Samahan ng mga Manggagawa sa Hyatt-NUWHRAIN-APL v. Bacungan,7 we repeated the well-
settled rule that a decision or award of a voluntary arbitrator is appealable to the CA via petition for review under
Rule 43. We held that:

"The question on the proper recourse to assail a decision of a voluntary arbitrator has already been settled in Luzon
Development Bank v. Association of Luzon Development Bank Employees, where the Court held that the decision
or award of the voluntary arbitrator or panel of arbitrators should likewise be appealable to the Court of Appeals, in
line with the procedure outlined in Revised Administrative Circular No. 1-95 (now embodied in Rule 43 of the 1997
Rules of Civil Procedure), just like those of the quasi-judicial agencies, boards and commissions enumerated
therein, and consistent with the original purpose to provide a uniform procedure for the appellate review of
adjudications of all quasi-judicial entities.

Subsequently, in Alcantara, Jr. v. Court of Appeals, and Nippon Paint Employees Union-Olalia v. Court of Appeals,
the Court reiterated the aforequoted ruling. In Alcantara, the Court held that notwithstanding Section 2 of Rule 43,
the ruling in Luzon Development Bank still stands. The Court explained, thus:

‘The provisions may be new to the Rules of Court but it is far from being a new law. Section 2, Rules 42 of the 1997
Rules of Civil Procedure, as presently worded, is nothing more but a reiteration of the exception to the exclusive
appellate jurisdiction of the Court of Appeals, as provided for in Section 9, Batas Pambansa Blg. 129, as amended
by Republic Act No. 7902:

(3) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders or awards of Regional Trial
Courts and quasi-judicial agencies, instrumentalities, boards or commissions, including the Securities and Exchange
Commission, the Employees’ Compensation Commission and the Civil Service Commission, except those falling
within the appellate jurisdiction of the Supreme Court in accordance with the Constitution, the Labor Code of the
Philippines under Presidential Decree No. 442, as amended, the provisions of this Act and of subparagraph (1) of
the third paragraph and subparagraph (4) of the fourth paragraph of Section 17 of the Judiciary Act of 1948.’

The Court took into account this exception in Luzon Development Bank but, nevertheless, held that the decisions of
voluntary arbitrators issued pursuant to the Labor Code do not come within its ambit x x x."

Furthermore, Sections 1, 3 and 4, Rule 43 of the 1997 Rules of Civil Procedure, as amended, provide:

"SECTION 1. Scope. - This Rule shall apply to appeals from judgments or final orders of the Court of Tax Appeals
and from awards, judgments, final orders or resolutions of or authorized by any quasi-judicial agency in the exercise
of its quasi-judicial functions. Among these agencies are the x x x, and voluntary arbitrators authorized by law.

Labor II – 1
xxxx

SEC. 3. Where to appeal. - An appeal under this Rule may be taken to the Court of Appeals within the period and in
the manner therein provided, whether the appeal involves questions of fact, of law, or mixed questions of fact and
law.

SEC. 4. Period of appeal. - The appeal shall be taken within fifteen (15) days from notice of the award, judgment,
final order or resolution, or from the date of its last publication, if publication is required by law for its effectivity, or of
the denial of petitioner’s motion for new trial or reconsideration duly filed in accordance with the governing law of the
court or agency a quo. x x x. (Emphasis supplied.)’

Hence, upon receipt on May 26, 2003 of the Voluntary Arbitrator’s Resolution denying petitioner’s motion for
reconsideration, petitioner should have filed with the CA, within the fifteen (15)-day reglementary period, a petition
for review, not a petition for certiorari.

On the second issue, the Union basically claims that the CCBPI’s decision to unilaterally remove the operators’
chairs from the production/manufacturing lines of its bottling plants is not valid because it violates some fundamental
labor policies. According to the Union, such removal constitutes a violation of the 1) Occupational Health and Safety
Standards which provide that every worker is entitled to be provided by the employer with appropriate seats, among
others; 2) policy of the State to assure the right of workers to a just and humane condition of work as provided for in
Article 3 of the Labor Code;8 3) Global Workplace Rights Policy of CCBPI which provides for a safe and healthy
workplace by maintaining a productive workplace and by minimizing the risk of accident, injury and exposure to
health risks; and 4) diminution of benefits provided in Article 100 of the Labor Code.9

Opposing the Union’s argument, CCBPI mainly contends that the removal of the subject chairs is a valid exercise of
management prerogative. The management decision to remove the subject chairs was made in good faith and did
not intend to defeat or circumvent the rights of the Union under the special laws, the CBA and the general principles
of justice and fair play.

Again, the Court agrees with CCBPI on the matter.

A Valid Exercise of

Management Prerogative

The Court has held that management is free to regulate, according to its own discretion and judgment, all aspects of
employment, including hiring, work assignments, working methods, time, place, and manner of work, processes to
be followed, supervision of workers, working regulations, transfer of employees, work supervision, lay-off of workers,
and discipline, dismissal and recall of workers. The exercise of management prerogative, however, is not absolute
as it must be exercised in good faith and with due regard to the rights of labor. 10

In the present controversy, it cannot be denied that CCBPI removed the operators’ chairs pursuant to a national
directive and in line with its "I Operate, I Maintain, I Clean" program, launched to enable the Union to perform their
duties and responsibilities more efficiently. The chairs were not removed indiscriminately. They were carefully
studied with due regard to the welfare of the members of the Union. The removal of the chairs was compensated by:
a) a reduction of the operating hours of the bottling operators from a two-and-one-half (2 ½)-hour rotation period to a
one-and-a-half (1 ½) hour rotation period; and b) an increase of the break period from 15 to 30 minutes between
rotations.

Apparently, the decision to remove the chairs was done with good intentions as CCBPI wanted to avoid instances of
operators sleeping on the job while in the performance of their duties and responsibilities and because of the fact
that the chairs were not necessary considering that the operators constantly move about while working. In short, the
removal of the chairs was designed to increase work efficiency. Hence, CCBPI’s exercise of its management
prerogative was made in good faith without doing any harm to the workers’ rights.

Labor II – 1
The fact that there is no proof of any operator sleeping on the job is of no moment. There is no guarantee that such
incident would never happen as sitting on a chair is relaxing. Besides, the operators constantly move about while
doing their job. The ultimate purpose is to promote work efficiency.

No Violation of Labor Laws

The rights of the Union under any labor law were not violated. There is no law that requires employers to provide
chairs for bottling operators. The CA correctly ruled that the Labor Code, specifically Article 132 11 thereof, only
requires employers to provide seats for women. No similar requirement is mandated for men or male workers. It
must be stressed that all concerned bottling operators in this case are men.

There was no violation either of the Health, Safety and Social Welfare Benefit provisions under Book IV of the Labor
Code of the Philippines. As shown in the foregoing, the removal of the chairs was compensated by the reduction of
the working hours and increase in the rest period. The directive did not expose the bottling operators to safety and
health hazards.

The Union should not complain too much about standing and moving about for one and one-half (1 ½) hours
because studies show that sitting in workplaces for a long time is hazardous to one’s health. The report of
VicHealth, Australia,12 disclosed that "prolonged workplace sitting is an emerging public health and occupational
health issue with serious implications for the health of our working population. Importantly, prolonged sitting is a risk
factor for poor health and early death, even among those who meet, or exceed, national 13 activity guidelines." In
another report,14 it was written:

Workers needing to spend long periods in a seated position on the job such as taxi drivers, call centre and office
workers, are at risk for injury and a variety of adverse health effects.

The most common injuries occur in the muscles, bones, tendons and ligaments, affecting the neck and lower back
regions. Prolonged sitting:

● reduces body movement making muscles more likely to pull, cramp or strain when stretched suddenly, causes
fatigue in the back and neck muscles by slowing the blood supply and puts high tension on the spine, especially in
the low back or neck, and

● causes a steady compression on the spinal discs that hinders their nutrition and can contribute to their premature
degeneration.

Sedentary employees may also face a gradual deterioration in health if they do not exercise or do not lead an
otherwise physically active life. The most common health problems that these employees experience are disorders
in blood circulation and injuries affecting their ability to move. Deep Vein Thrombosis (DVT), where a clot forms in a
large vein after prolonged sitting (eg after a long flight) has also been shown to be a risk.

Workers who spend most of their working time seated may also experience other, less specific adverse health
effects. Common effects include decreased fitness, reduced heart and lung efficiency, and digestive problems.
Recent research has identified too much sitting as an important part of the physical activity and health equation, and
suggests we should focus on the harm caused by daily inactivity such as prolonged sitting.
Associate professor David Dunstan leads a team at the Baker IDI in Melbourne which is specifically researching
sitting and physical activity. He has found that people who spend long periods of time seated (more than four hours
per day) were at risk of:

● higher blood levels of sugar and fats,

● larger waistlines, and

● higher risk of metabolic syndrome

regardless of how much moderate to vigorous exercise they had.

Labor II – 1
In addition, people who interrupted their sitting time more often just by standing or with light activities such as
housework, shopping, and moving about the office had healthier blood sugar and fat levels, and smaller waistlines
than those whose sitting time was not broken up.

Of course, in this case, if the chairs would be returned, no risks would be involved because of the shorter period of
working time. The study was cited just to show that there is a health risk in prolonged sitting.

No Violation of the CBA

The CBA15 between the Union and CCBPI contains no provision whatsoever requiring the management to provide
chairs for the operators in the production/manufacturing line while performing their duties and responsibilities. On
the contrary, Section 2 of Article 1 of the CBA expressly provides as follows:

Article I

SCOPE

SECTION 2. Scope of the Agreement. All the terms and conditions of employment of employees and workers within
the appropriate bargaining unit (as defined in Section 1 hereof) are embodied in this Agreement and the same shall
govern the relationship between the COMPANY and such employees and/or workers. On the other hand, all such
benefits and/or privileges as are not expressly provided for in this Agreement but which are now being accorded,
may in the future be accorded, or might have previously been accorded, to the employees and/or workers, shall be
deemed as purely voluntary acts on the part of the COMPANY in each case, and the continuance and repetition
thereof now or in the future, no matter how long or how often, shall not be construed as establishing an obligation on
the part of the COMPANY. It is however understood that any benefits that are agreed upon by and between the
COMPANY and the UNION in the Labor-Management Committee Meetings regarding the terms and conditions of
employment outside the CBA that have general application to employees who are similarly situated in a Department
or in the Plant shall be implemented. [emphasis and underscoring supplied]

As can be gleaned from the aforecited provision, the CBA expressly provides that benefits and/or privileges, not
expressly given therein but which are presently being granted by the company and enjoyed by the employees, shall
be considered as purely voluntary acts by the management and that the continuance of such benefits and/or
privileges, no matter how long or how often, shall not be understood as establishing an obligation on the company’s
part. Since the matter of the chairs is not expressly stated in the CBA, it is understood that it was a purely voluntary
act on the part of CCBPI and the long practice did not convert it into an obligation or a vested right in favor of the
Union.

No Violation of the general principles

of justice and fair play

The Court completely agrees with the CA ruling that the removal of the chairs did not violate the general principles
of justice and fair play because the bottling operators’ working time was considerably reduced from two and a half (2
½) hours to just one and a half (1 ½) hours and the break period, when they could sit down, was increased to 30
minutes between rotations. The bottling operators’ new work schedule is certainly advantageous to them because it
greatly increases their rest period and significantly decreases their working time. A break time of thirty (30) minutes
after working for only one and a half (1 ½) hours is a just and fair work schedule.

No Violation of Article 100 of the Labor Code

The operators’ chairs cannot be considered as one of the employee benefits covered in Article 10016 of the Labor
Code. In the Court’s view, the term "benefits" mentioned in the non-diminution rule refers to monetary benefits or
privileges given to the employee with monetary equivalents.

Such benefits or privileges form part of the employees’ wage, salary or compensation making them enforceable
obligations.
Labor II – 1
This Court has already decided several cases regarding the non-diminution rule where the benefits or privileges
involved in those cases mainly concern monetary considerations or privileges with monetary equivalents. Some of
these cases are: Eastern Telecommunication Phils. Inc. v. Eastern Telecoms Employees Union, 17 where the case
involves the payment of 14th, 15th and 16th month bonuses; Central Azucarera De Tarlac v. Central Azucarera De
Tarlac Labor Union-NLU,18 regarding the 13th month pay, legal/special holiday pay, night premium pay and vacation
and sick leaves; TSPIC Corp. v. TSPIC Employees Union, 19 regarding salary wage increases; and American Wire
and Cable Daily Employees Union vs. American Wire and Cable Company, Inc., 20 involving service awards with
cash incentives, premium pay, Christmas party with incidental benefits and promotional increase.

In this regard, the Court agrees with the CA when it resolved the matter and wrote:

Let it be stressed that the aforequoted article speaks of non-diminution of supplements and other employee
benefits. Supplements arc privileges given to an employee which constitute as extra remuneration besides his or her
basic ordinary earnings and wages. From this definition, We can only deduce that the other employee benefits
spoken of by Article 100 pertain only to those which are susceptible of monetary considerations. Indeed, this could
only be the most plausible conclusion because the cases tackling Article 100 involve mainly with monetary
considerations or privileges converted to their monetary equivalents.

xxxx

Without a doubt, equating the provision of chairs to the bottling operators Ds something within the ambit of
"benefits'' in the context of Article 100 of the Labor Code is unduly stretching the coverage of the law. The
interpretations of Article 100 of the Labor Code do not show even with the slightest hint that such provision of chairs
for the bottling operators may be sheltered under its mantle. 21

Jurisprudence recognizes the exercise of management prerogatives. Labor Jaws also discourage interference with
an employer's judgment in the conduct of its business. For this reason, the Court often declines to interfere in
legitimate business decisions of employers. The law must protect not only the welfare of the employees, but also the
right of the employers.22

WHEREFORE, the petition is DENIED.

Labor II – 1
 38.) G.R. No. 170054 : January 21, 2013

GOYA, INC., Petitioner, v. GOYA, INC. EMPLOYEES UNION-FFW, Respondent.

DECISION

PERALTA, J.:

This petition for review on certiorari under Rule 45 of the Rules of Civil Procedure seeks to reverse
and set aside the June 16, 2005 Decision 1 and October 12, 2005 Resolution2 of the Court of Appeals
in CA-G.R. SP No. 87335, which sustained the October 26, 2004 Decision 3 of Voluntary Arbitrator
Bienvenido E. Laguesma, the dispositive portion of which reads: cralawlibrary

WHEREFORE, judgment is hereby rendered declaring that the Company is NOT guilty of unfair labor
practice in engaging the services of PESO.

The company is, however, directed to observe and comply with its commitment as it pertains to the
hiring of casual employees when necessitated by business circumstances. 4 ?r?l1

The facts are simple and appear to be undisputed.

Sometime in January 2004, petitioner Goya, Inc. (Company), a domestic corporation engaged in
the manufacture, importation, and wholesale of top quality food products, hired contractual
employees from PESO Resources Development Corporation (PESO) to perform temporary and
occasional services in its factory in Parang, Marikina City. This prompted respondent Goya,
Inc. Employees UnionFFW (Union) to request for a grievance conference on the ground
that the contractual workers do not belong to the categories of employees stipulated in the
existing Collective Bargaining Agreement (CBA).5 When the matter remained unresolved, the
grievance was referred to the National Conciliation and Mediation Board (NCMB) for voluntary
arbitration.

During the hearing on July 1, 2004, the Company and the Union manifested before Voluntary
Arbitrator (VA) Bienvenido E. Laguesma that amicable settlement was no longer possible; hence,
they agreed to submit for resolution the solitary issue of "[w]hether or not the Company is guilty
of unfair labor acts in engaging the services of PESO, a third party service provider, under
the existing CBA, laws, and jurisprudence."6 Both parties thereafter filed their respective
pleadings.

The Union asserted that the hiring of contractual employees from PESO is not a
management prerogative and in gross violation of the CBA tantamount to unfair labor
practice (ULP). It noted that the contractual workers engaged have been assigned to work
in positions previously handled by regular workers and Union members, in effect violating
Section 4, Article I of the CBA, which provides for three categories of employees in the Company, to
wit:cralawlibrary

Section 4. Categories of Employees. The parties agree on the following categories of

employees: cralawlibrary

(a) Probationary Employee. One hired to occupy a regular rank-and-file position in the Company
and is serving a probationary period. If the probationary employee is hired or comes from outside the
Company (non-Goya, Inc. employee), he shall be required to undergo a probationary period of six
(6) months, which period, in the sole judgment of management, may be shortened if the employee
has already acquired the knowledge or skills required of the job. If the employee is hired from the
Labor II – 1
casual pool and has worked in the same position at any time during the past two (2) years, the
probationary period shall be three (3) months.

(b) Regular Employee. An employee who has satisfactorily completed his probationary period and
automatically granted regular employment status in the Company.

(c) Casual Employee, One hired by the Company to perform occasional or seasonal work directly
connected with the regular operations of the Company, or one hired for specific projects of limited
duration not connected directly with the regular operations of the Company.

It was averred that the categories of employees had been a part of the CBA since the 1970s and that
due to this provision, a pool of casual employees had been maintained by the Company from which it
hired workers who then became regular workers when urgently necessary to employ them for more
than a year. Likewise, the Company sometimes hired probationary employees who also later became
regular workers after passing the probationary period. With the hiring of contractual employees,
the Union contended that it would no longer have probationary and casual employees from
which it could obtain additional Union members; thus, rendering inutile Section 1, Article III
(Union Security) of the CBA, which states: cralawlibrary

Section 1. Condition of Employment. As a condition of continued employment in the Company, all

regular rank-and-file employees shall remain members of the Union in good standing and that new
employees covered by the appropriate bargaining unit shall automatically become regular employees
of the Company and shall remain members of the Union in good standing as a condition of continued
employment.

The Union moreover advanced that sustaining the Companys position would easily weaken and
ultimately destroy the former with the latters resort to retrenchment and/or retirement of employees
and not filling up the vacant regular positions through the hiring of contractual workers from PESO,
and that a possible scenario could also be created by the Company wherein it could "import" workers
from PESO during an actual strike.

In countering the Unions allegations, the Company argued that: (a) the law expressly allows
contracting and subcontracting arrangements through Department of Labor and
Employment (DOLE) Order No. 18-02; (b) the engagement of contractual employees did not,
in any way, prejudice the Union, since not a single employee was terminated and neither did
it result in a reduction of working hours nor a reduction or splitting of the bargaining unit; and (c)
Section 4, Article I of the CBA merely provides for the definition of the categories of
employees and does not put a limitation on the Companys right to engage the services of
job contractors or its management prerogative to address temporary/occasional needs in
its operation.

On October 26, 2004, VA Laguesma dismissed the Unions charge of ULP for being purely speculative
and for lacking in factual basis, but the Company was directed to observe and comply with its
commitment under the CBA. The VA opined: cralawlibrary

We examined the CBA provision Section 4, Article I of the CBAallegedly violated by the Company and
indeed the agreement prescribes three (3) categories of employees in the Company and provides for
the definition, functions and duties of each. Material to the case at hand is the definition as regards
the functions of a casual employee described as follows: cralawlibrary

Casual Employee One hired by the COMPANY to perform occasional or seasonal work directly
connected with the regular operations of the COMPANY, or one hired for specific projects of limited
duration not connected directly with the regular operations of the COMPANY.

Labor II – 1
While the foregoing agreement between the parties did eliminate managements prerogative of
outsourcing parts of its operations, it serves as a limitation on such prerogative particularly if it
involves functions or duties specified under the aforequoted agreement. It is clear that the parties
agreed that in the event that the Company needs to engage the services of additional workers who
will perform "occasional or seasonal work directly connected with the regular operations of the
COMPANY," or "specific projects of limited duration not connected directly with the regular operations
of the COMPANY", the Company can hire casual employees which is akin to contractual employees. If
we note the Companys own declaration that PESO was engaged to perform "temporary or occasional
services" (See the Companys Position Paper, at p. 1), then it should have directly hired the services
of casual employees rather than do it through PESO.

It is evident, therefore, that the engagement of PESO is not in keeping with the intent and spirit of
the CBA provision in question. It must, however, be stressed that the right of management to
outsource parts of its operations is not totally eliminated but is merely limited by the CBA. Given the
foregoing, the Companys engagement of PESO for the given purpose is indubitably a violation of the
CBA.7 ?r?l1

While the Union moved for partial reconsideration of the VA Decision, 8 the Company immediately filed
a petition for review9 before the Court of Appeals (CA) under Rule 43 of the Revised Rules of Civil
Procedure to set aside the directive to observe and comply with the CBA commitment pertaining to
the hiring of casual employees when necessitated by business circumstances. Professing that such
order was not covered by the sole issue submitted for voluntary arbitration, the Company assigned
the following errors: cralawlibrary

THE HONORABLE VOLUNTARY ARBITRATOR EXCEEDED HIS POWER WHICH WAS EXPRESSLY
GRANTED AND LIMITED BY BOTH PARTIES IN RULING THAT THE ENGAGEMENT OF PESO IS NOT IN
KEEPING WITH THE INTENT AND SPIRIT OF THE CBA.10 ?r?l1

THE HONORABLE VOLUNTARY ARBITRATOR COMMITTED A PATENT AND PALPABLE ERROR IN

DECLARING THAT THE ENGAGEMENT OF PESO IS NOT IN KEEPING WITH THE INTENT AND SPIRIT
OF THE CBA.11 ?r?l1

On June 16, 2005, the CA dismissed the petition. In dispensing with the merits of the controversy, it
held:cralawlibrary

This Court does not find it arbitrary on the part of the Hon. Voluntary Arbitrator in ruling that "the
engagement of PESO is not in keeping with the intent and spirit of the CBA." The said ruling is
interrelated and intertwined with the sole issue to be resolved that is, "Whether or not the Company
is guilty of unfair labor practice in engaging the services of PESO, a third party service provider,
under existing CBA, laws, and jurisprudence." Both issues concern the engagement of PESO by the
Company which is perceived as a violation of the CBA and which constitutes as unfair labor practice
on the part of the Company. This is easily discernible in the decision of the Hon. Voluntary Arbitrator
when it held: cralawlibrary

x x x x While the engagement of PESO is in violation of Section 4, Article I of the CBA, it does not
constitute unfair labor practice as it (sic) not characterized under the law as a gross violation of the
CBA. Violations of a CBA, except those which are gross in character, shall no longer be treated as
unfair labor practice. Gross violations of a CBA means flagrant and/or malicious refusal to comply
with the economic provisions of such agreement. x x x

Anent the second assigned error, the Company contends that the Hon. Voluntary Arbitrator erred in
declaring that the engagement of PESO is not in keeping with the intent and spirit of the CBA. The
Company justified its engagement of contractual employees through PESO as a management
prerogative, which is not prohibited by law. Also, it further alleged that no provision under the CBA

Labor II – 1
limits or prohibits its right to contract out certain services in the exercise of management
prerogatives.

Germane to the resolution of the above issue is the provision in their CBA with respect to the
categories of the employees: cralawlibrary

xxx

A careful reading of the above-enumerated categories of employees reveals that the PESO
contractual employees do not fall within the enumerated categories of employees stated in the CBA
of the parties. Following the said categories, the Company should have observed and complied with
the provision of their CBA. Since the Company had admitted that it engaged the services of PESO to
perform temporary or occasional services which is akin to those performed by casual employees, the
Company should have tapped the services of casual employees instead of engaging PESO.

In justifying its act, the Company posits that its engagement of PESO was a management
prerogative. It bears stressing that a management prerogative refers to the right of the employer to
regulate all aspects of employment, such as the freedom to prescribe work assignments, working
methods, processes to be followed, regulation regarding transfer of employees, supervision of their
work, lay-off and discipline, and dismissal and recall of work, presupposing the existence of
employer-employee relationship. On the basis of the foregoing definition, the Companys engagement
of PESO was indeed a management prerogative. This is in consonance with the pronouncement of the
Supreme Court in the case of Manila Electric Company v. Quisumbing where it ruled that contracting
out of services is an exercise of business judgment or management prerogative.

This management prerogative of contracting out services, however, is not without limitation. In
contracting out services, the management must be motivated by good faith and the contracting out
should not be resorted to circumvent the law or must not have been the result of malicious arbitrary
actions. In the case at bench, the CBA of the parties has already provided for the categories of the
employees in the Companysestablishment. These categories of employees particularly with respect to
casual employees serve as limitation to the Companys prerogative to outsource parts of its
operations especially when hiring contractual employees. As stated earlier, the work to be performed
by PESO was similar to that of the casual employees. With the provision on casual employees, the
hiring of PESO contractual employees, therefore, is not in keeping with the spirit and intent of their
CBA. (Citations omitted)12?r?l1

The Company moved to reconsider the CA Decision, 13 but it was denied;14 hence, this petition.

Incidentally, on July 16, 2009, the Company filed a Manifestation15 informing this Court that
its stockholders and directors unanimously voted to shorten the Companys corporate
existence only until June 30, 2006, and that the three-year period allowed by law for
liquidation of the Companys affairs already expired on June 30, 2009. Referring to Gelano v.
Court of Appeals,16 Public Interest Center, Inc. v. Elma,17 and Atienza v. Villarosa,18 it urged Us,
however, to still resolve the case for future guidance of the bench and the bar as the issue
raised herein allegedly calls for a clarification of a legal principle, specifically, whether the
VA is empowered to rule on a matter not covered by the issue submitted for arbitration.

Even if this Court would brush aside technicality by ignoring the supervening event that renders this
case moot and academic19 due to the permanent cessation of the Companys business operation on
June 30, 2009, the arguments raised in this petition still fail to convince Us.

We confirm that the VA ruled on a matter that is covered by the sole issue submitted for voluntary
arbitration. Resultantly, the CA did not commit serious error when it sustained the ruling that
the hiring of contractual employees from PESO was not in keeping with the intent and
Labor II – 1
spirit of the CBA. Indeed, the opinion of the VA is germane to, or, in the words of the CA,
"interrelated and intertwined with," the sole issue submitted for resolution by the parties. This being
said, the Companys invocation of Sections 4 and 5, Rule IV 20 and Section 5, Rule VI21 of the Revised
Procedural Guidelines in the Conduct of Voluntary Arbitration Proceedings dated October 15, 2004
issued by the NCMB is plainly out of order.

Likewise, the Company cannot find solace in its cited case of Ludo & Luym Corporation v.
Saornido.22 In Ludo, the company was engaged in the manufacture of coconut oil, corn starch,
glucose and related products. In the course of its business operations, it engaged the arrastre
services of CLAS for the loading and unloading of its finished products at the wharf. The arrastre
workers deployed by CLAS to perform the services needed were subsequently hired, on different
dates, as Ludos regular rank-and-file employees. Thereafter, said employees joined LEU, which acted
as the exclusive bargaining agent of the rank-and-file employees. When LEU entered into a CBA with
Ludo, providing for certain benefits to the employees (the amount of which vary according to the
length of service rendered), it requested to include in its members period of service the time during
which they rendered arrastre services so that they could get higher benefits. The matter was
submitted for voluntary arbitration when Ludo failed to act. Per submission agreement executed by
both parties, the sole issue for resolution was the date of regularization of the workers. The VA
Decision ruled that: (1) the subject employees were engaged in activities necessary and desirable to
the business of Ludo, and (2) CLAS is a labor-only contractor of Ludo. It then disposed as follows: (a)
the complainants were considered regular employees six months from the first day of service at
CLAS; (b) the complainants, being entitled to the CBA benefits during the regular employment, were
awarded sick leave, vacation leave, and annual wage and salary increases during such period; (c)
respondents shall pay attorneys fees of 10% of the total award; and (d) an interest of 12% per
annum or 1% per month shall be imposed on the award from the date of promulgation until fully
paid. The VA added that all separation and/or retirement benefits shall be construed from the date of
regularization subject only to the appropriate government laws and other social legislation. Ludo filed
a motion for reconsideration, but the VA denied it. On appeal, the CA affirmed in toto the assailed
decision; hence, a petition was brought before this Court raising the issue, among others, of whether
a voluntary arbitrator can award benefits not claimed in the submission agreement. In denying the
petition, We ruled:cralawlibrary

Generally, the arbitrator is expected to decide only those questions expressly delineated by the
submission agreement. Nevertheless, the arbitrator can assume that he has the necessary power to
make a final settlement since arbitration is the final resort for the adjudication of disputes. The
succinct reasoning enunciated by the CA in support of its holding, that the Voluntary Arbitrator in a
labor controversy has jurisdiction to render the questioned arbitral awards, deserves our
concurrence, thus: cralawlibrary

In general, the arbitrator is expected to decide those questions expressly stated and limited in the
submission agreement. However, since arbitration is the final resort for the adjudication of disputes,
the arbitrator can assume that he has the power to make a final settlement. Thus, assuming that the
submission empowers the arbitrator to decide whether an employee was discharged for just cause,
the arbitrator in this instance can reasonably assume that his powers extended beyond giving a yes-
or-no answer and included the power to reinstate him with or without back pay.

In one case, the Supreme Court stressed that "xxx the Voluntary Arbitrator had plenary jurisdiction
and authority to interpret the agreement to arbitrate and to determine the scope of his own authority
subject only, in a proper case, to the certiorari jurisdiction of this Court. The Arbitrator, as already
indicated, viewed his authority as embracing not merely the determination of the abstract question of
whether or not a performance bonus was to be granted but also, in the affirmative case, the amount
thereof.

Labor II – 1
By the same token, the issue of regularization should be viewed as two-tiered issue. While the
submission agreement mentioned only the determination of the date or regularization, law and
jurisprudence give the voluntary arbitrator enough leeway of authority as well as adequate
prerogative to accomplish the reason for which the law on voluntary arbitration was created speedy
labor justice. It bears stressing that the underlying reason why this case arose is to settle, once and
for all, the ultimate question of whether respondent employees are entitled to higher benefits. To
require them to file another action for payment of such benefits would certainly undermine labor
proceedings and contravene the constitutional mandate providing full protection to labor. 23 ?r?l1

Indubitably, Ludo fortifies, not diminishes, the soundness of the questioned VA Decision. Said case
reaffirms the plenary jurisdiction and authority of the voluntary arbitrator to interpret the CBA and to
determine the scope of his/her own authority. Subject to judicial review, the leeway of authority as
well as adequate prerogative is aimed at accomplishing the rationale of the law on voluntary
arbitration speedy labor justice. In this case, a complete and final adjudication of the dispute
between the parties necessarily called for the resolution of the related and incidental issue of whether
the Company still violated the CBA but without being guilty of ULP as, needless to state, ULP is
committed only if there is gross violation of the agreement.

Lastly, the Company kept on harping that both the VA and the CA conceded that its engagement of
contractual workers from PESO was a valid exercise of management prerogative. It is confused. To
emphasize, declaring that a particular act falls within the concept of management prerogative is
significantly different from acknowledging that such act is a valid exercise thereof. What the VA and
the CA correctly ruled was that the Companys act of contracting out/outsourcing is within the
purview of management prerogative. Both did not say, however, that such act is a valid exercise
thereof. Obviously, this is due to the recognition that the CBA provisions agreed upon by the
Company and the Union delimit the free exercise of management prerogative pertaining to the hiring
of contractual employees. Indeed, the VA opined that "the right of the management to outsource
parts of its operations is not totally eliminated but is merely limited by the CBA," while the CA held
that "this management prerogative of contracting out services, however, is not without limitation. x x
x These categories of employees particularly with respect to casual employees serve as limitation to
the Companys prerogative to outsource parts of its operations especially when hiring contractual
employees." ???ñr?bl?š ??r†??l  l?? l?br?rÿ

A collective bargaining agreement is the law between the parties: cralawlibrary

It is familiar and fundamental doctrine in labor law that the CBA is the law between the parties and
they are obliged to comply with its provisions. We said so in Honda Phils., Inc. v. Samahan ng
Malayang Manggagawa sa Honda: cralawlibrary

A collective bargaining agreement or CBA refers to the negotiated contract between a legitimate
labor organization and the employer concerning wages, hours of work and all other terms and
conditions of employment in a bargaining unit. As in all contracts, the parties in a CBA may establish
such stipulations, clauses, terms and conditions as they may deem convenient provided these are not
contrary to law, morals, good customs, public order or public policy. Thus, where the CBA is clear
and unambiguous, it becomes the law between the parties and compliance therewith is mandated by
the express policy of the law.

Moreover, if the terms of a contract, as in a CBA, are clear and leave no doubt upon the intention of
the contracting parties, the literal meaning of their stipulations shall control. x x x. 24
?r?l1

In this case, Section 4, Article I (on categories of employees) of the CBA between the Company and
the Union must be read in conjunction with its Section 1, Article III (on union security). Both are
interconnected and must be given full force and effect. Also, these provisions are clear and
unambiguous. The terms are explicit and the language of the CBA is not susceptible to any other

Labor II – 1
interpretation. Hence, the literal meaning should prevail. As repeatedly held, the exercise of
management prerogative is not unlimited; it is subject to the limitations found in law, collective
bargaining agreement or the general principles of fair play and justice 25 Evidently, this case has one
of the restrictions- the presence of specific CBA provisions-unlike in San Miguel Corporation
Employees Union-PTGWO v. Bersamira,26 De Ocampo v. NLRC,27 Asian Alcohol Corporation v.
NLRC,28 and Serrano v. NLRC29cited by the Company. To reiterate, the CBA is the norm of conduct
between the parties and compliance therewith is mandated by the express policy of the law. 30 ?r?l1

WHEREFORE, the petition is DENIED. The assailed June 16, 2005 Decision, as well as the October 12,
2005 Resolution of the Court of Appeals, which sustained the October 26, 2004 Decision of the
Voluntary Arbitrator, are hereby AFFIRMED.

Labor II – 1
 39.) G.R. No. 191714, February 26, 2014

T & H SHOPFITTERS CORPORATION/GIN QUEEN CORPORATION, STINNES HUANG, BEN

HUANG AND ROGELIO MADRIAGA, Petitioners, v. T & H SHOPFITTERS CORPORATION/GIN
QUEEN WORKERS UNION, ELPIDIO ZALDIVAR, DARIOS GONZALES, WILLIAM DOMINGO,
BOBBY CASTILLO, JIMMY M. PASCUA, GERMANO M. BAJO, RICO L. MANZANO, ALLAN L.
CALLORINA, ROMEO BLANCO, GILBERT M. GARCIA, CARLOS F. GERILLO, EDUARDO A.
GRANDE, EDILBRANDO MARTICIO, VIVENCIO SUSANO, ROLANDO GARCIA, JR., MICHAEL
FABABIER, ROWELL MADRIAGA, PRESNIL TOLENTINO, MARVIN VENTURA, FRANCISCO
RIVARES, PLACIDO TOLENTINO AND ROLANDO ROMERO, Respondents.

DECISION

MENDOZA, J.:

Assailed in this petition for review on  certiorari  under Rule 45 of the Rules of Court are: 1) the
November 12, 2009 Decision1 of the Court of Appeals (CA), in CA–G.R. SP No. 107188, which
affirmed the July 24, 2007 and November 13, 2008 Decision 2 of the National Labor Relations
Commission (NLRC); and 2) its March 24, 2010 Resolution3 denying reconsideration of its decision.

The Facts

On September 7, 2004, the T&H Shopfitters Corporation/Gin Queen Corporation workers

union (THS–GQ Union) and Elpidio Zaldivar,4 Darios Gonzales, William Domingo, Bobby Castillo,
Jimmy M. Pascua, Germano M. Bajo,5 Rico L. Manzano, Allan L. Callorina,6 Romeo Blanco, Gilbert M.
Garcia, Carlos F. Gerillo, Eduardo A. Grande, Edilbrando Marticio, Vivencio Susano, Rolando Garcia,
Jr., Michael Fababier, Rowell Madriaga, Presnil Tolentino, Marvin Ventura, Francisco Rivares, Placido
Tolentino, and Rolando Romero (respondents), all of whom are officers and/or members of THS–GQ
union, filed their Complaint7 for Unfair Labor Practice (ULP) by way of union busting, and
Illegal Lockout, with moral and exemplary damages and attorney’s fees, against T&H Shopfitters
Corporation (T&H Shopfitters) and Gin Queen Corporation (Gin Queen) (collectively referred
to as “petitioners”), before the Labor Arbiter (LA).

Respondents treated T&H Shopfitters and Gin Queen as a single entity and their sole employer. In
their desire to improve their working conditions, respondents and other employees of
petitioners held their first formal meeting on November 23, 2003 to discuss the formation
of a union. The following day or on November 24, 2003, seventeen (17) employees were
barred from entering petitioners’ factory premises located in Castillejos, Zambales, and
ordered to transfer to T&H Shopfitters’ warehouse at Subic Bay Freeport Zone (SBFZ) purportedly
because of its expansion. Afterwards, the said seventeen (17) employees were repeatedly
ordered to go on forced leave due to the unavailability of work.

On December 18, 2003, the Department of Labor and Employment (DOLE), Regional Office No. III
issued a certificate of registration in favor of THS–GQ Union.

Respondents contended that the affected employees were not given regular work
assignments, while subcontractors were continuously hired to perform their functions. This
development prompted respondents to seek the assistance of the National Conciliation and Mediation
Board. Subsequently, an agreement between petitioners and THS–GQ Union was reached. Petitioners
agreed to give priority to regular employees in the distribution of work assignments. Respondents
averred, however, that petitioners never complied with its commitment but instead hired contractual
workers.

Labor II – 1
On March 24, 2004, THS–GQ Union filed a petition for certification election. On July 12, 2004,
an order was issued to hold the certification election in both T&H Shopfitters and Gin Queen.
Eventually, the certification election was scheduled on October 11, 2004.

Meanwhile, through a memorandum, dated August 17, 2004, petitioner Ben Huang (Huang),
Director for Gin Queen, informed its employees of the expiration of the lease contract
between Gin Queen and its lessor in Castillejos, Zambales and announced the relocation of
its office and workers to Cabangan, Zambales. Some of the respondents, who visited the
site in Cabangan, discovered that it was a “talahiban” or grassland. Later, the said union
officers and members were made to work as grass cutters in Cabangan, under the supervision
of a certain Barangay Captain Greg Pangan. Due to these circumstances, the employees assigned
in Cabangan did not report for work. As a consequence, the THS–GQ Union president was
made to explain why he should not be terminated for insubordination. The other employees
who likewise failed to report in Cabangan were meted out with suspension.

On October 10, 2004, petitioners sponsored a field trip to Iba, Zambales, for its employees.
The officers and members of the THS–GQ Union were purportedly excluded from the field
trip. On the evening of the field trip, a certain Angel Madriaga, a sales officer of petitioners,
campaigned against the union in the forthcoming certification election.

The following day or on October 11, 2004, the employees were escorted from the field trip to
the polling center in Zambales to cast their votes. On October 13, 2004, the remaining
employees situated at the SBFZ plant cast their votes as well. Due to the heavy pressure exerted
by petitioners, the votes for “no union” prevailed. On October 14, 2004, the THS–GQ Union
filed its protest with respect to the certification election proceedings.

Respondents averred that the following week after the certification elections were held, petitioners
retrenched THG–GQ Union officers and members assigned at the Zambales plant.
Respondents claimed that the work weeks of those employees in the SBFZ plant were
drastically reduced to only three (3) days in a month.

In its defense, Gin Queen, claiming that it is a corporation separate and distinct from T&H
Shopfitters, stressed that respondents were all employees. Gin Queen claimed that due to the
decrease in orders from its customers, they had to resort to cost cutting measures to avoid
anticipated financial losses. Thus, it assigned work on a rotational basis. It was of the impression that
the employees, who opposed its economic measures, were merely motivated by spite in filing the
complaint for ULP against it.

In addition, Gin Queen explained that its transfer from Castillejos, Zambales to Cabangan, Zambales
was a result of the expiration of its lease agreement with Myra D. Lumibao (Myra), its lessor. Since
the Cabangan site was bare and still required construction, Gin Queen offered work, to employees
who opted to stay, on rotation as well.

In its Decision,8 dated December 21, 2005, the LA dismissed respondents’ complaint and all their
money claims for lack of merit.

In dismissing the complaint, the LA explained:

x x x x.

In the case at bar, we carefully examined the grounds raised by the complainants [herein
respondents] as basis for claiming that the respondents [herein petitioners] committed unfair labor
practices by way of illegal lockout, one of which is the alleged transfer of 17 workers to Subic Bay
Freeport Zone, however, we are dismay (sic) to know that not even one of these 17 workers is a
Labor II – 1
complainant in these cases. While the labor union may represent its members in filing cases before
this Office, at least these members must show their intention to file a case by signing in the
complaint to prove that they have grievances against their employer which was lacking in these
cases. Further, there was no showing that the transfer of these 17 workers is considered an unfair
labor practice of the respondents considering that their transfer was effected long before the
union was organized.

We also analyzed the allegations of the complainants that the transfer of the working cite (sic) of the
respondent Gin Queen Corporation was a part of the unfair labor practices committed by the
respondents, however, the complainants failed miserably to controvert the documentary evidence
adduced by the respondent Gin Queen Corporation that the lease contract agreement of the place
had already expired and it was the management prerogative to transfer as a cost cutting measures.
Again the transfer of the place of work would not be considered as unfair labor practice.

Complainants alleged that the respondents committed unfair labor practices by means of ‘lockout’
wherein the respondents should have temporarily refused to provide work to the complainants by a
result of labor or industrial dispute. Complainants failed to show that the rotation of work for them is
considered an unfair labor practice and considered a ‘Lockout’. Complainants rather submitted
several notices showing that the company has no sufficient orders coming from clients and does not
have enough raw materials for production as basis for these complainants not to render work and be
rotated, and thus controvert their allegations that there was ‘lockout’ committed by the respondents.
Further, the documentary evidences adduced by the complainants clearly show that respondents
never terminated the complainants when they were given their notices of suspension negating the
claim that there was ‘lockout’ committed by respondents.

x x x x.9

Aggrieved, respondents appealed to the NLRC. In its July 24, 2007 Decision, the NLRC  reversed the
LA decision and ruled in favor of respondents. The dispositive portion of the said decision reads:

WHEREFORE, the decision appealed from is hereby REVERSED.

Respondents T & H Shopfitters Corp., Gin Queen Corp. (or ‘MDL’, as it is now called), Stennis Huang,
as well as the presidents of the respondent corporations as of November 2003 and the date of the
execution of this decision are hereby ordered to pay each of the complainants moral and exemplary
damages amounting to P50,000.00 and P35,000.00 respectively. In addition, they shall pay the
complainants attorney’s fees equivalent to ten percent (10%) of the total judgment award.

SO ORDERED.

In granting the appeal, the NLRC reasoned:

Based on the above–mentioned affidavits, 10 it may be concluded that the respondents [herein
petitioners] committed unfair labor practice acts consisting in interfering with the exercise
of the employees’ right to self–organization (specifically, sponsoring a field trip on the day
preceding the certification election, warning the employees of dire consequences should
the union prevail, and escorting them to the polling center) and discriminating in regard to
conditions of employment in order to discourage union membership (assigning union officers
and active union members as grass cutters on rotation basis).

xxxx

Furthermore, it is noteworthy that, based on their Articles of Incorporation, T & H Corporation and
Gin Queen Corporation are engaged in the same line of business.
Labor II – 1
It should also be noted that respondents did not controvert the allegations to the effect that Myra D.
Lumibao, the supposed lessor of respondent corporations, is the wife of respondent Stennis Huang,
and that Gin Queen Corporation has been renamed ‘MDL’, but still carries on the same business in
the same premises using the same machines and facilities. These circumstances, together with the
supposed assignment of respondent Stennis Huang’s interest in Gin Queen Corporation to a third
party are badges of fraud that justify the piercing of the veil of corporate fiction. x x x

Thus, based on the foregoing, respondents T & H Shopfitters Corporation, Gin Queen Corporation
(now known as ‘MDL’) and Stennis Huang, as well as the presidents of the respondent corporations
as of November 2003 and the date of execution of this decision may be held liable for unfair labor
practice and the corresponding award of moral and exemplary damages. 11

Petitioners filed a motion for reconsideration but the NLRC denied the same in its November 13, 2008
Decision.

Dissatisfied with the adverse ruling, petitioners instituted a petition for certiorari under Rule 65 of the
Rules of Court before the CA arguing grave abuse of discretion on the part of the NLRC in reversing
the LA decision.

In its Decision, dated November 12, 2009, the CA  sustained the NLRC ruling. The  fallo of which
reads:

WHEREFORE, premises considered, the petition for certiorari is DENIED. The NLRC Decisions dated
July 24, 2007 and November 13, 2008 in NLRC NCR CA NO. 048258 (NLRC RAB III–09–7882–04,
NLRC RAB III–09–7980–04) are AFFIRMED.

SO ORDERED.

The CA held that errors of judgment are not within the province of a special civil action for certiorari.
It declared that factual findings of quasi–judicial agencies that had acquired expertise in matters
entrusted to their jurisdiction were accorded not only respect but finality if they were supported by
substantial evidence. The CA noted that the NLRC considered the evidence and applied the law in this
case, thus, no grave abuse of discretion could be imputed on the part of the NLRC in reversing the LA
ruling.

Petitioners moved for reconsideration but the same was denied by the CA in its March 24, 2010
Resolution.

Not in conformity with the ruling of the CA, petitioners seek relief with this Court raising the following

ISSUES

I. WHETHER OR NOT PETITIONERS T & H SHOPFITTERS CORPORATION AND GIN

QUEEN CORPORATION ARE ONE AND THE SAME CORPORATION.
   
II. WHETHER OR NOT PETITIONER GIN QUEEN CORPORATION IS LIABLE TO THE
RESPONDENTS FOR UNFAIR LABOR PRACTICE.
   
III. WHETHER OR NOT THE AWARD OF MORAL AND EXEMPLARY DAMAGES IN FAVOR
OF THE RESPONDENTS IS PROPER.
   
IV. WHETHER OR NOT THE AWARD OF TEN PERCENT (10%) ATTORNEY’S FEES IN FAVOR
Labor II – 1
 OF THE RESPONDENT IS PROPER.12

Simply put, the issue for the Court’s resolution is whether ULP acts were committed by petitioners
against respondents in the case at bench.

In support of their position, petitioners stress that T&H Shopfitters and Gin Queen are corporations
separate and distinct from each other. Consequently, T&H Shopfitters and Stinnes Huang, an officer
of T&H Shopfitters, cannot be held liable for ULP for the reason that there is no employer–employee
relationship between the former and respondents. Further, Gin Queen avers that its decision to
implement an enforced rotation of work assignments for respondents was a management
prerogative permitted by law, justified by the decrease in the orders it received from its
customers. It explains that its failure to present concrete proof of its decreasing orders was due to
the impossibility of proving a negative assertion. It also asserts that the transfer from Castillejos to
Cabangan was made in good faith and solely because of the expiration of its lease contract in
Castillejos.

The Court’s Ruling

As to the issue of ULP, petitioners’ argument is utterly without merit.

In the case at bench, petitioners are being accused of violations of paragraphs (a), (c), and (e) of
Article 257 (formerly Article 248) of the Labor Code,13 to wit:

Article 257. Unfair labor practices of employers.––It shall be unlawful for an employer to

commit any of the following unfair labor practices:

(a) To interfere with, restrain or coerce employees in the exercise of their right to self–
organization;

xxxx

(c) To contract out services or functions being performed by union members when such
will interfere with, restrain, or coerce employees in the exercise of their right to self–
organization;

xxxx

(e) To discriminate in regard to wages, hours of work, and other terms and conditions of
employment in order to encourage or discourage membership in any labor organization. x
xx

The concept of ULP is embodied in Article 256 (formerly Article 247) of the Labor Code, 14 which
provides:

Article 256. Concept of unfair labor practice and procedure for prosecution thereof.––Unfair labor
practices violate the constitutional right of workers and employees to self–organization, are inimical
to the legitimate interests of both labor and management, including their right to bargain collectively
and otherwise deal with each other in an atmosphere of freedom and mutual respect, disrupt
industrial peace and hinder the promotion of healthy and stable labor–management relations.

xxxx

Labor II – 1
In essence, ULP relates to the commission of acts that transgress the workers’ right to
organize. As specified in Articles 248 [now Article 257] and 249 [now Article 258] of the Labor Code,
the prohibited acts must necessarily relate to the workers’ right to self–organization x x
x.15

In the case of Insular Life Assurance Co., Ltd. Employees Association – NATU v. Insular Life
Assurance Co. Ltd.,16 this Court had occasion to lay down the test of whether an employer has
interfered with and coerced employees in the exercise of their right to self–organization,
that is, whether the employer has engaged in conduct which, it may reasonably be said,
tends to interfere with the free exercise of employees’ rights; and that it is not
necessary that there be direct evidence that any employee was in fact intimidated or
coerced by statements of threats of the employer if there is a reasonable inference that
anti–union conduct of the employer does have an adverse effect on self–organization and
collective bargaining.

The questioned acts of petitioners, namely: 1) sponsoring a field trip to Zambales for its
employees, to the exclusion of union members, before the scheduled certification election;
2) the active campaign by the sales officer of petitioners against the union prevailing as a
bargaining agent during the field trip; 3) escorting its employees after the field trip to the
polling center; 4) the continuous hiring of subcontractors performing respondents’
functions; 5) assigning union members to the Cabangan site to work as grass cutters; and
6) the enforcement of work on a rotational basis for union members, all reek of
interference on the part of petitioners.

Indubitably, the various acts of petitioners, taken together, reasonably support an inference
that, indeed, such were all orchestrated to restrict respondents’ free exercise of their right
to self–organization. The Court is of the considered view that petitioners’ undisputed actions prior
and immediately before the scheduled certification election, while seemingly innocuous, unduly
meddled in the affairs of its employees in selecting their exclusive bargaining representative. In  Holy
Child Catholic School v. Hon. Patricia Sto. Tomas,17 the Court ruled that a certification election was
the sole concern of the workers, save when the employer itself had to file the petition x x x, but even
after such filing, its role in the certification process ceased and became merely a bystander. Thus,
petitioners had no business persuading and/or assisting its employees in their legally protected
independent process of selecting their exclusive bargaining representative. The fact and peculiar
timing of the field trip sponsored by petitioners for its employees not affiliated with THS–GQ Union,
although a positive enticement, was undoubtedly extraneous influence designed to impede
respondents in their quest to be certified. This cannot be countenanced.

Not content with achieving a “no union” vote in the certification election, petitioners
launched a vindictive campaign against union members by assigning work on a rotational
basis while subcontractors performed the latter’s functions regularly. Worse, some of the
respondents were made to work as grass cutters in an effort to dissuade them from
further collective action. Again, this cannot be countenanced.

More importantly, petitioners’ bare denial of some of the complained acts and unacceptable
explanations, a mere afterthought at best, cannot prevail over respondents’ detailed narration of the
events that transpired. At this juncture, it bears to emphasize that in labor cases, the quantum of
proof necessary is substantial evidence,18 or that amount of relevant evidence as a reasonable mind
might accept as adequate to support a conclusion, even if other minds, equally reasonable, might
conceivably opine otherwise.19

In fine, mindful of the nature of the charge of ULP, including its civil and/or criminal consequences,
the Court finds that the NLRC, as correctly sustained by the CA, had sufficient factual and legal bases
to support its finding of ULP.

Labor II – 1
Anent the issue on the award of attorney’s fess, the applicable law concerning the grant thereof in
labor cases is Article 11120 of the Labor Code. Pursuant thereto, the award of 10% attorney’s fees is
limited to cases of unlawful withholding of wages. In this case, however, the Court cannot find any
claim or proof that petitioners unlawfully withheld the wages of respondents. Consequently, the grant
of 10% attorney’s fees in favor of respondents is not justified under the circumstances. Accordingly,
the Court deems it proper to delete the same.

WHEREFORE, the November 12, 2009 Decision of the Court of Appeals and its March 24, 2010
Resolution, in CA–G.R. SP No. 107188, are AFFIRMED, except with respect to the award of
attorney’s fees which is hereby DELETED.

Labor II – 1
40.) G.R. No. 201595

ALLAN M. MENDOZA, Petitioner,
vs.
OFFICERS OF MANILA WATER EMPLOYEES UNION (MWEU), namely, EDUARDO B. BORELA,
BUENAVENTURA QUEBRAL, ELIZABETH COMETA, ALEJANDRO TORRES, AMORSOLO TIERRA,
SOLEDAD YEBAN, LUIS RENDON, VIRGINIA APILADO, TERESITA BOLO, ROGELIO BARBERO, JOSE
CASAÑAS, ALFREDO MAGA, EMILIO FERNANDEZ, ROSITA BUENA VENTURA, ALMENIO CANCINO,
ADELA IMANA, MARIO MANCENIDO, WILFREDO MANDILAG, ROLANDO MANLAP AZ, EFREN
MONTEMAYOR, NELSON PAGULAYAN, CARLOS VILLA, RIC BRIONES, and CHITO
BERNARDO, Respondents.

DECISION

DEL CASTILLO, J.:

This Petition for Review on Certiorari  assails the April 24, 2012 Decision  of the Court of Appeals (CA) which
1 2

dismissed the Petition for Certiorari  in CA-G.R. SP No. 115639.

3

Factual Antecedents

Petitioner was a member of the Manila Water Employees Union (MWEU), a Department of Labor and
Employment (DOLE)-registered labor organization consisting of rank-and-file employees within Manila Water
Company (MWC). The respondents herein named – Eduardo B. Borela (Borela), Buenaventura Quebral
(Quebral), Elizabeth Cometa (Cometa), Alejandro Torres (Torres), Amorsolo Tierra (Tierra), Soledad Yeban
(Yeban), Luis Rendon (Rendon), Virginia Apilado (Apilado), Teresita Bolo (Bolo), Rogelio Barbero (Barbero), Jose
Casañas (Casañas), Alfredo Maga (Maga), Emilio Fernandez (Fernandez), Rosita Buenaventura (Buenaventura),
Almenio Cancino (Cancino), Adela Imana, Mario Mancenido (Mancenido), Wilfredo Mandilag (Mandilag), Rolando
Manlapaz (Manlapaz), Efren Montemayor (Montemayor), Nelson Pagulayan, Carlos Villa, Ric Briones, and Chito
Bernardo – were MWEU officers during the period material to this Petition, with Borela as President and
Chairman of the MWEU Executive Board, Quebral as First Vice-President and Treasurer, and Cometa as
Secretary.4

In an April 11, 2007 letter,  MWEU through Cometa informed petitioner that the union was unable to fully
5

deduct the increased P200.00 union dues from his salary due to lack of the required December 2006 check-
off authorization from him. Petitioner was warned that his failure to pay the union dues would result in
sanctions upon him. Quebral informed Borela, through a May 2, 2007 letter,  that for such failure to pay the
6

union dues, petitioner and several others violated Section 1(g), Article IX of the MWEU’s Constitution and
By-Laws.  In turn, Borela referred the charge to the MWEU grievance committee for investigation.
7

On May 21, 2007, a notice of hearing was sent to petitioner, who attended the scheduled hearing. On June 6,
2007, the MWEU grievance committee recommended that petitioner be suspended for 30 days.

In a June 20, 2007 letter,  Borela informed petitioner and his corespondents of the MWEU Executive Board’s
8

"unanimous approval"  of the grievance committee’s recommendation and imposition upon them of a penalty of 30
9

days suspension, effective June 25, 2007.

In a June 26, 2007 letter  to Borela, petitioner and his co-respondents took exception to the imposition and
10

indicated their intention to appeal the same to the General Membership Assembly in accordance with Section
2(g), Article V of the union’s Constitution and By-Laws,  which grants them the right to appeal any arbitrary
11

resolution, policy and rule promulgated by the Executive Board to the General Membership Assembly. In a
June 28, 2007 reply,  Borela denied petitioner’s appeal, stating that the prescribed period for appeal had
12

expired.

Labor II – 1
Petitioner and his co-respondents sent another letter  on July 4, 2007, reiterating their arguments and demanding
13

that the General Membership Assembly be convened in order that their appeal could be taken up. The letter was not
acted upon.

Petitioner was once more charged with non-payment of union dues, and was required to attend an August 3,
2007 hearing.  Thereafter, petitioner was again penalized with a 30-day suspension through an August 21,
14

2007 letter  by Borela informing petitioner of the Executive Board’s "unanimous approval"  of the grievance
15 16

committee recommendation to suspend him effective August 24, 2007, to which he submitted a written
reply,  invoking his right to appeal through the convening of the General Membership Assembly. However, the
17

respondents did not act on petitioner’s plea.

Meanwhile, MWEU scheduled an election of officers on September 14, 2007. Petitioner filed his certificate of
candidacy for Vice-President, but he was disqualified for not being a member in good standing on account of
his suspension.

On October 2, 2007, petitioner was charged with non-payment of union dues for the third time. He did not
attend the scheduled hearing. This time, he was meted the penalty of expulsion from the union, per
"unanimous approval"  of the members of the Executive Board. His pleas for an appeal to the General Membership
18

Assembly were once more unheeded. 19

In 2008, during the freedom period and negotiations for a new collective bargaining agreement (CBA) with MWC,
petitioner joined another union, the Workers Association for Transparency, Empowerment and Reform, All-
Filipino Workers Confederation (WATER-AFWC). He was elected union President. Other MWEU members were
inclined to join WATER-AFWC, but MWEU director Torres threatened that they would not get benefits from the
new CBA. 20

The MWEU leadership submitted a proposed CBA which contained provisions to the effect that in the event
of retrenchment, non-MWEU members shall be removed first, and that upon the signing of the CBA, only
MWEU members shall receive a signing bonus. 21

Ruling of the Labor Arbiter

On October 13, 2008, petitioner filed a Complaint  against respondents for unfair labor practices, damages,
22

and attorney’s fees before the National Labor Relations Commission (NLRC), Quezon City, docketed as NLRC
Case No. NCR-10-14255-08. In his Position Paper and other written submissions,  petitioner accused the
23

respondents of illegal termination from MWEU in connection with the events relative to his non-payment of union
dues; unlawful interference, coercion, and violation of the rights of MWC employees to self-organization – in
connection with the proposed CBA submitted by MWEU leadership, which petitioner claims contained
provisions that discriminated against non-MWEU members. Petitioner prayed in his Supplemental Position
Paper that respondents be held guilty of unfair labor practices and ordered to indemnify him moral damages in the
amount of P100,000.00, exemplary damages amounting to P50,000.00, and 10% attorney’s fees.

In their joint Position Paper and other pleadings,  respondents claimed that the Labor Arbiter had no jurisdiction
24

over the dispute, which is intra-union in nature; that the Bureau of Labor Relations (BLR) was the proper venue, in
accordance with Article 226 of the Labor Code  and Section 1, Rule XI of Department Order 40-03, series of 2003,
25

of the DOLE;  and that they were not guilty of unfair labor practices, discrimination, coercion or restraint.
26

On May 29, 2009, Labor Arbiter Virginia T. Luyas-Azarraga issued her Decision  which decreed as follows:
27

Indeed the filing of the instant case is still premature. Section 5, Article X-Investigation Procedures and Appeal
Process of the Union Constitution and By-Laws provides that:

Section 5. Any dismissed and/or expelled member shall have the rights to appeal to the Executive Board within
seven (7) days from the date of notice of the said dismissal and/or expulsion, which in [turn] shall be referred to the
General Membership Assembly. In case of an appeal, a simple majority of the decision of the Executive Board is

Labor II – 1
imperative. The same shall be approved/disapproved by a majority vote of the general membership assembly in a
meeting duly called for the purpose.

On the basis of the foregoing, the parties shall exhaust first all the administrative remedies before resorting to
compulsory arbitration. Thus, instant case is referred back to the Union for the General Assembly to act or
deliberate complainant’s appeal on the decision of the Executive Board.

WHEREFORE PREMISES CONSIDERED, instant case is referred back to the Union level for the General
Assembly to act on complainant’s appeal.

SO ORDERED. 28

Ruling of the National Labor Relations Commission

Petitioner appealed before the NLRC, where the case was docketed as NLRC LAC No. 07-001913-09. On March
15, 2010, the NLRC issued its Decision,  declaring as follows:
29

Complainant  imputes serious error to the Labor Arbiter when she decided as follows:
30

a. Referring back the subject case to the Union level for the General Assembly to act on his appeal.

b. Not ruling that respondents are guilty of ULP as charged.

c. Not granting to complainant moral and exemplary damages and attorney’s fees.

Complainant, in support of his charges, claims that respondents restrained or coerced him in the exercise of
his right as a union member in violation of paragraph "a", Article 249 of the Labor Code,  particularly, in
31

denying him the explanation as to whether there was observance of the proper procedure in the increase of
the membership dues from P100.00 to P200.00 per month. Further, complainant avers that he was denied
the right to appeal his suspension and expulsion in accordance with the provisions of the Union’s
Constitution and By-Laws. In addition, complainant claims that respondents attempted to cause the
management to discriminate against the members of WATER-AFWC thru the proposed CBA.

Pertinent to the issue then on hand, the Labor Arbiter ordered that the case be referred back to the Union level for
the General Assembly to act on complainant’s appeal. Hence, these appeals.

After a careful look at all the documents submitted and a meticulous review of the facts, We find that this
Commission lacks the jurisdictional competence to act on this case.

Article 217 of the Labor Code,  as amended, specifically enumerates the cases over which the Labor Arbiters and
32

the Commission have original and exclusive jurisdiction. A perusal of the record reveals that the causes of action
invoked by complainant do not fall under any of the enumerations therein. Clearly, We have no jurisdiction over the
same.

Moreover, pursuant to Section 1, Rule XI, as amended, DOLE Department Order No. 40-03 in particular, Item A,
paragraphs (h) and (j) and Item B, paragraph (a)(3), respectively, provide:

"A. Inter-Intra-Union disputes shall include:

"(h) violation of or disagreements over any provision of the Constitution and By-Laws of a Union or workers’
association.

"(j) violation of the rights and conditions of membership in a Union or workers’ association.

"B. Other Labor Relations disputes, not otherwise covered by Article 217 of the Labor Code, shall include –
Labor II – 1
"3. a labor union and an individual who is not a member of said union."

Clearly, the above-mentioned disputes and conflict fall under the jurisdiction of the Bureau of Labor Relations, as
these are inter/intra-union disputes.

WHEREFORE, the decision of the Labor Arbiter a quo dated May 29, 2009 is hereby declared NULL and VOID for
being rendered without jurisdiction and the instant complaint is DISMISSED.

SO ORDERED. 33

Petitioner moved for reconsideration,  but in a June 16, 2010 Resolution,  the motion was denied and the NLRC
34 35

sustained its Decision.

Ruling of the Court of Appeals

In a Petition for Certiorari  filed with the CA and docketed as CA-G.R. SP No. 115639, petitioner sought to reverse
36

the NLRC Decision and be awarded his claim for damages and attorney’s fees on account of respondents’ unfair
labor practices, arguing among others that his charge of unfair labor practices is cognizable by the Labor Arbiter;
that the fact that the dispute is inter- or intra-union in nature cannot erase the fact that respondents were guilty of
unfair labor practices in interfering and restraining him in the exercise of his right to self-organization as member of
both MWEU and WATER-AFWC, and in discriminating against him and other members through the provisions of the
proposed 2008 CBA which they drafted; that his failure to pay the increased union dues was proper since the
approval of said increase was arrived at without observing the prescribed voting procedure laid down in the Labor
Code; that he is entitled to an award of damages and attorney’s fees as a result of respondents’ illegal acts in
discriminating against him; and that in ruling the way it did, the NLRC committed grave abuse of discretion.

On April 24, 2012, the CA issued the assailed Decision containing the following pronouncement:

The petition lacks merit.

Petitioner’s causes of action against MWEU are inter/intra-union disputes cognizable by the BLR whose
functions and jurisdiction are largely confined to union matters, collective bargaining registry, and labor education.
Section 1, Rule XI of Department Order (D.O.) No. 40-03, Series of 2003, of the Department of Labor and
Employment enumerates instances of inter/intra-union disputes, viz:

Section 1. Coverage. – Inter/intra-union disputes shall include:

xxxx

(b) conduct of election of union and workers’ association officers/nullification of election of union and workers’
association officers;

(c) audit/accounts examination of union or workers’ association funds;

xxxx

(g) validity/invalidity of impeachment/ expulsion of union and workers’ association officers and members;

xxxx

(j) violations of or disagreements over any provision in a union or workers’ association constitution and by-laws;

xxxx

(l) violations of the rights and conditions of union or workers’ association membership;
Labor II – 1
 xxxx

(n) such other disputes or conflicts involving the rights to self-organization, union membership and collective
bargaining –

(1) between and among legitimate labor organizations;

(2) between and among members of a union or workers’ association.

In brief, "Inter-Union Dispute" refers to any conflict between and among legitimate labor unions involving
representation questions for purposes of collective bargaining or to any other conflict or dispute between legitimate
labor unions. "Intra-Union Dispute" refers to any conflict between and among union members, including grievances
arising from any violation of the rights and conditions of membership, violation of or disagreement over any provision
of the union’s constitution and by-laws, or disputes arising from chartering or affiliation of union. On the other hand,
the circumstances of unfair labor practices (ULP) of a labor organization are stated in Article 249 of the Labor Code,
to wit:

Article 249. Unfair labor practices of labor organizations. It shall be unlawful for labor organization, its officers,
agents, or representatives to commit any of the following unfair labor practices:

(a) To restrain or coerce employees in the exercise of their right to self-organization; Provided, That the
labor organization shall have the right to prescribe its own rules with respect to the acquisition or retention of
membership;

(b) To cause or attempt to cause an employer to discriminate against an employee, including discrimination
against an employee with respect to whom membership in such organization has been denied or terminated
on any ground other than the usual terms and conditions under which membership or continuation of
membership is made available to other members;

xxxx

Applying the aforementioned rules, We find that the issues arising from petitioner’s right to information on the
increased membership dues, right to appeal his suspension and expulsion according to CBL provisions, and right to
vote and be voted on are essentially intra-union disputes; these involve violations of rights and conditions of union
membership. But his claim that a director of MWEU warned that non-MWEU members would not receive CBA
benefits is an inter-union dispute. It is more of an "interference" by a rival union to ensure the loyalty of its members
and to persuade non-members to join their union. This is not an actionable wrong because interfering in the
exercise of the right to organize is itself a function of self-organizing.  As long as it does not amount to restraint or
37

coercion, a labor organization may interfere in the employees’ right to self-organization.  Consequently, a
38

determination of validity or illegality of the alleged acts necessarily touches on union matters, not ULPs, and are
outside the scope of the labor arbiter’s jurisdiction.

As regards petitioner’s other accusations, i.e., discrimination in terms of meting out the penalty of expulsion against
him alone, and attempt to cause the employer, MWC, to discriminate against non-MWEU members in terms of
retrenchment or reduction of personnel, and signing bonus, while We may consider them as falling within the
concept of ULP under Article 249(a) and (b), still, petitioner’s complaint cannot prosper for lack of substantial
evidence. Other than his bare allegation, petitioner offered no proof that MWEU did not penalize some union
members who failed to pay the increased dues. On the proposed discriminatory CBA provisions, petitioner merely
attached the pages containing the questioned provisions without bothering to reveal the MWEU representatives
responsible for the said proposal. Article 249 mandates that "x x x only the officers, members of the governing
boards, representatives or agents or members of labor associations or organizations who have actually participated
in, authorized or ratified unfair labor practices shall be held criminally liable." Plain accusations against all MWEU
officers, without specifying their actual participation, do not suffice. Thus, the ULP charges must necessarily fail.

In administrative and quasi-judicial proceedings, only substantial evidence is necessary to establish the case for or
against a party. Substantial evidence is that amount of relevant evidence which a reasonable mind might accept as

Labor II – 1
adequate to justify a conclusion. Petitioner failed to discharge the burden of proving, by substantial evidence, the
allegations of ULP in his complaint. The NLRC, therefore, properly dismissed the case.

FOR THESE REASONS, the petition is DISMISSED.

SO ORDERED. 39

Thus, the instant Petition.

Issue

In an August 28, 2013 Resolution,  this Court resolved to give due course to the Petition, which claims that the CA
40

erred:

A. IN DECLARING THAT THE PRESENCE OF INTER/INTRA-UNION CONFLICTS NEGATES THE COMPLAINT

FOR UNFAIR LABOR PRACTICES AGAINST A LABOR ORGANIZATION AND ITS OFFICERS, AND IN
AFFIRMING THAT THE NLRC PROPERLY DISMISSED THE CASE FOR ALLEGED LACK OF JURISDICTION.

B. IN NOT RULING THAT RESPONDENTS ARE GUILTY OF UNFAIR LABOR PRACTICES UNDER ARTICLE
249(a) AND (b) OF THE LABOR CODE.

C. IN DECLARING THAT THE THREATS MADE BY A UNION OFFICER AGAINST MEMBERS OF A RIVAL
UNION IS (sic) MERELY AN "INTERFERENCE" AND DO NOT AMOUNT TO "RESTRAINT" OR "COERCION".

D. IN DECLARING THAT PETITIONER FAILED TO PRESENT SUBSTANTIAL EVIDENCE IN PROVING

RESPONDENTS’ SPECIFIC ACTS OF UNFAIR LABOR PRACTICES.

E. IN NOT RULING THAT RESPONDENTS ARE SOLIDARILY LIABLE TO PETITIONER FOR MORAL AND
EXEMPLARY DAMAGES, AND ATTORNEY’S FEES. 41

Petitioner’s Arguments

Praying that the assailed CA dispositions be set aside and that respondents be declared guilty of unfair labor
practices under Article 249(a) and (b) and adjudged liable for damages and attorney’s fees as prayed for in his
complaint, petitioner maintains in his Petition and Reply  that respondents are guilty of unfair labor practices which
42

he clearly enumerated and laid out in his pleadings below; that these unfair labor practices committed by
respondents fall within the jurisdiction of the Labor Arbiter; that the Labor Arbiter, the NLRC, and the CA failed to
rule on his accusation of unfair labor practices and simply dismissed his complaint on the ground that his causes of
action are intra- or inter-union in nature; that admittedly, some of his causes of action involved intra- or inter-union
disputes, but other acts of respondents constitute unfair labor practices; that he presented substantial evidence to
prove that respondents are guilty of unfair labor practices by failing to observe the proper procedure in the
imposition of the increased monthly union dues, and in unduly imposing the penalties of suspension and expulsion
against him; that under the union’s constitution and by-laws, he is given the right to appeal his suspension and
expulsion to the general membership assembly; that in denying him his rights as a union member and expelling him,
respondents are guilty of malice and evident bad faith; that respondents are equally guilty for violating and curtailing
his rights to vote and be voted to a position within the union, and for discriminating against non-MWEU members;
and that the totality of respondents’ conduct shows that they are guilty of unfair labor practices.

Respondent’s Arguments

In their joint Comment,  respondents maintain that petitioner raises issues of fact which are beyond the purview of a
43

petition for review on certiorari; that the findings of fact of the CA are final and conclusive; that the Labor Arbiter,
NLRC, and CA are one in declaring that there is no unfair labor practices committed against petitioner; that
petitioner’s other allegations fall within the jurisdiction of the BLR, as they refer to intra- or inter-union disputes
between the parties; that the issues arising from petitioner’s right to information on the increased dues, right to
appeal his suspension and expulsion, and right to vote and be voted upon are essentially intra-union in nature; that
Labor II – 1
his allegations regarding supposed coercion and restraint relative to benefits in the proposed CBA do not constitute
an actionable wrong; that all of the acts questioned by petitioner are covered by Section 1, Rule XI of Department
Order 40-03, series of 2003 as intra-/inter-union disputes which do not fall within the jurisdiction of the Labor Arbiter;
that in not paying his union dues, petitioner is guilty of insubordination and deserved the penalty of expulsion; that
petitioner failed to petition to convene the general assembly through the required signature of 30% of the union
membership in good standing pursuant to Article VI, Section 2(a) of MWEU’s Constitution and By-Laws or by a
petition of the majority of the general membership in good standing under Article VI, Section 3; and that for his
failure to resort to said remedies, petitioner can no longer question his suspension or expulsion and avail of his right
to appeal.

Our Ruling

The Court partly grants the Petition.

In labor cases, issues of fact are for the labor tribunals and the CA to resolve, as this Court is not a trier of facts.
However, when the conclusion arrived at by them is erroneous in certain respects, and would result in injustice as to
the parties, this Court must intervene to correct the error. While the Labor Arbiter, NLRC, and CA are one in their
conclusion in this case, they erred in failing to resolve petitioner’s charge of unfair labor practices against
respondents.

It is true that some of petitioner’s causes of action constitute intra-union cases cognizable by the BLR
under Article 226 of the Labor Code.

An intra-union dispute refers to any conflict between and among union members, including grievances arising from
any violation of the rights and conditions of membership, violation of or disagreement over any provision of the
union’s constitution and by-laws, or disputes arising from chartering or disaffiliation of the union. Sections 1 and 2,
Rule XI of Department Order No. 40-03, Series of 2003 of the DOLE enumerate the following circumstances as
inter/intra-union disputes x x x.
44

However, petitioner’s charge of unfair labor practices falls within the original and exclusive jurisdiction of

the Labor Arbiters, pursuant to Article 217 of the Labor Code. In addition, Article 247 of the same Code provides
that "the civil aspects of all cases involving unfair labor practices, which may include claims for actual, moral,
exemplary and other forms of damages, attorney’s fees and other affirmative relief, shall be under the jurisdiction of
the Labor Arbiters."

Unfair labor practices may be committed both by the employer under Article 248 and by labor organizations
under Article 249 of the Labor Code,  which provides as follows:
45

ART. 249. Unfair labor practices of labor organizations. - It shall be unfair labor practice for a labor organization, its
officers, agents or representatives:

(a) To restrain or coerce employees in the exercise of their right to self-organization. However, a labor
organization shall have the right to prescribe its own rules with respect to the acquisition or retention of
membership;

(b) To cause or attempt to cause an employer to discriminate against an employee, including discrimination
against an employee with respect to whom membership in such organization has been denied or to
terminate an employee on any ground other than the usual terms and conditions under which membership
or continuation of membership is made available to other members;

(c) To violate the duty, or refuse to bargain collectively with the employer, provided it is the representative of
the employees;

(d) To cause or attempt to cause an employer to pay or deliver or agree to pay or deliver any money or other
things of value, in the nature of an exaction, for services which are not performed or not to be performed,
including the demand for fee for union negotiations;
Labor II – 1
 (e) To ask for or accept negotiation or attorney’s fees from employers as part of the settlement of any issue
in collective bargaining or any other dispute; or

(f) To violate a collective bargaining agreement.

The provisions of the preceding paragraph notwithstanding, only the officers, members of governing boards,
representatives or agents or members of labor associations or organizations who have actually participated in,
authorized or ratified unfair labor practices shall be held criminally liable. (As amended by Batas Pambansa Bilang
130, August 21, 1981).

Petitioner contends that respondents committed acts constituting unfair labor practices – which charge was
particularly laid out in his pleadings, but that the Labor Arbiter, the NLRC, and the CA ignored it and simply
dismissed his complaint on the ground that his causes of action were intra- or inter-union in nature. Specifically,
petitioner claims that he was suspended and expelled from MWEU illegally as a result of the denial of his
right to appeal his case to the general membership assembly in accordance with the union’s constitution
and by-laws. On the other hand, respondents counter that such charge is intra-union in nature, and that
petitioner lost his right to appeal when he failed to petition to convene the general assembly through the
required signature of 30% of the union membership in good standing pursuant to Article VI, Section 2(a) of
MWEU’s Constitution and By-Laws or by a petition of the majority of the general membership in good standing
under Article VI, Section 3.

Under Article VI, Section 2(a) of MWEU’s Constitution and By-Laws, the general membership assembly has
the power to "review revise modify affirm or repeal [sic] resolution and decision of the Executive Board
and/or committees upon petition of thirty percent (30%) of the Union in good standing,"  and under Section
46

2(d), to "revise, modify, affirm or reverse all expulsion cases."  Under Section 3 of the same Article, "[t]he decision
47

of the Executive Board may be appealed to the General Membership which by a simple majority vote reverse the
decision of said body. If the general Assembly is not in session the decision of the Executive Board may be reversed
by a petition of the majority of the general membership in good standing."  And, in Article X, Section 5, "[a]ny
48

dismissed and/or expelled member shall have the right to appeal to the Executive Board within seven days from
notice of said dismissal and/or expulsion which, in [turn] shall be referred to the General membership assembly. In
case of an appeal, a simple majority of the decision of the Executive Board is imperative. The same shall be
approved/disapproved by a majority vote of the general membership assembly in a meeting duly called for the
purpose."49

In regard to suspension of a union member, MWEU’s Constitution and By-Laws provides under Article X,
Section 4 thereof that "[a]ny suspended member shall have the right to appeal within three (3) working days
from the date of notice of said suspension. In case of an appeal a simple majority of vote of the Executive
Board shall be necessary to nullify the suspension."

Thus, when an MWEU member is suspended, he is given the right to appeal such suspension within three
working days from the date of notice of said suspension, which appeal the MWEU Executive Board is
obligated to act upon by a simple majority vote. When the penalty imposed is expulsion, the expelled
member is given seven days from notice of said dismissal and/or expulsion to appeal to the Executive
Board, which is required to act by a simple majority vote of its members. The Board’s decision shall then be
approved/ disapproved by a majority vote of the general membership assembly in a meeting duly called for
the purpose. 1avvphi1

The documentary evidence is clear that when petitioner received Borela’s August 21, 2007 letter informing him of
the Executive Board’s unanimous approval of the grievance committee recommendation to suspend him for the
second time effective August 24, 2007, he immediately and timely filed a written appeal. However, the
Executive Board – then consisting of respondents Borela, Tierra, Bolo, Casañas, Fernandez, Rendon,
Montemayor, Torres, Quebral, Pagulayan, Cancino, Maga, Cometa, Mancenido, and two others who are not
respondents herein – did not act thereon. Then again, when petitioner was charged for the third time and
meted the penalty of expulsion from MWEU by the unanimous vote of the Executive Board, his timely
appeal was again not acted upon by said board – this time consisting of respondents Borela, Quebral, Tierra,
Imana, Rendon, Yeban, Cancino, Torres, Montemayor, Mancenido, Mandilag, Fernandez, Buenaventura, Apilado,
Maga, Barbero, Cometa, Bolo, and Manlapaz.
Labor II – 1
Thus, contrary to respondents’ argument that petitioner lost his right to appeal when he failed to petition to
convene the general assembly through the required signature of 30% of the union membership in good
standing pursuant to Article VI, Section 2(a) of MWEU’s Constitution and By-Laws or by a petition of the
majority of the general membership in good standing under Article VI, Section 3, this Court finds that
petitioner was illegally suspended for the second time and thereafter unlawfully expelled from MWEU due to
respondents’ failure to act on his written appeals. The required petition to convene the general assembly
through the required signature of 30% (under Article VI, Section 2[a]) or majority (under Article VI, Section
3) of the union membership does not apply in petitioner’s case; the Executive Board must first act on his
two appeals before the matter could properly be referred to the general membership. Because respondents
did not act on his two appeals, petitioner was unceremoniously suspended, disqualified and deprived of his right to
run for the position of MWEU Vice-President in the September 14, 2007 election of officers, expelled from MWEU,
and forced to join another union, WATER-AFWC. For these, respondents are guilty of unfair labor practices
under Article 249 (a) and (b) – that is, violation of petitioner’s right to self-organization, unlawful
discrimination, and illegal termination of his union membership – which case falls within the original and
exclusive jurisdiction of the Labor Arbiters, in accordance with Article 217 of the Labor Code.

The primary concept of unfair labor practices is stated in Article 247 of the Labor Code, which states:

Article 247. Concept of unfair labor practice and procedure for prosecution thereof. –– Unfair labor practices violate
the constitutional right of workers and employees to self-organization, are inimical to the legitimate interests of both
labor and management, including their right to bargain collectively and otherwise deal with each other in an
atmosphere of freedom and mutual respect, disrupt industrial peace and hinder the promotion of healthy and stable
labor-management relations.

"In essence, [unfair labor practice] relates to the commission of acts that transgress the workers’ right to
organize."  "[A]ll the prohibited acts constituting unfair labor practice in essence relate to the workers’ right
50

to self-organization."  "[T]he term unfair labor practice refers to that gamut of offenses defined in the Labor
51

Code which, at their core, violates the constitutional right of workers and employees to self-organization." 52

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

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

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

xxxx

The right of self-organization includes the right to organize or affiliate with a labor union or determine which of two or
more unions in an establishment to join, and to engage in concerted activities with co-workers for purposes of
collective bargaining through representatives of their own choosing, or for their mutual aid and protection, i.e., the
protection, promotion, or enhancement of their rights and interests. 53

As members of the governing board of MWEU, respondents are presumed to know, observe, and apply the
union’s constitution and by-laws. Thus, their repeated violations thereof and their disregard of petitioner’s
rights as a union member – their inaction on his two appeals which resulted in his suspension,
disqualification from running as MWEU officer, and subsequent expulsion without being accorded the full
benefits of due process – connote willfulness and bad faith, a gross disregard of his rights thus causing
Labor II – 1
untold suffering, oppression and, ultimately, ostracism from MWEU. "Bad faith implies breach of faith and
willful failure to respond to plain and well understood obligation."  This warrants an award of moral
54

damages in the amount of P100,000.00. Moreover, the Civil Code provides:

Art. 32. Any public officer or employee, or any private individual, who directly or indirectly obstructs, defeats, violates
or in any manner impedes or impairs any of the following rights and liberties of another person shall be liable to the
latter for damages:

xxxx

(12) The right to become a member of associations or societies for purposes not contrary to law;

In Vital-Gozon v. Court of Appeals,  this Court declared, as follows:

55

Moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded
feelings, moral shock, social humiliation, and similar injury. They may be recovered if they are the proximate result
of the defendant’s wrongful act or omission. The instances when moral damages may be recovered are, inter alia,
‘acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34 and 35 of the Civil Code,’ which, in turn, are
found in the Chapter on Human Relations of the Preliminary Title of the Civil Code. x x x

Under the circumstances, an award of exemplary damages in the amount of P50,000.00, as prayed for, is likewise
proper. "Exemplary damages are designed to permit the courts to mould behavior that has socially deleterious
consequences, and their imposition is required by public policy to suppress the wanton acts of the offender."  This
56

should prevent respondents from repeating their mistakes, which proved costly for petitioner. 1âwphi1

Under Article 2229 of the Civil Code, ‘[e]xemplary or corrective damages are imposed, by way of example or
correction for the public good, in addition to the moral, temperate, liquidated or compensatory damages.’ As this
court has stated in the past: ‘Exemplary damages are designed by our civil law to permit the courts to reshape
behaviour that is socially deleterious in its consequence by creating negative incentives or deterrents against such
behaviour.’57

Finally, petitioner is also entitled to attorney’s fees equivalent to 10 per cent (10%) of the total award. The unjustified
acts of respondents clearly compelled him to institute an action primarily to vindicate his rights and protect his
interest. Indeed, when an employee is forced to litigate and incur expenses to protect his rights and interest, he is
entitled to an award of attorney’s fees. 58

WHEREFORE, the Petition is PARTIALLY GRANTED. The assailed April 24, 2012 Decision of the Court of Appeals
in CA-G.R. SP No. 115639 is hereby MODIFIED, in that all of the respondents - except for Carlos Villa, Ric Briones,
and Chito Bernardo - are declared guilty of unfair labor practices and ORDERED TO INDEMNIFY petitioner Allan M.
Mendoza the amounts of Pl00,000.00 as and by way of moral damages, PS0,000.00 as exemplary damages, and
attorney's fees equivalent to 10 per cent (10%) of the total award.

Labor II – 1
 41.) G.R. No. 211015, June 20, 2016 [LABOR CONTRACTING CAN BE ULP BUT JUST
BECAUSE LABOR CONTRACTING DOESN’T MEAN THAT IT IS ULP. THERE HAS TO BE A
CONNECTION. IN THIS CASE WHILE THERE WAS LABOR ONLY CONTRACTING, THERE IS NO
ULP]

CAGAYAN ELECTRIC POWER & LIGHT COMPANY, INC. (CEPALCO) AND CEPALCO ENERGY
SERVICES CORPORATION (CESCO), FORMERLY CEPALCO ENERGY SERVICES & TRADING
CORPORATION (CESTCO), Petitioners, v. CEPALCO EMPLOYEE'S LABOR UNION-ASSOCIATED
LABOR UNIONS-TRADE UNION CONGRESS OF THE PHILIPPINES (TUCP), Respondent.

G.R. No. 213835

CAGAYAN ELECTRIC POWER & LIGHT COMPANY, INC. (CEPALCO) AND CEPALCO ENERGY
SERVICES CORPORATION (CESCO), FORMERLY CEPALCO ENERGY SERVICES & TRADING
CORPORATION (CESTCO), Petitioners, v. CEPALCO EMPLOYEE'S LABOR UNION-ASSOCIATED
LABOR UNIONS-TRADE UNION CONGRESS OF THE PHILIPPINES (TUCP), Respondent.

DECISION

PERLAS-BERNABE, J.:

Before the Court are petitions for review on certiorari1 which assail: (a) in G.R. No. 211015, the
Decision2 dated September 14, 2012 and the Resolution 3 dated January 15, 2014 of the Court of
Appeals (CA) in CA-G.R. SP No. 03169-MIN; and (b) in G.R. No. 213835, the Decision4 dated
November 11, 2013 and the Resolution5 dated July 17, 2014 of the CA in CA-G.R. SP No. 04296-MIN.
In both cases, the CA absolved herein petitioners Cagayan Electric Power & Light Company, Inc.
(CEPALCO) and CEPALCO Energy Services Corporation (CESCO), formerly CEPALCO Energy
Services & Trading Corporation,6 from the charges of Unfair Labor Practice (ULP) filed by herein
respondent CEPALCO Employee's Labor Union-Associated Labor Unions-Trade Union Congress of the
Philippines (respondent), but nonetheless, pronounced that CESCO was engaged in labor-only
contracting and that, in consequence, the latter's employees are actually the regular employees of
CEPALCO in the same manner and extent as if they were directly employed by CEPALCO.

The Facts

Respondent is the duly certified bargaining representative of CEPALCO's regular rank-and-

file employees. On the other hand, CEPALCO is a domestic corporation engaged in electric
distribution in Cagayan de Oro and other municipalities in Misamis Oriental; while CESCO is a
business entity engaged in trading and services.7 chanrobleslaw

On February 19, 2007, CEPALCO and CESCO (petitioners) entered into a Contract for Meter
Reading Work8 where CESCO undertook to perform CEPALCO's meter-reading activities. As
a result, several employees and union members of CEPALCO were relieved, assigned in
floating positions, and replaced with CESCO workers, 9 prompting respondent to file a
complaint10 for ULP against petitioners, docketed as NLRC Case No. RAB-10-07-00408-2007.
Respondent alleged that when CEPALCO engaged CESCO to perform its meter-reading
activities, its intention was to evade its responsibilities under the Collective Bargaining
Agreement (CBA) and labor laws, and that it would ultimately result in the dissipation of
respondent's membership in CEPALCO.11 Thus, respondent claimed that CEPALCO's act of
contracting out services, which used to be part of the functions of the regular union
members, is violative of Article 259 (c)12 of the Labor Code, as amended,13 governing ULP
of employers. It further averred that for engaging in labor-only contracting, the workers placed by
CESCO must be deemed regular rank-and-file employees of CEPALCO, and that the Contract for
Meter Reading Work be declared null and void. 14
chanrobleslaw

Labor II – 1
In defense,15 petitioners averred that CESCO is an independent job contractor and that the
contracting out of the meter-reading services did not interfere with CEPALCO's regular
workers' right to self-organize, denying that none of respondent's members was put on floating
status.16 Moreover, they argued that the case is only a labor standards issue, and that respondent is
not the proper party to raise the issue regarding the status of CESCO's employees and, hence,
cannot seek that the latter be declared as CEPALCO's regular employees. 17 chanrobleslaw

In a Decision18 dated August 20, 2008, the Labor Arbiter (LA) dismissed the complaint for lack of
merit. The LA found that petitioners have shown by substantial evidence that CESCO carries on an
independent business of contracting services, in this case for CEPALCO's meter-reading work, and
that CESCO has an authorized capital stock of P100,000,000.00, as well as equipment and materials
necessary to carry out its business.19 As an independent contractor, CESCO is the statutory employer
of the workers it supplied to CEPALCO pursuant to their contract. 20 Thus, there is no factual basis to
say that CEPALCO committed ULP as there can be no splitting or erosion of the existing rank-and-file
bargaining unit that negates interference with the exercise of CEPALCO workers' right to self-
organize.21chanrobleslaw

On appeal22 by respondent, the National Labor Relations Commission (NLRC), in a Decision23 dated

April 30, 2009, affirmed the LA's ruling in toto, finding that the evidence proffered by respondent
proved inadequate in establishing that the service contract amounted to the interference of the right
of the union members to self-organization and collective bargaining. 24 chanrobleslaw

Respondent's motion for reconsideration25  was denied in a Resolution26 dated June 30, 2009; hence,
cralawred

it filed a petition for certiorari27 before the CA, docketed as CA-G.R. SP No. 03169-MIN.

Pending resolution of CA-G.R. SP No. 03169-MIN, or on January 5, 2010, CEPALCO and

CESCO entered into another Contract of Service,28 this time for the warehousing works of
CEPALCO. Alleging that three (3) union members who were assigned at the warehouse of
the logistics department were transferred to other positions and departments without
their conformity and, eventually, were replaced by workers recruited by CESCO,
respondent filed another complaint29 for ULP against petitioners, docketed as NLRC Case No.
RAB-10-12-00602-2009, similarly decrying that CEPALCO was engaged in labor-only contracting
and, thus, committed ULP.30 chanrobleslaw

As in the first case against them, petitioners posited 31 that CEPALCO did not engage in ULP when it
contracted out its warehousing works32 and that CESCO is an independent contractor.33 They further
reiterated their argument that respondent is not the proper party to seek any form of relief for the
CESCO employees.34 chanrobleslaw

In a Decision35 dated July 29, 2010, the LA dismissed the case for lack of merit, citing its earlier
decision in NLRC Case No. RAB-10-07-00408-2007. It explained that the only difference between
the previous case and the present case was that in the former, CEPALCO contracted out its meter-
reading activities, while in the latter, it contracted out its warehousing works. However, both cases
essentially raised the same issue between the same parties, i.e., whether or not the contracting out
of services being performed by the union members constitute ULP. 36 As such, the NLRC applied the
principle of res judicata under the rule on eonclusiveness of judgment and dismissed the complaint
for ULP.37 At any rate, it found that respondent failed to present substantial evidence that CEPALCO's
contracting out of the warehousing works constituted ULP. 38 chanrobleslaw

On appeal39 by respondent, the NLRC, in a Resolution40 dated February 21, 2011, dismissed the
appeal and affirmed the LA's ruling in toto. Respondent's motion for reconsideration41 was denied in a
Resolution42 dated April 15, 2011; hence, it elevated the matter to the CA via petition
for certiorari,43 docketed as CA-G.R. SP No. 04296-MIN.

Labor II – 1
 The Ruling in CA-G.R. SP No. 03169-MIN

In a Decision44 dated September 14, 2012, the CA partially granted respondent's certiorari petition

and reversed and set aside the assailed NLRC issuances.

Preliminarily, the CA found that CESCO was engaged in labor-only contracting in view of the
following circumstances: (a) there was absolutely no evidence to show that CESCO exercised control
over its workers, as it was CEPALCO that established the working procedure and methods, supervised
CESCO's workers, and evaluated them;45 (b) there is no substantial evidence to show that CESCO
had substantial capitalization as it only had a paid-up capital of P51,000.00 as of May 30, 1984, and
there was nothing on CESCO's list of machineries and equipment that could have been used for the
performance of the meter-reading activities contracted out to it; 46 and (c) the workers of CESCO
performed activities that are directly related to CEPALCO's main line of business. 47 Moreover, while
CESCO presented a Certificate of Registration48 with the Department of Labor and Employment, the
CA held that it was not a conclusive evidence of CESCO's status as an independent
contractor.49 Consequently, the workers hired by CESCO pursuant to the service contract for the
meter-reading activities were declared regular employees of CEPALCO. 50 chanrobleslaw

However, the CA found no substantial evidence that CEPALCO was engaged in ULP, there being no
showing that when it contracted out the meter-reading activities to CESCO, CEPALCO was motivated
by ill will, bad faith or malice, or that it was aimed at interfering with its employees' right to self-
organize.51chanrobleslaw

Petitioners' motion for reconsideration52 was denied in a Resolution53 dated January 15, 2014; hence,
the present petition docketed as G.R. No. 211015.

The Ruling in CA-G.R. SP No. 04296-MIN

In a Decision54 dated November 11, 2013, the CA partially granted respondent's petition,

finding that CESCO was a labor-only contractor as it had no substantial capitalization, as well as
tools, equipment, and machineries used in the work contracted out by CEPALCO. 55 As such, it stated
that CESCO is merely an agent of CEPALCO, and that the latter is still responsible to the workers
recruited by CESCO in the same manner and extent as if those workers were directly employed by
CEPALCO.56 chanrobleslaw

Nonetheless, same as the ruling in CA-G.R. SP No. 03169-MIN, the CA found that CEPALCO
committed no ULP for lack of substantial evidence to establish the same. 57 chanrobleslaw

Petitioners' motion for reconsideration58 was denied in a Resolution59 dated July 17, 2014; hence, the
present petition docketed as G.R. No. 213835.

The Issues Before the Court

In both G.R. Nos. 211015 and 213835,60 petitioners lament that the CA erred in declaring CESCO

as a labor-only contractor notwithstanding the fact that CEPALCO has already been absolved of the
charges of ULP. To this, petitioners argue that the issue of whether or not CESCO is an independent
contractor was mooted by the finality of the finding that there was no ULP on the part of
CEPALCO.61 Also, they aver that respondent is not a party-in-interest in this issue because the
declaration of the CA t&at the employees of CESCO are considered regular employees will not even
benefit the respondent.62 If there is anyone who stands to benefit from such rulings, they are the
employees of the CESCO who are not impleaded in these cases. In any event, petitioners insist that
CESCO is a legitimate contractor. Overall, they prayed that the assailed CA rulings be reversed and
set aside insofar as the CA found CESCO as engaged in labor-only contracting and that its employees
are actually the regular employees of CEPALCO. 63 chanrobleslaw

Labor II – 1
 The Court's Ruling

The petitions are partly meritorious.

At the outset, it is well to note that the status of CESCO as a labor-only contractor was raised in
respondent's complaints before the labor tribunals only in relation to the charges of ULP. In
particular, respondent, in its complaint in NLRC Case No. RAB-10-07-00408-2007, mainly argued
that the "[labor-only] contracting agreement between CEPALCO and [CESCO] discriminates regular
union member employees and will ultimately result in the dissipation of its ranks in the line
maintenance and construction department."64 This is similar to the thrust of its complaint in NLRC
Case No. RAB-10-12-00602-2009, wherein they averred that "the [labor-only] contracting
arrangement between CEPALCO and [CESCO] discriminates union members and restrains or coerces
employees in the exercise of their rights to [self-organization] and collective bargaining[,] and
amounts to union busting."65 As the LA in the latter case aptly observed, "the essential issue between
the same parties remain[s] identical: whether the contracting out of activities or services being
performed by [u]nion members constitute [ULP]." 66 chanrobleslaw

Under Article 10667 of the Labor Code, as amended, labor-only contracting is an arrangement where
the contractor, who does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others, supplies workers to an employer and the workers
recruited are performing activities which are directly related to the principal business of such
employer. Section 5 of Department Order No. 18-02, Series of 2002, otherwise known as
the "Rules Implementing Articles 106 to 109 of the Labor Code, As Amended" (DO 18-02),
provides the following criteria to gauge whether or not an arrangement constitutes labor-
only contracting:
Section 5. Prohibition against labor-only contracting. Labor-only contracting is hereby declared
prohibited. For this purpose, labor-only contracting shall refer to an arrangement where the
contractor or subcontractor merely recruits, supplies or places workers to perform a job, work or
service for a principal, and any of the following elements are present:
chanRoblesvirtualLawlibrary

i) The contractor or subcontractor does not have substantial capital or investment which relates to
the job, work or service to be performed and the employees recruited, supplied or placed by such
contractor or subcontractor are performing activities which are directly related to the main
business of the principal; or
ii) the contractor does not exercise the right to control over the performance of the work of the
contractual employee.

The foregoing provisions shall be without prejudice to the application of Article 248 (C) of the Labor
Code, as amended.

"Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case of
corporations, tools, equipment, implements, machineries and work premises, actually and directly
used by the contractor or subcontractor in the performance or completion of the job, work or service
contracted out.

The "right to control" shall refer to the right reserved to the person for whom the services of the
contractual workers are performed, to determine not only the end to be achieved, but also the
manner and means to be used in reaching that end. (Emphases supplied)

Labor-only contracting is considered as a form of ULP when the same is devised by the
employer to "interfere with, restrain or coerce employees in the exercise of their rights to
self-organization."68 Article 259 of the Labor Code, as amended, which enumerates certain
prohibited activities constitutive of ULP, provides: ChanRoblesVirtualawlibrary

Labor II – 1
Article 259. Unfair Labor Practices of Employers. - It shall be unlawful for an employer to
commit any of the following unfair labor practice:
chanRoblesvirtualLawlibrary

xxxx

(c) To contract out services or functions being performed by union members when such will
interfere with, restrain or coerce employees in the exercise of their rights to self-
organization.

x x x x (Emphasis and underscoring supplied)

The need to determine whether or not the contracting out of services (or any particular activity or
scheme devised by the employer for that matter) was intended to defeat the workers' right to self-
organization is impelled by the underlying concept of ULP. This is stated in Article 258 of the Labor
Code, as amended, to wit: ChanRoblesVirtualawlibrary

Article 258. Concept of Unfair Labor Practice and Procedure for Prosecution Thereof. - Unfair labor
practices violate the constitutional right of workers and employees to self-organization,
are inimical to the legitimate interests of both labor and management, including their right to
bargain collectively and otherwise deal with each other in an atmosphere of freedom and mutual
respect, disrupt industrial peace and hinder the promotion of healthy and stable labor-management
relations.

x x x x (Emphases and underscoring supplied)

Thus, in Great Pacific Employees Union v. Great Pacific Life Assurance Corporation,69 the Court
observed: ChanRoblesVirtualawlibrary

There should be no dispute that all the prohibited acts constituting unfair labor practice in
essence relate to the workers' right to self-organization. Thus, an employer may be held liable
under this provision if his conduct affects in whatever manner the right of an employee to self-
organize.70 chanroblesvirtuallawlibrary

Similarly, in Bankard, Inc. v. NLRC:71

The Court has ruled that the prohibited acts considered as ULP relate to the workers' right to self-
organization and to the observance of a CBA. It refers to "acts that violate the workers' right to
organize." Without that element, the acts, even if unfair, are not ULP. Thus, an employer
may only be held liable for unfair labor practice if it can be shown that his acts affect in whatever
manner the right of his employees to self-organize. 72 (Emphasis and underscoring supplied)

In these cases, the Court agrees with the CA that CEPALCO was engaged in labor-only contracting as
its Contract for Meter-Reading Work dated February 19, 2007 and Contract of Service To Perform
Warehousing Works dated January 5, 2010 (subject contracts) with CESCO fit the criteria provided
for in Section 5 of DO 18-02, as above-highlighted.

To be specific, petitioners failed to show that CESCO has substantial capital or investment
which relates to the job, work or service to be performed. While it is true that: (a) CESCO's Amended
Articles of Incorporation73 as of November 26, 2008 shows that CESCO's authorized capital stock is
P200,000,000.00 as of September 26, 2008,74 which was increased from P100,000,000.0075 on May
30, 2007; and (b) its financial statement76 as of 2010 and 2011 shows that its paid-up capital stock is
in the sum of P81,063,000.00,77 there is no available document to show CESCO's authorized capital
stock at the time of the contracting out of CEPALCO's meter-reading activities to CESCO on
February 19, 2007. As it is, the increases in its authorized capital stock and paid-up capital were only
made after November 26, 2008, hence, are only relevant with regard to the time CEPALCO
contracted out its warehousing works to CESCO on January 5, 2010. Since the amount of CESCO's
authorized capital stock at the time CEPALCO contracted out its meter-reading activities was not
shown, the Court has no means of determining whether it had substantial capital at the time the
contract therefor was entered into. Furthermore, the list78 of CESCO's office equipment, furniture and
fixtures, and vehicles offered in evidence by petitioners does not satisfy the requirement that they
Labor II – 1
could have been used in the performance of the specific work contracted out, i.e., meter-reading
service. As the CA aptly pointed out,79 the tools and equipment utilized by CESCO in the meter-
reading activities are owned by CEPALCO, emphasizing the fact that CESCO has no basic equipment
to carry out the service contracted out by CEPALCO.

It is also evident that meter-reading is a job that is directly related to the main business of
CEPALCO, considering that the latter is an electric distribution utility, 80 which is necessarily
tasked with the evaluation and appraisal of meters in order to bill its clients.

More significantly, records are devoid of evidence to prove that the work undertaken in furtherance
of the meter-reading contract was made under the sole control and supervision of CESCO. Instead,
as noted81 by the CA, it was CEPALCO that established the working procedure and methods and
supervised CESCO's workers in their tasks.

On the other hand, although it may be said that CESCO had substantial capital when CEPALCO
contracted out its warehousing works on January 5, 2010, there is, however, lack of credible
evidence to show that CESCO had the aforesaid substantial investment in the form of equipment,
tools, implements, machineries, and work premises to perform the warehousing activities on its own
account. Similarly, the job contracted out is directly related to CEPALCO's electric distribution
business, which involves logistics, inventories, accounting, billing services, and other related
operations. Lastly, same as above, no evidence has been offered to establish that CESCO exercised
control with respect to the manner and methods of achieving the warehousing works, or that it
supervised the workers assigned to perform the same.

The foregoing findings notwithstanding, the Court, similar to the CA and the labor
tribunals, finds that CEPALCO's contracting arrangements with CESCO did not amount to
ULP. This is because respondent was not able to present any evidence to show that such
arrangements violated CEPALCO's workers' right to self-organization, which, as above-
mentioned, constitutes the core of ULP. Records do not show that this finding was further
appealed by respondent. Thus, the complaints filed by respondent should be dismissed with
finality.

At this juncture, it should be made clear that the disposition of these cases should be limited only to
the foregoing declaration. Again, the complaints filed by respondent were only for ULP. While there is
nothing infirm in passing upon the matter of labor-only contracting since it was vigorously litigated in
these proceedings, the resolution of the same must only be read in relation to the charges of ULP. As
earlier stated, labor-only contracting was invoked by respondent as a prohibited act under Article 259
(c) of the Labor Code, as amended. As it turned out, however, respondent failed to relate the
arrangement to the defining element of ULP, i.e., that it violated the workers' right to self-
organization. Hence, being a preliminary matter actively argued by respondent to prove the
charges of ULP, the same was not rendered moot and academic by the eventual dismissal of the
complaints as an issue only becomes moot and academic if it becomes a "dead" issue, devoid of any
practical value or use to be passed upon. In Pormento v. Estrada:82

An action is considered "moot" when it no longer presents a justiciable controversy because the
issues involved have become academic or dead or when the matter in dispute has already been
resolved and hence, one is not entitled to judicial intervention unless the issue is likely to be raised
again between the parties. There is nothing for the court to resolve as the determination thereof has
been overtaken by subsequent events.83 chanroblesvirtuallawlibra

ry

For another, the Court also observes that while respondent did ask for the nullification of the subject
contracts between petitioners, and even sought that the employees provided by CESCO to CEPALCO
be declared as the latter's own employees, petitioners correctly argue that respondent is not a real
party-in-interest and hence, had no legal standing insofar as these matters are concerned. This is
because respondent failed to demonstrate how it stands to be benefited or injured by a judgment on
Labor II – 1
the same, or that any personal or direct injury would be sustained by it if these reliefs were not
granted. In Joya v. Presidential Commission on Good Government,84 the Court explained: ChanRoblesVirtualawlibrary

"Legal standing" means a personal and substantial interest in the case such that the party has
sustained or will sustain direct injury as a result of the x x x act being challenged. The term "interest"
is material interest, an interest in issue and to be affected by the decree, as distinguished from mere
interest in the question involved, or a mere incidental interest. Moreover, the interest of the party
plaintiff must be personal and not one based on a desire to vindicate the constitutional right of some
third and unrelated party.85chanroblesvirtu

allawlibrary

If at all, it would be the employees of CESCO who are entitled to seek the foregoing reliefs
since in cases of labor-only contracting, "the person or intermediary shall be considered
merely as an agent of the employer who shall be responsible to the workers in the same
manner and extent as if the latter were directly employed by him." 86 However, they have
not been impleaded in these cases. Thus, as prayed for by petitioners, the Court must set aside
the portions of the assailed CA Decisions declaring: (a) the workers hired by CESCO, pursuant to the
contracts subject of these cases, as regular employees of CEPALCO; and (b) the latter responsible to
said workers in the same manner and extent as if they were directly employed by it. This
pronouncement not only squares with the rules on real party-in-interest and legal standing, but also
with the precept that no one shall be affected by any proceeding to which he is a stranger, and that
strangers to a case are not bound by any judgment rendered by the court. 87 chanrobleslaw

With the principal issues already resolved, the Court sees no need to delve into other ancillary issues
that would have no effect to the conclusion of these cases.

WHEREFORE, the petitions are PARTLY GRANTED. The portions of the Decisions and Resolutions
of the Court of Appeals (CA) in CA-G.R. SP No. 03169-MIN and CA-G.R. SP No. 04296-MIN declaring
that the workers hired by CESCO, pursuant to the contracts subject of these cases, are regular
employees of CEPALCO, and that the latter is responsible to said workers in the same manner and
extent as if those workers were directly employed by CEPALCO are hereby DELETED. The rest of the
CA Decisions stand.

Labor II – 1
 42.) A. G.R. No. 220383, October 05, 2016 [Respondent company is guilty of ULP for
refusing to negotiate even though they unilaterally gave increases because their acts, such
as the requirement of a waiver interfered with the right of the union to bargain collectively
– cannot impose unilaterally without negotiation even though it seems that they are giving
benefits ]

SONEDCO WORKERS FREE LABOR UNION (SWOFLU) / RENATO YUDE, MARIANITO REGINO,
MANUEL YUMAGUE, FRANCISCO DACUDAG, RUDY ABABAO, DOMINIC SORNITO, SERGIO
CAJUYONG, ROMULO LABONETE, GENEROSO GRANADA, EMILIO AGUS, ARNOLD CAYAO,
BEN GENEVE, VICTOR MAQUE, RICARDO GOMEZ, RODOLFO GAWAN, JIMMY SULLIVAN,
FEDERICO SUMUGAT, JR., ROMULO AVENTURA, JR., JURRY MAGALLANES, HERNAN
EPISTOLA, JR., ROBERTO BELARTE, EDMON MONTALVO, TEODORO MAGUAD, DOMINGO
TABABA, MAXIMO SALE, CYRUS DIONILLO, LEONARDO JUNSAY, JR., DANILO SAMILLION,
MARIANITO BOCATEJA, JUANITO GEBUSION, RICARDO MAYO, RAUL ALIMON, ARNEL
ARNAIZ, REBENCY BASOY, JIMMY VICTORIO BERNALDE, RICARDO BOCOL, JR., JOB
CALAMBA, WOLFRANDO CALAMBA, RODOLFO CASISID, JR., EDGARDO DELA PENA, ALLAN
DIONILLO, EDMUNDO EBIDO, JOSE ELEPTICO, JR., MARCELINO FLORES, HERNANDO
FUENTEBILLA, SAUL HITALIA, JOSELITO JAGODILLA, NONITO JAYME, ADJIE JUANILLO,
JEROLD JUDILLA, EDILBERTO NACIONAL, SANDY NAVALES, FELIPE NICOLASORA, JOSE
PAMALO-AN, ISMAEL PEREZ, JR., ERNESTO RANDO, JR., PHILIP REPULLO, VICENTE RUIZ,
JR., JOHN SUMUGAT, CARLO SUSANA, ROMEO TALAPIERO, JR., FERNANDO TRIENTA,
FINDY VILLACRUZ, JOEL VILLANUEVA, AND JERRY
MONTELIBANO, Petitioners, v. UNIVERSAL ROBINA CORPORATION, SUGAR DIVISION-
SOUTHERN NEGROS DEVELOPMENT CORPORATION (SONEDCO), Respondent.

DECISION

LEONEN, J.:

An employer who refuses to bargain with the union and tries to restrict its bargaining power is guilty
of unfair labor practice. In determining whether an employer has not bargained in good faith, the
totality of all the acts of the employer at the time of negotiations must be taken into account.

This resolves a Petition1 for review assailing the Decision2 dated January 30, 2015 and the
Resolution3 dated July 27, 2015 of the Court of Appeals. The Court of Appeals dismissed the Petition
for Certiorari filed by members of SONEDCO Workers Free Labor Union for lack of merit. 4

On May 6, 2002, Universal Robina Corporation Sugar Division - Southern Negros

Development Corporation (URC-SONEDCO) and Philippine Agricultural Commercial and
Industrial Workers Union (PACIWU-TUCP), then the exclusive bargaining representative of
URC-SONEDCO's rank-and-file employees, entered into a Collective Bargaining Agreement
(2002 Collective Bargaining Agreement) effective January 1, 2002 to December 31, 2006. 5 Under the
2002 Collective Bargaining Agreement, rank-and-file employees were entitled to a wage
increase of P14.00/day for 2002 and P12.00/day for the succeeding years until 2006.6

On May 17, 2002, days after the 2002 Collective Bargaining Agreement was signed, a
certification election was conducted. SONEDCO Workers Free Labor Union won and
replaced PACIWU-TUCP as the exclusive bargaining representative. 7

PACIWU-TUCP questioned the results of the certification election before the Department of Labor and
Employment. On July 8, 2002, Med-Arbiter Romulo Sumalinog certified SONEDCO Workers Free
Labor Union as the sole and exclusive bargaining representative of URC-SONEDCO.8 This was
affirmed by the Labor Secretary in a Resolution dated December 27, 2002, which became final on

Labor II – 1
April 15, 2003.9 PACIWU-TUCP elevated the same issue to the Court of Appeals and thereafter this
Court, which on July 11, 2007, resolved that the certification election was valid. SONEDCO Workers
Free Labor Union was declared the exclusive bargaining agent of URC-SONEDCO's rank-and-file
employees.10

URC-SONEDCO consistently refused to negotiate a new collective bargaining agreement

with SONEDCO Workers Free Labor Union, despite several demands from SONEDCO Workers
Free Labor Union, allegedly due to the 2002 Collective Bargaining Agreement, which it
signed with PACIWU-TUCP.12

Despite being the incumbent exclusive bargaining agent, SONEDCO Workers Free Labor Union filed
before the Department of Labor and Employment a Petition 13 for certification election on December 6,
2006 in view of the approaching expiration of the 2002 Collective Bargaining Agreement. On
December 31, 2006, the 2002 Collective Bargaining Agreement expired with no new
collective bargaining agreement being signed. 14

On August 28, 2007, with no collective bargaining agreement in effect, URC-SONEDCO

informed the rank-and-file employees that they would be granted the following economic
benefits: chanRoblesvirtualLawlibrary

(1) Wage increase of P16.00/day effective January 1, 2007;

(2) Group life insurance of P50,000.00 coverage/year;
(3) Emergency leave in lieu of bereavement leave, up to five (5) days per year; and
(4) Cash loan in lieu of emergency loan of P5,000.00, payable in 11 months.15
chanrobleslaw

URC-SONEDCO asked the employees who wished to avail themselves of these-benefits to

sign an acknowledgment receipt/waiver (2007 waiver), which stated that "[i]n the event
that a subsequent [collective bargaining agreement] is negotiated between Management
and Union, the new [Collective Bargaining Agreement] shall only be effective January 1,
2008."16 URC-SONEDCO claimed that the 2007 waiver was designed to avoid and/or
prevent double compensation.17

Several SONEDCO Workers Free Labor Union members refused to sign the 2007 waiver. Hence,
they did not receive the benefits given to other members of the bargaining unit who had
done so.18

In 2008, another wage increase of P16.00/day effective January 1, 2008 were given to
employees who signed an acknowledgment receipt/waiver (2008 waiver).19 The 2008 waiver
stated that "[s]a panahon na kung saan may [collective bargaining agreement] na maisasara sa
pagitan ng Management at Uniyon, ito ay magiging epektibo lamang Simula January 1, 2009."20

Again, several SONEDCO Workers Free Labor Union members refused to sign the 2008 waiver. They
did not receive the benefits from URC-SONEDCO.20

On August 20, 2008, a certification election was conducted. 21 SONEDCO Workers Free Labor
Union won again and proceeded to negotiate a new collective bargaining agreement,
which became effective January 1, 2009 to December 31, 2013 (2009 Collective Bargaining
Agreement).22

On July 2, 2009, SONEDCO Workers Free Labor Union and its members who refused to sign
the 2007 and 2008 waivers filed a complaint for unfair labor practices against URC-
SONEDCO.23 They argued that the requirement of a waiver before the release of the wage

Labor II – 1
increase violated their right to self-organization, collective bargaining, and concerted
action.24

The Labor Arbiter found that URC-SONEDCO did not commit unfair labor practice when it
increased the wages of the rank-and-file employees for 2007 and 2008. 25 He found that,
the requirement of a waiver aside, it was benevolent for URC-SONEDCO to give its
employees additional benefits outside the Collective Bargaining Agreement. 26 However, the
Labor Arbiter ordered URC-SONEDCO to pay the employees who refused to sign the 2007 and 2008
waivers of the benefits received by their fellow employees for 2007 and 2008. As a new collective
bargaining agreement had already been renegotiated and did not include the years 2007 and 2008,
the purpose of the waivers was already served.

On appeal, the National Labor Relations Commission sustained27 the Labor Arbiter's Decision
that the requirement of a waiver before the release of the benefits for 2007 and 2008 did not
constitute unfair labor practice:
chanRoblesvirtualLawlibrary

Such an act does not constitute interference, restraining or coercing employees in the
exercise of their right to self organization or to bargain collectively, neither is it tantamount to
discrimination against union members who refused to waive wage increase in a CBA. As aptly termed
by respondents, it is an "offer" during the absence of a Collective Bargaining Agreement (CBA) and
during the time when there was an unresolved union representation, which this Commission
considers as reasonable.29
chanrobleslaw

The National Labor Relations Commission likewise affirmed the decision to award the wage increase
to the employees who initially refused to sign the waiver. 30

Aggrieved, members of SONEDCO Workers Free Labor Union filed before the Court of Appeals a
Petition for Certiorari assailing the National Labor Relations Commission Decision. The Court of
Appeals found no grave abuse of discretion in the assailed decision and dismissed the Petition. 31

Hence, on October 22, 2015, this Petition32 was filed.

In the Resolution33 dated January 11, 2016, this Court required respondent URC-SONEDCO to file its
comment on the Petition. Respondent filed its Comment 34 on March 22, 2016.

Petitioners now argue that the Court of Appeals failed to consider the totality of respondent's
dealings with them.35 They allege that despite their several invitations, respondent
consistently failed to bargain with them, and the wage increase was just another move to
avoid negotiations.36 Petitioners claim that the benefits given by respondent was an
economic incentive meant to encourage individual employees to give up agreement
bargaining for 2007 and 2008.37 Moreover, petitioners maintain that the wage increase for 2007
and 2008 should be considered as a continuing benefit over what was already provided in the 2009
Collective Bargaining Agreement because Article XXI of the 2009 Collective Bargaining Agreement
excluded claims pending before the courts. 38 Article XXI provides:chanRoblesvirtualLawlibrary

ARTICLE XXI
COMPLETE SETTLEMENT

The parties agree that this Agreement is full and complete settlement of all demands, requests,
claims and disputes of any nature, written or verbal, that either party have or may have against the
other prior to the effectivity hereof, except those subject of pending cases before the NLRC or its
arbitration branch, or before the DOLE or regular courts. 39
chanrobleslaw

Respondent points out that petitioners merely rehashed the same matters already ruled upon by
the Court of Appeals.40 It reiterates that both the National Labor Relations Commission and the Court
of Appeals found them not guilty of unfair labor practice since the waivers did not violate the
employees' right to organize.41 Moreover, the employees freely signed the waivers; even
Labor II – 1
petitioners did not accuse respondent of coercing employees to sign these
waivers.42 Respondent claims that the benefits that it offered were higher than what the employees
had previously received; there was no diminution of benefits involved. 43

For resolution are the following issues: cralawlawlibrary

First, whether respondent committed unfair labor practice; ChanRoblesVirtualawlibrary

Second, whether petitioners, who refused to sign the 2007 and 2008 waivers, are entitled to the
wage increase and other economic benefits as a continuing employee benefit notwithstanding the
2009 Collective Bargaining Agreement; and

Lastly, whether respondent is liable for damages. chanroblesvirtuallawlibrary

Respondent is guilty of unfair labor practice.

Both the National Labor Relations Commission and the Court of Appeals ruled that respondent did not
commit unfair labor practice since the requirement of a waiver for 2007 and 2008 did not interfere
with the employees 5 exercise of their right to self-organization. 44 However, the Court of Appeals
failed to take into account that unfair labor practice not only involves acts that violate the right to
self-organization but also covers several acts enumerated in Article 259 of the Labor Code, thus: chanRoblesvirtualLawlibrary

ARTICLE 259. [248] Unfair Labor Practices of Employers. — It shall be unlawful for an employer to
commit any of the following unfair labor practices: cralawlawlibrary

(a) To interfere with,  restrain or coerce employees in the exercise of their right to self-
organization;

(b) To require as a condition of employment that a person or an employee shall not join a labor
organization or shall withdraw from one to which he belongs; ChanRoblesVirtualawlibrary

(c) To contract out services or functions being performed by union members when such will interfere
with, restrain or coerce employees in the exercise of their right to self-organization; ChanRoblesVirtualawlibrary

(d) To initiate, dominate, assist or otherwise interfere with the formation or administration of any
labor organization, including the giving of financial or other support to it or its organizers or
supporters; ChanRoblesVirtualawlibrary

(e) To discriminate in regard to wages, hours of work and other terms and conditions of
employment in order to encourage or discourage membership in any labor
organization.  Nothing in this Code or in any other law shall stop the parties from requiring
membership in a recognized collective bargaining agent as a condition for employment, except those
employees who are already members of another union at the time of the signing of the collective
bargaining agreement. Employees of an appropriate bargaining unit who are not members of the
recognized collective bargaining agent may be assessed a reasonable fee equivalent to the dues and
other fees paid by members of the recognized collective bargaining agent, if such non-union
members accept the benefits under the collective bargaining agreement: Provided,  That the
individual authorization required under Article 242, paragraph (o) of this Code 204 shall not apply to
the non-members of the recognized collective bargaining agent; ChanRoblesVirtualawlibrary

(f) To dismiss, discharge or otherwise prejudice or discriminate against an employee for having given
or being about to give testimony under this Code; ChanRoblesVirtualawlibrary

Labor II – 1
(g) To violate the duty to bargain collectively as prescribed by this Code;

(h) To pay negotiation or attorney's fees to the union or its officers or agents as part of the
settlement of any issue in collective bargaining or any other dispute; or

(i) To violate a collective bargaining agreement.

The provisions of the preceding paragraph notwithstanding, only the officers and agents of
corporations, associations or partnerships who have actually participated in, authorized or ratified
unfair labor practices shall be held criminally liable. (Emphasis supplied)
chanrobleslaw

Under this provision, an employer is guilty of unfair labor practice when it fails in its duty
to bargain in good faith.

Although it Is well-settled that the findings of fact of quasi-judicial agencies such as the National
Labor Relations Commission are accorded great respect, this rule does admit exceptions. 45 One of
these exceptions is when, as in this case, the Court of Appeals errs in appreciating the facts. In Culili
v. Eastern Telecommunications Philippines, Inc.:46 chanroblesvirtuallawlibrary

While it is true that factual findings made by quasi-judicial and administrative tribunals, if supported
by substantial evidence, are accorded great respect and even finality by the courts, this general rule
admits of exceptions. When there is a showing that a palpable and demonstrable mistake that needs
rectification has been committed or when the factual findings were arrived at arbitrarily or in
disregard of the evidence on record, these findings may be examined by the courts. 47
chanrobleslaw

In ruling that respondent did not commit unfair labor practice, the National Labor Relations
Commission and the Court of Appeals failed to consider the totality of respondent's acts,
which showed that it violated its duty to bargain collectively. This constitutes unfair labor
practice under Article 259(g) of the Labor Code.

Article 263 of the Labor Code defines the duty to bargain collectively: chanRoblesvirtualLawlibrary

ARTICLE 263. [252] Meaning of Duty to Bargain Collectively. — The duty to bargain
collectively means the performance of a mutual obligation to meet and convene promptly
and expeditiously in good faith for the purpose of negotiating an agreement with respect
to wages, hours of work and all other terms and conditions of employment including
proposals for adjusting any grievances or questions arising under such agreement and
executing a contract incorporating such agreements if requested by either party but such
duty does not compel any party to agree to a proposal or to make any concession.
chanrobleslaw

Respondent repeatedly refused to meet and bargain with SONEDCO Workers Free Labor
Union, the exclusive bargaining agent of its rank-and-file employees. In its Position Paper48 before
the National Labor Relations Commission, respondent cited the different instances when petitioners
sent it letters trying to set meetings to discuss a new collective bargaining agreement. 49 Respondent
admitted that it refused to meet with petitioners in light of the 2002 Collective Bargaining
Agreement, which it signed with PACIWU-TUCP, the previous bargaining representative. It claimed
that the 2002 Collective Bargaining Agreement remained in full force and effect without change until
December 31, 2006, despite PACIWU-TUCP losing the May 17, 2002 certification election to
SONEDCO Workers Free Labor Union.50

Respondent's argument has no merit. Respondent's reliance on the 2002 Collective Bargaining
Agreement as basis for not negotiating with petitioners is unjustified. The Collective
Bargaining Agreement that respondent invoked had been entered into when a Petition for

Labor II – 1
Certification Election was already filed.

In Associated Trade Unions v. Trajano,50 this Court ruled on the temporary nature of this type of
collective bargaining agreement: chanRoblesvirtualLawlibrary

The Court will not rule on the merits and/or defects of the new CBA and shall only consider the fact
that it was entered into at a time when the petition for certification election had already been filed by
TUP AS and was then pending resolution. The said CBA cannot be deemed permanent,
precluding the commencement of negotiations by another union with the management.  In
the meantime however, so as not to deprive the workers of the benefits of the said agreement, it
shall be recognized and given effect on a temporary basis, subject to the results of the certification
election.  The agreement may be continued in force if ATU is certified as the exclusive bargaining
representative of the workers or may be rejected and replaced in the event that TUP AS emerges as
the winner.51 (Emphasis supplied)
chanrobleslaw

Respondent claimed that it refused to bargain with petitioners because the issue of representation
was still pending before the courts. It claimed that when the 2002 Collective Bargaining Agreement
expired on December 31, 2006, it had no bargaining agent to deal with as SONEDCO Workers Free
Labor Union had filed before the Department of Labor and Employment a Petition for Certification
Election on December 6, 2006, which resulted in the absence of a duly elected bargaining
representative.52 Respondent claimed it was only on September 25, 2008 that SONEDCO Workers
Free Labor Union was certified by the Department of Labor and Employment as the exclusive
bargaining agent of respondent's rank-and-file employees.53

This argument fails to persuade.

The Department of Labor and Employment, in its Order54 dated May 4, 2007 granting SONEDCO
Workers Free Labor Union's second Petition for Certification Election, illustrated why respondent's
argument is untenable: chanRoblesvirtualLawlibrary

Let it be noted that based on the results of the certification election conducted in the establishment
on 17 May 2002, Mediator-Arbiter Sumalinog, declared and certified SWOFLU as the sole and
exclusive bargaining agent of the rank-and-file employees of SONEDCO. The office of the Secretary
affirmed SWOFLU's certification in OS-A-6-63-01, and the decision became final and executory on 15
April 2003. As such, the suspension of the running of the one (1) year period referred in Section 3(a)
Rule VIII was automatically lifted on 15 April 2003. Hence, the one (1) year bar cannot be used to
deny the subject petition. Furthermore, despite PACIWU-TUCP's act of questioning the Office of the
Secretary's affirmation before the Court of Appeals by way of a petition for certiorari, no restraining
order was issued to stay the implementation of the decision.

In other words, as far as this Office is concerned, SWOFLU is the incumbent sole and exclusive
bargaining agent of the rank-and-file employees of SONEDCO. As such, there was actually no
necessity for SWOFLU to file the subject petition, as its representation status remains to be effective
unless challenged by other legitimate labor organizations during the freedom period of the CBA that
was entered into by PACIWU-TUCP and employer SONEDCO.

Incidentally, the Office of the Secretary declared in OS-A-6-63-01 that SWOFLU had the option to
adopt the interim CBA or negotiate with SONEDCO a new CBA. Whether SWOFLU was able to actually
administer the said CBA, or whether it attempted to negotiate with the employer for a new CBA but
was rejected, the issues are already moot and academic by reason of the expiration of the effectivity
of the agreement.56 (Emphasis supplied)
chanrobleslaw

Respondent's duty to bargain with SONEDCO Workers Free Labor Union as the incumbent
bargaining agent is clear. The last paragraph of Article 268 of the Labor Code states: chanRoblesvirtualLawlibrary

Labor II – 1
ARTICLE 268 [256]. Representation issue in organized establishments. —  In organized
establishments, when a verified petition questioning the majority status of the incumbent bargaining
agent is filed before the Department of Labor and Employment within the sixty-day period before the
expiration of the collective bargaining agreement, the Med-Arbiter shall automatically order an
election by secret ballot when the verified petition is supported by the written consent of at least
twenty-five percent (25%) of all the employees in the bargaining unit to ascertain the will of the
employees in the appropriate bargaining unit. To have a valid election, at least a majority of all
eligible voters in the unit must have cast their votes. The labor union receiving the majority of the
valid votes cast shall be certified as the exclusive bargaining agent of all the workers in the unit.
When an election which provides for three or more choices results in no choice receiving a majority of
the valid votes cast, a run-off election shall be conducted between the labor unions receiving the two
highest number of votes: Provided, that the total number of votes for all contending unions is at
least fifty percent (50%) of the number of votes cast.

At the expiration of the freedom period, the employer shall continue to recognize the
majority status of the incumbent bargaining agent where no petition for certification
election is filed. (Emphasis supplied)
chanrobleslaw

When petitioners held a conference on May 26, 2003, respondent refused to

attend.57 Because respondent failed to appear in the conference, petitioners wrote their
demands in a letter sometime in July 2003. The letter included, among others, a wage
increase of P50.00/day from September 2003 to 2006.58 Instead of explaining its non-
attendance to the conference or making a counter-offer, respondent replied on August 15,
2003 acknowledging the receipt and contents of the July 2003 letter but invoking the 2002
Collective Bargaining Agreement as an excuse not to answer petitioners' demands to
negotiate.59 This is contrary to Article 261 of the Labor Code, which requires the other party to reply
within 10 days from receipt of the written demand: chanRoblesvirtualLawlibrary

ARTICLE 261. [250] Procedure in Collective Bargaining.  — The following procedures shall be

observed in collective bargaining:cralawlawlibrary

(a) When a party desires to negotiate an agreement, it shall serve a written notice upon the other
party with a statement of its proposals. The other party shall make a reply thereto not later than ten
(10) calendar days from receipt of such notice[.]
chanrobleslaw

This was not respondent's only violation of Article 261. Respondent likewise failed to reply to the
collective bargaining agreement proposal sent by petitioners on August 21, 2007. 60 The September
22, 2007 letter, sent with the agreement proposal, also went unheeded. 61

Respondent's reliance on the 2002 Collective Bargaining Agreement is contrary to jurisprudence.

In Associated Labor Unions v. Trajano,62 this Court explicitly held that the winning union had the
option to either continue the existing collective bargaining agreement or negotiate a new one: chanRoblesvirtualLawlibrary

The new CBA negotiated by petitioners whether or not submitted to the MOLE in accordance with
Article 231 of the Labor Code cannot be deemed permanent, precluding commencement of
negotiations by another union with management, considering that it was entered into at a time when
the petition for certification election had already been filed by respondent union. . . . Meantime, this
interim agreement must be recognized and given effect on a temporary basis so as not to deprive the
workers of the favorable terms of the agreement. . . .

If, as a result of the certification election, respondent union or a union other than petitioner union
which executed the interim agreement is certified as the exclusive bargaining representative of the
rank and file employees of respondent company, then, such union may adopt the interim collective
bargaining agreement or negotiate with management for a new collective bargaining
agreement[.]63 (Citations omitted, emphasis supplied)
chanrobleslaw

Labor II – 1
As petitioners asked for a P50.00 wage increase, as opposed to the P12.00 wage increase
they had been receiving under the 2002 Collective Bargaining Agreement, petitioners were
justified in demanding a renegotiation. Respondent was remiss in its duty when it
repeatedly refused negotiations with petitioners.

Respondent's refusal is even more unfounded considering that the Labor Secretary's
Resolution,64 which upheld the result of the May 17, 2002 certification election and declared
SONEDCO Workers Free Labor Union as the exclusive bargaining agent, became final and executory
as early as April 15, 2003.65 Even though there had been a pending petition for certiorari questioning
the election results, no temporary restraining order was issued to preclude respondent from
bargaining with SONEDCO Workers Free Labor Union, the declared incumbent union.

Even if we consider respondent's refusal to bargain as merely a mistake made in good

faith, its subsequent acts show an attempt to restrict petitioners' negotiating power.

First, the 2002 Collective Bargaining Agreement was done on May 6, 2002, only days before the May
17, 2002 certification election. When respondent and PACIWU-TUCP entered into the 2002
Collective Bargaining Agreement, they had been aware that a certification election was
going to be conducted in a few days. In pushing through with negotiations instead of
waiting for the outcome of the election, respondent risked needing to renegotiate with a
new union if PACIWU-TUCP loses. It cannot, thus, invoke the hastily concluded 2002 Collective
Bargaining Agreement as an excuse not to bargain with petitioners. If respondent had truly intended
to bargain in good faith, it could have easily waited a few more days to know the result of the
certification election.

Second, when the 2002 Collective Bargaining Agreement expired in December 2006, the Labor
Secretary's Resolution declaring SONEDCO Workers Free Labor Union as the bargaining agent of
respondent's rank-and-file employees was already final and executory. Respondent's initial basis for
refusal to bargain had expired, and since no temporary restraining order was issued, nothing was
legally preventing respondent from negotiating a new collective bargaining agreement with
petitioners. That it chose to refuse negotiations and instead entered into an agreement with its
employees to essentially waive negotiations for 2007 and 2008 betrays its intention of limiting
petitioners' bargaining power.

The 2007 waiver provided, in part: chanRoblesvirtualLawlibrary

In the event that a subsequent CBA is negotiated between Management and Union, the
new CBA shall only be effective January 1, 2008.66
chanrobleslaw

The 2008 waiver provided, in part: chanRoblesvirtualLawlibrary

Sa panahon na kung saan may CBA na maisasara sa pagitan ng Management at Unyon, ito ay
magiging epektibo lamang Simula January l, 2009.67
chanrobleslaw

The wording of the waivers shows a clear attempt to limit petitioners' bargaining power by
making them waive the negotiations for 2007 and 2008. In stipulating that the collective
bargaining agreement that would be entered into would only be effective the year
following the 2008 waiver, respondent limited when the collective bargaining agreement
could be deemed effective. Tn other words, respondent asked petitioners to forego any
benefits they might have received under a collective bargaining agreement in exchange for
the company-granted benefits.

Both the National Labor Relations Commission and the Court of Appeals regarded the incentives as a
magnanimous move because it gave the employees a P16.00 wage increase, P4.00 more than the
Labor II – 1
P12.00 increase under the 2002 Collective Bargaining Agreement. However, respondent's claim of
benevolence falls short: the wage increase proposed by petitioners in 2007 was P50.00. If
a collective bargaining agreement had been concluded in 2007, employees who signed the waivers
would have lost the chance to receive P34.00 wage increase for that year.

Lastly, when the 2007 waiver was circulated, respondent already had a copy of petitioners'
agreement proposal. Respondent was aware that petitioners asked for a P50.00 wage
increase. More importantly, the last bar preventing respondent from recognizing SONEDCO Workers
Free Labor Union as the bargaining agent has been resolved by the time it issued the waivers. The
Petition for Certiorari relative to the May 17, 2002 certification election was denied with finality by
this Court on July 11, 2007.68 There was no reason to doubt that SONEDCO Workers Free Labor
Union was the sole and exclusive bargaining representative. If respondent did indeed act in good
faith, it would have undergone agreement negotiations with petitioners. However,
respondent incessantly refused to meet with petitioners to discuss the agreement proposal
even after petitioners sent their September 22, 2007 letter. 69 Instead of negotiating the
proposed P50.00 wage increase, respondent granted a P16.00 wage increase on the
condition that if a collective bargaining agreement was to be signed, it would only be
effective the succeeding year. In effect, respondent hindered petitioners' bargaining
power when it made them waive the bargaining efforts for 2007 and 2008. chanroblesvirtuallawlibrary

II
The National Labor Relations Commission did not err in granting the benefits for 2007 and 2008 to
the employees who did not sign the waiver.

After SONEDCO Workers Free Labor Union was again declared as the exclusive bargaining
representative in the August 20, 2008 certification election, the 2009 Collective Bargaining
Agreement was created to cover 2009 to 2013.70 Since the 2009 Collective Bargaining Agreement did
not include the years 2007 and 2008, the alleged purpose of the waivers, which was to prevent
double compensation, was already served. 71 It would be unfair for the employees to still not receive
the benefits for 2007 and 2008 simply because they refused to sign a waiver that was already moot.

However, there is no need for the continuation of the wage increase for 2007 and 2008 since the
2009 Collective Bargaining Agreement contains wage increase provisions for 2009 to 2013. As
explained in Samahang Manggagawa sa Top Form Manufacturing v. National Labor Relations
Commission,72 if a proposal is not printed in the collective bargaining agreement, it cannot be
demanded: chanRoblesvirtualLawlibrary

The CBA is the law between the contracting parties — the collective bargaining representative and
the employer-company. Compliance with a CBA is mandated by the expressed policy to give
protection to labor, hi the same vein, CBA provisions should 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." This is founded on the dictum that a CBA is not an ordinary contract but one impressed with
public interest. It goes without saying, however, that only provisions embodied in the CBA should be
so interpreted and complied with. Where a proposal raised by a contracting party does not find print
in the CBA, it is not a part thereof and the proponent has no claim whatsoever to its
implementation.72 (Citations omitted)
chanrobleslaw

If petitioners wanted the wage increase for 2007 and 2008 to be carried on, the proper recourse
would have been to demand that this be included in the 2009 Collective Bargaining Agreement. chanroblesvirtuallawlibrary

III

Respondent is liable to pay moral and exemplary damages. In Nueva Ecija Electric Cooperative, Inc.
v. National Labor Relations Commission:73 chanroblesvirtuallawlibrary

Unfair labor practices violate the constitutional rights of workers and employees to self-organization,
are inimical to the legitimate interests of both labor and management, including their right to bargain
Labor II – 1
collectively and otherwise deal with each other in an atmosphere of freedom and mutual respect; and
disrupt industrial peace and hinder the promotion of healthy and stable labor-management relations.
As the conscience of the government, it is the Courts sworn duty to ensure that none trifles with
labor rights.

For this reason, we find it proper in this case to impose moral and exemplary damages on private
respondent.74
chanrobleslaw

WHEREFORE, the Petition is GRANTED. The Decision of the Court of Appeals dated January 30,
2015 and the Resolution dated July 27, 2015 in CA-GR. SP No. 05950 are SET ASIDE. Respondent
Universal Robina Corporation. Sugar Division - Southern Negros Development Corporation
is GUILTY of unfair labor practice and is ORDERED to pay each of the petitioners the wage increase
of P16.00 for the years 2007 and 2008; and to pay SONEDCO Workers Free Labor Union moral
damages in the amount of P100,000.00; and exemplary damages in the amount of P200,000.00.

Labor II – 1
 42.) B. G.R. No. 220383, July 05, 2017

SONEDCO WORKERS FREE LABOR UNION (SWOFLU) / RENATO YUDE, MARIANITO REGINO,
MANUEL YUMAGUE, FRANCISCO DACUDAG, RUDY ABABAO, DOMINIC SORNITO, SERGIO
CAJUYONG, ROMULO LABONETE, GENEROSO GRANADA, EMILIO AGUS, ARNOLD CAYAO,
BEN GENEVE, VICTOR MAQUE, RICARDO GOMEZ, RODOLFO GAWAN, JIMMY SULLIVAN,
FEDERICO SUMUGAT, JR., ROMULO AVENTURA, JR., JURRY MAGALLANES, HERNAN
EPISTOLA, JR., ROBERTO BELARTE, EDMON MONTALVO, TEODORO MAGUAD, DOMINGO
TABABA, MAXIMO SALE, CYRUS DIONILLO, LEONARDO JUNSAY, JR., DANILO SAMILLION,
MARIANITO BOCATEJA, JUANITO GEBUSION, RICARDO MAYO, RAUL ALIMON, ARNEL
ARNAIZ, REBENCY BASOY, JIMMY VICTORIO BERNALDE, RICARDO BOCOL, JR., JOB
CALAMBA, WOLFRANDO CALAMBA, RODOLFO CASISID, JR., EDGARDO DELA PENA, ALLAN
DIONILLO, EDMUNDO EBIDO, JOSE ELEPTICO, JR., MARCELINO FLORES, HERNANDO
FUENTEBILLA, SAUL HITALIA, JOSELITO JAGODILLA, NONITO JAYME, ADJIE JUANILLO,
JEROLD JUDILLA, EDILBERTO NACIONAL, SANDY NAVALES, FELIPE NICOLASORA, JOSE
PAMALO-AN, ISMAEL PEREZ, JR., ERNESTO RANDO, JR., PHILIP REPULLO, VICENTE RUIZ,
JR., JOHN SUMUGAT, CARLO SUSANA, ROMEO TALAPIERO, JR., FERNANDO TRIENTA,
FINDY VILLACRUZ, JOEL VILLANUEVA, AND JERRY
MONTELIBANO, Petitioners, v. UNIVERSAL ROBINA CORPORATION, SUGAR DIVISION-
SOUTHERN NEGROS DEVELOPMENT CORPORATION (SONEDCO), Respondents.

RESOLUTION

LEONEN, J.:

Generally, a wage increase not included in the C9ollective Bargaining Agreement is not demandable.
However, if it was withheld by the employer as part of its unfair labor practice against the union
members, this benefit should be granted.

Before this Court is a Motion for Partial Reconsideration 1 filed by Southern Negros Development
Corporation (SONEDCO) Workers Free Labor Union. The concerned SONEDCO Workers Free Labor
Union members are asking that the wage increase given to their fellow employees be awarded to
them as well. Their co-workers of the same rank are allegedly earning P32.00/day more than they
are receiving.2

This case arose from an unfair labor practice complaint filed by SONEDCO Workers Free Labor Union
against its employer, Universal Robina Corporation, Sugar Division-Southern Negros Development
Corporation (URC-SONEDCO).3

In 2007, while there was no Collective Bargaining Agreement in effect, URC-SONEDCO offered,
among other benefits, a P16.00/day wage increase to their employees. To receive the benefits,
employees had to sign a waiver that said: "In the event that a subsequent [Collective Bargaining
Agreement] is negotiated between Management and Union, the new [Collective Bargaining
Agreement] shall only be effective [on] January 1, 2008." 4 Realizing that the waiver was an unfair
labor practice, some members of SONEDCO Workers Free Labor Union refused to sign. 5

URC-SONEDCO offered the same arrangement in 2008. It extended an additional P16.00/day wage
increase to employees who would agree that any Collective Bargaining Agreement negotiated for that
year would only be effective on January 1, 2009.6 Several members of SONEDCO Workers Free
Labor Union again refused to waive their rights. Consequently, they did not receive the
wage increase which already amounted to a total of P32.00/day, beginning 2009. 7

On July 2, 2009, SONEDCO Workers Free Labor Union and its members who refused to sign the 2007

Labor II – 1
and 2008 waivers filed a complaint for unfair labor practices against URC-SONEDCO. They argued
that the requirement of a waiver prior to the release of the wage increase constituted interference to
the employees' right to self-organization, collective bargaining, and concerted action. They asked
that they be granted a P16.00/day wage increase for 2007 and an additional P16.00/day wage
increase for 2008.8 SONEDCO Workers Free Labor Union also demanded a continuing wage increase
of P32.00/day "from January 1, 2009 onwards."9

Both the National Labor Relations Commission and the Court of Appeals found URC-SONEDCO not
guilty of unfair labor practice.10 Nonetheless, they ordered URC-SONEDCO to give petitioners the
same benefits their co-workers received in 2007 and 2008. However, SONEDCO Workers Free Labor
Union's claim for the 2009 wage increase was denied. Since a new Collective Bargaining Agreement
was already in effect by 2009, this Collective Bargaining Agreement governed the relationship
between the management and the union.11 The Court of Appeals ruled:

As there was no provision in the existing CBA regarding wage increase of [P]16.00 per day, the
[National Labor Relations Commission] was correct in ruling that it cannot further impose private
respondents to pay petitioners the subject wage increase for the year 2009 and onwards. 12

On October 5, 2016, this Court found URC-SONEDCO guilty of unfair labor practice for failing to
bargain with SONEDCO Workers Free Labor Union in good faith. 13 URC-SONEDCO restricted
SONEDCO Workers Free Labor Union's bargaining power when it asked the rank-and-file employees
to sign a waiver foregoing Collective Bargaining Agreement negotiations in exchange for wage
increases.14 Thus, this Court ordered URC-SONEDCO to grant the union members the 2007 and 2008
wage increases. Nevertheless, this Court denied the claim for the 2009 wage increase and ruled that
if SONEDCO Workers Free Labor Union wished to continue receiving the additional wage after 2008,
the proper recourse was to include it in the 2009 Collective Bargaining Agreement. 15

On December 27, 2016, URC-SONEDCO filed a Motion for Reconsideration 16 assailing this Court's
October 5, 2016 Decision. Since respondent merely reiterated the same arguments it raised in the
Comment, the motion was denied.

On February 20, 2017 petitioners, who are members of SONEDCO Workers Free Labor Union, filed a
Motion for Partial Reconsideration.17 Petitioners aver that the P16.00 wage increases granted
in 2007 and 2008 were integrated in the salary of the employees who signed the waiver.
Thus, since the start of 2009, employees who signed the waiver have been receiving
P32.00/day more than petitioners.

Respondent URC-SONEDCO filed a Comment/Opposition 18 to Petitioners' Motion for Partial

Reconsideration on March 2, 2017. It was filed prior to this Court's March 6, 2017 Resolution, 19 which
required such comment.

Respondent argues that this issue has already been ruled upon. Since the 2009 wage increase was
not included in the 2009 Collective Bargaining Agreement, it cannot be demanded. 20

The sole issue for resolution is whether a P32.00/day wage increase beginning January 1, 2009 to
present should be awarded to petitioners.

In their Motion for Partial Reconsideration, petitioners ask for four (4) awards: 1) a
P16.00/day wage increase for 2007; 2) another P16.00/day wage increase for 2008; 3)
the 2009 wage increase, which is a "continuing wage increase," 21 of P32.00/day from
January 1, 2009 to present, and 4) attorney's fees.22

The Court already granted the wage increases for 2007 and 2008 in its October 5, 2016 Decision:23

Labor II – 1
WHEREFORE, the Petition is GRANTED. The Decision of the Court of Appeals dated January 30,
2015 and the Resolution dated July 27, 2015 in CA-G.R. SP No. 05950 are SET ASIDE. Respondent
Universal Robina Corporation Sugar Division - Southern Negros Development Corporation
is GUILTY of unfair labor practice and is ORDERED to pay each of the petitioners the wage in crease
of P16.00 for the years 2007 and 2008; and to pay SONEDCO Workers Free Labor Union moral
damages in the amount of P100,000.00; and exemplary damages in the amount of P200,000.00.

SO ORDERED.24 (Emphasis supplied)

Thus, the only wage increase in issue here is the continuing wage increase of P32.00/day
starting 2009.

Generally, the Collective Bargaining Agreement controls the relationship between the
parties. Any benefit not included in it is not demandable. 25

However, in light of the peculiar circumstances in this case, the requested wage increase
should be granted.

According to petitioners, the "P32.00/day [wage increase] was integrated to the wage[s] of those
who signed the waivers so that they are receiving the wage increase of P32.00/day up to now." 26 To
prove this allegation, petitioners have attached a joint affidavit 27 dated January 18, 2017 signed by
26 URC-SONEDCO employees. According to the affiants, they signed the 2007 and 2008 waivers and
are, thus, currently receiving P32.00/day more than petitioners.28

The wage increase was integrated in the salary of those who signed the waivers. When the affiants
waived their rights, respondent rewarded them with a P32.00/day wage increase that continues to
this day. The respondent company granted this benefit to its employees to induce them to waive
their collective bargaining rights. This Court has declared this an unfair labor practice. Accordingly, it
is illegal to continue denying the petitioners the wage increase that was granted to employees who
signed the waivers. To rule otherwise will perpetuate the discrimination against petitioners. All the
consequences of the unfair labor practice must be addressed.

The grant of the P32.00/day wage increase is not an additional benefit outside the
Collective Bargaining Agreement of 2009. By granting this increase to petitioners, this
Court is eliminating the discrimination against them, which was a result of respondent's
unfair labor practice.

Considering that exemplary damages were imposed, this Court also deems it proper to grant
attorney's fees.29

WHEREFORE, the Motion for Partial Reconsideration is GRANTED. The dispositive portion of the

October 5, 2016 Decision in G.R. No. 220383 is MODIFIED as follows:

Respondent Universal Robina Corporation, Sugar Division - Southern Negros Development

Corporation is ORDERED to:

1. pay the wage increase of P16.00/day in the year 2007 and another wage increase of P16.00/day
in the year 2008 to the following petitioners: (1) Renato Yude, (2) Marianito Regino, (3) Manuel
Yumague, (4) Francisco Dacudag, (5) Rudy Ababao, (6) Dominic Sornito, (7) Sergio Cajuyong, (8)
Romulo Labonete, (9) Generoso Granada, (10) Emilio Agus, (11) Arnold Cayao, (12) Ben Geneve,
(13) Victor Maque, (14) Ricardo Gomez, (15) Rodolfo Gawan, (16) Jimmy Sullivan, (17) Federico
Sumugat, Jr., (18) Romulo Aventura, Jr., (19) Jurry Magallanes, (20) Hernan Epistola, Jr., (21)
Roberto Belarte, (22) Edmon Montalvo, (23) Teodoro Maguad, (24) Domingo Tababa, (25) Maximo
Sale, (26) Cyrus Dionillo, (27) Leonardo Junsay, Jr., (28) Danilo Samillion, (29) Marianito Bocateja,
(30) Juanito Gebusion, and (31) Ricardo Mayo;
Labor II – 1
2. pay the wage increase of P16.00/day in the year 2008 to the following petitioners: (1) Raul
Alimon, (2) Rebency Basoy, (3) Ricardo Bocol, Jr., (4) Wolfrando Calamba, (5) Edgardo Dela Pena,
(6) Edmundo Ebido, (7) Marcelino Flores, (8) Saul Hitalia, (9) Nonito Jayme, (10) Jerold Judilla, (11)
Sandy Navales, (12) Jose Pamalo-an, (13) Ernesto Rando, Jr., (14) Vicente Ruiz, Jr., (15) Carlo
Susana, (16) Fernando Trienta, (17) Joel Villanueva, (18) Arnel Arnaiz, (19) Jimmy Victorio Bernalde,
(20) Job Calamba, (21) Rodolfo Casisid, Jr., (22) Allan Dionillo, (23) Jose Eleptico, Jr., (24) Hernando
Fuentebilla, (25) Joselito Jagodilla, (26) Adjie Juanillo, (27) Edilberto Nacional, (28) Felipe Nicolasora,
(29) Ismael Perez, Jr., (30) Philip Repullo, (31) John Sumugat, (32) Romeo Talapiero, Jr., (33) Findy
Villacruz and (34) Jerry Montelibano;

3. incorporate the wage increase of P32.00/day to the wage of all the individual petitioners from
January 1, 2009 to present;

4. pay SONEDCO Workers Free Labor Union moral damages in the amount of P100,000.00;

5. pay SONEDCO Workers Free Labor Union exemplary damages in the amount of P200,000.00; and

6. pay SONEDCO Workers Free Labor Union ten percent (10%) of the total award as attorney's fees.

Labor II – 1
 43.) G.R. No. 206795, September 16, 2019

FOODBEV INTERNATIONAL AND LUCILA S. DELA CRUZ, PETITIONERS, v. NOLI C. FERRER,

JEVER BELARDO, FELIX GALELA, ROMEO SISCAR, MICHAEL BALDESCO, RICO ACADEMIA,
EDUARDO DELA CRUZ, RYAN AQUINO, GAUDENCIO PARIO, MARK TRAPAGO, MAIR GOMEZ,
NAGKAKAISANG MANGGAGAWA NG FOODBEV INTERNATIONAL, RICHARD EROLES AND
BERNADETTE BELARDO, RESPONDENTS.

DECISION

REYES, J. JR., J.:

This case is about four consolidated labor complaints of illegal dismissal, unfair labor practice, non-
payment of salary and other benefits, and claims for damages and attorney's fees filed by union
members.

The Facts

Petitioner Foodbev International (Foodbev) is a partnership engaged in the food service industry by
providing after-sales support for specialized equipment, like hot and cold dispensers and displays.
Foodbev hires skilled technicians to ensure that its specialized equipment are installed and
maintained properly.1

Respondents Noli C. Ferrer (Ferrer), Jever N. Belardo (Jever), 2 Felix Galela (Galela),3 Romeo Siscar,
Jr. (Siscar), Michael Baldesco (Baldesco), Rico Academia (Academia), Eduardo Dela Cruz (Dela Cruz),
Ryan Aquino (Aquino), Gaudencio Pario III (Pario), Mark Trapago (Trapago), Mair Gomez (Gomez),
and Reynaldo B. Eroles, Jr.4 (Eroles), are Foodbev rank and file employees and members of Samahan
ng Nagkakaisang Manggagawa ng Foodbev International Central (Samahan), a labor union
established on May 31, 2008.

Respondent Bernadette Belardo (Bernadette) is a managerial employee and spouse of respondent

Jever.5 She filed a complaint for illegal dismissal, which was consolidated with the other cases.

From July 3 to 9, 2008, meetings were held between the union members, Foodbev managers,
and petitioner Lucila Dela Cruz (Lucila), Foodbev president. Lucila asked their grievances
and reasons in establishmg a union, and threatened to close Foodbev if the union activities
persist. In a general meeting of all Foodbev workers, union members were made to stand
in front of everyone. Foodbev's Quality Assurance Manager Malou Espeña (Espeña) shared her
husband's experience with a union. She relayed that the management closed the company, filed for
bankruptcy, and no one got paid. Lucila reiterated to stop union activities and to withdraw
from the union for the sake of their jobs. Espeña and Operations Manager Mila Gatchalian
(Gatchalian) asked for the union members' voluntary resignation in exchange for one
month salary, proportional 13th month pay, one sack of rice, and one dozen canned corned
beef, but without separation pay. Those who refused to resign were told to submit an
apology letter for establishing a union.6

Most of the union members did not resign, so Foodbev castigated them by conducting a
written examination exclusively for union members. The examination was difficult as it
involved questions on machines that were unrelated to their duties. It was only after Galela
complained that other non-union-member employees were made to take the examination. Those
who failed the examination were considered guilty of violating Article VI, Section C4 of
Foodbev's Code of Discipline on slowing down, dragging or limiting out.7

Gatchalian issued a July 18, 2008 memorandum (memo) to Ferrer, Aquino, Trapago, Pimentel, and
Labor II – 1
Pario, who are ice cream machine technicians. They were required to explain why they should not be
given disciplinary action after finding that the ice cream machine that they installed at Don Bosco,
Makati on July 11, 2008,8 was infested with cockroaches. An administrative hearing was conducted,
and shortly thereafter, they were served with termination notices for gross negligence resulting to
loss, which caused grave damage to the company's reputation and image. 9

On July 21, 2008, Ferrer, Aquino, Jever, Galela, and Pario filed a complaint for unfair labor
practice with the National Labor Relations Commission (NLRC), docketed as NLRC NCR 07-10332-
08. The following day, July 22, 2008, another complaint for unfair labor practice was filed by Eroles,
Baldesco, Gomez, Fame, Dela Cruz, Academia, Siscar, Jimenez, and Trapago in the NLRC, docketed
as NLRC NCR 07-10360-08. The complaints were consolidated and assigned to Labor Arbiter (LA)
Virginia Azarraga (LA Azarraga).10

Thereafter, the respondents started receiving memoranda. Academia received his July 23, 2008
memo, requiring him to explain why he should not be subject of a disciplinary action for negligence
of duty and for failing in the examination for the second time. 11

Eroles received two memoranda both dated July 23, 2008. One temporarily assigning him to Isabela
branch effective July 25, 2008. Another ordering him to explain his July 22, 2008 12absence, when he
filed a complaint for unfair labor practice with the NLRC. 13

Ferrer, Pario, Galela, and Aquino received a similar memo regarding their July 21, 2008 absence
when they filed their complaint.14

On July 28, 2008, the five ice cream machine technicians filed a complaint for illegal dismissal and
money claims with the NLRC, docketed as NLRC NCR 07-10721-08, which was assigned to LA
Thomas T. Que, Jr. (LA Que).15 On July 31, 2008, Foodbev offered them one month salary and goods
should they sign, a quitclaim, but they refused.16

On July 29, 2008, Foodbev managers, Bernadette and Espeña, verbally instructed several
respondents to report to Equipment Masters International (EMI), another Dela Cruz owned
corporation. Galela followed the instruction but was told that he was not in the list of employees
required to report at EMI. He went to Foodbev's head office and inquired if he was being transferred
to EMI. Foodbev's managers, Espeña and Gatchalian, asked him "Gaano ka ka-solid sa grupo, 50
percent ba o 100 percent? " He answered "Ma 'am hindi naman percentage ang pinaguusapan, kung
ano yung nararapat at tama, dun po ako. " Espeña and Gatchalian included him in the list of
technicians who would report to EMI.17

At EMI, the other respondents were confused as they were made to wait for work
instruction coming from Foodbev. Respondents feared that they were being removed from
Foodbev and transferred to EMI, and so, they requested to formalize the verbal order given
them.18 On August 2, 2008, Foodbev posted a July 29, 2008 memo at the gate reassigning to
EMI 11 technicians, nine of whom are union members.19

Also on August 2, 2008, Foodbev issued a memo to Jever, Galela, Gomez, Baldesco,
Academia, Siscar, Dela Cruz, Jimenez, and Piad informing them that they "can go home
since there is no more work schedule that can be given" to them for that day. Respondents
noticed that non-union members were not sent home. Still, they went home as
directed.20 Upon reporting for work on August 4, 2008, they were told to wait at Foodbev's gate as
they were to receive another memo. Foodbev's chairman and Lucila's husband, Elmo Dela Cruz
(Elmo) confronted them. The following conversation transpired: 21
SIR
: Ikaw si Jever?
ELMO

Labor II – 1
 JEVER : Opo
SIR
: Ikaw ang leader nila?
ELMO
JEVER : Hindi po.
xxxx
SIR
: So huwag mong iniinfluence itong mga tao na to.
ELMO
JEVER : Ah di po Sir, kagustuhan po nila yan kahit kasusapin niyo po sila.
SIR Ah, kagustuhan nila. Okay, basta't you follow instructions, and walang maa, walang maaano
:
ELMO sa inyo. Sundin niyo lang ang instructions sa opisina. Hindi kayo pwedeng magmatigas.
xxxx
SIR
: Di ka na naawa [sa] asawa mo, ikaw e, sinasayang mo lang yung papel ng asawa mo...
ELMO
JEVER : Di naman po ganun ung usapan Sir
SIR
: Ano?
ELMO
JEVER : Di naman po ganun ung usapan.
Di naman ganun ang usapan? You talk to your wife and mag-usap kayong dalawa. Kasi,
SIR
: [sayang] yung asawa mo, siya pa naman ang manager dito. And you are jeopardizing her
ELMO
position.
JEVER : Di naman po ganun ung usapan
SIR You are! I'm telling you. Sa amin, sa pag-uusap namin, talagang naaapektuhan ... Useless...
:
ELMO It's useless. It's non sense.22
The memo served to them placed them on preventive suspension for 48 hours pending an
administrative hearing for insubordination for not proceeding to their designated work assignments. 23

Around past 12 p.m. of August 4, 2008, Dela Cruz, Baldesco, Frederick Jimenez (Jimenez) and
Angelito Fame (Fame) were prevented from entering Foodbev's gate and were told to time-in instead
at EMI. They suspected that they were being transferred to EMI, and so they decided to take their
lunch and report for work later.24

About 1 p.m. of the same day, Dela Cruz and Baldesco returned to Foodbev's office when Lucila's
daughters, Merlinda Dela Cruz Carpio (Carpio) and Michelle Dela Cruz Brosas (Brosas), who are part
of Foodbev's management, met them at the gate and angrily told them "Kasama ba kayo sa mga sira
ulo? Hindi na [namin] kayo kailangan dito! Ano pa ang ginagawa niyo dito! Tutal hindi naman kayo
sumusunod sa amin, bakit nabili ninyo ang Foodbev at gusto niyo kami ang sumunod sa inyo?"Carpio
further asked "Ikaw anong pangalan mo?" Dela Cruz answered "Ako po si Eduardo Dela Cruz po. "
Carpio commented "Dela Cruz kapa naman, kapal ng mukha mo!"  Then Brosas told them to move
away.25

Around 1:30 p.m., another incident occurred with a different group of respondents. While Jever,

Labor II – 1
Galela, Gomez, Siscar, and Academia were having lunch at a restaurant, Carpio and Brosas barged in
and hurled invectives at them. Carpio angrily shouted "Mga putang ina niyo, ang kakapal ng mukha
niyo at wala kayong utang na loob!...Binastos niyo ang papa kol Wala kayong karapatan magsuot ng
uniporme na yan." Then Carpio forcibly removed their polo jacket uniform. Brosas told them "Wag na
kayong magpakita sa kumpanya hindi naming kayo kailangan! Mga putang ina niyo! Tutal
nagmurahan na tayo dito, ano bang gusto niyo!"26

Galela responded that may God forgive them for what they had done. This further angered Carpio
and retorted expletives at him. She grabbed a chair to hit him, but Brosas stopped her. The
restaurant owner intervened and told Carpio and Brosas to leave. The respondents reported the
incident to the barangay officials of Barangay Sta. Cruz and Barangay Tejeros, Makati. 27

Still on August 4, 2008, when Bernadette returned from her lunch break, she found her personal
belongings at the company's reception desk. Bernadette was told to wait for Carpio and Brosas. Upon
their arrival, they began cursing her and told her that her husband, Jever, disrespected their father.
Despite her explanations, Bernadette was fired, prompting her to file a complaint for illegal dismissal
with money claims on August 11, 2008, docketed as NLRC NCR 08-11324-08. The case was assigned
to LA Melquiades Sol D. Del Rosario, and was later consolidated with the complaints assigned to LA
Que.28

The following day, August 5, 2008, Jever, Galela, Gomez, Siscar, Fame, Baldesco, Dela Cruz,
Jimenez, and Academia filed a complaint for illegal dismissal with money claims, docketed as NLRC
NCR 08-11081-08, and was assigned to LA Patricio P. Libo-on. It was also consolidated with the
complaint pending with LA Que.29

On August 12, 2008, Eroles returned from Isabela and reported for work at Foodbev's office in
Makati. He requested that his absence on August 11, 2008 be counted against his leave credits, and
that he be permitted to go on leave on August 13, 2008 to attend a hearing on the unfair labor
practice case before LA Azarraga. During the hearing, LA Azarraga advised the respondents to secure
the services of a lawyer, move for the dismissal of the case before her, and to pursue the action filed
before LA Que. On August 13, 2008, respondents filed a Notice of Dismissal or Withdrawal of
Complaint without Prejudice.30

When Eroles returned to work on August 14, 2008, he was given a memo requiring him to explain his
insubordination for being absent despite the disapproval of his application for leave. 31

On August 19, 2008, Eroles filed his explanation stating that his absence on August 11, 2008, was
due to exhaustion from his Isabela trip, while his absence on August 13, 2008 was because of a
hearing before the LA.32

On the same day, Lucila summoned Eroles and told him to hand in his resignation, because he would
be appointed at Greentech Inter-Phils., (Greentech) another Dela Cruz-owned company. He was
offered two months salary, two sacks of rice, and two boxes of canned corned beef. 33 Eroles
recounted the following:
Ang offer sa akin, wala naman daw ginagawa sa Foodbev, magkakaroon daw ako ng
appointment letter sa Greentech, at magresign na ako sa Foodbev. Bale wala na daw as per
mam Sonie ang length of service ko kasi bagong kumpanya na daw ito, at tinatanong ko kung ano
ang option ko kung hindi ako napayag, wala daw tumingin daw ako sa salamin at
magmunimuni.(Emphases supplied)34
Foodbev drew up a written offer of wage, sack of rice, and canned corned beef to the 13 union
members in exchange for a waiver. Lucila instructed Eroles to take the day off the next day to
convince the 13 respondents to accept their offer.35

On August 21, 2008, Eroles informed Foodbev that their offer was rejected. 36 Later that day, Foodbev
issued a memo to Eroles informing him that the reasons for his absences do not constitute sufficient
Labor II – 1
justification and that he was being suspended from work for 7 days. 37 After the lapse of the
suspension period, he did not report back to work. 38

On August 22, 2008, Eroles and the Samahan filed a complaint for unfair labor practice, illegal
dismissal, and money claims with the NLRC, docketed as NLRC NCR 08-11868-08, and was assigned
to LA Felipe T. Garduque II. The complaint was consolidated with the three other cases assigned to
LA Que.39 On the same day, the complaint docketed as NLRC NCR 07-10721-08 was amended to
include unfair labor practice.40

On September 18, 2008, LA Azarraga dismissed the two complaints for unfair labor practice, namely:
NLRC NCR 07-10332-08 and NLRC NCR 07-10360-08, as prayed for by respondents in their Notice of
Dismissal or Withdrawal of Complaint without Prejudice.41

The Labor Arbiter's Decision

On July 16, 2009, LA Que rendered a decision dismissing the four consolidated complaints for
violation of the rule against forum shopping.42 The labor arbiter explained that while the filing of
consolidated cases before his branch initially involved dissimilar causes of action from the cases filed
before LA Azarraga, the subsequent amendment of the complaints to include unfair labor practice,
and the failure to inform his branch of the status of the pending complaints was a violation of the rule
against forum shopping.43

The LA pointed out that the respondents knew the pendency of the unfair labor practice case before
LA Azarraga, and by not informing his branch of such pendency was an indication of their intention to
trifle with the proceedings before his branch. This led to the dismissal of the four consolidated
complaints: NLRC NCR 07-10721-08, NLRC NCR 08-11081-08, NLRC NCR 08-11324-08, and NLRC
NCR 08-11868-08.44

The NLRC Decision

The respondents appealed to the NLRC, which rendered a decision on September 17, 2009, affirming
the dismissal of the complaints with modification as to Michael Pimentel's (Pimentel) complaint. 45

The NLRC established that respondents failed to disclose in their verification that there were other
pending cases before LA Azarraga, which is a violation of the rule against forum shopping. The NLRC
affirmed the dismissal of the four complaints. 46

As for Eroles' complaint on behalf of the union, the NLRC determined that the complaint was filed not
for the union but for the same union members, who earlier filed the complaints. The NLRC observed
that the respondents merely changed the name into the Samahan to make it appear that the case
did not involve the same parties, and added unfair labor practice as a new cause of action, but the
allegations were the same as the earlier cases. Nevertheless, the NLRC concluded that the allegations
against Foodbev did not constitute unfair labor practice. 47

As for Bernadette's complaint, the NLRC held that she was not dismissed from the service but she
abandoned her work, and that she filed a complaint to get hold of separation pay and not to regain
her employment. The NLRC decided that her termination was warranted and she was not entitled to
separation pay.48

As for Pimentel's complaint, the NLRC ruled in his favor. The NLRC ascertained that although he was
negligent in the installation of the ice cream machine, his negligence could not be characterized as
gross and habitual to justify dismissal from the service. There was no showing that he committed
other infractions, and this single act could not be considered as habitual neglect of duty. Further,
Foodbev's claim that Pimentel was guilty of habitual absences was not proven with substantial
evidence. The NLRC declared that Pimentel's termination from employment was without valid or just
Labor II – 1
cause. Considering that he was not interested in reinstatement, but only for separation pay, the
NLRC awarded the same to him equivalent to one month salary for every year of service. 49

The respondents moved for reconsideration, which the NLRC denied in its November 17, 2009
Resolution.50

The Court of Appeals Decision

Aggrieved, respondents elevated the case to the Court of Appeals (CA) through a petition
for certiorari under Rule 65, as amended, alleging grave abuse of discretion on the part of the NLRC.

On November 28, 2012, the CA rendered a decision partly granting the petition. 51 The CA affirmed
the labor tribunal's finding that respondents committed forum shopping. However, it deemed
appropriate to resolve the substantial issues presented as a dismissal on pure technicalities was
frowned upon.52

On the claim of unfair labor practice, the CA determined that Foodbev was discouraging the
formation of a union, and committed acts constituting unfair labor practice based on the
following evidence: the union's application for registration, the minutes of the meeting between
Foodbev's president and/or managers and union members, the affidavits of Aquino and Pario, the
acts of Carpio and Brosas, the blotter report, the transfer of the union president to Isabela, the show
cause memo, and the notices of termination. The CA ruled that the NLRC arbitrarily pronounced that
there was no unfair labor practice despite the lack of factual and legal bases. 53

On the claim of illegal dismissal, the CA resolved the issue individually.

As for Bernadette, the CA explained that a managerial employee married to a rank and file employee
created issues within the company and was enough reason to dismiss her. However, there was
nothing in the records that would show that she was given any termination notice or any chance to
defend her side in a proper hearing. Foodbev was unable to support its allegation that Bernadette
refused to receive the notice sent to her. The CA concluded that Foodbev failed to overcome the
burden to prove that the dismissal was done in accordance with law. 54

As for Aquino, Ferrer, Pario, and Trapago, the CA held that there was nothing in the records that
would reflect any habitual and gross negligence on their part, and the NLRC did not cite any incident
to support the same. The CA elucidated that it was incorrect to conclude that only the four
technicians were grossly negligent and not Pimentel as they were part of same team with the task of
installing the same machine at the same place. The CA stated that the NLRC could not justifiably
single out Pimentel as having been illegally dismissed without any facts that would make his situation
different from that of his teammates.55

As for the rest of the respondents, the CA resolved that the burden to prove the validity of the
dismissal rests on the employer, and the proof must be based on substantial evidence. The CA found
that there was a dearth of evidence to prove that respondents refused to follow instructions for their
transfer to EMI. It was further revealed that nine of the 11 employees transferred to EMI were union
members, which led the CA to believe that the transfer was made to prevent them from conducting
union activities.56

In partly granting the petition, the CA reversed the September 17, 2009 NLRC Decision and
November 17, 2009 NLRC Resolution, and ordered reinstatement or payment of separation benefits,
as the case may be. The CA also awarded P50,000.00 as moral damages, P25,000.00 as exemplary
damages to each respondent, and attorney's fees equivalent to 10% of the total amount awarded. 57

Foodbev moved for reconsideration, which the CA denied in its April 8, 2013 Resolution. 58 Undaunted,
Foodbev filed this petition before the Court. A summary of its arguments are as follows.
Labor II – 1
Whether or not the CA erred:   

1. In not dismissing the complaint due to forum shopping;

2. In finding that the ice cream machine technicians were illegally dismissed from employment;

3. In finding Foodbev guilty of unfair labor practice; and

4. In awarding money claims, damages and attorney's fees to respondents. 59

In their Comment, respondents enumerated the instances of union busting in support of the
unfair labor practice allegation: the meetings between Foodbev president and/or
managers and respondents were aimed on hindering union activities, Foodbev's directive
to resign, the written examination initially given to union members only, the temporary
transfer of union president to Isabela, the transfer of the rest of the respondents to EMI,
and the termination from employment of union president, union officers (such as the ice
cream machine technicians), union members, and Bernadette Belardo as spouse of a union
member. Respondents narrated the circumstances surrounding their respective
termination.60

In their Reply, petitioners reiterated their arguments in the Petition.

The Issue to be Resolved

The issue to be resolved is whether or not the CA committed a reversible error in partly reversing the
September 17, 2009 NLRC Decision and November 17, 2009 NLRC Resolution.

The Court's Ruling

The petition is denied.

The general rule in a petition for review on certiorari under Rule 45, as amended, is that only
questions of law should be raised. In Republic v. Heirs of Santiago,61 the Court enumerated that one
of the exceptions to the general rule is when the CA's findings are contrary to those of the trial court.
Considering the different findings of fact and conclusions of law of the labor arbiter, the NLRC and the
CA, the Court shall entertain this petition, which involves a re-assessment of the evidence presented.

I. Procedural Issue: Forum Shopping

It is true that the Court is strict in dismissing a case when lawyers and/or litigants commit forum
shopping. In CMTC International Marketing Corp. v. Bhagis International Trading Corp.,62 the Court
emphasized that "procedural rules should be treated with utmost respect and due regard, since they
are designed to facilitate the adjudication of cases to remedy the worsening problem of delay in the
resolution of rival claims and in the administration of justice."

However, it is likewise true that strict imposition of technical rules can result to miscarriage of
substantial justice. The CMTC case recognized exceptions to the Rules, but only for the most
compelling reasons where stubborn obedience to the Rules would defeat rather than serve the ends
of justice.

The Court reiterates its pronouncement in National Power Corp. v. Court of Appeals?63
Notwithstanding the procedural lapse in this case, We opt not to deny the case based on merely
technical grounds. We must be reminded that deciding a case is not a mere play of technical rules. If

Labor II – 1
we are to abide by our mandate to provide justice for all, we should be ready to set aside technical
rules of procedure when the same hampers justice rather than to serve the same.
Substantial justice is of paramount importance to the Court and it is our duty to uphold it. It has
been the practice of the Court to set aside technical rules to give way to substantial justice,
especially of those who are underprivileged or the disadvantaged, such as the workers.

Here, the respondents are at risk of losing their jobs after they were terminated from the service
without factual basis and/or due process of law. Their years of service may be thrown away without
getting a well-deserved compensation if the Court would favor technicality over resolving the
substantive issues. Further, an employer may get away with unfair labor practice of union busting
due to technicality.

The framers of our Constitution recognized the fragile position of workers in our society given their
economic status. Thus, they drafted Article XIII to protect labor and the rights of workers.

ARTICLE XIII

xxxx

LABOR

Section 3. The State shall afford full protection to labor, local and overseas, organized and
unorganized, and promote full employment and equality of employment opportunities for all.

It shall guarantee the rights of all workers to self-organization, collective bargaining and
negotiations, and peaceful concerted activities, including the right to strike in accordance with law.
They shall be entitled to security of tenure, humane conditions of work, and a living wage. They shall
also participate in policy and decision-making processes affecting their rights and benefits as may be
provided by law.

The State shall promote the principle of shared responsibility between workers and employers and
the preferential use of voluntary modes in settling disputes, including conciliation, and shall enforce
their mutual compliance therewith to foster industrial peace.

The State shall regulate the relations between workers and employers, recognizing the right of labor
to its just share in the fruits of production and the right of enterprises to reasonable returns on
investments, and to expansion and growth.64
The Court has the duty to uphold the Constitution and safeguard the rights it embodies. Here, the
rights of workers to self-organization, security of tenure, and a living wage are at stake. A dismissal
of the complaints due to technicalities would defeat these valuable rights of complaining workers,
which the Constitution protects.

In Nueva Ecija I Electric Cooperative, Inc. v. NLRC,65 the Court explained the effect of unfair labor
practice in the society.
Unfair labor practices violate the constitutional rights of workers and employees to self-organization,
are inimical to the legitimate interests of both labor and management, including their right to bargain
collectively and otherwise deal with each other in an atmosphere of freedom and mutual respect; and
disrupt industrial peace and hinder the promotion of healthy and stable labor-management relations.
As the conscience of the government, it is the Court's sworn duty to ensure that none trifles with
labor rights.
Therefore, the CA was correct in setting aside technical rules on forum shopping to give way to the
more important Constitutional and statutory rights of respondent workers.

II. Substantive Issues

Labor II – 1
A. The dismissal of ice cream machine technicians

One of the technicians, Pimentel, obtained a favorable decision in the NLRC and has moved for its
execution.66 The case now proceeds as to the four other technicians, Ferrer, Aquino, Trapago, and
Pario, who complained of illegal dismissal with money claims.

Foodbev alleges that respondents' failure to follow the cleaning procedure of ice cream machine and
habitual absences amount to gross negligence, serious misconduct, and willful disobedience, which
compel a dismissal from the service.67 Pario has an additional infraction of gambling inside work
premises.68

It is settled that a valid dismissal mandates compliance with substantive and procedural
requirements. In Mantle Trading Services, Inc. and/or Del Rosario v. NLRC,69 the Court emphasized,
"(a) there be just and valid cause as provided under Article 282 (now Art. 297) of the Labor Code;
and (b) the employee be afforded an opportunity to be heard and to defend himself."

The Court further discussed the two facets of procedural due process in New Puerto Commercial v.
Lopez70
[Procedural due process consists of the twin requirements of notice and hearing. The employer must
furnish the employee with two written notices before the termination of employment can be effected:
(1) the first apprises the employee of the particular acts or omissions for which his dismissal is
sought; and (2) the second informs the employee of the employer's decision to dismiss him. The
requirement of a hearing is complied with as long as there was an opportunity to be heard, and not
necessarily that an actual hearing was conducted, x x x.
In King of Kings Transport, Inc. v. Mamac,71 the twin requirements of notice and hearing were further
clarified below:
The first written notice to be served on the employees should contain the specific causes or grounds
for termination against them, and a directive that the employees are given the opportunity to submit
their written explanation within a reasonable period. "Reasonable opportunity" under the Omnibus
Rules means every kind of assistance that management must accord to the employees to enable
them to prepare adequately for their defense. This should be construed as a period of at least five (5)
calendar days from receipt of the notice to give the employees an opportunity to study the
accusation against them, consult a union official or lawyer, gather data and evidence, and decide on
the defenses they will raise against the complaint. Moreover, in order to enable the employees to
intelligently prepare their explanation and defenses, the notice should contain a detailed narration of
the facts and circumstances that will serve as basis for the charge against the employees. A general
description of the charge will not suffice. Lastly, the notice should specifically mention which
company rules, if any, are violated and/or which among the grounds under Art. 282 is being charged
against the employees.

After serving the first notice, the employers should schedule and conduct a hearing or conference
wherein the employees will be given the opportunity to: (1) explain and clarify their defenses to the
charge against them; (2) present evidence in support of their defenses; and (3) rebut the evidence
presented against them by the management. During the hearing or conference, the employees are
given the chance to defend themselves personally, with the assistance of a representative or counsel
of their choice. Moreover, this conference or hearing could be used by the parties as an opportunity
to come to an amicable settlement.

(3) After determining that termination of employment is justified, the employers shall serve the
employees a written notice of termination indicating that: (1) all circumstances involving the charge
against the employees have been considered; and (2) grounds have been established to justify the
severance of their employment.
1. 1st Notice - Notice of violation and order to explain
The records reveal that Ferrer, Aquino, Trapago, and Pario were individually served with a show
cause memo notifying them of their violation of company rules with order to explain in writing.
Labor II – 1
Ferrer, as supervisor and head of the installation team, received the following memo dated July 18,
2008.
xxxx

It has been found out that MSS Machine with serial no. 20050 installed at Don Bosco Makati
has sightings of pest (cockroach), an indication that the machine was not properly cleaned
and checked in the shop before it was installed.

You are the head of the MSS Team and one of those who cleaned the unit. As the Supervisor, it is
your main responsibility to ensure that the machine to be installed is in good condition and passes
[the] quality standards prior to installation and before leaving the outlet.

Please take note that this created an aggravating issue against us in terms of quality service.

In this regard, you are found guilty of violating the FBI Code Article VI Section 13 (Gross
Negligence resulting to loss...which causes grave damage to our company's reputation and
image) subject to penalty of Dismissal for first time offenders.

Please explain in writing within 48 hours why you should not be given disciplinary action on this
regard.72 (Emphases supplied)
On the other hand, Aquino, Trapago, and Pario, as members of the installation team, received a
similar memo also dated July 18, 2008.
xxxx

It has been found out that MSS Machine with serial no. 20050 installed at Don Bosco Makati
has sightings of pest (cockroach), an indication that the machine was not properly cleaned
and checked in the shop before it was installed.

You were one of those who installed the unit. This is to remind you that our SOP is to ensure that the
machine to be installed is in good condition prior to installation and before leaving the outlet.

Please take note that this created an aggravating issue against us in terms of quality service.

In this regard, you are found guilty of violating the FBI Code Article VI Section 13 (Gross
Negligence resulting to loss...which causes grave damage to our company's reputation and
image) subject to penalty of Dismissal for first time offenders.

Please explain in writing within 48 hours why you should not be given disciplinary action on this
regard.73 (Emphasis supplied)

The Court observes several flaws in the show cause memo. First, the memo contains a general
statement that a cockroach was found in the ice cream machine that respondents installed at Don
Bosco Makati. It does not indicate when and how the pest was discovered, and/or in which part of
the machine was it found.

Second, the memo draws a conclusion that the fault lies on the respondents in the absence of a
proper investigation. It states that sightings of pest (cockroach), an indication that the machine was
not properly cleaned and checked in the shop before it was installed, xxx. In this regard, you are
found guilty of violating the FBI Code Article VI Section 13 (Gross Negligence resulting to loss . . .
which causes grave damage to our company's reputation and image) subject to penalty of Dismissal
for first time offenders. The purpose of the first notice is to inform the employee of his/her violation
and to afford him/her of an opportunity to explain, and not to pass judgment.

Third, the memo failed to specify how the supposed negligence gravely damaged Foodbev's
reputation and image. It does not declare a detailed narration of the facts and circumstances as basis
Labor II – 1
for the charge of gross negligence resulting to loss and damage to the company's reputation and
image.

Fourth, respondents were given 48 hours or two days to explain their side, which is too short
compared to the 5-day period enunciated in the King of Kings Transport case.

Lastly, the memo does not include the charge of serious misconduct and willful disobedience, which
Foodbev accuses respondents of, in this petition. Respondents only replied to the charge of gross
negligence since it is the only charge they were informed of. By raising new charges in this petition,
respondents were deprived of the opportunity to defend themselves at the first instance on the
administrative level.

In sum, the memo does not comply with the requirements laid down by the King of Kings
Transport case. The respondents' dismissal due to gross negligence resulting to loss and damage to
the company's reputation and image, lacks factual foundation and disregards due process.

As for the allegation of habitual absences, the petition fails to specifically state the dates or
circumstances constituting habitual absence. The petition states:
35. After concluding the administrative hearing on 26 July 2008, and considering further the habitual
absences and infractions committed against petitioner Foodbev rules, [e.g.] gambling inside
petitioner Foodbev's premises, and the fact that they were not able to satisfactorily explain their
failure to strictly adhere and abide with the standard operating procedures, petitioner Foodbev
decided to dismiss the employment of respondents Trapago, Pario, Pimentel, Aquino and Ferrer. 74
While the records show that Pario, Ferrer, and Aquino were served with individual memo dated July
23, 2008, for their absence on July 21, 2008, it is unclear if this is the particular absence that
Foodbev is referring to as habitual absence.
To :      Gaudencio Pario III

xxxx

This refers to your absence last July 21, 2008. You have been issued the memo regarding the MSS
case last July 19, Saturday. It has been noted with regret that all of those who have been issued the
memo absented after the memo was received. Total number of absences on that day has been very
detrimental to our operations.

In view of the above, you are construed to have violated FBI Code of Discipline Article VI B13
(Engaging in sabotage or other acts inimical to the security or interest of the company) a type A
offense subject to Dismissal.

Please explain in writing within 48 hours why you should not be given the disciplinary action cited
above. 75

To :       Noli Ferrer

xxxx

This refers to your absences, which as of today, you have accumulated 3 days absences.

You have been issued the memo regarding the MSS case last July 19, Saturday. On July 21, 2008,
you were absent. It has been noted with regret that all of those who have been issued a memo
absented on the same day which has been very detrimental to our operations.

In view of the above, you are construed to have violated FBI Code of Discipline Article VI, Section
A1(AWOL - incurring two absences without leave whether consecutive or not) a type B offense
subject to penalty of 10-15 days suspension for 1 st time offenders.
Labor II – 1
FBI Code of Discipline Article VI B13 (Engaging in sabotage or other acts inimical to the security or
interest of the company) a type A offense subject to Dismissal.

Please explain in writing within 48 hours why you should not be given the disciplinary action cited
above.76

To :      Ryan Aquino

xxxx

This refers to your absences, which as of today, you have accumulated 3.5 days absences.

You have been issued the memo regarding the MSS case last July 19, Saturday. On July 21, 2008,
you were absent, which is an unauthorized leave. It has been noted with regret that all of those who
have been issued a memo absented on the same day which has been very detrimental to our
operations.

In view of the above, you are construed to have violated FBI Code of Discipline Article VI, Section
A1(AWOL - incurring two absences without leave whether consecutive or not) a type B offense
subject to penalty of 15-20 days suspension for 2 nd time offenders.

FBI Code of Discipline Article VI B13 (Engaging in sabotage or other acts inimical to the security or
interest of the company) a type A offense subject to Dismissal.

Please explain in writing within 48 hours why you should not be given the disciplinary action cited
above.77
The memo stated that the three respondents were absent on July 21, 2008. Ferrer and Aquino's
memo stated their accumulated number of absences without indicating specific dates to establish
habitual absence. As for Trapago, there is no record that he was served with a memo regarding his
absence. The Court finds Foodbev's claim of habitual absences against Pario, Ferrer, Aquino, and
Trapago to be too general and unsupported by evidence. The 48-hour period to explain is too short
compared to the 5-day period as previously discussed. The memo failed to comply with the
requirements of law and jurisprudence. The respondents' dismissal on the ground of habitual absence
lacks factual basis and violates procedural requirements.

As for respondent Pario, who was caught gambling inside the work premises, it appears that the
same is true as there was sufficient documentary evidence to support the charge. The records
disclose that Foodbev sent a memo to Pario informing him of his violation, and after Pario admitted
his misdeed in his written explanation, Foodbev issued another memo finding him guilty of violating
the company rules and suspended him from work for three days. However, the Court will not rule on
the validity of the Pario's suspension as the issue to be resolved is the legality of his dismissal.

2. 2nd Notice - Notice of opportunity to be heard

Foodbev sent individual memo to respondents for a scheduled administrative hearing on the charge
of gross negligence in cleaning the ice cream machine. The memo reads:
As you maybe aware, the installation of MSS Machine bearing Serial No. 20050 at Don Bosco Makati
had caused great damage to the prestige and reputation of the company to its client, because
cockroach and other pests were sighted on the said machine.

The incident only showed your gross negligence in not checking and cleaning the machine prior to
its installation, thus in violation of the company's policy of which you are very much aware of.

Consequently, your attention was called through a memorandum sent to you of which, you favor the
Labor II – 1
company with a reply.

However, the company deems it proper to conduct an administrative hearing to determine your
culpability on the charge against you. In this regard, you are invited to appear on July 24, 2008 at
the Executive Office in the afternoon before the administrative body who will conduct the
investigation. This hearing could likewise be the best avenue for you to air out your side as the
truthfulness of the matter.

Your presence on the hearing is very important and is therefore highly appreciated. On the contrary,
failure to appear on the scheduled hearing will constitute a waiver on your part to introduce evidence
to exonerate or free you from possible liability. 78 (Emphases supplied)
This memo sufficiently satisfies the requirement of affording due process to the respondents in
defending their side. However, this memo applies only to the charge of gross negligence, and does
not include the charge of habitual absence, serious misconduct, and willful disobedience.

3. 3rd Notice - Termination notice with grounds

The King of Kings Transport case requires that the termination notice should state that (1) all
circumstances involving the charge against the employees have been considered; and (2) grounds
have been established to justify the severance of their employment.

The termination notices, addressed separately to respondents, are similarly worded as follows:
Date : July 26, 2008

xxxx

This refers to the memo dated July 18, 2008 regarding your alleged negligence in your duty as
evidenced by cockroaches found in the soft serve ice cream machine which you cleaned and installed
at Don Bosco Makati.

In this regard an administrative consultation was held last July25-26, 2008 to thresh out all issues.
The totality of evidences gathered during the administrative investigation most especially your
unequivocal admission that you, together with other technicians were indeed the one who prepared
and installed the soft serve ice cream machines sufficiently established that you are guilty of serious
misconduct, fraud and willful breach of trust and confidence causing serious damage and prejudice to
the company. Our company, being in the Food and Beverage [I]ndustry should always see to it that
above average due diligence be practiced lest the consumer public would suffer. Per our QA
department, the most susceptible to food poisoning would be the school age children and the elderly.
Our client's (Nestle) primary customers in Don Bosco Makati are school age children.

Thus effective upon receipt of this letter, your employment is hereby terminated for violating
Foodbev International Code of Discipline Article VI Section 13 (Gross Negligence resulting to
loss...which causes grave damage to our company's reputation and image), a type A
violation with penalty of Dismissal for first time offenders. Please return immediately all company
documents and materials that may have come into your possession as a consequence of your
employment.79 (Emphasis supplied)
Foodbev avers in this petition that management dismissed respondents because of gross negligence,
habitual absence, infractions, serious misconduct, and willful disobedience. However, the first notice
only charged respondents of gross negligence resulting to loss, which caused grave damage to the
company's reputation and image. Subsequently, the termination notice stated that Foodbev found
respondents "guilty of serious misconduct, fraud and willful breach of trust and confidence causing
serious damage and prejudice to the company. " The same notice indicated that the ground for
termination is a violation of Foodbev International Code of Discipline Article VI Section 13 (Gross
Negligence resulting to loss...which causes grave damage to our company's reputation and image).

Labor II – 1
The inconsistencies in the charges, findings, and ground for termination make the termination notice
substantially and procedurally defective. Since respondents were not formally charged of serious
misconduct, fraud, and willful breach of trust and confidence causing serious damage and prejudice
to the company, they were unable to defend their side and present evidence on their behalf. It is
unfair and unjust to base a termination on a finding that had not undergone notice and hearing. The
termination notice clearly violates respondents' rights to due process.

In addition, the termination notice does not state habitual absence, and in Pario's case, his gambling
activity as additional ground for dismissal from the service.

Noticeably, there are inconsistencies on the dates of the administrative hearing. In the July 22, 2008
notice of hearing, the administrative hearing was set on July 24, 2008. In the July 26, 2008,
termination notice, the date of administrative hearing in the body of the letter is July 25-26, 2008.
The petition also contains different dates of administrative hearing:
31. Notices of administrative investigation were then subsequently sent to the respondents and an
administrative hearing was then conducted on 24 July 2008 at the Executive Office of petitioner
Company.

xxxx

35. After concluding the administrative hearing on 26 July 2008, and considering further the
habitual absences and infractions committed against petitioner Foodbev rules, [e.g.] gambling inside
petitioner Foodbev's premises, and the fact that they were not able to satisfactorily explain their
failure to strictly adhere and abide with the standard operating procedures, petitioner Foodbev
decided to dismiss the employment of respondents Trapago, Pario, Pimentel, Aquino and
Ferrer.80 (Emphasis supplied)
The discrepancies in the administrative hearing's date put doubt on Foodbev's claim that the date
appearing on the termination notice was a typographical error. More so, when respondents alleged
that they were served with the termination notice shortly after the administrative hearing. These
observations lead the Court to ask whether the termination notices were prepared ahead of the
administrative hearing with a decision to terminate respondents' employment, and whether the
administrative hearing was a sham and was conducted only for compliance purposes.

An administrative hearing involves sorting of facts, evaluation of evidence, and assessment of the
arguments presented by both management and employ ee/s. The actual hearing in the presence of
both management and employee/s is time consuming. At times, it can take days to finish considering
the number of parties involved. Moreover, there should be an actual deliberation by a panel or
committee of persons who heard the charge/s and defense/s. With all the work that comes in an
administrative hearing, it is hardly possible to finish the inquiry and decision-making process in one
day. Applying this to the case at hand, the Court is suspicious of the integrity of the administrative
hearing conducted on the charges against the respondents. It is unclear whether the respondents
were assisted by a counsel or representative in the presentation of their defenses, or whether they
waived such right. The numerous procedural violations alone make respondents' dismissal against
the law. Yet, the Court has to determine if the charge of gross negligence against the respondents
has merit.

4. Just and Valid Cause for Termination

Article 29781 (formerly Art. 282) of the Labor Code listed gross and habitual neglect of duties by the
employee as a ground for termination of his/her services. In Publico v. Hospital Managers, Inc., 82 the
Court declared that "gross negligence connotes want of care in the performance of one's duties.
Habitual neglect implies repeated failure to perform one's duties for a period of time, depending upon
the circumstances."

The notice of the administrative hearing and the respondents' written explanation reveal that
Labor II – 1
respondents were tasked to clean and install an ice cream machine at Don Bosco Makati, which
reported to Foodbev that cockroaches were found in the machine. Respondents cleaned the machine
on July 7, 2008, and later wrapped and sealed it in plastic. The machine remained at Foodbev's office
for 3 days before delivering it to Don Bosco Makati on July 11, 2008. On site, respondents tested the
machine for two hours to ensure that it was functioning well. During the test run, no cockroach was
found in the machine, thus respondents believed that they accomplished their work. Respondents
mentioned that the machine should have passed through the Quality Assurance Department for
checking before installation of the unit. Ferrer, as supervisor and head of the team, declared that it
was the first time that he learned of the use of "robby vapor" on the machine, but it was not
endorsed to him.83

From the narration, respondents did not exhibit acts constituting gross negligence, nor did Foodbev
cite other instances when respondents failed to perform assigned task, signifying habitual negligence.
There was no showing that respondents had deliberate or thoughtless disregard for the cleaning
procedure. Foodbev failed to demonstrate gross and habitual negligence on the part of respondents.
If at all, respondents are liable of simple negligence for failing to use robby vapor in sanitizing the
machine.

In dismissing respondents, Foodbev cannot invoke the principle of totality of infractions considering
that respondents' alleged previous acts of misconduct, such as habitual absence and gambling,
serious misconduct, and willful disobedience, were not established in accordance with the
requirements of procedural due process.84

While the Court understands that Foodbev is engaged in the food service industry, which is imbued
with public interest, the penalty of dismissal from the service is too harsh as it involves the loss of
income for the respondents, who are rank and file employees. A less severe penalty of suspension
should have been imposed considering that the respondents have been in the service for several
years.85 The Court also observes that this is the first time in the long years of service that
respondents failed to follow the cleaning procedure. Thus, a more compassionate penalty of
suspension is deemed appropriate.

In Philippine Long Distance Company v. Teves,86 the Court stressed that while it is the prerogative of
the management to discipline its employees, it should not be indiscriminate in imposing the ultimate
penalty of dismissal as it not only affects the employee concerned, but also those who depend on his
livelihood.
While management has the prerogative to discipline its employees and to impose appropriate
penalties on erring workers, pursuant to company rules and regulations, however, such management
prerogatives must be exercised in good faith for the advancement of the employer's interest and not
for the purpose of defeating or circumventing the rights of the employees under special laws and
valid agreements. The Court is wont to reiterate that while an employer has its own interest
to protect, and pursuant thereto, it may terminate an employee for a just cause, such
prerogative to dismiss or lay off an employee must be exercised without abuse of
discretion. Its implementation should be tempered with compassion and understanding. The
employer should bear in mind that, in the execution of said prerogative, what is at stake is not only
the employee's position, but his very livelihood, his very breadbasket.

Dismissal is the ultimate penalty that can be meted to an employee. Even where a worker
has committed an infraction, a penalty less punitive may suffice, whatever missteps maybe
committed by labor ought not to be visited with a consequence so severe. This is not only
the laws concern for the workingman. There is, in addition, his or her family to consider.
Unemployment brings untold hardships and sorrows upon those dependent on the wage-
earner.87 (Emphases supplied)
The Court finds that respondent's dismissal from employment is illegal due to several violations of
procedural and substantive requirements of the Labor Code and its Implementing Rules.

Labor II – 1
B. The verbal dismissal of respondents transferred to EMI

Both Foodbev and respondents Jever, Galela, Gomez, Siscar, Fame, Baldesco, Dela Cruz, Jimenez,
and Academia admit that a verbal and physical altercation erupted between them and Foodbev's
corporate officials. Foodbev specifically admitted the incident in its petition.
49. This untoward in cident caused Mr. Elmo Dela Cruz' (sic) daughters, Mesdames Car pio and
Brosas, extreme emotional anguish as they felt that their father was undeserving of respondent
Belardo's disrespectful attitude and treatment. They then met with respondent Belardo and his group
composed of respondents Gomez, Siscar, Academia and Galela, to demand an explanation for the
said unpleasant incident. (Underscoring in the original) 88
The tenor of Carpio and Brosas' statements (Hindi na namin kayo kailangan ditol Ano pa ang
ginagawa niyo dito! Wag na kayong magpakita sa kumpanya hindi naming kayo kailangan!) during
the confrontation in a restaurant leave no room for interpretation other than a verbal dismissal from
the service.

Foodbev claims that they served notice to explain and notice of administrative hearing. However, the
notices are futile because respondents were verbally dismissed from employment and were no longer
reporting for work. Thus, it is not surprising that respondents did not submit their answers to the
notice to explain and did not attend the supposed administrative hearing.

In Reyes v. Global Beer Below Zero, Inc.89 the Court held that "verbal notice of termination can
hardly be considered as valid or legal." As previously discussed, the employer should comply with the
substantive and procedural requirements in dismissing employees from the service. Here, Foodbev
failed to abide by these requirements in dismissing Jever, Galela, Gomez, Siscar, Fame, Baldesco,
Dela Cruz, Jimenez, and Academia. Thus, their termination from employment is illegal.

C. The verbal dismissal of managerial employee, Bernadette Belardo, who was married to a
union member

Foodbev avers in this petition that Bernadette's claim of unfair labor practice is unfounded because a
managerial employee like her is prohibited from joining a union. Contrarily, the records show that
Bernadette never joined the Samahan. Bernadette complained of illegal dismissal because she was
unceremoniously terminated from employment without just or authorized cause and due process.

Foodbev alleges that: (1) Bernadette was not dismissed from the service, but rather she abandoned
her job. (2) they served her with a notice to explain her absence, but she refused to receive it,, and
(3) they sent another notice through registered mail.

Bernadette narrated a different story of her dismissal on August 4, 2008, at Foodbev's office.
30.1 She was surprised to find out that her bag and jacket - items she left inside her table at the
2nd floor where she worked - were at the reception area of the building, at the ground floor;

30.2 Petitioner Bernadette was told to wait for Carpio and Brosas at the reception area. Minutes later,
Carpio and Brosas arrived. Carpio began shouting: Putang ina ng tarantado mong asawa! Binastos
niya ang papa ko, walang galang sa matanda!

30.3 Petitioner Bernadette tried to explain that she talked to her husband and who said that he
(Jever) did not disrespect Sir Elmo;

30.4 Carpio and Brosas didn't believe Bernadette. Carpio countered that Jever was disrespectful even
to managers. "Naglilider lideran!" Petitioner Bernadette denied that Jever was a leader in the union;

30.5 Carpio then proceeded to insult petitioner Bernadette by saying: ["] Tapos ko nans murahin
yung tarantado mong asawa sa kainan... "Wala kayong kwentang mag-asawa, wala
kayong utans na loob..." San ba gating ang pinapakain mo sa pamilva mo .'" And, told
Labor II – 1
Bernadette: "Ano pa ang ginagawa mo ditto!"

30.6 Brosas said that petitioner Bernadette Belardo was a problem because of the union activities of
her husband. By then petitioner Bernadette was crying, even as she was being insulted in front of her
co-workers;

30.7 Petitioner Bernadette Belardo later came to know that earlier during lunch break of August 4,
2008, Carpio (VP for Finance, Foodbev) was shouting inside the office where Bernadette
worked and ordered that Bernadette's things be thrown out of the premises as she will no
longer report to work starting the next day.90 (Emphasis supplied.)
The Court observes that in its petition, Foodbev did not deny that there was an encounter between
Bemadette, Carpio and Brosas, and claims that the meeting was cordial. 91

The CA determined that "there is nothing in the records that would show that Bernadette was given
any notice of termination or any chance to defend her side in a proper hearing.' 92

The Court agrees with the CA's findings. Carpio's own words (Tapos ko nang murahin yung tarantado
mong asawa sa kainan. Wala kayong kwentang mag-asawa, wala kayong utang na loob. Saan ba
gating ang pinapakain mo sa pamilya mo! Ano pa ang ginagawa mo dito?) convey a clear intent to
sever employment ties with Bernadette. Carpio also ordered that Bernadette's things be thrown out
of the premises because she would no longer report for work. Her actuations demonstrate that
Bernadette was terminated from employment.

The Court does not consider Bernadette to have abandoned her work because her absences were a
direct result of Carpio and Brosas' conduct. There was no clear reason for her dismissal. It can only
be inferred that her dismissal was due to her husband's membership in the union and participation in
union activities. But that is not among the just causes of termination under Article 294 of the Labor
Code. Bernadette's verbal termination from employment is a violation of her right to security of
tenure, and was done without just cause and due process under Articles 294 93 and 29794 of the Labor
Code. Thus, the Court rules that Bernadette's dismissal from the service is illegal.

D. The dismissal of union president, Reynaldo Eroles

Eroles complained that he was illegally dismissed from the service, and that Foodbev is guilty of
unfair labor practice. He claimed that Foodbev assigned him to their Isabela branch to isolate him
from the union.95 He alleged that Lucila asked him to resign at Foodbev in exchange for appointment
at Greentech.96

For its part, Foodbev avers that Eroles' temporary transfer to Isabela was part of management
practice to bring provincial employees for training in Makati, where the proper equipment and
trainers are located. Then, an employee in Makati would be sent to the provincial branch to take over
the trainee's job.97

Foodbev admits that in July 2008, there was an offer to its employees for voluntary resignation in
exchange for pecuniary benefits in order to save the company from severe economic losses. 98 In
August 2008, there was another offer for several months of pay and food supply. 99

It is a rule that before the employer must bear the burden of proving that the dismissal was legal,
the employee must first establish by substantial evidence the fact of his dismissal from service. 100

Here, there is no evidence on record that Eroles was directly terminated from the service. He simply
failed to report for work after his suspension. But what prompted Eroles to stop reporting for work?
The records show that in a meeting between him and Lucila on August 19, 2008, Eroles was told to
resign at Foodbev in exchange for a job in Greentech. 101

Labor II – 1
The Court observes that Foodbev did not deny the job offer, which has no specific position, rank, or
salary. Eroles mentioned that once he accepts the job offer, his years of service in Foodbev would be
worthless. These observations do not reflect Foodbev's sincere effort to provide job security for
Eroles. They also failed to acknowledge his years of service in the company. Eroles was placed in a
tight situation wherein he had to choose between staying in Foodbev and risk suffering the ire of
management, or transfer to Greentech with an unspecified position and salary and forego his years of
service at Foodbev. Neither of the options were favorable to him and pushed him instead not to
report for work. This is constructive dismissal.

In Doble, Jr. v. ABB, Inc.,102 the Court explained constructive dismissal.

To begin with, constructive dismissal is defined as quitting or cessation of work because
continued employment is rendered impossible, unreasonable or unlikely; when there is a
demotion in rank or a diminution of pay and other benefits. It exists if an act of clear
discrimination, insensibility, or disdain by an employer becomes so unbearable on the part
of the employee that it could foreclose any choice by him except to forego his continued
employment. There is involuntary resignation due to the harsh, hostile, and unfavorable
conditions set by the employer. The test of constructive dismissal is whether a reasonable
person in the employee's position would have felt compelled to give up his
employment/position under the circumstances. (Emphasis ours)
Here, Eroles is susceptible to being transferred to another branch or company in the guise of training
or company practice, or verbal harassment similar to his dismissed co-workers. The insinuations to
resign and the successive termination from employment of union members had created a hostile
working environment, which convinced him to sacrifice his employment and tantamount to
constructive dismissal.

E. Unfair Labor Practice

Articles 258 and 259 of the Labor Code state the concept of unfair labor practice and enumerate the
unfair labor practices committed by employers.
ART. 258. [247] Concept of Unfair Labor Practice and Procedure for Prosecution Thereof.  — Unfair
labor practices violate the constitutional right of workers and employees to self-organization, are
inimical to the legitimate interests of both labor and management, including their right to bargain
collectively and otherwise deal with each other in an atmosphere of freedom and mutual respect,
disrupt industrial peace and hinder the promotion of healthy and stable labor-management relations.
(Labor Code of the Philippines, Presidential Decree No. 442 (Amended & Renumbered), [July 21,
2015])

xxxx

ART. 259. [248] Unfair Labor Practices of Employers. — It shall be unlawful for an employer to
commit any of the following unfair labor practices:

(a) To interfere with, restrain or coerce employees in the exercise of their right to self-organization;
xxx
x
To discriminate in regard to wages, hours of work and other terms and conditions of
employment in order to encourage or discourage membership in any labor organization, x x x
(e)
(Labor Code of the Philippines, Presidential Decree No. 442 (Amended & Renumbered), [July 21,
2015])
The records reveal several instances to support unfair labor practice, specifically union
busting, such as:   

Labor II – 1
 1. Lucila's statements during the meetings in July 2008, discouraging employees from
joining and engaging in union activities, and embarrassing union members by
requiring them to stand in front of the employees during a meeting;

2. Conducting written examinations on union members;

3. Transferring the union president, Eroles, to the provincial branch to isolate him from
the union;

4. Transferring union members to another company;

5. Company managers inquiring about loyalty of employees to the union as a factor

whether to transfer the employee or not;

6. Termination from employment of union members and union officers (Ferrer as Vice
President, Aquino as Treasurer, Galela as Auditor, Academia as Sgt.-at-arms, and
Pario, Gomez, Jever, and Dela Cruz as Board Members); 103

7. Foodbev President's (Elmo) statements during a confrontation with some

respondents, inquiring about leadership in the union and discouraging them from
influencing other employees to join the union; and

8. Encouraging union members to voluntarily resign from the company in exchange for
a measly salary and goods.

Foodbev argues that they became aware of the existence of the union sometime in August 2008,
when they received summons in one of the complaints before the labor arbiter. 104 However, the
Minutes of the Meetings105 disclose that as early as July 2008, Lucila and Espeña had been
discouraging the employees from joining the union and in participating in union activities. These
evidence on record belie Foodbev's claim of ignorance on the existence of the union.

Foodbev alleges that all employees, both union and non-union members, were required to take the
written examination. This was true only after Galela complained why the examination was limited to
union members. He added that the examination involved questions on machines, which were
unrelated to their duties, and those who failed were considered guilty of violating Foodbev's Code of
Discipline. Foodbev avers that no employee was sanctioned due to failure in the examination. 106 This
is untrue, because the records show that Academia received a July 23, 2008 memo requiring him to
explain why he failed in the exam for the second time. 107 The fact that the examination was at first
limited to union members is in itself an unfair labor practice because it is discriminatory.

Foodbev claims that they announced the conduct of the written examination in May 2008, and that it
is regularly done. This allegation is unsubstantiated as Foodbev failed to prove that the conduct of
written examination is a customary company activity. The timing of the examination together with
the respondents' complaints cast doubt on the truthfulness of Foodbev's justification.

The Court likewise, doubts the purpose for Eroles' transfer to Isabela. The memo informing him of his
temporary assignment does not indicate a definite period. If indeed he was to temporarily take over
the duties of employees in Isabela Branch undergoing training in Makati, the memo should have
reflected the duration of the training. However, the memo sent to him only specified the effectivity of
his transfer on July 25, 2008, without a completion date. This gives the employer the discretion to
extend his assignment on the ground of management prerogative.
xxxx

This is to inform you that you will be temporarily assigned to Isabel branch effective Friday, July 25,
2008.

Labor II – 1
All Isabela branch personnel will have to report to Manila on Saturday as they will be scheduled for
assessment and training.

All turnover procedures will have to be conducted prior to departure of Isabela personnel.

Please coordinate with provincial branch coordinators for further instructions. 108
The Court is also skeptical of Foodbev's reason for reassigning respondents to EMI. Foodbev
maintains that it had been a company policy to direct its employees to receive work instructions at its
extension office. However, Foodbev failed to present proof that it is an established company policy.
Foodbev's explanation appears to be made out of convenience rather than legitimate and valid
company policy. Once again, the timing of the instructions and the series of complaints are not in
favor of Foodbev's case.

Foodbev avers that the company suffered loss of substantial revenue when one of its clients
terminated its contract. Thus, prompting it to propose voluntary resignation to its
employees.109 However, the allegation of loss of revenue remains unsubstantiated and cannot stand
against the corroborated complaints of respondents. Article 298 110 of the Labor Code mandates the
payment of separation pay to an employee terminated from the service. Here, Foodbev's offer does
not include separation pay, which is contrary to law.

Lastly, the statements of Foodbev's chairman, Elmo, against Jever and his group show an intention to
meddle with their right to organize.

The discussions above demonstrate Foodbev's unfair labor practices, which create an
unpleasant working atmosphere for respondent union members and officers. They were
targeted to take part in a written examination, or prone to being transferred to another
company or to another branch. They were urged to file for resignation and accept a measly
compensation and goods, instead of full benefits under the law. If these will not work,
their employment will be terminated in order to dissolve the union. The facts undeniably
point to interference and restraining respondents' right to self-organization, and
discriminate their terms and conditions of employment, as enumerated in paragraphs (a)
and (e) of Article 259 of the Labor Code.

In addition, the Court observes that Foodbev did not charge Roseller Gabutero Semense with gross
negligence along with the ice cream machine technicians, since he admitted in his affidavit that it is
his responsibility to supervise the technicians' work/service of food dispensing machines. This further
supports respondents' allegation that they were targeted because of their union membership, and
confirms that Foodbev is liable for union busting.

In his sworn statement, Semense made the following declaration:

xxxx

1. I am a Supervisor for processes in FoodBev International, x x x. As a Supervisor, I am

responsible for, among others, the supervision of the Company's technicians with respect to
their work/service of food dispensing machines, including soft serve machines, and ensuring
that these technicians perform their tasks strictly in accordance with the procedures required
by the Company.111

The numerous pieces of evidence prove that Foodbev is guilty of unfair labor practice.

III. CONCLUSION

In sum, the Court finds that the CA did not commit a reversible error in overturning the September
Labor II – 1
17, 2009 NLRC Decision and November 17, 2009 Resolution. The CA's findings of facts were based on
record, and the ruling based on law and jurisprudence.

As for the rate of legal interest due on the monetary judgments, Nacar v. Gallery Frames,112 provides
that –
3. When the judgment of the court awarding a sum of money becomes final and executory, the rate
of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 6% per
annum from such finality until its satisfaction, this interim period being deemed to be by then an
equivalent to a forbearance of credit.
And, in addition to the above, judgments that have become final and executory prior to July 1, 2013,
shall not be disturbed and shall continue to be implemented applying the rate of interest fixed
therein.113
WHEREFORE, the petition is DENIED. The Court of Appeals Decision114 dated November 28, 2012
and Resolution115 dated April 8, 2013 in CA G.R. SP No. 112620 are AFFIRMED.

Labor II – 1
44.) G.R. No. L-22456             September 27, 1967

FRANCISCO SALUNGA, petitioner,
vs.
COURT OF INDUSTRIAL RELATIONS; SAN MIGUEL BREWERY, INC. and MIGUEL NOEL; NATIONAL
BREWERY & ALLIED INDUSTRIES LABOR UNION OF THE PHILIPPINES (NABAILUP-PAFLU); JOHN DE
CATILLO and CIPRIANO CID, respondents.

C. Magat & Associates for petitioner.

Cipriano Cid & Associates and Ponce Enrile, S. Reyna, Montecillo & Belo for respondents.

CONCEPCION, C.J.:

Appeal by petitioner Francisco Salunga from a resolution of the Court of Industrial Relations, sitting en banc,
dismissing unfair labor practice charges against the National Brewery and Allied Industries Labor Union of the
Philippines (PAFLU) — hereinafter referred to as the Union — John de Castillo, Cipriano Cid, San Miguel Brewery,
Inc. — hereinafter referred to as the Company — and Miguel Noel.

Petitioner had, since 1948, been an employee of the Company, which, on October 2, 1959, entered with the
Union, of which respondent John de Castillo is the president, into a collective bargaining agreement, effective up
to June 30, 1962. Section 3 thereof reads:

The company agrees to require as a condition of employment of those workers covered by this
agreement who either are members of the UNION on the date of the signing of this agreement, or
may join the UNION during the effectivity of this agreement, that they shall not voluntarily resign from the
UNION earlier than thirty (30) days before the expiry date of this agreement as provided in Article XIII
hereof, provided, however, that nothing herein contained shall be construed to require the company to
enforce any sanction whatsoever against any employee or worker who fails to retain his membership in the
UNION as hereinbefore stated, for any cause other than voluntary resignation or non-payment of regular
union dues on the part of said employee or worker. (Exh. 4-A-Union.) .

Petitioner was a member of the Union since 1953. For reasons later to be stated, on August 18, 1961, he
tendered his resignation from the Union, which accepted it on August 26, 1961, and transmitted it to the
Company on August 29, 1961, with a request for the immediate implementation of said section 3. The
Company having informed him that his aforementioned resignation would result in the termination of his
employment, in view of said section, petitioner wrote to the Union, on August 31, 1961, a letter withdrawing or
revoking his resignation and advising the Union to continue deducting his monthly union dues. He, moreover,
furnished a copy of this communication to the Company. The latter, in turn, notified the Union of the receipt of said
copy and that "in view thereof, we shall not take any action on this case and shall consider Mr. Francisco Salunga
still a member of your union and continue deducting his union dues." On September 8, 1961, the Union told the
Company that petitioner's membership could not be reinstated and insisted on his separation from the
service, conformably with the stipulation above-quoted. The Company replied, on September 12, 1961, stating:

. . . We asked Mr. Salunga if he realized that by resigning from the Union he would in effect be forfeiting his
position in the company. When he answered in the negative, we showed him a copy of our Collective
Bargaining Agreement and called his attention to Sec. 3, Art. II thereof. He then told us that he did not
realize that he would be losing his job if he were to resign from the Union. We did not at any time ask or urge
him to withdraw his resignation; neither are we now asking or insisting that you readmit him into your
membership. We thought that informing him of the consequences of his resignation from the Union, was the
only humane thing to do under the circumstances.

Labor II – 1
 Nevertheless, if notwithstanding our foregoing clarification you still consider him as having actually resigned
from your organization, and you insist that we dismiss him from the service in accordance with Sec. 3,
Article II of our agreement, we will have no alternative but to do so. (Exh. E)

In a letter to the Company, dated September 20, 1961, the Union reiterated its request for implementation of said
section 3, for which reason, on September 22, 1961, the Company notified petitioner that, in view of said letter
and the aforementioned section, "we regret we have to terminate your employment for cause. You are,
therefore, hereby notified of your dismissal from the service effective as of the close of business hours,
September 30, 1961."

Meanwhile, petitioner had sought the intervention of PAFLU's National President, respondent Cipriano Cid, to which
the Union was affiliated, for a review of the latter's action. The PAFLU gave due course to petitioner's request for
review and asked the Company, on September 29, 1961, to defer his dismissal, for at least two (2) weeks, so that its
(PAFLU's) Executive Board could act on his appeal. On October 6, 1961, respondent Cid advised petitioner that the
PAFLU had found no ground to review the action taken by the Union and that, on the expiration of the 15-day grace
granted to him by the Company, the decision thereof to terminate his services would take effect.

Thereupon, or on October 11, 1961, petitioner notified the PAFLU that he was appealing to its supreme authority —
the PAFLU National Convention — and requested that action on his case be deferred until such time as the
Convention shall have acted on his appeal. A letter of the same date and tenor was sent, also, by the petitioner to
the Union. Furthermore, he asked the Company to maintain the status quo, in the meantime. This notwithstanding,
at the close of the business hours, on October 15, 1961, petitioner was discharged from the employment of the
Company, through its assistant-secretary and vice-president, herein respondent Miguel Noel.

At petitioner's behest, on or about December 7, 1961, a prosecutor of the Court of Industrial Relations
commenced, therefore, the present proceedings, for unfair labor practice, against the Union, its president,
respondent John de Castillo, respondent Cipriano Cid, as PAFLU president, the Company, and its aforementioned
Vice-President Miguel Noel. In due course, thereafter, the trial Judge rendered a decision the dispositive part of
which reads:

IN VIEW OF ALL THE FOREGOING, the San Miguel Brewery, Inc. and Miguel Noel and National Brewery &
Allied Industrial Labor Union of the Philippines (PAFLU), John de Castillo, and Cipriano Cid, are hereby
declared guilty of unfair labor practices as charged, and ordered to cease and desist from further
committing such unfair labor practice acts complained of; and as affirmative reliefs:

(a) The National Brewery & Allied Industries Labor Union of the Philippines (PAFLU), John de Castillo and
Cipriano Cid, their officers and agents, are hereby directed to readmit and to continue the membership of
Francisco Salunga in the membership rolls of the union after paying all union dues, with all the rights and
privileges being enjoyed by bonafide members;

(b) The San Miguel Brewery, Inc., and Miguel Noel, their officers and agents are hereby directed to
immediately reinstate Francisco Salunga to his former or substantially equivalent position with one-half back
wages, without prejudice, however, to his seniority and/or other rights and privileges; and

(c) Respondents Union and Company, their respective officers and agents, are likewise directed to post two
copies of this decision in conspicuous places in their respective offices or plants for a period of one month,
furnishing this Court with certificate of compliance after the expiration of said period.

On motion for reconsideration of the respondents, this decision was reversed by the Court of Industrial
Relations — sitting en banc with two (2) judges concurring in the result and the trial judge dissenting — which
dismissed the case. Hence, this appeal by the petitioner.

The appeal is well taken, for, although petitioner had resigned from the Union and the latter had accepted the
resignation, the former had, soon later — upon learning that his withdrawal from the Union would result in his
separation from the Company, owing to the closed-shop provision above referred to — revoked or withdrawn said
resignation, and the Union refused to consent thereto without any just cause therefor. The Union had not only

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acted arbitrarily in not allowing petitioner to continue his membership. The trial Judge found said refusal of
the Union officers to be due to his critical attitude towards certain measures taken or sanctioned by them.
As set forth in the decision of the trial Judge:

. . . Prior to August, 1961, he had been criticizing and objecting to what he believed were illegal or
irregular disbursements of union funds, i.e., allowing Florencio Tirad, a union official, to receive six
months advanced salaries when Tirad went to the United States, which objection he openly manifested in
a meeting of the board of directors and stewards, but instead of receiving favorable response, he
(Salunga) was twitted and felt insulted by the laughter of those present that he would be the next man
to be sent to America; second, granting Ricardo Garcia, union secretary, two months advanced salaries
when preparing for the bar examinations, which objection he broached to union officer Efren Meneses; third,
the union's additional monthly expense for the salary of a counsel when the PAFLU, their mother union is
well staffed with a number of lawyers who could attend to and handle their cases and other legal matters,
and to which mother union the NABAILUP has been paying a monthly assessment of more than P1,000.00;
and fourth, giving salary to Charles Mitschek who was dismissed by the company but denying the same
privilege to other similarly situated member-employees. Salunga was later removed by the union from his
position as steward without his knowledge. It also appears that the power of attorney executed in his favor
by co-worker Alejandro Miranda for the collection of Miranda's indebtedness of P60.00 to him (the latter has
certain amount in possession of the Union) was not honored by the union. 1awphîl.nèt

xxx     xxx     xxx

The record is clear that feeling dejected by the inaction of the union officials on his grievances and
objections to what he believed were illegal disbursements of union funds, coupled with the fact that
he was later removed from his position as a union steward without his knowledge, as well as the fact
that the union did not honor the power of attorney executed in his favor by Alejandro Miranda, a co-
worker, for the collection of Miranda's indebtedness of P60.00 to him, he submitted his letter of
resignation from the union on August 18, 1961. It must be stated here that no evidence was adduced by
the respondent union to overcome complainant's testimonies about his objections to the disbursements of
union funds but only tried to elicit from him, on cross examination, that the funds of the union are only
disbursed upon authority of the Executive Board of the union. . . .

It should be noted that the Court of Industrial Relations en banc did not reverse these findings of fact or even
question the accuracy thereof. What is more, the officers of the Union have, in effect, confirmed the fact that their
refusal to allow the withdrawal of petitioner's resignation had been due to his aforementioned criticisms.
Indeed said officers tried to justify themselves by characterizing said criticisms as acts of disloyalty to the Union,
which, of course, is not true, not only because the criticism assailed, not the Union, but certain acts of its officers,
and, indirectly, the officers themselves, but also because the constitution and by-laws of the Union explicitly
recognize the right of its members to give their views on "all transactions made by the Union." As a consequence,
the resolution appealed from cannot be affirmed without, in effect, nullifying said right which, independently of the
constitution and by-laws of the Union, is part and parcel of the freedom of speech guaranteed in the Constitution of
our Republic, as a condition sine qua non to the sound growth and development of labor organizations and
democratic institutions.

Although, generally, a state may not compel ordinary voluntary associations to admit thereto any given
individual, because membership therein may be accorded or withheld as a matter of privilege, 1 the rule is
qualified in respect of labor unions holding a monopoly in the supply of labor, either in a given locality, or
as regards a particular employer with which it has a closed-shop agreement. 2 The reason is that

. . . The closed shop and the union shop cause the admission requirements of trade union to
become affected with the public interest. Likewise, a closed shop, a union shop, or maintenance of
membership clauses cause the administration of discipline by unions to be affected with the public
interest.3

Consequently, it is well settled that such unions are not entitled to arbitrarily exclude qualified applicants for
membership, and a closed-shop provision would not justify the employer in discharging, or a union in
insisting upon the discharge of, an employee whom the union thus refuses to admit to membership, without
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any reasonable ground therefor.4 Needless to say, if said unions may be compelled to admit new members, who
have the requisite qualifications, with more reason may the law and the courts exercise the coercive power when the
employee involved is a long standing union member, who, owing to provocations of union officers, was impelled to
tender his resignation, which he forthwith withdrew or revoked. Surely, he may, at least, invoke the rights of those
who seek admission for the first time, and can not arbitrarily he denied readmission.

We cannot agree, however, with the finding of the trial Judge to the effect that the Company was guilty of
unfair labor practice. The Company was reluctant — if not unwilling — to discharge the petitioner. When the
Union first informed the Company of petitioner's resignation and urged implementation of section 3 of the bargaining
contract, the Company advised petitioner of the provision thereof, thereby intimating that he had to withdraw his
resignation in order to keep his employment. Besides, the Company notified the Union that it (the Company) would
not take any action on the case and would consider the petitioner, "still a member" of the Union. When the latter,
thereafter, insisted on petitioner's discharge, the Company still demurred and explained it was not taking sides and
that its stand was prompted merely by "humane" considerations, springing from the belief that petitioner had
resigned from the Union without realizing its effect upon his employment. And, as the Union reiterated its demand,
the Company notified petitioner that it had no other alternative but to terminate his employment, and
dismissed him from the service, although with "regret".

Under these circumstances, the Company was not "unfair" to the petitioner. On the contrary, it did not merely
show a commendable understanding of and sympathy for his plight. It even tried to help him, although to such
extent only as was consistent with its obligation to refrain from interfering in purely internal affairs of the Union. At
the same time, the Company could not safely inquire into the motives of the Union officers, in refusing to allow the
petitioner to withdraw his resignation. Inasmuch as the true motives were not manifest, without such inquiry, and
petitioner had concededly tendered his resignation of his own free will, the arbitrary nature of the decision of said
officers was not such as to be apparent and to justify the company in regarding said decision unreasonable. Upon
the other hand, the Company can not be blamed for assuming the contrary, for petitioner had appealed to the
National Officers of the PAFLU and the latter had sustained the Union. The Company was justified in presuming that
the PAFLU had inquired into all relevant circumstances, including the motives of the Union Officers.

In finding, this notwithstanding, that the Company is guilty of unfair labor practice, the trial Judge seemed to have
been unduly influenced by the fact that the former had dismissed the petitioner despite his announced intention to
appeal from the decision of the Union and that of the Officers of PAFLU to its "Supreme authority", namely, the
PAFLU's "National Convention". In other words, said Judge felt that the Company should have waited for the action
of the national convention before issuing the notice of dismissal.

There is no evidence, however, that petitioner had really brought this matter to said "Convention". Much less is there
any proof that the latter had sustained him and reversed the PAFLU officers and the Union. Thus, the record does
not show that petitioner was prejudiced by the Company's failure to maintain the status quo, after the Union had
been sustained by said officers. In fact, petitioner did not even try to establish that he had submitted to the Company
— as he has not introduced in the lower court — satisfactory proof that an appeal had really been taken by him to
the aforementioned Convention. In short, it was error to hold the Company guilty of unfair labor practice.

Just the same, having been denied readmission into the Union and having been dismissed from the service
owing to an unfair labor practice on the part of the Union, petitioner is entitled to reinstatement as member
of the Union and to his former or substantially equivalent position in the Company, without prejudice to his
seniority and/or rights and privileges, and with back pay, which back pay shall be borne exclusively by the Union. In
the exercise of its sound judgment and discretion, the lower court may, however, take such measures as it may
deem best, including the power to authorize the Company to make deductions, for petitioner's benefit, from the
sums due to the Union, by way of check off or otherwise, with a view to executing this decision, and, at the same
time, effectuating the purposes of the Industrial Peace Act.

With this modification, the aforementioned decision of the trial Judge is hereby affirmed in all other respects, and
the appealed resolution of the Court of Industrial Relations en banc is reversed, with costs against respondents,
except the Company.

Labor II – 1