SECOND DIVISION

[G.R. No. L-38258. November 19, 1982.]

LAKAS NG MANGGAGAWANG MAKABAYAN (LAKAS), Petitioner, v. MARCELO

ENTERPRISES and MARCELO TIRE & RUBBER CORP., MARCELO RUBBER AND LATEX
PRODUCTS, MARCELO STEEL CORPORATION, MARCELO CHEMICAL & PIGMENT
CORP., POLARIS MARKETING CORPORATION and THE COURT OF INDUSTRIAL
RELATIONS, Respondents.

[G.R. No. L-38260. November 19, 1982.]

MARCELO TIRE & RUBBER CORPORATION, MARCELO RUBBER & LATEX PRODUCTS,
INC., MARCELO STEEL CORPORATION, POLARIS MARKETING CORPORATION,
MARCELO CHEMICAL AND PIGMENT CORP., MARCELO ENTERPRISES, under which
name or style they are also known, Petitioners, v. LAKAS NG MANGGAGAWANG
MAKABAYAN (LAKAS) AND THE HONORABLE COURT OF INDUSTRIAL RELATIONS,
Respondents.
D E C I S I O N

GUERRERO, J.:

Separate appeals by certiorari from the Decision of the Court of Industrial Relations (Manila)
dated July 20, 1973, as well as the Resolution of the court en banc dated January 24, 1974
denying the reconsideration thereof rendered in ULP Case No. 4951 entitled, "Lakas ng
Manggagawang Makabayan, Petitioner, versus Marcelo Enterprises and Marcelo Tire and
Rubber Corporation, Marcelo Rubber and Latex Products, Marcelo Steel Corporation, Polaris
Marketing Corporation, and Marcelo Chemical and Pigment Corporation, Respondents."cralaw
virtua1aw library

The antecedent facts as found by the respondent Court of Industrial Relations embodied in
the appealed Decision are correct, supported as they are by the evidence on record.
Nevertheless, We find it necessary to make a re-statement of the facts that are integrated
and inter-related, drawn from the voluminuous records of these cases which are herein jointly

decided, since it would only be from a statement of all the relevant facts of the cases made in
all fullness, collectively and comprehensively, can the intricate issues posed in these appeals
be completely and judiciously resolved.

It appears that prior to May 23, 1967, the date which may be stated as the start of the labor
dispute between Lakas ng Manggagawang Makabayan (hereinafter referred to as complainant
LAKAS) and the management of the Marcelo Tire and Rubber Corporation, Marcelo Rubber
and Latex Products, Inc., Polaris Marketing Corporation, Marcelo Chemical and Pigment
Corporation, and the Marcelo Steel Corporation (Nail Plan) (hereinafter referred to as
respondent Marcelo Companies) the Marcelo Companies had existing collective bargaining
agreements (CBAs) with the local unions then existing within the appropriate bargaining units,
viz: (1) the respondent Marcelo Tire and Rubber Corporation, with the Marcelo Camelback Tire
and Foam Union (MACATIFU); (2) the respondent Marcelo Rubber and Latex Products, Inc.,
with the Marcelo Free Workers Union (MFWU); and (3) the respondent Marcelo Steel
Corporation with the United Nail Workers Union (UNWU). These existing CBAs were entered
into by and between the parties while the aforestated local unions were then affiliated with a
national federation, the Philippine Social Security Labor Union (PSSLU).

It is well to note from the records that when the aforestated CBAs of the said local unions
were nearing their respective expiration dates (March 15, 1967) for MACATIFU and UNWU,
and June 5, 1967 for MFWU), the general situation within the ranks of labor was far from
united. The MACATIFU in respondent Marcelo Tire and Rubber Corporation, then headed by
Augusto Carreon, did not enjoy the undivided support of all the workers of the respondent
corporation, as there existed a rival union, the Marcelo United Employees and Workers
Association (MUEWA) whose president was then Paulino Lazaro. As events would later
develop, the members of the MACATIFU of Augusto Carreon joined the MUEWA of Paulino
Lazaro, after the latter filed a petition for direct certification which was granted by the
industrial court’s Order of July 5, 1967 recognizing and certifying MUEWA as the sole and
exclusive bargaining representative of all the regular workers of the respondent corporation.
The union rivalry between MACATIFU and MUEWA did not, however, end with the Order of
July 5, 1967, but more than ever developed into a more pressing problem of union leadership
because Augusto Carreon also claimed to be the president of the MUEWA by virtue of the
affiliation of his MACATIFU members with MUEWA. The records also reveal that even the
ranks of MFWU in respondent Marcelo Rubber and Latex Products, Inc. was divided between
those supporting Ceferino Ramos and Cornelio Dizon who both claimed the presidency in said
union. Only the UNWU in respondent Marcelo Steel Corporation was then enjoying relative
peace as Jose Roque was solely recognized as the union’s president. The events that followed

 are hereinafter stated in chronological order for a clearer understanding of the present
situation.

On March 14, 1967, the management of respondent Marcelo Steel Corporation received a
letter requesting the negotiation of a new CBA together with a draft thereof, from the
PSSLU president, Antonio Diaz, for and in behalf of UNWU whose CBA was to expire the
following day. Similar letters and proposals were, likewise, sent to the management of
respondent Marcelo Tire and Rubber Corporation for and in behalf of MACATIFU, and to
respondent Marcelo Rubber and Latex Products for and in behalf of MFWU, whose respective
CBAs were both to expire on June 5, 1967.

However, on that very same day of March 14, 1967, the management of respondent Marcelo
Tire and Rubber Corporation received a letter from the UNWU president, Jose Roque,
disauthorizing the PSSLU from representing his union.

Then, on April 14, 1967, Paulino Lazaro of MUEWA requested negotiation of a new CBA with
respondent Marcelo Tire and Rubber Corporation, submitting therewith his union’s own
proposals.

Again, on May 3, 1967, the management of respondents Marcelo Tire and Rubber Corporation
and Marcelo Rubber and Latex Products, Inc., received another letter requesting negotiation
of new CBAs also for and in behalf of the MACATIFU and the MFWU from J.C. Espinas &
Associates.

Finally, on May 23, 1967, the management of all the respondent Marcelo Companies received a
letter from Prudencio Jalandoni, the alleged president of the complainant LAKAS. In this
letter of May 23, 1967, the complainant LAKAS informed management of the affiliation of
the Marcelo United Labor Union (MULU) with it. Included therein was a 17-points demand for
purposes of the requested collective bargaining with management.

Confronted with a problem of whom to recognize as the bargaining representative of all its
workers, the management of all the respondent Marcelo Companies understandably dealt with
the problem in this wise, viz: (1) it asked proof of authority to represent the MFWU and the
MACATIFU from J.C. Espinas & Associates: and (2) in a letter dated May 25, 1967, it
apprised PSSLU, Paulino Lazaro of MUEWA and complainant LAKAS of the fact of the
existing conflicting demands for recognition as the bargaining representative in the
appropriate units involved, consequently suggesting to all to settle the question by filing a

 petition for certification election before the Court of Industrial Relations, with an assurance
that the management will abide by whatever orders the industrial court may issue thereon.

PSSLU demurred to management’s stand and informed them of its intention to file an unfair
labor practice case because of management’s refusal to bargain with it, pointedly stating that
it was with the PSSLU that the existing CBAs were entered into. Again, as events later
developed, on or about the middle of August 1981, PSSLU filed a Notice of Strike which
became the subject of conciliation with the respondent companies. In the case of MUEWA,
Paulino Lazaro threatened that his union will declare a strike against respondent Marcelo Tire
and Rubber Corporation. On the other hand, complainant LAKAS for MULU filed on June 13,
1967 before the Bureau of Labor Relations a Notice of Strike against all the respondent
Marcelo Companies, alleging as reasons therefor harrassment of union officers and members
due to union affiliation and refusal to bargain. This aforestated Notice of Strike was,
however, withdrawn on July 14, 1967.

In the meantime, as stated earlier in this Decision, the MUEWA filed a petition for direct
certification before the industrial court. There being no other union or interested person
appearing before the court except the MUEWA, and finding that MUEWA represented more
than the majority of the workers in respondent Marcelo Tire and Rubber Corporation, the
court granted the petition and by Order of July 5, 1967, certified MUEWA of Paulino Lazaro
as the sole and exclusive bargaining representative of all the regular workers in said
Respondent.

On July 11, 1967, Augusto Carreon of MACATIFU wrote the management of respondent
Marcelo Tire and Rubber Corporation expressly stating that no one was yet authorized to
submit proposals for and in behalf of the union for the renewal of its CBA, adding that" (a)ny
group representing our Union is not authorized and should not be entertained."cralaw
virtua1aw library

On July 14, 1967, as earlier stated, the Notice of Strike filed by complainant LAKAS was
withdrawn pursuant to a Memorandum Agreement signed on the same day by management and
LAKAS.

Thereafter, or on July 20, 1967, letters of proposal for collective bargaining were sent by
Prudencio Jalandoni of LAKAS to all the respondent Marcelo companies. In answer thereto,
management wrote two (2) letters, both dated July 24, 1967, addressed to Jalandoni,
expressing their conformity to sit down in conference on the points to be negotiated as soon

 as LAKAS can present evidence of authority to represent the employees of respondent

corporations in said conference. The records disclose that it was in the atmosphere of
constant reservation on the part of management as to the question of representation
recognition that complainant LAKAS and management sat down for CBA negotiations.

The first conference was held on August 14, 1967, followed by one on August 16, 1967
whereby management, in formal reply to union’s economic demands, stated its willingness to
give pay adjustments and suggested renewal of other provisions of the old CBAs. A third
conference was set although no one from LAKAS or the local unions appeared. On August 29,
1967, the fourth conference was held where, from a letter dated August 30, 1967 from Jose
Delfin of Management to Jose B. Roque of UNWU, can be inferred that in the conference of
August 29, 1967, the management with respect to respondent Marcelo Steel Corporation,
agreed to give pay adjustments from P0.15 to P0.25 to meritorious cases only, and to increase
its contribution to the retirement fund from 1-1/2% to 3% provided the employees’
contribution will be increased from 1% to 2%. Management likewise suggested the renewal of
the other provisions of the existing CBA. Management’s offers were not accepted by
complainant LAKAS who insisted on the grant of all its economic demands and in all of the
Marcelo Companies.

As it would later appear during the trial of the ULP case below, and as found as a fact by the
respondent court, only the economic proposals of complainant LAKAS were the matters taken
up in all these CBA conferences.

Less than a week after the fourth CBA conference, or on September 4, 1967, the complainant
LAKAS declared a strike against all the respondent Marcelo Companies. Acts of violence and
vandalism attended the picketing. Ingress and egress at the respondents’ premises were
successfully blocked. One worker, Plaridel Tiangco, was manhandled by the strikers and was
hospitalized. Windows of the Chemical Plant were badly damaged. As a consequence, ten (10)
strikers were later charged before the Municipal Court of Malabon, Rizal, four of whom were
convicted while the others were at large.

On September 13, 1967, the respondent Marcelo Companies obtained a writ of preliminary
injunction from the Court of First Instance of Rizal enjoining the strikers from preventing
the ingress and egress at the respondents’ premises. The following day, a "Return to Work
Agreement" (Exhibit "A") was executed by and among the management, represented by Jose
P. Marcelo and Jose A. Delfin, and the local unions, together with complainant LAKAS,
represented by Prudencio Jalandoni for LAKAS, Jose B. Roque for UNWU, Cornelio Dizon for

MFWU and Augusto Carreon for MUEWA, the representations of the latter two, however,
being expressly subjected by management to non-recognition. Aside from providing for the
immediate lifting of the picket lines, the agreement, more pertinently provides, to wit,

"4. The management agrees to accept all employees who struck without discrimination or
harassment consistent with an orderly operation of its various plants, provided it is
understood that management has not waived and shall continue to exercise freely its rights
and prerogatives to punish, discipline and dismiss its employees in accordance with law and
existing rules and regulations that cases filed in court will be allowed to take their normal
course."cralaw virtua1aw library

By virtue of this agreement, the respondent Marcelo Companies resumed operations and the
strikers went back to work. As found by the respondent court, all strikers were admitted
back to work, except four (4) namely, Wilfredo Jarquio, Leonardo Sakdalan, Jesus Lim and
Arlington Glodeviza, who chose not to report for work because of the criminal charges filed
against them before the municipal court of Malabon and because of the administrative
investigation conducted by management in connection with the acts of violence and vandalism
committed during the September 4 strike. Together with Jesus Lim, three other strikers who
reported for work and were admitted, namely, Jose Roque, Alfredo Cabel and Ramon Bataycan,
were convicted in said criminal case.

After the resumption of normal business, the management of the respondent Marcelo
Companies, the complainant LAKAS together with the local unions resumed their bargaining
negotiations subject to the conditions earlier mentioned. On October 4, 1967, the parties met
and discussed the bargaining unit to be covered by the CBA in case one is entered into, union
shop arrangement, check-off, waiver of the employer of the notice requirement in case of
employees’ separation, separation pay in cash equivalent to 12-days pay for every year of
service, retirement plan, and one or two years duration of the CBA. It was also agreed in that
meeting not to negotiate with respect to respondent Marcelo Tire and Rubber Corporation
inasmuch as a CBA had already been entered into by management with the MUEWA of Paulino
Lazaro, the recently certified union in said Respondent.

Finally, on October 13, 1967, the negotiations reached its final stage when the management of
respondents Marcelo Rubber and Latex Products, Inc. and Marcelo Steel Corporation gave the
complainant LAKAS a copy of management’s drafts of the collective bargaining proposals for
MFWU and UNWU, respectively.

Unexpectedly and without filing a notice of strike, complainant LAKAS declared another
strike against the respondent Marcelo Companies on November 7, 1967, resulting in the
complete paralyzation of the business of said respondents. Because of this second strike,
conciliation conferences were again set by the Conciliation Service Division of the Department
of Labor on November 8, November 23, and December 4, 1967. On the last aforementioned
date, however, neither complainant LAKAS nor the local unions appeared.

Instead, on December 13, 1967, Prudencio Jalandoni of complainant LAKAS, in behalf of the
striking unions, coursed a letter (Exhibit "B") to Jose P. Marcelo of management advising that,
"on Monday, December 18, 1967, at 7:00 o’clock in the morning, all your striking workers and
employees will return to work under the same terms and conditions of employment before the
strike." The letter was attested to by Cornelio Dizon for MFWU, Jose Roque for UNWU and
Augusto Carreon for MUEWA. On December 15, 1967, the Bureau of Labor Relations was
informed by the complainant LAKAS who requested for the Bureau’s representative to witness
the return of the strikers to their jobs.

The records reveal that in the meantime, prior to December 13, 1967, some of the strikers
started going back to work and were admitted; and that as early as December 4, 1967, the
management started posting notices at the gates of the respective premises of the
respondents for strikers to return back to work. Similar notices were also posted on
December 18 and December 27, 1967.chanrobles.com:cralaw:red

Upon their return, the reporting strikers were requested to fill up a certain form (Exhibit
"49") wherein they were to indicate the date of their availability for work in order that they
may be scheduled. According to the respondent Marcelo Companies, this requirement was
asked of the strikers for legitimate business reasons within management prerogative. Several
of the strikers filled up the required form and were accordingly scheduled for work. The
remaining others, led and supported by complainant LAKAS, refused and insisted that they be
all admitted back to work without complying with the aforestated requirement, alleging that
the same constituted a "screening" of the striking workers. As matters stood, Management
refused to forego the requirement; on the other hand, the remaining strikers demanded to be
re-admitted without filing up the form for scheduling.

These then constitute the factual background when the complainant LAKAS, represented by
its counsel, Atty. Benjamin C. Pineda, on December 26, 1967, filed before the respondent
court a charge for unfair labor practice against the respondent Marcelo Companies, alleging
non-readmission of the striking members of the three (3) affiliated local unions despite the

 unconditional offer to return to work after the strike of November 7, 1967. Based on the
allegations of the foregoing charge and after a preliminary investigation conducted by the
acting Prosecutor of said respondent court, the acting Chief Prosecutor, Atty. Antonio Tria
Tirona, filed on February 12, 1968 the instant complaint under authority of Section 5(b) of
Republic Act 875, otherwise known as the Industrial Peace Act.

The Complaint below alleges, among others, to wit:jgc:chanrobles.com.ph

"1. That complainant is a legitimate labor organization, with its affiliates, namely: Marcelo
Free Workers Union, United Nail Workers Union, and Marcelo United Employees Unions,
whose members listed in Annexes "A", "B", and "C" of this complaint are considered employees
of respondent within the meaning of the Act;

"2. . . .

x       x       x

"3. That individual complainants listed in Annexes "A", "B", and "C" of this complaint are
members of the Marcelo United Employees and Workers Association, Marcelo Free Workers
Union, and United Nail Workers Union, respectively; that the members of the Marcelo United
Employees and Workers Union are workers of respondent Marcelo Tire and Rubber
Corporation; that the members of the Marcelo Free Workers Union compose the workers of
the Marcelo Rubber and Latex Products, Polaris Marketing Corporation, and the members of
the United Nail Workers Union compose the workers of the Marcelo Steel Corporation (Nail
Plant);

"4. That each of the aforesaid local unions, before their affiliation with the complainant union
LAKAS, had a collective bargaining agreement with respondents; that after the expiration of
the collective bargaining agreement above-mentioned and after the above-mentioned local
unions affiliated with the complainant LAKAS, the said federation sent to respondents’
president, Jose P. Marcelo, on May 23, 1967, a letter, requesting for a negotiation for
collective bargaining, together with union proposals thereof, but respondents refused;

"5. That after respondents knew of the affiliation of the aforementioned local unions with the
LAKAS, the said respondents, thru their officers and agents began harassing the union
members, discriminated against them by transferring some of its officers and members from

 one section to another in such a way that their work was reduced to manual labor, and by
suspending them without justifiable cause, in spite of long years of service with said
respondents;

"6. That as a result of the abovementioned unfair labor practice of respondents, and after
complainant sent communication thereto, protesting against the acts of the above-mentioned,
complainant decided to stage a strike on September 4, 1967, after filing a notice of strike
with the Department of Labor;

"7. That on September 14, 1967, however, Jose P. Marcelo, and Jose A. Delfin, president and
vice-president of the respondents, respectively, on one hand and the presidents of the three
local unions above-mentioned and the national president of complainant union on the other,
entered into a Return-to-Work Agreement, providing among others, as
follows:jgc:chanrobles.com.ph

"4. The management agrees to accept all employees who struck without discrimination or
harassment consistent with an orderly operation of its various plants provided it is understood
that management has not waived and shall continue to exercise freely its rights and
prerogatives to punish, discipline and dismiss its employees in accordance with law and existing
rules and regulations and that cases filed in Court will be allowed to take their normal course.’

"8. That, contrary to the above Return-to-Work agreement, and in violation thereof,
respondents refused to admit the members of the three striking local unions; that in
admitting union members back to work, they were screened in spite of their long employment
with respondent, but respondents gave preference to the casual employees;

"9. That, because of the refusal of the respondents to accept some union members, in
violation of the above-mentioned Return-to-Work agreement and refusal of respondents to
bargain in good faith with complainant, the latter, together with the members of the three
local unions above-mentioned, again staged a strike on November 7, 1967;

"10. That on December 13, 1967, complainant sent a letter to respondents that the members
of the striking unions above-mentioned offered to return to work on December 18, 1967
without any condition, but respondents likewise refused, and still continue to refuse to
reinstate them up to the present;

 "11. That hereto attached are the list of names of the members of the three local unions
above-mentioned who were not admitted back to work by respondents, marked as Annexes
"A", "B", and "C" and made as an integral part of this complaint;

"12. That the union members listed in Annexes "A", "B", and "C" hereof were not able to
secure substantial employment in spite of diligent efforts exerted by them;

"13. That the above unfair labor practice acts of respondents are in violation of Section 4,
subsections 1, 4 and 6 in relation to Sections 13, 14 and 15 of Republic Act No. 875."cralaw
virtua1aw library

The complaint prayed "that after due hearing, judgment be rendered, declaring respondents
guilty of unfair labor practice, and

"(a) Ordering respondents to cease and desist from further committing the acts complained
of;

"(b) Ordering respondents to comply with the Return-to-Work agreement dated September
14, 1967, and to admit back to work the workers listed in annexes "A", "B" and "C" hereof,
with back wages, without loss of seniority rights and privileges thereof;

"(c) Ordering respondents to bargain in good faith with complainant union; and

"(d) Granting complainant and its complaining members thereof such other affirmative reliefs
and remedies equitable and proper, in order to effectuate the policies of the Industrial Peace
Act."cralaw virtua1aw library

On March 16, 1968, after an Urgent Motion for Extension of Time to File Answer, the
respondents filed their Answer denying the material allegations of the Complaint and alleging
as affirmative defenses,

"I. That the Collective Bargaining Agreement between respondent Marcelo Steel Corporation
and the United Nail Workers Union expired on March 15, 1967; The Collective Bargaining
Agreement between the United Rubber Workers Union (which eventually became the Marcelo
Free Workers Union) and the respondent Marcelo Rubber and Latex Products, Inc., expired on
June 5, 1967; the Collective Bargaining Agreement between Marcelo Camelback Tire and Foam
Union and the Marcelo Tire and Rubber Corporation expired on June 5, 1967;

 "II. That on May 23, 1967, one Mr. Prudencio Jalandoni of complainant addressed a
communication to Mr. Jose P. Marcelo of respondents informing him of the alleged affiliation
of the Marcelo United Labor Union with complainant and submitting a set of collective
bargaining proposal to which counsel for respondents replied suggesting that a petition for
certification election be filed with the Court of Industrial Relations in view of the several
demands for representation recognition;

"III. That the transfers of workers from one job to another were made in accordance with
needs of the service. Respondents afforded union officers and members affected by the
transfers the privilege to watch out for vacancies and select positions they prefer to be in.
No suspensions without justifiable cause were made as alleged in the Complaint;

"IV. That between May 23, 1967, the date of their first demand for negotiations, and
September 4, 1967, the start of the first strike, proposals and counter-proposals were had.
Respondents are not aware of whether or not a notice of strike was filed with the Court of
Industrial Relations;

"V. That Mr. Jose P. Marcelo is the President of Marcelo Rubber and Latex Products, Inc.,
Marcelo Tire and Rubber Corporation, and Marcelo Steel Corporation, while Mr. Jose A. Delfin
is the acting Personnel Manager of respondent Marcelo Rubber and Latex Products, Inc.,
Marcelo Tire and Rubber Corporation, Marcelo Steel Corporation and Marcelo Chemical and
Pigment Corporation;

"VI. That respondents did not refuse to admit members of the striking union. Only four (4)
workers who had criminal cases filed against them voluntarily failed to report to the Personnel
Department for administrative investigation;

"VII. That after September 14, 1967, all workers of the different respondent corporations
returned to work except the four mentioned in the preceding paragraph hereof who have
pending criminal cases; between September 14, 1967, and November 7, 1967 another strike
was declared without justifiable cause;

"VIII. That on November 28, 1967, respondent obtained an injunction from the Court of First
Instance of Rizal, Caloocan City Branch, against the illegal picketing of the local unions; in the
first week of December, 1967, the striking workers began returning to work; on December 13,
1967, a letter was received from complainant advising respondents that its striking workers

were calling off, lifting the picket line and returning to work, that from the first week of
December, 1967, respondents invited the striking workers desiring to return to work to fill
out an information sheet stating therein their readiness to work and the exact dates they
were available so that proper scheduling could be done; a number of workers showed no
interest in reporting to work; management posted in the Checkpoint, Bulletin Boards, and the
gates notices calling all workers to return to work but a number of workers obviously were not
interested in returning anymore;

"IX. That respondents posted several times lists of names of workers who had not returned
to work with the invitation to return to work, but they did not return to work;

"X. That a number of workers in the list Annexes "A" "B" and "C" have resigned after they
found more profitable employment elsewhere;

"XI. That the local unions referred to in the Complaint if they ever had affiliated with
complainant union had subsequently disaffiliated therefrom;

"XII. That the strikes called and declared by the striking unions were illegal;

"XIII. That the local unions were bargaining in bad faith with respondents,"

and praying for the dismissal of the Complaint as well as for the declaration of illegality of
the two (2) strikes called by the striking unions.

Thereafter, the trial commenced. Then on October 24, 1968, a development occurred which
gave a peculiar aspect to the case at bar. A Manifestation and Motion signed by the
respective officers and members of the MUEWA, headed by Paulino Lazaro, was filed by the
said union, alleging, to wit,

"1. That the above-entitled case purportedly shows that the Marcelo United Employees and
Workers Association is one of the Complainants being represented by the Petitioner Lakas ng
Manggagawang Makabayan (LMM);

"2. That it likewise appears in the above-entitled case that the services of the herein
Petitioner was sought by a certain Augusto Carreon together with his cohorts who are not
members of the Marcelo United Employees and Workers Association much less connected with

 the Marcelo Tire and Rubber Corporation wherein the Marcelo United Employees and Workers
Association has an existing Collective Bargaining Agreement;

"3. That to set the records of this Honorable Court straight, the undersigned officers and
members of the Marcelo United Employees and Workers Association respectfully manifest
that the aforesaid organization has no complaint whatsoever against any of the Marcelo
Enterprises;

"4. . . .

"5. . . ., the Complaint filed by the Petitioner in the above-entitled case in behalf of the
Marcelo United Employees and Workers Association is without authority from the latter and
therefore the officers and/or representatives of the petitioning labor organization should be
cited for Contempt of Court;

"6. . . ., the Complaint filed by the Petitioner in the above-entitled case in behalf of the
Marcelo United and Employees and Workers Association should be considered as withdrawn;

x       x       x"

This was followed by another Manifestation and Motion filed on November 6, 1968 and signed
by the officers and members of the UNWU, headed by its President, Juan Balgos, alleging, to
wit,

"1. That the above-entitled case purportedly shows that the United Nail Workers Union is
being represented by the Petitioner Lakas ng Manggagawang Makabayan for the alleged
reason that the former is one of the affiliates of the latter;

"2. That on January 15, 1968, all the Officers and members of the United Nail Workers Union
disaffiliated from the herein Petitioning labor organization for the reason that Petitioning
labor organization could not serve the best interest of the Officers and members of the
United Nail Workers Union and as such is a stumbling block to a harmonious labor-management
relations within all the Marcelo enterprises; . . .

"3. That the filing of the above-entitled case by the herein Petitioning labor organization was
made over and above the objections of the officers and members of the United Nail Workers
Union;

 "4. That in view of all the foregoing, the Officers and members of the United Nail Workers
Union do hereby disauthorize the Petitioner of the above-entitled case (Re: Lakas ng
Manggagawang Makabayan) from further representing the United Nail Workers Union in the
above-entitled case;

"5. That in view further of the fact that the filing of the above-entitled case was made over
and above the objections of the Officers and members of the United Nail Workers Union, the
latter therefore manifest their intention to cease and desist as they hereby ceased and
desisted from further prosecuting the above-entitled case in the interest of a harmonious
labor-management relation within the Marcelo Enterprises;

x       x       x"

Likewise, a Manifestation and Motion signed by the Officers and members of the MFWU,
headed by its president, Benjamin Mañaol, dated October 28, 1968 and filed November 6,
1968, stated the same allegations as the Manifestation and Motion filed by the UNWU quoted
above, except that the disaffiliation of the MFWU from LAKAS was made effective January
25, 1968. The Resolutions of Disaffiliation of both MFWU and UNWU were attached to these
Manifestations.

On November 19, 1968, complainant LAKAS filed an Opposition to these Manifestations and
Motions, materially alleging that, to wit:jgc:chanrobles.com.ph

"1. That complainants respectfully stated that when Charge No. 2265 was filed on December
26, 1967 in this case, giving rise to the instant complaint, the alleged officers of the union-
movants were not yet officers on the filing of said Charge No. 2265, . . .

"2. That the alleged officers and members who signed the three (3) Manifestations and
Motions are the very employees who were accepted back to work by the respondents during
the strike by the complainants on September 4, 1967 and November 7, 1967, and the said
alleged officers and members who signed the said manifestations and motions are still working
up to the present in the establishments of the respondents.

"3. That precisely because of the acceptance back to work of these alleged officers and
members of the union-movants, and the refusal of respondents to accept back to work all the
individual complainants in this case mentioned in Annexes "A", "B" and "C" of the instant

 complaint, inspite of the offer to return to work by the complainants herein made to the
respondents without any conditions at the time of the strike, as per complainants’ letter of
December 13, 1967 (Exh. "B", for the complainants), which fact precisely gave rise to the
filing of this case.

x       x       x

On January 31, 1969, after the submission of their respective Memoranda on the motions
asking for the dismissal and withdrawal of the complaint, the Court of Industrial Relations
issued an Order deferring the resolution of the Motions until after the trial on the merits. To
this Order, two separate Motions for Reconsideration were filed by the respondent companies
and the movant-unions, which motions were, however, denied by the court en banc by its
Resolution dated March 5, 1969.

After the trial on the merits of the case, and after submission by the parties of their
respective memoranda, the respondent court rendered on July 20, 1973 the Decision subject
of these petitions. On the motions for dismissal or withdrawal of the complaint as prayed for
by MUEWA, UNWU and MFWU, the respondent court denied the same on the ground that the
instant case was filed by the Lakas ng Manggagawang Makabayan for and in behalf of the
individual employees concerned and not for the movants who were not authorized by said
individual complainants to ask for the dismissal. On the merits of the case, while the Decision
contained opinions to the effect that the respondent Marcelo Companies were not remiss in
their obligation to bargain, and that the September 4, 1967 strike as well as the November 7,
1967 strike, were economic strikes, and were, therefore, illegal because of lack of the
required notices of strike before the strikes were declared in both instances, the Decision,
nevertheless, on the opinion that the "procedure of scheduling adopted by the respondents
was in effect a screening of those who were to be readmitted," declared respondent Marcelo
Companies guilty of unfair labor practice in discriminating against the employees named in
Annexes "A", "B", and "C" by refusing to admit them back to work while other strikers were
admitted back to work after the strike of November 7, 1967. The dispositive portion of the
appealed Decision states, to wit,

"WHEREFORE, in view of all the foregoing, respondents should be, as they are hereby,
declared guilty of unfair labor practice only for the discrimination on terms or conditions of
employment as hereinbefore discussed in connection with the return of the strikers-
complainants back to work after the second strike, and, therefore, ordered to pay the

individual complainants appearing in Annexes "A", "B" and "C" of the Complaint, except
Arlington Glodeviza, Jesus Lim, Wilfredo Jarquio, Leonardo Sakdalan, Jose Roque, Alfredo
Cabel, and those still working, were dismissed for cause. whose contracts expired or who had
resigned as above indicated, their back wages from December 18, 1967 but only up to June 29,
1970 when this case was submitted for decision, without reinstatement, minus their earnings
elsewhere for the same period.

"As to those who died without having been reemployed, the back wages shall be from
December 18, 1967 up to the date of their demise, as indicated in the body of this Decision,
but not beyond June 20, 1970, likewise less their earnings elsewhere.

"The Chief Auditing Examiner of this Court, or his duly authorized representative, is hereby
directed to proceed to the premises of respondent companies to examine their books,
payrolls, vouchers and other pertinent papers or documents as may be necessary to compute
the back wages due the individual complainant in line with this Decision, and to submit his
Report thereon not later than twenty (20) days after completion of such examination for
further disposition of the Court.

SO ORDERED."cralaw virtua1aw library

On August 9, 1973, counsel for respondent Marcelo Companies filed a Motion for
Reconsideration of the above Decision assigning as errors, to wit,

"I. The trial court erred in not finding that complainant Lakas ng Manggagawang Makabayan
(Lakas) has no authority to file and/or to prosecute the Complaint against respondents in
representation of the local unions and/or individual complainants and/or members of local
unions in their individual capacities and in not dismissing the complaint on that ground upon
motions of the local unions concerned and/or their members.

II. The trial court erred in finding that respondent discriminated against individual
complainants who were not readmitted to work after the November 7, 1967 strike while
others were able to return to their former employment and in holding that the procedure
adopted by respondents was in effect a screening of those who were readmitted and in
finding respondents guilty of unfair labor practice by reason thereof."cralaw virtua1aw library

On August 14, 1973, the individual complainants who had earlier disauthorized the counsel of
record, Atty. Benjamin Pineda, from further representing them and from amicably settling

 their claims, on their own behalf filed their arguments in support of their Motion for
Reconsideration, through a newly retained counsel, Atty. Pablo B. Castillon. Assigned as errors
are, to wit,

"I. The findings of the trial court excluding some of the employees from the aforementioned
Decision as well as from the benefits resulting therefrom is not in accordance with law and
the facts.

"II. The findings of the trial court declaring the strikes of September 4 and November 7,
1967 as illegal for being an economic strike is not in accordance with law and the facts
adduced in this case.

"III. The Honorable trial court in ordering the reduction of the back wages, without
reinstatement, appears to have departed from the substantial evidence rule and established
jurisprudence."cralaw virtua1aw library

By Resolution of January 24, 1974, the Court en banc denied the two (2) Motions for
Reconsideration filed by both the respondent Marcelo Companies and the individual
complainants. On February 19, 1974 and on February 20, 1974, both parties filed their
respective Notices of Appeals. Hence, these petitions.

In L-38258, the petition filed by complainant Lakas ng Manggagawang Makabayan (LAKAS),

the following were assigned as reversible errors, to wit,

I. The respondent court erred in finding the strikes of September 4 and November 7, 1967 to
be economic strikes and declaring the said strikes illegal for non-compliance with the
procedural requirement of Section 14(d) of Republic Act 875, although its illegality was
condoned or waived because of the Return-to-Work agreement on the first strike, and the
discriminatory rehiring of the striking employees after the second strike.

II. The respondent court erred in denying reinstatement to the striking complainants in Case
No. 4951-ULP, and limiting the computation of their backwages from December 18, 1967 to
June 29, 1970 only, despite its findings of unfair labor practice against private respondents
herein as a consequence of the discriminatory rehiring of the striking employees after the
November 7, 1967 strike.

 III. The respondent court erred in excluding the other individual complainants, except those
who are still working, those who resigned on or before December 18, 1967, and those whose
employment contract expired, and denying to these individual complainants the benefits
resulting therefrom.

On the other hand, in L-38260 which is the petition filed by respondents Marcelo Enterprises,
Marcelo Tire and Rubber Corporation, Marcelo Rubber & Latex Products, Marcelo Steel
Corporation, Marcelo Chemical & Pigment Corporation, and Polaris Marketing Corporation, the
following is the alleged assignment of errors, to wit,

I. Respondent court erred in not finding that respondent Lakas ng Manggagawang Makabayan
(LAKAS) had no authority to file and/or to prosecute the complaint against the petitioners
herein in representation of the local unions and or individual complainants and/or members of
local unions in their individual capacities and in not dismissing the complaint in Case No. 4951-
ULP of respondent court on that ground upon motions of the local unions concerned and/or
their officers and members.

II. Respondent court erred in finding that petitioners herein discriminated against individual
complainants in Case No. 4951-ULP of respondent court who were not readmitted to work
after the November 7, 1967 strike, while others were able to return to their former
employment and in holding that the procedure adopted by petitioners herein was in effect a
screening of those who were readmitted and in finding petitioners herein guilty of unfair labor
practice by reasons thereof.

III. Respondent court erred in rendering judgment ordering petitioners herein to pay
individual complainants in Case No. 4951-ULP of respondent court backwages from December
18, 1967, to June 29, 1970, minus their earnings elsewhere, except those who have resigned,
those who have been dismissed for cause, those whose contracts have expired and those who
are already working.

IV. Respondent court erred in holding that petitioners herein have waived their right to
declare the strikes of September 4, 1967 and November 7, 1967, illegal.

From the aforecited assignments of errors respectively made in both petitions before Us, We
find that there are only two basic issues posed for Our resolution, viz: (1) whether or not the
complaint filed by LAKAS against the Marcelo Companies can be sustained, in view of the
alleged fact that its authority to file and prosecute the same has been squarely raised in issue

 at the first instance before the respondent court; and (2) whether or not the Marcelo
Companies are guilty of unfair labor practice, for which they should be made liable for
backwages and be obliged to reinstate the employees appearing in Annexes "A", "B", and "C" of
the complaint, taking into consideration the prayer of LAKAS anent the correct payment of
said backwages and the non-exclusion of some employees from the benefits arising from the
appealed Decision.

The first issue poses a procedural question which We shall dwell on after a resolution of the
second issue, this latter issue being of greater significance to the correct determination of
the rights of all parties concerned as it treats of the merits of the present
petitions.chanrobles virtual lawlibrary

Hence, anent the second issue of whether or not the complaint for unfair labor practice can
be sustained, this Court rules in favor of the respondent Marcelo Companies and consequently,
the appealed Decision is reversed. This reversal is inevitable after this Court has pored
through the voluminuous records of the case as well as after applying the established
jurisprudence and the law on the matters raised. We are not unmindful of the plight of the
employees in this case but We consider it oppressive to grant their petition in G.R. No.
L-38258 for not only is there no evidence which shows that the respondent Marcelo
Companies were seeking for an opportunity to discharge these employees for union activities,
or to discriminate against them because of such activities, but there is affirmative evidence
to establish the contrary conclusion.

The present controversy is a three-sided conflict, although focus has been greatly placed
upon an alleged labor dispute between complainant LAKAS and the respondent Marcelo
Companies. It would bear emphasizing, however, that what had been patently disregarded by
the respondent industrial court and the parties alike, is the fact that LAKAS had never been
the bargaining representative of any and all of the local unions then existing in the respondent
Marcelo Companies.

Contrary to the pretensions of complainant LAKAS, the respondent Marcelo Companies did not
ignore the demand for collective bargaining contained in its letter of June 20, 1967. Neither
did the companies refuse to bargain at all. What it did was to apprise LAKAS of the existing
conflicting demands for recognition as the bargaining representative in the appropriate units
involved, and suggested the settlement of the issue by means of the filing of a petition for
certification election before the Court of Industrial Relations. This was not only the legally
approved procedure but was dictated by the fact that there was indeed a legitimate

representation issue. PSSLU, with whom the existing CBAs were entered into, was demanding
of respondent companies to collectively bargain with it; so was Paulino Lazaro of MUEWA, J.C.
Espinas & Associates for MACATIFU and the MFWU, and the complainant LAKAS for MULU
which we understand is the aggrupation of MACATIFU, MFWU and UNWU. On top of all of
these, Jose Roque of UNWU disauthorized the PSSLU from representing his union; and
similarly, Augusto Carreon of MACATIFU itself informed management as late as July 11, 1967
or after the demand of LAKAS that no group representing his Union "is not authorized and
should not be entertained."cralaw virtua1aw library

Indeed, what We said in Philippine Association of Free Labor Unions (PAFLU) v. The Bureau of
Labor Relations, 69 SCRA 132, applies as well to this case.

". . ., in a situation like this where the issue of legitimate representation in dispute is viewed
for not only by one legitimate labor organization but two or more, there is every equitable
ground warranting the holding of a certification election. In this way, the issue as to who is
really the true bargaining representative of all the employees may be firmly settled by the
simple expedient of an election."cralaw virtua1aw library

The above-cited case gives the reason for the need of determining once and for all the true
choice of membership as to who should be their bargaining representative, which is
that," (E)xperience teaches us, one of the root causes of labor or industrial disputes is the
problem arising from a questionable bargaining representative entering into CBA concerning
terms and conditions of employment."cralaw virtua1aw library

Respecting the issue of representation and the right of the employer to demand reasonable
proof of majority representation on the part of the supposed or putative bargaining agent,
the commentaries in Rothenberg on Labor Relations, pp. 429-431, are forceful and persuasive,
thus:jgc:chanrobles.com.ph

"It is essential to the right of a putative bargaining agent to represent the employees that it
be the delegate of a majority of the employees and, conversely, an employer is under duty to
bargain collectively only when the bargaining agent is representative of the majority of the
employees. A natural consequence of these principles is that the employer has the right to
demand of the asserted bargaining agent proof of its representation of its employees. Having
the right to demonstration of this fact, it is not an ‘unfair labor practice’ for an employer to
refuse to negotiate until the asserted bargaining agent has presented reasonable proof of
majority representation. It is necessary however, that such demand be made in good faith and

 not merely as a pretext or device for delay or evasion. The employer’s right is however to
reasonable proof . . .

". . . Although an employer has the undoubted right to bargain with a bargaining agent whose
authority has been established, without the requirement that the bargaining agent be
officially certified by the National Labor Relations Board as such, if the informally presented
evidence leaves a real doubt as to the issue, the employer has a right to demand a
certification and to refuse to negotiate until such official certification is presented."cralaw
virtua1aw library

The clear facts of the case as hereinbefore restated indisputably show that a legitimate
representation issue confronted the respondent Marcelo Companies. In the face of these
facts and in conformity with the existing jurisprudence, We hold that there existed no duty
to bargain collectively with the complainant LAKAS on the part of said companies. And
proceeding from this basis, it follows that an acts instigated by complainant LAKAS such as
the filing of the Notice of Strike on June 13, 1967 (although later withdrawn) and the two
strikes of September 4, 1967 and November 7, 1967 were calculated, designed and intended
to compel the respondent Marcelo Companies to recognize or bargain with it notwithstanding
that it was an uncertified union, or in the case of respondent Marcelo Tire and Rubber
Corporation, to bargain with it despite the fact that the MUEWA of Paulino Lazaro was
already certified as the sole bargaining agent in said respondent company. These concerted
activities executed and carried into effect at the instigation and motivation of LAKAS are
illegal and violative of the employer’s basic right to bargain collectively only with the
representative supported by the majority of its employees in each of the bargaining units.
This Court is not unaware of the present predicament of the employees involved but much as
We sympathize with those who have been misled and so lost their jobs through hasty, ill-
advised and precipitate moves, We rule that the facts neither substantiate nor support the
finding that the respondent Marcelo Companies are guilty of unfair labor practice.

There are also other facts which this Court cannot ignore. The complaint of LAKAS charge
that after their first strike of September 4, 1967, management and the striking employees
entered into a Return-to-Work Agreement but that it was violated by the respondent
companies who "refused to admit the members of the three striking local unions . . . and gave
preference to the casual employees." (No. 8, Complaint). It is also alleged that the strike of
November 7, 1967 was staged "because of the refusal of the respondents to accept some
union members . . . and refusal of respondents to bargain in good faith with complainant" (No.

9, Complaint). We find however, that in making these charges, complainant LAKAS lacked
candor, truth and fidelity towards the courts.chanrobles virtual lawlibrary

It is a fact found by the respondent court, and as revealed by the records of the case, that
the respondent Marcelo Companies did not violate the terms of the Return-to-Work
Agreement negotiated after the first strike. All of the strikers were admitted back to work
except four (4) who opted not to report for work because of the administrative investigation
conducted in connection with the acts of violence perpetrated during the said strike.

It is also evident from the records that the charge of bargaining in bad faith imputed to the
respondent companies, is hardly credible. In fact, such charge is valid as only against the
complainant LAKAS. The parties had a total of five (5) conferences for purposes of collective
bargaining. It is worth considering that the first strike of September 4, 1967 was staged less
than a week after the fourth CBA conference and without any benefit of any previous strike
notice. In this connection, it must be stated that the notice of strike filed on June 13, 1967
could not have been the strike notice for the first strike because it was already withdrawn on
July 14, 1967. Thus, from these stated facts can be seen that the first strike was held while
the parties were in the process of negotiating. Nor can it be sustained that the respondent
Marcelo Companies bargained in bad faith since there were proposals offered by them, but
the complainant LAKAS stood pat on its position that all of their economic demands should be
met and that all of these demands should be granted in all of the respondent Marcelo
Companies. The companies’ refusal to accede to the demands of LAKAS appears to be
justified since there is no showing that these companies were in the same state of financial
and economic affairs. There is reason to believe that the first strike was staged only for the
purpose of compelling the respondent Marcelo Companies to accede to the inflexible demands
of the complainant LAKAS. The records further establish that after the resumption of
normal operations following the first strike and the consequent Return-to-Work Agreement,
the striking unions led by complainant LAKAS and the management of the respondent Marcelo
Companies resumed their bargaining negotiations. And that on October 13, 1967, complainant
LAKAS sent the final drafts of the collective bargaining proposals for MFWU and UNWU.
The second strike-of November 7, 1967 was then staged immediately after which strike, as
before, was again lacking of a strike notice. All of these facts show that it was complainant
LAKAS, and not the respondent Marcelo Companies, which refused to negotiate in the pending
collective bargaining process. All that the facts show is that the bargaining position of
complainant LAKAS was inflexible and that it was in line with this uncompromising attitude
that the strikes were declared, significantly after notice that management did not or could
not meet all of their 17-points demand.

 Respondent court, upholding the contention of petitioner LAKAS that after the second strike,
the respondent Marcelo Companies, despite the strikers’ unconditional offer to return to
work, refused to readmit them without "screening" which LAKAS insists to be "discriminatory
hiring of the striking employees," declared that although the two strikes were illegal, being
economic strikes held in violation of the strike notice requirement, nevertheless held the
Marcelo Companies guilty of unfair labor practice in discriminating against the complaining
employees by refusing to readmit them while other strikers were admitted back to work. We
do not agree.

It is the settled jurisprudence that it is an unfair labor practice for an employer not to
reinstate, or refuse re-employment to, members of union who abandon their strike and make
unconditional offer to return to work. 1 As indeed Exhibit "B" presents an unconditional offer
of the striking employees to return to work under the same terms and conditions of
employment before the strike, the question then confronting Us is whether or not on the part
of the respondent companies, there was refusal to reinstate or re-employ the strikers.

We find as a fact that the respondent Marcelo Companies did not refuse to reinstate or re-
employ the strikers, as a consequence of which We overrule the finding of unfair labor
practice against said companies based on the erroneous conclusion of the respondent court. It
is clear from the records that even before the unconditional offer to return to work
contained in Exhibit "B" was made, the respondent Marcelo Companies had already posted
notices for the strikers to return back to work. It is true that upon their return, the strikers
were required to fill up a form (Exhibit "49") wherein they were to indicate the date of their
availability for work. But We are more impressed and are persuaded to accept as true the
contention of the respondent Marcelo Companies that the aforestated requirement was only
for purposes of proper scheduling of the start of work for each returning striker. It must be
noted that as a consequence of the two strikes which were both attended by widespread acts
of violence and vandalism, the businesses of the respondent companies were completely
paralyzed. It would hardly be justiciable to demand of the respondent companies to readmit
all the returning workers in one big force or as each demanded readmission. There were
machines that were not in operating condition because of long disuse during the strikes. Some
of the machines needed more than one worker to operate them so that in the absence of the
needed team of workers, the start of work by one without his teammates would necessarily be
useless, and the company would be paying for his time spent doing no work. Finally, We take
judicial cognizance of the fact that companies whose businesses were completely paralyzed by

 major strikes cannot resume operations at once and in the same state or force as before the
strikes.chanrobles virtual lawlibrary

But what strikes Us most in lending credence to respondents’ allegation that Exhibit "49" was
not meant to screen the strikers, is the fact that all of the returning strikers who filled up
the form were scheduled for work and consequently started with their jobs. It is only those
strikers who refused or failed to fill-up the required form, like the herein complaining
employees, who were not scheduled for work and consequently have not been re-employed by
the respondent Marcelo Companies. Even if there was a sincere belief on their part that the
requirement of Exhibit "49" was a ruse at "screening" them, this fear would have been
dispelled upon notice of the fact that each and all of their co-strikers who filled up the
required form were in fact scheduled for work and started to work. The stoppage of their
work was not, therefore, the direct consequence of the respondent companies’ complained act.
Hence, their economic loss should not be shifted to the employer. 2

It was never the state policy nor Our judicial pronouncement that the employees’ right to
self-organization and to engage in concerted activities for mutual aid and protection, are
absolute or be upheld under all circumstances. Thus, in the case of Royal Interocean Lines, Et.
Al. v. CIR, 3 We cited these authorities giving adequate panoply to the rights of employer, to
wit:jgc:chanrobles.com.ph

"The protection of workers’ right to self-organization in no way interfere with employer’s

freedom to enforce such rules and orders as are necessary to proper conduct of his
businesses, so long as employer’s supervision is not for the purpose of intimidating or coercing
his employees with respect to their self-organization and representation. (National Relations
Board v. Hudson Motor Car Co., C.C.A., 1942, 123 F 2d. 528)."cralaw virtua1aw library

"It is the function of the court to see that the rights of self-organization and collective
bargaining guaranteed by the Act are amply secured to the employee, but in its effort to
prevent the prescribed unfair labor practice, the court must be mindful of the welfare of the
honest employer (Martel Mills Corp. v. M.L.R.L., C.C.A., 1940, 11471 F2d. 264)."cralaw virtua1aw
library

In Pagkakaisang Itinataguyod ng mga Manggagawa sa Ang Tibay (PIMA), Eliseo Samson, Et. Al.
v. Ang Tibay, Inc., Et Al., L-22273, May 16, 1967, 20 SCRA 45, We held that the exaction, by
the employer, from the strikers returning to work, of a promise not to destroy company
property and not to commit acts of reprisal against union members who did not participate in

the strike, cannot be considered an unfair labor practice because it was not intended to
discourage union membership. It was an act of a self-preservation designed to insure peace
and order in the employer’s premises. It was also held therein that what the Industrial Peace
Act regards as an unfair labor practice is the discrimination committed by the employer in
regard to tenure of employment for the purpose of encouraging or discouraging union
membership.chanrobles virtual lawlibrary

In the light of the above ruling and taking the facts and circumstances of the case before Us
in relation to the requirement by the respondent companies in the filling up of Exhibit "49",
We hold and rule that the requirement was an act of self-preservation, designed to effect
cost-savings as well as to insure peace and order within their premises. Accordingly, the
petition in G. R. No. L-38258 should be dismissed, it having failed to prove, substantiate and
justify the unfair labor practice charges against the respondent Marcelo Companies.

Now to the procedural question posed in the first issue brought about by the respondent
court’s denial of the motions to withdraw the complaint respectively filed by MUEWA, UNWU
and MFWU. In their petition (G.R. L-38260) the respondent Marcelo Companies maintain that
the respondent court erred in not dismissing the complaint even as it knew fully well that the
very authority of LAKAS to represent the labor unions who had precisely disaffiliated from
the LAKAS, was open to serious question and was being ventilated before it. On the other
hand, the respondent court rationalized the denial of the aforestated motions to withdraw by
holding that the complaint was filed by LAKAS on behalf of the individual employees whose
names were attached to the complaint and hence, that the local unions who were not so
authorized by these individual employees, cannot withdraw the said complaint. The lower
court’s opinion is erroneous.

Firstly, LAKAS cannot bring any action for and in behalf of the employees who were members
of MUEWA because, as intimated earlier in this Decision, the said local union was never an
affiliate of LAKAS. What appears clearly from the records is that it was Augusto Carreon and
his followers who joined LAKAS, but then Augusto Carreon was not the recognized president
of MUEWA and neither he nor his followers can claim any legitimate representation of
MUEWA. Apparently, it is this split faction of MUEWA, headed by Augusto Carreon, who is
being sought to be represented by LAKAS. However, it cannot do so because the members
constituting this split faction of MUEWA were still members of MUEWA which was on its own
right a duly registered labor union. Hence, any suit to be brought for and in behalf of them
can be made only by MUEWA, and not LAKAS. It appearing then that Augusto Carreon and his
cohorts did not disaffiliate from MUEWA nor signed any individual affiliation with LAKAS,

 LAKAS bears no legal interest in representing MUEWA or any of its members.chanrobles

lawlibrary : rednad

Nor will the lower court’s opinion be availing with respect to the complaining employees
belonging to UNWU and MFWU. Although it is true, as alleged by LAKAS, that when it filed
the charge on December 26, 1967, the officers of the movant unions were not yet then the
officers thereof, nevertheless, the moment MFWU and UNWU separated from and
disaffiliated with LAKAS to again exercise its rights as independent local unions, registered
before as such, they are no longer affiliates of LAKAS, as what transpired here. Naturally,
there would no longer be any reason or occasion for LAKAS to continue representing them.
Notable is the fact that the members purportedly represented by LAKAS constitute the
mere minority of the movant unions, as may be inferred from the allegations of the movant
unions as well as the counter-allegations of LAKAS filed below. As such, they cannot prevail or
dictate upon the will of the greater majority of the unions to which they still belong, it
appearing that they never disaffiliated from their unions; or stated in another way, they are
bound by the action of the greater majority. 4

In NARIC Workers’ Union v. CIR, 5 We ruled that," (a) labor union would go beyond the limits
of its legitimate purposes if it is given the unrestrained liberty to prosecute any case even for
employees who are not members of any union at all. A suit brought by another in
representation of a real party in interest is defective." Under the uncontroverted facts
obtaining herein, the aforestated ruling is applicable, the only difference being that, here, a
labor federation seeks to represent members of a registered local union never affiliated with
it and members of registered local unions which, in the course of the proceedings before the
industrial court, disaffiliated from it.

This is not to say that the complaining employees were without any venue for redress. Under
the aforestated considerations, the respondent court should have directed the amendment of
the complaint by dropping LAKAS as the complainant and allowing the suit to be further
prosecuted in the individual names of those who had grievances. A class suit under Rule 3,
Section 12 of the Rules of Court is authorized and should suffice for the purpose.

In fairness to the complaining employees, however, We treated their Motion for

Reconsideration of the Decision subject of appeal as curing the defect of the complaint as the
said motion expressly manifested their collective desire to pursue the complaint for and in
their own behalves and disauthorizing LAKAS’ counsel from further representing them. And
We have also treated their petition before Us in the same manner, disregarding the fact that

 LAKAS remained the petitioning party, as it appears from the verification that the petition in
L-38258 was for and in behalf of the complaining employees. The merits of their petition,
however, fall short of substantiating the charge of unfair labor practice against the
respondent Marcelo Companies. On the other hand, the appeal of the Marcelo Companies in
L-38260 must be upheld and sustained.chanrobles virtual lawlibrary

WHEREFORE, upon the foregoing considerations, the petition in L-38258 is dismissed and the
petition in L-38260 is granted. The decision of the Court of Industrial Relations is hereby
REVERSED and SET ASIDE and a new judgment is rendered holding that the respondent
Marcelo Companies are not guilty of unfair labor practice.

No Costs.

SO ORDERED.

EN BANC

[G.R. No. L-20044. April 30, 1964.]

NATIONAL UNION OF RESTAURANT WORKERS (PTUC), Petitioner, v. COURT OF

INDUSTRIAL RELATIONS, ET AL., Respondents.

Alejandro C. Villavieja for Petitioner.

Padilla Law Office for Respondents.

SYLLABUS

 1. LABOR RELATIONS; UNFAIR LABOR PRACTICE; REPLY TO WRITTEN DEMANDS;

FAILURE TO REPLY NOT AS SUCH AN ACT OF UNFAIR LABOR PRACTICE. — The condition
under Section 14, Rep. Act No. 875, requiring the employer to reply within 10 days from
receipt of a written notice making demands, is merely procedural, and as such its non-
compliance cannot be deemed to be an act of unfair labor practice.

2. ID.; ID.; INTERFERENCE WITH RIGHT OF SELF-ORGANIZATION; PERSON

UNAUTHORIZED BY MANAGEMENT. — Where there is no evidence to show that the alleged
counter-proposals, the nature of which would indicate coercion interfering with the right of
the employees to self-organization, were made by a person authorized to represent
management, the claim of the complaining union of coercion has no basis.

3. ID.; ID.; CLAIM OF DISMISSAL OF EMPLOYEE FOR UNION ACTIVITIES PROPERLY

DISCREDITED. — The lower court properly discredited the claim that an employee was
dismissed for union activities where it appears that other employees more active than him in
the organization of the union were retained and there (the employer’s) life on account of the
threats made on her and the hatred that he had against her, being always together in her car
driven by him during business routine, that prompted his dismissal.

D E C I S I O N

BAUTISTA ANGELO, J.:

A complaint for unfair labor On June 9, 1960, a complaint for unfair labor practice was lodged against the owners of Tres
practice was filed against
the owners of Tres Hermanas Restaurant, particularly Mrs. Felisa Herrera, on the ground, among others, that
Hermanas Restaurant on
the ground that the respondents refused to bargain collectively with the complaining union; respondents made a
respondents refused to
bargain collectively with the
counter-proposal in the sense that they would bargain with said union and would accept its
union. One Martin Briones demands if the same would become a company union, and one Martin Briones, and employee,
was separated from service
because he was found to was separated from the service because he was found to be the organizer and adviser of the
be the organizer of the
complaining union complaining union.

After respondents had filed their answer, wherein they denied the charges of unfair labor
Respondents denied the
charges of Unfair labor practice filed against them, Judge Emiliano C. Tabigne, who was assigned to act on the
practice against them and
the Judge who was
assigned to the case
dismissed the same

 complaint, received the evidence, and on July 28, 1961, rendered decision exonerating
respondents. He found that the charges were not proven and dismissed the complaint.

The case was taken to the court en banc, where in a split decision the court affirmed the
decision of Judge Tabigne. The case is now before us on a petition for review.

The important findings of the court a quo which are now disputed by the union are: (1)
respondents did not refuse to bargain collectively with the union as in fact they met its
members with the only particularity that they were not able to accept all the demands of the
Issues disputed by union; (2) respondents did not interfere, coerce or restrain their employees in the exercise of
the union
their right to join the complaining union; and (3) the dismissal of Martin Briones was due to
the concern of Mrs. Herrera for her life on account of the hatred that Briones had
entertained against her, she being always with him in the car he used to drive during their

As to the first issue, the

business routine. It is claimed that Judge Tabigne committed a grave abuse of discretion in
court found that in the making the above findings.
letter sent by the union to
respondents containing its
demands, there appears
certain marks, opposite Anent the first issue, the court a quo found that in the letter sent by the union to
each demand, such as a
check for those demands
respondents containing its demands marked in the case as Exhibit 1, there appears certain
to which Mrs. Felisa marks, opposite each demand, such as a check for those demands to which Mrs. Felisa Herrera
Herrera was agreeable, a
cross signifying the was agreeable, a cross signifying the disapproval of Mrs. Herrera, and a circle regarding those
disapproval of Mrs.
Herrera, and a circle demands which were left open for discussion on some future occasion that the parties may
regarding those demands
which were left open for deem convenient. Such markings were made during the discussion of the demands in the
discussion on some future
meeting called by respondents on May 3, 1960 at their restaurant in Quezon City. The court a
occasion that the parties
may deem convenient. quo concluded that the fact that respondent Herrera had agreed to some of the demands
The court a concluded
that the fact that shows that she did not refuse to bargain collectively with the complaining union.
respondent Herrera had
agreed to some of the
demands shows that she
We can hardly dispute this finding, for it finds support in the evidence. The inference that
did not refuse to bargain
collectively with the respondents did not refuse to bargain collectively with the complaining union because they
complaining union.
accepted some of the demands while they refused the others even leaving open other
demands for future discussion is correct, especially so when those demands were discussed at
a meeting called by respondents themselves precisely in view of the letter sent by the union
It is true that under
Section 14 of Republic
on April 29, 1960. It is true that under Section 14 of Republic Act 875 whenever a party
Act 875 whenever a party serves a written notice upon the employer making some demands the latter shall reply thereto
serves a written notice
upon the employer not later than 10 days from receipt thereof, but this condition is merely procedural, and as
making some demands
the latter shall reply much its non- compliance cannot be deemed to be an act of unfair labor practice. The fact is
thereto not later than 10
days from receipt thereof, that respondents did not ignore the letter sent by the union so much so that they called a
but this condition is
meeting to discuss its demands, as already stated elsewhere.
merely procedural, and as
much its non- compliance
cannot be deemed to be
an act of unfair labor
practice.

 It is contended that respondents refused to bargain with the complaining union as such even
if they called a meeting of its officers and employees hereby concluding that they did not
desire to enter into a bargaining agreement with said union. This conclusion has no rational
relation with the main premise of the union for it is belied by the fact that respondents did
actually agree and bargain with the representatives of the union. While it is true that
respondents denied the capacity of the complaining union to bargain collectively with the
respondents this is because they were of the impression that before a union could have that
capacity it must first be certified by the Court of Industrial Relations as the duly authorized
bargaining unit, as in fact this is what they stated in their answer to the petition for
certification filed by said union before the Court of Industrial Relations (See Case No. 763-
MC). In said case, another union known as the International Labor and Marine Union of the
Philippines claimed to represent the majority of the employees of respondent restaurant, and
this is what it alleged in a letter sent to the manager of respondents dated May 25, 1962.

Anent the second issue, the

Anent the second issue, the claim of the complaining union has also no basis. This is premised
claim of the complaining
union has also no basis. This on a document marked Exhibit C which contains certain alleged counter-proposals tendered to
is premised on a document
which contains certain complainant union the nature of which would apparently indicate that respondents made use of
alleged counter-proposals
tendered to complainant coercion which interferes with the right of the employees to self-organization. On this
union which would
apparently indicate that
document certain notations were made by one Ernesto Tan which are indeed derogatory and
respondents made use of which were allegedly made by him upon instructions of respondent Felisa Herrera. Thus, the
coercion which interferes
with the right of the pertinent notation on which the union relies is one which states that respondent Herrera
employees to self-
organization. would be willing to recognize the union "if union would become company union", which would
indeed show that Mrs. Herrera interfered with the employees’ right to self-organization. But
This documents contain respondents denied that they ever authorized Ernesto Tan to make such notation or to
derogatory which were
made by one Ernesto Tan represent them in the negotiations, for he was merely a bookkeeper whose duties were
allegedly made upon
instructions of Herrera. confined to the keeping and examination of their books of accounts and sales invoices. It
Respondents denied that
they ever authorized
appears that he was not even invited to the meeting but merely volunteered to be present and
Ernesto Tan to make such made those notations on his own account and initiative. The court a quo gave credence to this
notation or to represent
them in the negotiations, for stand of respondents, as can be seen in the following finding: "There is no evidence to show
he was merely a
bookkeeper whose duties that Ernesto Tan was authorized to represent management in the meeting held on May 3,
were confined to the
keeping and examination of 1960, and that Ernesto Tan being a mere bookkeeper of respondents, he is not a part of
their books of accounts and
management although he is the nephew of Mrs. Herrera." We are not prepared to disturb this
sales invoices.
finding of the court a quo.

Finally, it is alleged in connection with the third issue that respondent Herrera dismissed
Martin Briones without sufficient cause other than his being the organizer and adviser of the

testimony of Martin Briones

that he is not the only one who
organized the complaining complaining union. It however appears from the very testimony of Martin Briones that he is
union but together with
Galicano Apiz, Pablo Cabreros
not the only one who organized the complaining union but together with Galicano Apiz, Pablo
and Juan Morales, with the Cabreros and Juan Morales, with the particularity that, as Briones himself had intimated,
particularity that, as Briones
himself had intimated, Apiz, Apiz, Cabreros and Morales were more active than himself in organizing the union so much so
Cabreros and Morales were
more active than himself in that they were appointed officers of that union. And yet Apiz, Cabreros and Morales were
organizing the union so much
so that they were appointed
never touched and continued to be employed in respondent’s restaurant. For this reason, the
officers of that union. And yetcourt a quo discredited the claim that Briones was dismissed because of union activities but
Apiz, Cabreros and Morales
were continued to be rather because of the threats he made on Mrs. Herrera, as communicated to her by her sister
employed in respondent’s
restaurant. However, the Court Aureata. The following is the finding made by the court a quo on this point: "If it is the union
discredited the claim that
Briones was dismissed activities of complainant’s members that Mrs. Herrera did not like, Apiz, Cabreros and
because of union activities butMorales should have been dismissed by her also, because said persons were more active than
rather because of the threats
he made on Mrs. Herrera, as Briones in the organization of the union. Verily, it was not the union activities of Martin
communicated to her by her
sister Aureata. Briones that prompted Mrs. Herrera to dismiss him, but her fear for the safety of her life on
account of the smoldering embers of hatred that the former had against the latter, the said
persons being always together in her car driven by Briones during business routine." This
finding finds support in the evidence.

On the strength of the foregoing considerations, we find no justification for disturbing the
findings of the court a quo which led to the dismissal of the complaint under consideration.

WHEREFORE, the decision appealed from is affirmed. No costs.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 58768-70 December 29, 1989
LIBERTY FLOUR MILLS EMPLOYEES, ANTONIO EVARISTO and POLICARPIO
BIASCAN, petitioners,
vs.
LIBERTY FLOUR MILLS, INC. PHILIPPINE LABOR ALLIANCE COUNCIL (PLAC) and
NATIONAL LABOR RELATIONS COMMISSION, (NLRC), respondents.
Julius A. Magno for petitioners.
De Leon, Diokno & Associates for respondent Liberty Flour Mills, Inc.

CRUZ, J.:

 In this petition for certiorari, the resolution of the public respondent dated August 3, 1978,
is faulted for: (a) affirming the decision of the labor arbiter dismissing the employees' claim
for emergency allowance for lack of jurisdiction; and (b) modifying the said decision by
disallowing the award of back wages to petitioners Policarpio Biascan and Antonio Evaristo.
The basic facts are as follows:
On February 6, 1974, respondent Philippine Labor Alliance Council (PLAC) and respondent
Liberty Flour Mills, Inc. entered into a three-year collective bargaining agreement effective
January 1, 1974, providing for a daily wage increase of P2.00 for 1974, Pl.00 for 1975 and
another Pl.00 for 1976. The agreement contained a compliance clause, which will be explained
later in this opinion. Additionally, the parties agreed to establish a union shop by imposing
"membership in good standing for the duration of the CBA as a condition for continued
employment" of workers. 1
On October 18, 1974, PLAC filed a complaint against the respondent company for non-payment
of the emergency cost of living allowance under P.D. No. 525. 2 A similar complaint was filed on
March 4, 1975, this time by the petitioners, who apparently were already veering away from
PLAC.3
On March 20, 1975, petitioners Evaristo and Biascan, after organizing a union caged the
Federation of National Democratic Labor Unions, filed with the Bureau of Labor Relations a
petition for certification election among the rank-and-file employees of the respondent
company 4 PLAC then expelled the two for disloyalty and demanded their dismissal by the
respondent company, which complied on May 20, 1975.5
The objection of Evaristo and Biascan to their termination were certified for compulsory
arbitration and assigned to Labor Arbiter Apolinario N. Lomabao, Jr. Meanwhile, the claims
for emergency allowance were referred for voluntary arbitration to Edmundo Cabal, who
eventually dismissed the same on the ground that the allowances were already absorbed by
the wage increases. This latter case was ultimately also certified for compulsory arbitration
and consolidated with the termination case being heard by Lomabao. His decision was, on
appeal, dealt with by the NLRC as above stated, 6 and the motion for reconsideration was
denied on August 26, 1981.7
At the outset, we note that the petitioners are taking an ambivalent position concerning the
CBA concluded in 1974. While claiming that this was entered into in bad faith and to forestall
the payment of the emergency allowances expected to be decreed, they nonetheless invoke
the same agreement to support their contention that their complaint for emergency
allowances was invalidly referred to voluntary arbitrator Cabal rather than Froilan M.
Bacungan.
We find there was no such violation as the choice of the voluntary arbitrator was not limited
to Bacungan although he was probably the first preference. Moreover, the petitioners are

 estopped from raising this objection now because they did not seasonably interpose it and
instead willingly submitted to Cabal's jurisdiction when he undertook to hear their complaint.
In sustaining Labor Arbiter Lomabao, the NLRC agreed that the decision of voluntary Arbiter
Cabal was final and unappealable under Article 262-A of the Labor Code and so could no longer
be reviewed by it. True enough. However, it is equally true that the same decision is not
binding on this Court, as we held in Oceanic Bic Division (FFW) v. Romero 8 and reiterated in
Mantrade/FMMC Division Employees and Workers Union v. Bacungan. 9 The rule as announced
in these cases is reflected in the following statements:
In spite of statutory provisions making "final" the decision of certain administrative agencies,
we have taken cognizance of petitions questioning these decisions where want of jurisdiction,
grave abuse of discretion, violation of due process, denial of substantial justice, or erroneous
interpretation of the law were brought to our attention.
xxx xxx xxx
A voluntary arbitrator by the nature of her functions acts in a quasi-judicial capacity. There
is no reason why her decisions involving interpretation of law should be beyond this Court's
review. Administrative officials are presumed to act in accordance with law and yet we do not
hesitate to pass upon their work where a question of law is involved or where a showing of
abuse of authority or discretion in their official acts is properly raised in petitions for
certiorari.
Accordingly, the validity of the voluntary arbiter's finding that the emergency allowance
sought by the petitioners are already absorbed in the stipulated wage increases will now be
examined by the Court itself.
The position of the company is that the emergency allowance required by P.D. No. 525 is
already covered by the wage increases prescribed in the said CBA. Furthermore, pursuant to
its Article VIII, such allowances also include all other statutory minimum wage increases that
might be decreed during the lifetime of the said agreement.
That agreement provided in Section 2 thereof as follows:
Section 2. The wage increase in the amounts and during the period above set forth shall, in
the event of any statutory increase of the minimum wage, either as allowance or as basic
wage, during the life of this Agreement, be considered compliance and payment of such
required statutory increase as far as it will go and under no circumstances will it be cumulative
nor duplication to the differential amount involved consequent to such statutory wage
increase.
The Court holds that such allowances are indeed absorbed by the wage increases required
under the agreement. This is because Section 6 of the Interpretative Bulletin on LOI No. 174
specifically provides:

 Sec. 6. Allowances under LOI. — -All allowances, bonuses, wage adjustments and other
benefits given by employers to their employees shall be treated by the Department of Labor
as in substantial compliance with the minimum standards set forth in LOI No. 174 if:
(a) they conform with at least the minimum allowances scales specified in the immediately
preceding Section; and
(b) they are given in response to the appeal of the President in his speech on 4 January 1974,
or to countervail the quantum jump in the cost of living as a result of the energy crisis
starting in November 1973, or pursuant to Presidential Decree No. 390; Provided, That the
payment is retroactive to 18 February 1974 or earlier.
The allowances and other benefits may be granted unilaterally by the employer or through
collective bargaining, and may be paid at the same time as the regular wages of the employees.
Allowances and other benefits which are not given in substantial compliance with the LOI as
interpreted herein shall not be treated by the Department of Labor as emergency allowances
in the contemplation of the LOI unless otherwise shown by sufficient proof. Thus, without
such proof, escalation clauses in collective bargaining agreements concluded before the appeal
of the President providing for automatic or periodic wage increases shall not be considered
allowances for purposes of the LOI. (Emphasis supplied.)
The "immediately preceding section" referred to above states:
SEC. 5. Determination of Amount of Allowances. — In determining the amount of allowances
that should be given by employers to meet the recommended minimum standards, the LOI has
classified employers into three general categories. As an implementation policy, the
Department of Labor shall consider as sufficient compliance with the scales of allowances
recommended by the LOI if the following monthly allowances are given by employers:
(a) P50.00 or higher where the authorized capital stock of the corporation, or the total assets
in the case of other undertakings, exceeds P 1 million;
(b) P 30.00 or higher where the authorized capital stock of the corporation, or the total
assets in the case of other undertakings, is not less than P100,000.00 but not more than
P1million; and
(c) P15.00 or higher where the authorized capital stock or total assets, as the case may be, is
less than P100,000.00.
It is not denied that the company falls under paragraph (a), as it has a capitalization of more
than P l million, 10 and so must pay a minimum allowance of P50.00 a month. This amount is
clearly covered by the increases prescribed in the CBA, which required a monthly increase (on
the basis of 30 days) of P60.00 for 1974, to be increased by P30.00 in 1975 (to P90.00) and
another P 30.00 in 1976 (to P120.00). The first increase in 1974 was already above the
minimum allowance of P50.00, which was exceeded even more with the increases of Pl.00 for
each of the next two years.

 Even if the basis used were 26 days a month (excluding Sundays), the conclusion would remain
unchanged as the raise in wage would be P52.00 for 1974, which amount was increased to
P78.00 in 1975 and to P104.00 in 1976.
But the petitioners contend that the wage increases were the result of negotiation
undertaken long before the promulgation of P.D. No. 525 and so should not be considered part
of the emergency allowance decreed. In support of this contention, they cite Section 15 of
the Rules implementing P.D. No. 525, providing as follows:
Nothing herein shall prevent the employer and his employees, from entering into any
agreement with terms more favorable to the employees than those provided herein, or be
construed to sanction the diminution of any benefits granted to the employees under existing
laws, agreements, and voluntary practice.
Obviously, this section should not be read in isolation but must be related to the other
sections above-quoted, to give effect to the intent and spirit of the decree. The meaning of
the section simply is that any benefit over and above the prescribed allowances may still be
agreed upon by the employees and the employer or, if already granted, may no longer be
withdrawn or diminished.
The petitioners also maintain that the above-quoted Section 2 of CBA is invalid because it
constitutes a waiver by the laborers of future benefits that may be granted them by law.
They contend this cannot be done because it is contrary to public policy.
While the principle is correct, the application is not, for there are no benefits being waived
under the provision. The benefits are already included in the wage increases. It is the law
itself that considers these increases, under the conditions prescribed in LOI No. 174, as
equivalent to, or in lieu of, the emergency allowance granted by P.D. No. 525.
In fact, the company agreed to grant the emergency allowance even before the obligation was
imposed by the government. What the petitioners claim they are being made to waive is the
additional P50.00 allowance but the truth is that they are not entitled to this because they
are already enjoying the stipulated increases. There is no waiver of these increases.
Moreover, Section 2 provides that the wage increase shall be considered payment of any
statutory increase of the minimum wage "as far as it will go," which means that any amount not
covered by such wage increase will have to be made good by the company. In short, the
difference between the stipulated wage increase and the statutory minimum wage will have to
be paid by the company notwithstanding and, indeed, pursuant to the said article. There is no
waiver as to this.
Curiously, Article 2 was produced verbatim in the collective bargaining agreement concluded
by the petitioners with the company in 1977 after PLAC had been replaced by the new labor
union formed by petitioners Evaristo and Biascan. 11 It is difficult to understand the
petitioners' position when they blow hot and cold like this.

 Coming now to the second issue, we find that it must also be resolved against the petitioners.
Evaristo and Biascan claim they were illegally dismissed for organizing another labor union
opposed to PLAC, which they describe as a company union. Arguing that they were only
exercising the right to self organization as guaranteed by the Constitution, they insist they
are entitled to the back wages which the NLRC disallowed while affirming their
reinstatement.
In its challenged decision, the public respondent held that in demanding the dismissal of
Evaristo and Biascan, PLAC had acted prematurely because the 1974 CBA providing for union
shop and pursuant to which the two petitioners were dismissed had not yet been certified. 12

The implication is that it was not yet in effect and so could not be the basis of the action
taken against the two petitioners. This conclusion is erroneous. It disregards the ruling of
this Court in Tanduay Distillery Labor Union v. NLRC, 13 were we held:
The fact, therefore, that the Bureau of Labor Relations (BLR) failed to certify or act on
TDLU's request for certification of the CBA in question is of no moment to the resolution of
the issues presented in this case. The BLR itself found in its order of July 8, 1982, that the
(un)certified CBA was duly filed and submitted on October 29, 1980, to last until June 30,
1982 is certifiable for having complied with all the requirements for certification. (Emphasis
supplied.)
The CBA concluded in 1974 was certifiable and was in fact certified on April 11, 1975, It
bears stressing that Evaristo and Biascan were dismissed only on May 20, 1975, more than a
month after the said certification.
The correct view is that expressed by Commissioner Cecilio P. Seno in his concurring and
dissenting opinion, 14 viz.:
I cannot however subscribe to the majority view that the 'dismissal of complainants Biascan
and Evaristo, ... was, to say the least, a premature action on the part of the respondents
because at the time they were expelled by PLAC the contract containing the union security
clause upon which the action was based was yet to be certified and the representation status
of the contracting union was still in question.
Evidence on record show that after the cancellation of the registration certificate of the
Federation of Democratic Labor Unions, no other union contested the exclusive
representation of the Philippine Labor Alliance Council (PLAC), consequently, there was no
more legal impediment that stood on the way as to the validity and enforceability of the
provisions of the collective bargaining agreement entered into by and between respondent
corporation and respondent union. The certification of the collective bargaining agreement by
the Bureau of Labor Relations is not required to put a stamp of validity to such contract. Once
it is duly entered into and signed by the parties, a collective bargaining agreement becomes

 effective as between the parties regardless of whether or not the same has been certified by
the BLR.
To be fair, it must be mentioned that in the certification election held at the Liberty Flour
Mills, Inc. on December 27, 1976, the Ilaw at Buklod ng Manggagawa, with which the union
organized by Biascan and Evaristo was affiliated, won overwhelmingly with 441 votes as
against the 5 votes cast for PLAC. 15 However, this does not excuse the fact that the two
disaffiliated from PLAC as early as March 1975 and thus rendered themselves subject to
dismissal under the union shop clause in the CBA.
The petitioners say that the reinstatement issue of Evaristo and Biascan has become
academic because the former has been readmitted and the latter has chosen to await the
resolution of this case. However, they still insist on the payment of their back wages on the
ground that their dismissal was illegal. This claim must be denied for the reasons already
given. The union shop clause was validly enforced against them and justified the termination
of their services.
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-a-vis the employer.
The Court would have preferred to resolve this case in favor of the petitioners, but the law
and the facts are against them. For all the concern of the State, for the well-being of the
worker, we must at all times conform to the requirements of the law as long as such law has
not been shown to be violative of the Constitution. No such violation has been shown here.
WHEREFORE, the petition is DISMISSED, without any pronouncement as to costs. It is so
ordered.
Narvasa, Gancayco, Griño-Aquino Medialdea, JJ., concur.

 FIRST DIVISION

[G.R. No. 111262. September 19, 1996.]

SAN MIGUEL CORPORATION EMPLOYEES UNION-PTGWO, represented by its

President RAYMUNDO HIPOLITO, JR., Petitioner, v. HON. MA. NIEVES D.
CONFESOR, Secretary of Labor, Dept. of Labor & Employment, SAN MIGUEL
CORPORATION, MAGNOLIA CORPORATION (Formerly, Magnolia Plant) and SAN
MIGUEL FOODS, INC. (Formerly, B-Meg Plant), Respondents.

D E C I S I O N

KAPUNAN, J.:

This is a petition for certiorari assailing the Order of the Secretary of Labor rendered on
February 15, 1993 involving a labor dispute at San Miguel Corporation.

The facts are as follows:chanrob1es virtual 1aw library

On June 28, 1990, petitioner-union San Miguel Corporation Employees Union — PTGWO
entered into a Collective Bargaining Agreement (CBA) with private respondent San Miguel
Corporation (SMC) to take effect upon the expiration of the previous CBA or on June 30,
1989.

This CBA provided, among others, that:chanrob1es virtual 1aw library

ARTICLE XIV

 DURATION OF AGREEMENT

SECTION 1. This Agreement which shall be binding upon the parties hereto and their
respective successors-in-interest, shall become effective and shall remain in force and effect
until June 30, 1992.

SEC. 2. In accordance with Article 253-A of the Labor Code as amended, the term of this
Agreement insofar as the representation aspect is concerned, shall be for five (5) years from
July 1, 1989 to June 30, 1994. Hence, the freedom period for purposes of such representation
shall be sixty (60) days to June 30, 1994.

SEC. 3. Sixty (60) days prior to June 30, 1992 either party may initiate negotiations of all
provisions of this Agreement, except insofar as the representation aspect is concerned. If no
agreement is reached in such negotiations, this Agreement shall nevertheless remain in force
up to the time a subsequent agreement is reached by the parties. 1

In keeping with their vision and long term strategy for business expansion, SMC management
informed its employees in a letter dated August 13, 1991 2 that company which was composed
of four operating divisions namely: (1) Beer, (2) Packaging, (3) Feeds and Livestocks, (4)
Magnolia and Agri-business would undergo a restructuring. 3

Effective October 1, 1991, Magnolia and Feeds and Livestock Division were spun-off and
became two separate and distinct corporations: Magnolia Corporation (Magnolia) and San
Miguel Foods Inc. (SMFI). Notwithstanding the spin-offs, the CBA remained in force and
effect.

After June 30, 1992, the CBA was renegotiated in accordance with the terms of the CBA and
Article 253-A of the Labor Code. Negotiations started sometime in July, with the two parties
submitting their respective proposals and counter proposals.

During the negotiations, the petitioner-union insisted that the bargaining unit of SMC should
still include the employees of the spun-off corporations: Magnolia and SMFI; and that the
renegotiated terms of the CBA shall be effective only for the remaining period of two years
or until June 30, 1994.

 SMC, on the other hand, contented that the members/employees who had moved to Magnolia
SMFI, automatically ceased to be part of the bargaining unit at the SMC. Furthermore, the
CBA should be effective for three years in accordance with Art. 253-A of the Labor Code.

Unable to agree on these issues with respect to the bargaining unit and duration of the CBA,
petitioner-union declared a deadlock on September 29, 1990.

On October 2, 1992, a Notice of Strike was filed against SMC.

In order to avert a strike, SMC requested the National Conciliation and Mediation Board
(NCMB) to conduct preventive mediation. No settlement was arrived at despite several
meetings held between the parties.

On November 3, 1992, a strike vote was conducted which resulted in a "yes vote" in favor of a
strike.

On November 4, 1992, private respondents SMC, Magnolia and SMFI filed a petition with the
Secretary of Labor praying that the latter assume jurisdiction over the labor dispute in a
vital industry.

As prayed for, the Secretary of Labor assumed jurisdiction over the labor dispute on
November 10, 1992. 4 Several conciliation meetings were held but still no agreement/
settlement was arrived at by both parties.

After the parties submitted their respective position papers, the Secretary of Labor issued
the assailed Order on February 15, 1993 directing, among others, that the renegotiated terms
of the CBA shall be effective for the period of three (3) years from June 30, 1992; and that
such CBA shall cover only the employees of SMC and not of Magnolia and SMFI.

Dissatisfied, petitioner-union now comes to this Court questioning this Order of the
Secretary of Labor.

Subsequently, on March 30, 1995, 5 petitioner-union filed a Motion for Issuance of a

Temporary Restraining Order or Writ of Preliminary Injunction to enjoin the holding of the
certification elections in the different companies, maintaining that the employees of Magnolia
and SMFI fall within the bargaining unit of SMC.

 On March 29, 1995, the Court issued a resolution granting the temporary restraining order
prayer for. 6

Meanwhile, an urgent motion for leave to intervene 7 in the case was filed by the Samahan ng
Malayang Manggagawa-San Miguel Corporation-Federation of Free Workers (SMM-SMC-FFW)
through its authorized representative, Elmer S. Armando, alleging that it is one of the
contending parties adversely effected by the temporary restraining order.

The Intervenor cited the case of Daniel S.L. Borbon v. Hon. Bienvenido B. Laguesma, 8 G.R. No.
101766, March 5, 1993, where the Court recognized the separation of the employees of
Magnolia from the SMC bargaining unit. It then prayed for the lifting of the temporary
restraining order.

Likewise, Efren Carreon, Acting President of the SMCEU-PTGWO, filed a petition for the
withdrawal/dismissal of the petition considering that the temporary restraining order
jeopardized the employees’ right to conclude a new CBA. At the same time, he challenged the
legal personality of Mr. Raymundo Hipolito, Jr. to represent the Union as its president when
the later was already officially dismissed from the company on October 4, 1994.

Amidst all these pleadings, the following primordial issues arise:chanrob1es virtual 1aw library

1) Whether or not the duration of the renegotiated terms of the CBA is to be effective for
three years or for only two years; and

2) Whether or not the bargaining unit of SMC includes also the employees of Magnolia and
SMFI.

Petitioner-union contends that the duration for the non-representation provisions of the CBA
should be coterminous with the terms of the bargaining agency which in effect shall be for
the remaining two years of the current CBA, citing a previous decision of the Secretary of
Labor on December 14, 1992 in the matter of the labor dispute at Philippine Refining Company.
9

However, the Secretary of Labor, in her questioned Order of February 15, 1993 ruled that
the renegotiated terms of the CBA at SMC should run for a period of three (3) years.

We agree with the Secretary of Labor.

Pertinent to the first issue is Art. 253-A of the Labor Code as amended which
reads:chanrob1es virtual 1aw library

ART. 253-A. Terms of a Collective Bargaining Agreement. — Any Collective Bargaining

Agreement that the parties may enter into shall, insofar as the representation aspect is
concerned, be for a term of five (5) years. No petition questioning the majority status of the
incumbent bargaining agent shall be entertained and no certification election shall be
conducted by the Department of Labor and Employment outside of the sixty-day period
immediately before the date of expiry of such five year term of the Collective Bargaining
Agreement. All other provisions of the Collective Bargaining Agreement shall be renegotiated
not later than three (3) years after its execution. Any agreement on such other provisions of
the Collective Bargaining Agreement entered into within six (6) months from the date of
expiry of the term of such other provisions as fixed in such Collective Bargaining Agreement,
shall retroact to the day immediately following such date. If any such agreement is entered
into beyond six months, the parties shall agree on the duration of retroactivity thereof. In
case of a deadlock in the renegotiation of the collective bargaining agreement, the parties
may exercise their rights under this Code. (Emphasis supplied.)

Article 253-A is a new provision. This was incorporated by Section 21 of Republic Act No.
6715 (the Herrera-Veloso Law) which took effect on March 21, 1989. This new provision
states that the CBA has a term of five (5) years instead of three years, before the
amendment of the law as far as the representation aspect is concerned. All other provisions
of the CBA shall be negotiated not later than three (3) years after its execution. The
"representation aspect" refers to the identity and majority status of the union that
negotiated the CBA as the exclusive bargaining representative of the appropriate bargaining
unit concerned. "All other provisions" simply refers to the rest of the CBA, economic as well
as non-economic provisions, except representation. 10

As the Secretary of Labor herself observed in the instant case, the law is clear and definite
on the duration of the CBA insofar as the representation aspect is concerned, but is quite
ambiguous with the terms of the other provisions of the CBA. It is a cardinal principle of
statutory construction that the Court must ascertain the legislative intent for the purpose of
giving effect to any statute. The history of the times and state of the things existing when
the act was framed or adopted must be followed and the conditions of the things at the time
of the enactment of the law should be considered to determine the legislative intent. 11 We
look into the discussions leading to the passage of the law:chanrob1es virtual 1aw library

 THE CHAIRMAN (REP. VELASCO): . . . the CBA, insofar as the economic provisions are
concerned . . .

THE CHAIRMAN (SEN. HERRERA): Maximum of three years?

THE CHAIRMAN (SEN. VELOSO): Maximum of three years.

THE CHAIRMAN (SEN. HERRERA): Present practice?

THE CHAIRMAN (REP. VELOSO): In other words, after three years puwede nang
magnegotiate in that CBA for the remaining two years.

THE CHAIRMAN (REP. HERRERA): You can negotiate for one year, two years or three years
but assuming three years which, I think, that’s the likelihood . . .

THE CHAIRMAN (REP. VELOSO): Yes.

THE CHAIRMAN (SEN. HERRERA): Three years, the new union, assuming there will be a
change of agent, at least he has one year to administer and to adjust, to develop rapport with
the management. Yan ang importante.

You know, for us na nagne-negotiate, and hazard talaga sa negotiation, when we negotiate with
somebody na hindi natin kilala, then, we are governed by our biases na ito ay destroyer ng
Labor; ang mga employer, ito bayaran ko lang ito okay na.

‘Yan ang nangyayari, but let us give that allowance for one year to let them know.

Actually, ang thrust natin ay industrial peace, and there can be no industrial peace if you
encourage union to fight each other.’Yan ang problema. 12

x       x       x

HON. ISIDRO: Madali iyan, kasi these two periods that are mentioned in the CBA seem to
provide some doubts later on in the implementation. Sabi kasi rito, insofar as representation
issue is concerned, seven years ang lifetime . . .

 HON. CHAIRMAN HERRERA: Five years.

HON. ISIDRO: Five years, all the others three years.

HON. CHAIRMAN HERRERA: No. Ang three years duon sa terms and conditions, not later
than three years.

HON. ISIDRO: Not later than three years, so within three years you have to make a new CBA.

HON. CHAIRMAN HERRERA: Yes.

HON. ISIDRO: That is again for purposes of renewing the terms, three years na naman iyan
— then, seven years . . .

HON. CHAIRMAN HERRERA: Not later than three years.

HON. ISIDRO: Assuming that they usually follow the period — three years nang three years,
but under this law with respect to representation — five years, ano? Now, after three years,
nagkaroon ng bagong terms, tapos na iyong term, renewed na iyong terms, ang karapatan noon
sa representation issue mayroon pang two years left.

HON. CHAIRMAN HERRERA: One year na lang because six years nang lahat, three plus three.

HON ISIDRO: Hindi, two years pa rin ang natitira, eh. Three years pa lang ang natatapos. So,
another CBA was formed and this CBA mayroon na naman siyang bagong five years with
respect to representation issue.

HON. CHAIRMAN HERRERA: Hindi. Hindi na. Ganito iyan. Iyong terms and conditions for
three years.

HON. ISIDRO: Yes.

HON. CHAIRMAN HERRERA: On the third year you can start negotiating to change the terms
and conditions.

HON. ISIDRO: Yes.

 HON. CHAIRMAN HERRERA: Assuming you will follow the practice . . .

HON. ISIDRO: Oo.

HON. CHAIRMAN HERRERA: But on the fifth year, ang representation status now can be
questioned, so baka puwedeng magkaroon ng certification election. If the incumbent union
loses, then the new union administers the contract for one year to give him time to know his
counterpart — the employer, before he can negotiate for a new term. Iyan ang advantage.

HON. ISIDRO: Kasi, when the CBA has only a three-year lifetime with respect to the terms
and conditions and then, so you have to renew that in three years — you renew for another
three years, mayroon na naman another five years iyong ano . . .

HON. ANIAG: Hindi, ang natitira duon sa representation two years na lang.

HON. CHAIRMAN HERRERA: Two years na lang sa representation.

HON. ANIAG: So that if they changed the union, iyong last year . . . .

HON. CHAIRMAN HERRERA: Iyon lang, that you have to administer the contract. Then,
voluntary arbitration na kayo and then mayroon ka nang probisyon "retroact on the date of the
expiry date." Pagnatalo ang incumbent unyon, mag-aassume ang new union, administer the
contract. As far as the term and condition, for one year, and that will give him time and the
employer to know each other.

HON. JABAR: Boy, let us be realistic. I think if a new union wins a certification election, it
would not want to administer a CBA which has not been negotiated by the union itself.

HON. CHAIRMAN HERRERA: That is not true, Hon. This is true because what is happening
now in the country is that the term ng contract natin, duon din mage-expire ang
representation. Iyon ang nangyari. That is where you have the gulo. Ganoon ang nangyari. So,
ang nangyari diyan, pag-mayroon certification election, expire ang contract, ano ang usual issue
— company union. I can you (sic) give you more what the incumbent union is giving. So ang
mangyayari diyan, pag-negotiate mo hardline na agad.

HON. CHAIRMAN VELOSO: Mon, for four years?

 HON. ISIDRO: Ang tingin ko lang dito, iyong distinction between the terms and the
representation aspect — why do we have to distinguish between three and five? What’s wrong
with having a uniform expiration period?

HON. CHAIRMAN HERRERA: Five years.

HON. ISIDRO: Puro three years.

HON. CHAIRMAN HERRERA: That is what we are trying to avoid because ang reality diyan,
Mart, pagpasok mo sa kumpanya, mag-ne-negotiate ka ng six months, that’s the average, aabot
pa minsan ng one year. Pagkatapos ng negotiation mo, signing kayo. There will be an allowed
period of one year. Third year na, uumpisahan naman ang organizations, papasok na ang ibang
unyon because the reality in Trade Union committee, they organize, we organize. So, actually,
you have only industrial peace for one year, effective industrial peace. That is what we are
trying to change. Otherwise, we will continue to discourage the investors and the union will
never grow because every other year it has to use its money for the certification election.
Ang grabe pang practice diyan, mag-a-advance ang federation for three years union dues para
panggastos lang sa certification election. That is what we are trying to avoid.

HON. JABAR: Although there are unions which really get advances.

HON. CHAIRMAN HERRERA: Pag nag-survey tayo sa mga unyon, ganoon ang mangyayari. And I
think our responsibility here is to create a legal framework to promote industrial peace and to
develop responsible and fair labor movement.

HON. CHAIRMAN VELOSO: In other words, the longer the period of the effectivity . . .

x       x       x

HON. CHAIRMAN VELOSO. (continuing) . . . in other words, the longer effectivity of the
CBA, the better for industrial peace.

HON. CHAIRMAN HERRERA: representation status.

HON. CHAIRMAN VELOSO: Only on —

 HON. CHAIRMAN HERRERA: the representations.

HON. CHAIRMAN VELOSO: But on the economic issues.

HON. CHAIRMAN HERRERA: You have to review that. The parties will have to review that.

HON. CHAIRMAN VELOSO: At least on second year.

HON. CHAIRMAN HERRERA: Not later than 3 years ang karamihan ng mga, mag-negotiate
when the company is — (interrupted) 13

x       x       x

From the aforesaid discussions, the legislators were more inclined to have the period of
effectivity for three (3) years insofar as the economic as well as non-economic provisions are
concerned, except representation.

Obviously, the framers of the law wanted to maintain industrial peace and stability by having
both management and labor work harmoniously together without any disturbance. Thus, no
outside union can enter the establishment within five (5) years and challenge the status of the
incumbent union as the exclusive bargaining agent. Likewise, the terms and conditions of
employment (economic and non-economic) can not be questioned by the employers or
employees during the period of effectivity of the CBA. The CBA is a contract between the
parties and the parties must respect the terms and conditions of the agreement. 14 Notably,
the framers of the law did not give a fixed terms as to the effectivity of the terms and
conditions of employment. It can be gleaned from their discussions that it was left to the
parties to fix the period.

In the instant case, it is not difficult to determine the period of effectivity for the non-
representation provisions of the CBA. Taking it from the history of their CBAs, SMC intended
to have the terms of the CBA effective for three (3) years reckoned from the expiration of
the old or previous CBA which was on June 30, 1989, as it provides:chanrob1es virtual 1aw
library

 SECTION 1. This Agreement which shall be binding upon the parties hereto and their
respective successors-in-interest, shall become effective and shall remain in force and effect
until June 30, 1992.

The argument that the PRC case is applicable is indeed misplaced. We quote with favor the
Order of the Secretary of Labor in the light of SMC’s peculiar situation as compared with
PRC’s company situation.

It is true that in the Philippine Refining Company case (OS-AJ-0031-91 (sic), Labor Dispute at
Philippine Refining Company), we ruled that the term of the renegotiated provisions of the
CBA should coincide with the remaining term of the agency. In doing so, we placed premium on
the fact that PRC has only two (2) unions and no other union had yet executed a renewed term
of 3 years. Nonetheless, in ruling for a shortened term, we were guided by our considered
perception that the said term would improve, rather than ruin, the general welfare of both
the workers and the company. It is equally true that once the economic provisions of the CBA
expire, the residual representative status of the union is effective for only 2 more years.
However, if circumstances warrant that the contract duration which it is soliciting from the
company for the benefit of the workers, shall be a little bit longer than its lifespan, then this
Office cannot stand in the way of a more ideal situation. We must not lose sight of the fact
that the primordial purpose of a collective contract is to promote industrial harmony and
stability in the terms and conditions of employment. To our mind, this objective cannot be
achieved without giving due consideration to the peculiarities and unique characteristics of
the employer. In the case at bar, there is no dispute that the mother corporation (SMC) spun-
off two of its divisions and thereby gave birth to two (2) other entities now known as Magnolia
Corporation and San Miguel Foods, Inc. In order to effect a smooth transition, the companies
concerned continued to recognize the existing unions as the bargaining agents of their
respective bargaining units. In the meantime, the other unions in these companies eventually
concluded their CBA negotiations on the remaining term and all of them agreed on a 3-year
cycle. Notably, the following CBAs were forged incorporating a term of 3-years on the
renegotiated provisions, to wit:chanrob1es virtual 1aw library

1. SMC — daily-paid employees union (IBM)

2. SMFI — monthly-paid employees and daily-paid employees at the Cabuyao Plant.

There is a direct link between the voluntary recognition by the company of the continuing
representative status of the unions after the aforementioned spin-offs and the stand of the

 company for a 3-year renegotiated cycle when the economic provisions of the existing CBAs
expired, i.e., to maintain stability and avoid confusion when the umbilical cord of the two
divisions were severed from their parent. These two cannot be considered independently of
each other for they were intended to reinforce one another. Precisely, the company conceded
to face the same union notwithstanding the spin-offs in order to preserve industrial peace
during the infancy of the two corporations. If the union would insist on a shorter renegotiated
term, than all the advantages gained by both parties in this regard, would have gone to naught.
With this in mind, this office feels that it will betray its mandate should we order the parties
to execute a 2-year renegotiated term for then chaos and confusion, rather than tranquility,
would be the order of the day. Worse, there is a strong likelihood that such a ruling might
spawn discontent and possible mass actions against the company coming from the other unions
who had already agreed to a 3-year renegotiated terms. If this happens, the purpose of this
Office’s intervention into the parties’ controversy would have been defeated. 15

The issue as to the term of the non-representation provisions of the CBA need not belabored
especially when we take note of the Memorandum of the Secretary of Labor dated February
24, 1994 which was mentioned in the Resolution of Undersecretary Bienvenido Laguesma on
January 16, 1995 in the certification election case involving the SMC employees. 16 In said
memorandum, the Secretary of Labor had occasion to clarify the term of the renegotiated
terms of the CBA vis-a-vis the term of the bargaining agent, to wit:chanrob1es virtual 1aw
library

As a matter of policy the parties are encourages (sic) to enter into a renegotiated CBA with a
term which would coincide (sic) with the aforesaid five (5) year term of the bargaining
representative.

In the event however, that the parties, by mutual agreement, enter into a renegotiated
contract with a term of three (3) years or one which does not coincide with the said 5-year
term, and said agreement is ratified by majority of the members in the bargaining unit, the
subject contract is valid and legal and therefore, binds the contracting parties. The same will
however not adversely affect the right of another union to challenge the majority status of
the incumbent bargaining agent within sixty (60) days before the lapse of the original five (5)
year term of the CBA.

Thus, we do not find any grave abuse of discretion on the part of the Secretary of Labor in
ruling that the effectivity of the renegotiated terms of the CBA shall be for three (3) years.

 With respect to the second issue, there is, likewise, no merit in petitioner-union’s assertion
that the employees of Magnolia and SMFI should still be considered part of the bargaining
unit of SMC.

Magnolia and SMFI were spun-off to operates as distinct companies on October 1, 1991.
Management saw the need for these transformations in keeping with its vision and long term
strategy as it explained its letter addressed to the employees dated August 13,
1991:chanrob1es virtual 1aw library

. . . As early as 1986, we announced the decentralization program and spoke of the need for
structures that can react fast to competition, a changing environment, shorter product life
cycles and shifts in consumer preference. We further stated in the 1987 Annual Report to
Stockholders that San Miguel’s business will be more autonomous and self sufficient so as to
better acquire and master new technologies, cope with a labor force with different expertises
and expectations, and master and satisfy the changing needs of our customers and end-
consumers. As subsidiaries, Magnolia and FLD will gain better industry focus and flexibility,
greater awareness of operating results, and speedier, more responsive decision making.

x       x       x

We only have to look at the experience of Coca-Cola Bottlers Philippines, Inc., since this
company was organized about ten years ago, to see the benefits that arise from restructuring
a division of San Miguel into a more competitive organization. As a stand-alone enterprise,
CCBPI engineered a dramatic turnaround and has sustained its sales and market share
leadership ever since.

We are confident that history will repeat itself, and the transformation of Magnolia and FLD
will be successful as that of CCBPI. 17

Undeniably, the transformation of the companies was a management prerogative and business
judgment which the courts can not look into unless it is contrary to law, public policy or
morals. Neither can we impute any bad faith on the part of SMC so as to justify the
application of the doctrine of piercing the corporate veil. 18 Ever mindful of the employees’
interests, management has assured the concerned employees that they will be absorbed by
the new corporations without loss of tenure and retaining their present pay and benefits
according to the existing CBAs. 19 They were advised that upon the expiration of the CBAs,

 new agreements will be negotiated between the management of the new corporations and the
bargaining representatives of the employees concerned. As a result of the spin-
offs:chanrob1es virtual 1aw library

1. Each of the companies are run by, supervised and controlled by different management
teams including separate human resource/personnel managers.

2. Each Company enforces its own administrative and operational rules and policies and are not
dependent on each other in their operations.

3. Each entity maintains separate financial statements and are audited separately from each
other. 20

Indubitably, therefore, Magnolia and SMFI became distinct entities with separate juridical
personalities. Thus, they can not belong to a single bargaining unit as held in the case of
Diatagon Labor Federation Local 110 of the ULGWP v. Ople. 21 We elucidate:chanrob1es
virtual 1aw library

The fact that their businesses are related and that the 236 employees of Georgia Pacific
International Corporation were originally employees of Lianga Bay Logging Co., Inc. is not a
justification for disregarding their separate personalities. Hence, the 236 employees, who are
now attached to Georgia Pacific International Corporation, should not be allowed to vote in
the certification election at the Lianga Bay Logging Co., Inc. They should vote at a separate
certification election to determine the collective bargaining representative of the employees
of Georgia Pacific International Corporation.

Petitioner-union’s attempt to include the employees of Magnolia and SMFI in the SMC
bargaining unit so as to have a bigger mass base of employees has, therefore, no more valid
ground.

Moreover, in determining an appropriate bargaining unit, the test of grouping is mutuality or

commonality of interests. The employees sought to be represented by the collective
bargaining agent must have substantial mutual interests in terms of employment and working
conditions as evinced by the type of work they performed. 22 Considering the spin-offs, the
companies would consequently have their respective and distinctive concerns in terms of the
nature of work, wages, hours of work and other conditions of employment. Interests of
employees in the different companies perforce differ. SMC is engaged in the business of beer

 manufacturing. Magnolia is involved in the manufacturing and processing of dairy products 23

while SMFI is involved in the production of feeds and the processing of chicken. 24 The
nature of their products and scales of business may require different skills which must
necessarily be commensurated by different compensation packages. The different companies
may have different volumes of work and different working conditions. For such reason, the
employees of the different companies see the need to group themselves together and
organize themselves into distinctive and different groups. It would then be best to have
separate bargaining units for the different companies where the employees can bargain
separately according to their needs and according to their own working conditions.

We reiterate what we have explained in the case of University of the Philippines v. Ferrer-
Calleja 25 that:chanrob1es virtual 1aw library

[T]here are various factors which must be satisfied and considered in determining the proper
constituency of a bargaining unit. No one particular factor is itself decisive of the
determination. The weight accorded to any particular factor varies in accordance with the
particular question or questions that may arise in a given case. What are these factors?
Rothenberg mentions a good number, but the most pertinent to our case are: (1) will of the
employees (Globe Doctrine); (2) affinity and unit of employees’ interest, such as substantial
similarity of work and duties, or similarity of compensation and working conditions; (3) prior
collective bargaining history; and (4) employment status, such as temporary, seasonal and
probationary employees . . .

x       x       x

An enlightening appraisal of the problem of defining an appropriate bargaining unit is given in

the 10th Annual Report of the National Labor Relations Board wherein it is emphasized that
the factors which said board may consider and weigh in fixing appropriate units are: the
history, extent and type of organization of employees; the history of their collective
bargaining; the history, extent and type of organization of employees in other plants of the
same employer, or other employers in the same industry; the skill wages, work, and working
conditions of the employees; the desires of the employees; the eligibility of the employees for
membership in the union or unions involved; and the relationship between the unit or units
proposed and the employer’s organization, management, and operation . . .

 . . . In said report, it is likewise emphasized that the basic test in determining the appropriate
bargaining unit is that a unit, to be appropriate, must affect a grouping of employees who have
substantial, mutual interests in wages, hours, working conditions and other subjects of
collective bargaining (citing Smith on Labor Laws, 316-317; Francisco, Labor Laws, 162) . . .

Finally, we take note of the fact that the separate interests of the employees of Magnolia and
SMFI from those of SMC has been recognized in the case of Daniel Borbon v. Laguesma. 26
We quote:chanrob1es virtual 1aw library

Even assuming in gratia argumenti that at the time of the election they were regular
employees of San Miguel, nonetheless, these workers are no longer connected with San Miguel
Corporation in any manner because Magnolia has ceased to be a division of San Miguel
Corporation and has been formed into a separate corporation with a personality of its own (p.
305, Rollo). This development, which was brought to our attention by private respondents,
necessarily renders moot and academic any further discourse on the propriety of the
elections which petitioners impugn via the present recourse (p. 319, Rollo).

In view of all the foregoing, we do not find any grave abuse of discretion on the part of the
Secretary of Labor in rendering the assailed Order.

WHEREFORE, the petition is DISMISSED for lack of merit. The Temporary Restraining
Order issued on March 29, 1995 is lifted

SO ORDERED.

Bellosillo, Vitug and Hermosisima, Jr., JJ., concur.

Padilla, J., took no part.

MANILA ELECTRIC COMPANY, Petitioner, v. THE HONORABLE SECRETARY OF LABOR

LEONARDO QUISUMBING AND MERALCO EMPLOYEES AND WORKERS ASSOCIATION
(MEWA), Respondents.

D E C I S I O N

 MARTINEZ, J.:

In this petition for certiorari, the Manila Electric Company (MERALCO) seeks to annul the
orders of the Secretary of Labor dated August 19, 1996 and December 28, 1996, wherein the
Secretary required MERALCO and its rank and file union — the Meralco Workers Association
(MEWA) — to execute a collective bargaining agreement (CBA) for the remainder of the
parties’ 1992-1997 CBA cycle, and to incorporate in this new CBA the Secretary’s dispositions
on the disputed economic and non-economic issues.

MEWA is the duly recognized labor organization of the rank-and-file employees of

MERALCO.chanrobles law library

On September 7, 1995, MEWA informed MERALCO of its intention to re-negotiate the terms
and conditions of their existing 1992-1997 Collective Bargaining Agreement (CBA) covering
the remaining period of two years starting from December 1, 1995 to November 30, 1997. 1
MERALCO signified its willingness to re-negotiate through its letter dated October 17, 1995
2 and formed a CBA negotiating panel for the purpose. On November 10, 1995, MEWA
submitted its proposal 3 to MERALCO, which, in turn, presented a counter-proposal.
Thereafter, collective bargaining negotiations proceeded. However, despite the series of
meetings between the negotiating panels of MERALCO and MEWA, the parties failed to arrive
at "terms and conditions acceptable to both of them."cralaw virtua1aw library

On April 23, 1996, MEWA filed a Notice of Strike with the National Capital Region Branch of
the National Conciliation and Mediation Board (NCMB) of the Department of Labor and
Employment (DOLE) which was docketed as NCMB-NCR-NS-04-152-96, on the grounds of
bargaining deadlock and unfair labor practices. The NCMB then conducted a series of
conciliation meetings but the parties failed to reach an amicable settlement. Faced with the
imminence of a strike, MERALCO on May 2, 1996, filed an Urgent Petition 4 with the
Department of Labor and Employment which was docketed as OS-AJ No. 0503[1]96 praying
that the Secretary assume jurisdiction over the labor dispute and to enjoin the striking
employees to go back to work.

The Labor Secretary granted the petition through its Order 5 of May 8, 1996, the dispositive
portion of which reads:jgc:chanrobles.com.ph

 "WHEREFORE, premises considered, this Office now assumes jurisdiction over the labor
dispute obtaining between the parties pursuant to Article 263(g) of the Labor Code.
Accordingly, the parties are here enjoined from committing any act that may exacerbate the
situation. To speed up the resolution of the dispute, the parties are also directed to submit
their respective Position Papers within ten (10) days from receipt.

‘Undersecretary Jose M. Espanol, Jr. is deputized to conduct conciliation conferences

between the parties to bridge their differences and eventually hammer out a solution that is
mutually acceptable. He shall be assisted by the Legal Service.

SO ORDERED."cralaw virtua1aw library

Thereafter, the parties submitted their respective memoranda and on August 19, 1996, the
Secretary resolved the labor dispute through an Order, 6 containing the following
awards:jgc:chanrobles.com.ph

"ECONOMIC DEMANDS

Wage increase P2,300.00 for the first year covering the period from December 1, 1995 to
November 30, 1996

P2,200.00 for the second year covering the period December 1, 1996 to November 30, 1997.

Red Circle Rate (RCR) Allowance — all RCR allowances (promotional increases that go beyond
the maximum range of a job classification salary) shall be integrated into the basic salary of
employees effective December 1, 1995.

Longevity Allowance — the integration of the longevity allowance into the basic wage is
denied; the present policy is maintained.

Longevity Increase — the present longevity bonus is maintained but the bonus shall be
incorporated into the new CBA.

Sick Leave — MEWA’s demand for upgrading is denied; the company’s present policy is
maintained. However, those who have not used the sick leave benefit during a particular year
shall be entitled to a one-day sick leave incentive.

 Sick leave reserve — the present reserve of 25 days shall be reduced to 15 days; the
employee has the option either to convert the excess of 10 days to cash or let it remain as
long as he wants. In case he opts to let it remain, he may later on convert it into cash at his
retirement or separation.

Vacation Leave — MEWA’s demand for upgrading denied & the company’s present policy is
maintained which must be incorporated into the new CBA but scheduled vacation leave may be
rounded off to one full day at a time in case of a benefit involving a fraction of a day.

Union Leave — of MEWA’s officers, directors or stewards assigned to perform union duties or
legitimate union activity is increased from 30 to 40 Mondays per month.

Maternity, Paternity and Funeral leaves — the existing policy is to be maintained and must be
incorporated in the new CBA unless a new law granting paternity leave benefit is enacted
which is superior to what the company has already granted.

Birthday Leave — union’s demand is granted. If birthday falls on the employee’s rest day or on
a non-working holiday, the worker shall be entitled to go on leave with pay on the next working
day.

Group Hospitalization & Surgical Insurance Plan (GHSIP) and Health Maintenance Plan (HMP)
— present policy is maintained insofar as the cost sharing is concerned — 70% for the
Company and 30% for MEWA.

Health Maintenance Plan (HMP) for dependents — subsidized dependents increased from
three to five dependents.

Longevity Bonus — is increased from P140.00 to P200.00 for every year of service to be
received by the employee after serving the Company for 5 years.

Christmas Bonus and Special Christmas Grant — MEWA’s demand of one month salary as
Christmas Bonus and two month’s salary as Special Christmas Grant is granted and to be
incorporated in the new CBA.

Midyear Bonus — one month’s pay to be included in the CBA.

Anniversary Bonus — union’s demand is denied.

 Christmas Gift Certificate — company has the discretion as to whether it will give it to its
employees.

Retirement Benefits:chanrob1es virtual 1aw library

a. Full retirement-present policy is maintained;

b. one cavan of rice per month is granted to retirees;

c. special retirement leave and allowance-present policy is maintained;

d. HMP coverage for retirees — HMP coverage is granted to retirees who have not reached
the age of 70, with MERALCO subsidizing 100% of the monthly premium; those over 70 are
entitled to not more than 30 days of hospitalization at the J.F. Cotton Hospital with the
company shouldering the entire cost.

e. HMP coverage for retiree’s dependents is denied

f. Monthly pension of P3,000.00 for each retiree is denied.

g. Death benefit for retiree’s beneficiaries is denied.

Optional retirement — union’s demand is denied; present policy is maintained; employee is

eligible for optional retirement if he has rendered at least 18 years of service.

Dental, Medical and Hospitalization Benefits — grant of all the allowable medical, surgical,
dental and annual physical examination benefits, including free medicine whenever the same is
not available at the JFCH.

Resignation benefits — union’s demand is denied.

Night work — union demand is denied but present policy must be incorporated in CBA.

Shortswing — work in another shift within the same day shall be considered as the employee’s
work for the following day and the employee shall be given additional four (4) hours straight
time and the applicable excess time premium if he works beyond 8 hours in the other shift.

High Voltage allowance — is increased from P45.00 to P55.00 to be given to any employee
authorized by the Safety Division to perform work on or near energized bare lines & bus
including stockman drivers & crane operators and other crew members on ground.

High Pole Allowance — is increased from P30.00 to P40.00 to be given to those authorized to
climb poles up to at least 60 ft. from the ground. Members of the team including stockman
drivers, crane operators and other crew members on the ground, are entitled to this benefit.

Towing Allowance — where stockmen drive tow trailers with long poles and equipment on
board, they shall be entitled to a towing allowance of P20.00 whether they perform the job on
regular shift or on overtime.

Employee’s Cooperative — a loan of P3 M seed money is granted to the proposed establishment

of a cooperative, payable in twenty (20) years starting one year from the start of operations.

Holdup Allowance — the union demand is denied; the present policy shall be maintained.

Meal and Lodging Allowance — shall be increased effective December 1, 1995 as

follows:chanrob1es virtual 1aw library

Breakfast from P25.00 to P35.00

Lunch from P35.00 to P45.00

Dinner from P35.00 to P45.00

Lodging from P135.00 to P180.00 a night in all

MERALCO franchise areas

Payroll Treatment for Accident while on Duty — an employee shall be paid his salary and
allowance if any is due plus average excess time for the past 12 months from the time of the
accident up to the time of full recovery and placing of the employee back to normal duty or an
allowance of P2,000.00, whichever is higher.

 Housing and Equity Assistance Loan — is increased to P60,000.00; those who have already
availed of the privilege shall be allowed to get the difference.

Benefits for Collectors:chanrob1es virtual 1aw library

a. Company shall reduce proportionately the quota and monthly average product level (MAPL)
in terms of equivalent bill assignment when an employee is on sick leave and paid vacation
leave.

b. When required to work on Saturdays, Sundays and holidays, an employee shall receive
P60.00 lunch allowance and applicable transportation allowance as determined by the Company
and shall also receive an additional compensation to one day fixed portion in addition to lunch
and transportation allowance.

c. The collector shall be entitled to an incentive pay of P25.00 for every delinquent account
disconnected.

d. When a collector voluntarily performs other work on regular shift or overtime, he shall be
entitled to remuneration based on his computed hourly compensation and the reimbursement
of actually incurred transportation expenses.

e. Collectors shall be provided with bobcat belt bags every year

f. Collector’s cash bond shall be deposited under his capital contribution to MESALA.

g. Collectors quota and MAPL shall be proportionately reduced during typhoons, floods,
earthquakes and other similar force majeure events when it is impossible for a collector to
perform collection work.

Political Demands:chanrob1es virtual 1aw library

a. Scope of the collective bargaining unit — the collective bargaining unit shall be composed of
all regular rank-and-file employees hired by the company in all its offices and operative
centers throughout its franchise area and those it may employ by reason of expansion,
reorganization or as a result of operational exigencies.

b. Union recognition and security —

 i. The union shall be recognized by the Company as sole and exclusive bargaining
representative of the rank-and-file employees included in the bargaining unit. The Company
shall agree to meet only with Union officers and its authorized representatives on all matters
involving the Union and all issues arising from the implementation and interpretation of the
new CBA.

ii. The union shall meet with the newly regularized employees for a period not to exceed four
(4) hours, on company time, to acquaint the new regular employees of the rights, duties and
benefits of Union membership.

iii. The right of all rank-and-file employees to join the union shall be recognized in accordance
with the maintenance of membership principle as a form of union security.

c. Transfer of assignment and job security —

i. No transfer of an employee from one position to another shall be made if motivated by

considerations of sex, race, creed, political and religious belief, seniority or union activity.

ii. If the transfer is due to the reorganization or decentralization, the distance from the
employee’s residence shall be considered unless the transfer is accepted by the employee. If
the transfer is extremely necessary, the transfer shall be made within the offices in the
same district.

iii. Personnel hired through agencies or contractors to perform the work done by covered
employees shall not exceed one month. If extension is necessary, the union shall be informed.
But the Company shall not permanently contract out regular or permanent positions that are
necessary in the normal operation of the Company.

d. Check off Union Dues — where the union increases its dues as approved by the Board of
Directors, the Company shall check off such increase from the salaries of union members
after the union submits check off authorizations signed by majority of the members. The
Company shall honor only those individual authorizations signed by the majority of the union
members and collectively submitted by the union to the Company’s Salary Administration.

e. Payroll Reinstatement — shall be in accordance with Article 223, p. 3 of the Labor Code.

f. Union Representation in Committees — the union is allowed to participate in policy

formulation and in the decision-making process on matters affecting their rights and welfare,
particularly in the Uniform Committee, the Safety Committee and other committees that may
be formed in the future.

Signing Bonus — P4,000.00 per member of the bargaining unit for the conclusion of the CBA.

Existing benefits already granted by the Company but which are not expressly or impliedly
repealed in the new agreement shall remain subsisting and shall be included in the new
agreement to be signed by the parties effective December 1, 1995.

On August 30, 1996, MERALCO filed a motion for reconsideration 7 alleging that the
Secretary of Labor committed grave abuse of discretion amounting to lack or excess of
jurisdiction:chanrob1es virtual 1aw library

1. in awarding to MEWA a package that would cost at least P1.142 billion, a package that is
grossly excessive and exorbitant, would not be affordable to MERALCO and would imperil its
viability as a public utility affected with national interest.

2. in ordering the grant of a P4,500 00 wage increase, as well as a new and improved fringe
benefits, under the remaining two (2) years of the CBA for the rank-and-file employees.

3. in ordering the ‘incorporation into the CBA of all existing employee benefits, on the one
hand, and those that MERALCO has unilaterally granted to its employees by virtue of
voluntary company policy or practice, on the other hand.’

4. in granting certain ‘political demands’ presented by the union.

5. in ordering the CBA to be ‘effective December 1995’ instead of August 19, 1996 when he
resolved the dispute.

MERALCO filed a supplement to the motion for reconsideration on September 18, 1995,
alleging that the Secretary of Labor did not properly appreciate the effect of the awarded
wages and benefits on MERALCO’s financial viability.chanrobles lawlibrary : rednad

MEWA likewise filed a motion asking the Secretary of Labor to reconsider its Order on the
wage increase, leaves, decentralized filing of paternity and maternity leaves, bonuses,

 retirement benefits, optional retirement, medical, dental and hospitalization benefits, short
swing and payroll treatment. On its political demands, MEWA asked the Secretary to rule on
its proposal to institute a Code of Discipline for its members and the union’s representation in
the administration of the Pension Fund.

On December 28, 1996, the Secretary issued an Order 8 resolving the parties’ separate
motions, the modifications of the August 19, 1996 Order being highlighted
hereunder:chanrob1es virtual 1aw library

1) Effectivity of Agreement — December 1, 1995 to November 30, 1997.

Economic Demands

2) Wage Increase:chanrob1es virtual 1aw library

First year — P2,200.00 per month;

Second year — P2,200.00 per month.

3) Integration of Red Circle Rate (RCR) and Longevity Allowance into Basic Salary — the RCR
allowance shall be integrated into the basic salary of employees as of August 19, 1996 (the
date of the disputed Order).

4) Longevity Bonus — P170 per year of service starting from 10 years of continuous service.

5) Vacation Leave — The status quo shall be maintained as to the number of vacation leave but
employees’ scheduled vacation may be taken one day at a time in the manner that this has
been provided in the supervisory CBA.

6) Sick Leave Reserve — is reduced to 15 days, with any excess payable at the end of the
year. The employee has the option to avail of this cash conversion or to accumulate his sick
leave credits up to 25 days for conversion to cash at retirement or separation from the
service.

7) Birthday Leave — the grant of a day off when an employee’s birthday falls on a non-working
day is deleted.

 8) Retirement Benefits for Retirees — The benefits granted shall be effective on August 19,
1996, the date of the disputed order up to November 30, 1997, which is the date the CBA
expires and shall apply to those who are members of the bargaining unit at the time the award
is made.

One sack of rice per quarter of the year shall be given to those retiring between August 19,
1996 and November 30, 1997.

On HMP Coverage for Retirees — The parties ‘maintain the status quo, that is, with the
Company complying with the present arrangement and the obligations to retirees as is.’

9) Medical, Dental and Hospitalization Benefits — The cost of medicine unavailable at the J.F.
Cotton Hospital shall be in accordance with MERALCO’s Memorandum dated September 14,
1976.

10) GHSIP and HMP for Dependents — The number of dependents to be subsidized shall be
reduced from 5 to 4 provided that their premiums are proportionately increased.

11) Employees’ Cooperative — The original award of P3 million pesos as seed money for the
proposed Cooperative is reduced to P1.5 million pesos.

12) Shortswing — the original award is deleted.

13) Payroll Treatment for Accident on Duty — Company ordered to continue its present
practice on payroll treatment for accident on duty without need to pay the excess time the
Union demanded.

Political Demands:chanrob1es virtual 1aw library

14) Scope of the collective bargaining unit — The bargaining unit shall be composed of all rank
and file employees hired by the Company in accordance with the original Order.

15) Union recognition and security — The incorporation of a closed shop form of union security
in the CBA; the Company is prohibited from entertaining individuals or groups of individuals
only on matters that are exclusively within the domain of the union; the Company shall furnish
the Union with a complete list of newly regularized employees within a week from

 regularization so that the Union can meet these employees on the Union’s and the employee’s
own time.

16) Transfer of assignment and job security — Transfer is a prerogative of the Company but
the transfer must be for a valid business reason, made in good faith and must be reasonably
exercised. The CBA shall provide that ‘No transfer of an employee from one position to
another, without the employee’s written consent, shall be made if motivated by considerations
of sex, race, creed, political and religious belief, age or union activity.

17) Contracting Out — The Company has the prerogative to contract out services provided
that this move is based on valid business reasons in accordance with law, is made in good faith,
is reasonably exercised and, provided further that if the contracting out involves more than
six months, the Union must be consulted before its implementation.

18) Check off of union dues

In any increase of union dues or contributions for mandatory activities, the union must submit
to the Company a copy of its board resolution increasing the union dues or authorizing such
contributions;

If a board resolution is submitted, the Company shall deduct union dues from all union
members after a majority of the union members have submitted their individual written
authorizations. Only those check-off authorizations submitted by the union shall be honored
by the Company.

With respect to special assessments, attorney’s fees, negotiation fees or any other
extraordinary fees, individual authorizations shall be necessary before the company may so
deduct the same.

19) Union Representation in Committees — The union is granted representation in the Safety
Committee, the Uniform Committee and other committees of a similar nature and purpose
involving personnel welfare, rights and benefits as well as duties.

Dissatisfied, petitioner filed this petition contending that the Secretary of Labor gravely
abused his discretion:chanrob1es virtual 1aw library

1) . . . in awarding wage increases of P2,200.00 for 1996 and P2,200 for 1997;

 2) . . . in awarding the following economic benefits:chanrob1es virtual 1aw library

a. Two months Christmas bonus;

b. Rice Subsidy and retirement benefits for retirees;

c. Loan for the employees’ cooperative;

d. Social benefits such as GHSIP and HMP for dependents, employees’ cooperative and housing
equity assistance loan;

e. Signing bonus;

f. Integration of the Red Circle Rate Allowance

g. Sick leave reserve of 15 days

h. The 40-day union leave;

i. High pole/high voltage and towing allowance; and

j. Benefits for collectors

3) . . . in expanding the scope of the bargaining unit to all regular rank and file employees hired
by the company in all its offices and operating centers and those it may employ by reason of
expansion, reorganization or as a result of operational exigencies;

4) . . . in ordering for a closed shop when his original order for a maintenance of membership
arrangement was not questioned by the parties;

5) . . . in ordering that Meralco should consult the union before any contracting out for more
than six months;

6) . . . in decreeing that the union be allowed to have representation in policy and decision
making into matters affecting "personnel welfare, rights and benefits as well as duties;"

7) . . . in ruling for the inclusion of all terms and conditions of employment in the collective
bargaining agreement;

8) . . . in exercising discretion in determining the retroactivity of the CBA;

Both MEWA and the Solicitor General, on behalf of the Secretary of Labor, filed their
comments to the petition. While the case was also set for oral argument on Feb. 10, 1997, this
hearing was cancelled due to MERALCO not having received the comment of the opposing
parties. The parties were instead required to submit written memoranda, which they did.
Subsequently, both petitioner and private respondent MEWA also filed replies to the opposing
parties’ Memoranda, all of which We took into account in the resolution of this case.

The union disputes the allegation of MERALCO that the Secretary abused his discretion in
issuing the assailed orders arguing that he acted within the scope of the powers granted him
by law and by the Constitution. The union contends that any judicial review is limited to an
examination of the Secretary’s decision-making/discretion — exercising process to determine
if this process was attended by some capricious or whimsical act that constitutes "grave
abuse" ; in the absence of such abuse, his findings — considering that he has both jurisdiction
and expertise to make them — are valid.

The union’s position is anchored on two premises:chanrob1es virtual 1aw library

First, no reviewable abuse of discretion could have attended the Secretary’s arbitral award
because the Secretary complied with constitutional norms in rendering the disputed award.
The union posits that the yardstick for comparison and for the determination of the validity
of the Secretary’s actions should be the specific standards laid down by the Constitution
itself. To the union, these standards include the State policy on the promotion of workers’
welfare, 9 the principle of distributive justice, 10 the right of the State to regulate the use
of property, 11 the obligation of the State to protect workers, both organized and
unorganized, and insure their enjoyment of "humane conditions of work" and a "living wage,"
and the right of labor to a just share in the fruits of production. 12

Second, no reversible abuse of discretion attended the Secretary’s decision because the
Secretary took all the relevant evidence into account, judiciously weighed them, and rendered
a decision based on the facts and law. Also, the arbitral award should not be reversed given
the Secretary’s expertise in his field and the general rule that findings of fact based on such
expertise is generally binding on this Court.

 To put matters in proper perspective, we go back to basic principles. The Secretary of Labor’s
statutory power under Art. 263 (g) of the Labor Code to assume jurisdiction over a labor
dispute in an industry indispensable to the national interest, and, to render an award on
compulsory arbitration, does not exempt the exercise of this power from the judicial review
that Sec. 1, Art. 8 of the Constitution mandates. This constitutional provision
states:jgc:chanrobles.com.ph

"Judicial power includes the duty of the courts of justice to settle actual controversies
involving rights which are legally demandable and enforceable, and to determine whether or
not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on
the part of any branch or instrumentality of the government."cralaw virtua1aw library

Under this constitutional mandate, every legal power of the Secretary of Labor under the
Labor Code, or, for that matter, any act of the Executive, that is attended by grave abuse of
discretion is subject to review by this Court in an appropriate proceeding. To be sure, the
existence of an executive power alone — whether granted by statute or by the Constitution —
cannot exempt the executive action from judicial oversight, interference or reversal when
grave abuse of discretion is, or is alleged to be, present. This is particularly true when
constitutional norms are cited as the applicable yardsticks since this Court is the final
interpreter of the meaning and intent of the Constitution. 13

The extent of judicial review over the Secretary of Labor’s arbitral award is not limited to a
determination of grave abuse in the manner of the secretary’s exercise of his statutory
powers. This Court is entitled to, and must — in the exercise of its judicial power — review
the substance of the Secretary’s award when grave abuse of discretion is alleged to exist in
the award, i.e., in the appreciation of and the conclusions the Secretary drew from the
evidence presented.

The natural and ever present limitation on the Secretary’s acts is, of course, the Constitution.
And we recognize that indeed the constitutional provisions the union cited are State policies
on labor and social justice that can serve as standards in assessing the validity of a Secretary
of Labor’s actions. However, we note that these provisions do not provide clear, precise and
objective standards of conduct that lend themselves to easy application. We likewise
recognize that the Constitution is not a lopsided document that only recognizes the interests
of the working man; it too protects the interests of the property owner and employer as well.
14

For these reasons — and more importantly because a ruling on the breadth and scope of the
suggested constitutional yardsticks is not absolutely necessary in the disposition of this case
— we shall not use these yardsticks in accordance with the time-honored practice of avoiding
constitutional interpretations when a decision can be reached using non-constitutional
standards. We have repeatedly held that one of the essential requisites for a successful
judicial inquiry into constitutional questions is that the resolution of the constitutional
question must be necessary in deciding the case. 15

In this case we believe that the more appropriate and available standard — and one does not
require a constitutional interpretation — is simply the standard of reasonableness. In layman’s
terms, reasonableness implies the absence of arbitrariness; 16 in legal parlance, this
translates into the exercise of proper discretion and to the observance of due process. Thus,
the question we have to answer in deciding this case is whether the Secretary’s actions have
been reasonable in light of the parties positions and the evidence they presented.

MEWA’s second premise — i.e., that the Secretary duly considered the evidence presented —
is the main issue that we shall discuss at length below. Additionally, MEWA implied that we
should take great care before reading an abuse of discretion on the part of the Secretary
because of his expertise on labor issues and because his findings of fact deserve the highest
respect from this Court.

This Court has recognized the Secretary of Labor’s distinct expertise in the study and
settlement of labor disputes falling under his power of compulsory arbitration. 17 It is also
well-settled that factual findings of labor administrative officials, if supported by substantial
evidence, are entitled not only to great respect but even to finality. 18 We, therefore, have
no difficulty in accepting the union’s caveat on how to handle a Secretary of Labor’s arbitral
award.chanrobles virtual lawlibrary

But at the same time, we also recognize the possibility that abuse of discretion may attend
the exercise of the Secretary’s arbitral functions; his findings in an arbitration case are
usually based on position papers and their supporting documents (as they are in the present
case), and not on the thorough examination of the parties’ contending claims that may be
present in a court trial and in the face-to-face adversarial process that better insures the
proper presentation and appreciation of evidence. 19 There may also be grave abuse of
discretion where the board, tribunal or officer exercising judicial function fails to consider
evidence adduced by the parties. 20 Given the parties’ positions on the justiciability of the

issues before us, the question we have to answer is one that goes into the substance of the
Secretary’s disputed orders: Did the Secretary properly consider and appreciate the evidence
presented before him?

We find, based on our consideration of the parties’ positions and the evidence on record, that
the Secretary of Labor disregarded and misappreciated evidence, particularly with respect to
the wage award. The Secretary of Labor apparently also acted arbitrarily and even whimsically
in considering a number of legal points; even the Solicitor General himself considered that the
Secretary gravely abused his discretion on at least three major points: (a) on the signing
bonus issue; (b) on the inclusion of confidential employees in the rank and file bargaining unit,
and (c) in mandating a union security "closed-shop" regime in the bargaining unit.

We begin with a discussion on the wages issue. The focal point in the consideration of the
wage award is the projected net income for 1996 which became the basis for the 1996 wage
award, which in turn — by extrapolation — became the basis for the (2nd Year) 1997 award.
MERALCO projected that the net operating income for 1996 was 14.7% above the 1999 level
or a total net operating income of 4.171 Billion, while the union placed the 1996 net operating
income at 5.795 Billion.

MERALCO based its projection on the increase of the income for the first 6 months of 1996
over the same period in 1995. The union, on the other hand, projected that the 1996 income
would increase by 29% to 35% because the "consumption of electric power is at its highest
during the last two quarters with the advent of the Yuletide season." The union likewise relied
heavily on a newspaper report citing an estimate by an all Asia capital financial analyst that
the net operating income would amount to 5.795 Billion. 21

Based essentially on these considerations, the Secretary made the following computations and
ordered his disputed wage award:chanrob1es virtual 1aw library

Projected net operating

income for 1996 5,795,000,000

Principals and interests 1,426,571,703

Dividends at 1995 rate 1,636,949,000

 Net Amount left with the Company 2,729,479,297

Add: Tax credit equivalent to

35% of labor cost 231,804,940

Company’s net operating income 2,961,284,237

"For 1997, the projected income is P7,613,612 which can easily absorb the incremental
increase of P2,200 per month or a total of P4,500 during the last year of the CBA period.

x       x       x

"An overriding aim is to estimate the amount that is left with the Company after the awarded
wages and benefits and the company’s customary obligations are paid. This amount can be the
source of an item not found in the above computations but which the Company must provide
for, that is — the amount the company can use for expansion.

"Considering the expansion plans stated in the Company’s Supplement that calls for capital
expenditures of 6 billion, 6.263 billion and 5.802 billion for 1996, 1997 and 1998 respectively,
We conclude that our original award of P2,300 per month for the first year and P2,200 for
the second year will still leave much by way of retained income that can be used for
expansion." 22 (Emphasis ours.)

We find after considering the records that the Secretary gravely abused his discretion in
making this wage award because he disregarded evidence on record. Where he considered
MERALCO’s evidence at all, he apparently misappreciated this evidence in favor of claims that
do not have evidentiary support. To our mind, the MERALCO projection had every reason to be
reliable because it was based on actual and undisputed figures for the first six months of
1996. 23 On the other hand, the union projection was based on a speculation of Yuletide
consumption that the union failed to substantiate. In fact, as against the union’s
unsubstantiated Yuletide consumption claim, MERALCO adduced evidence in the form of
historical consumption data showing that a lengthy consumption does not tend to rise during
the Christmas period. 24 Additionally, the All-Asia Capital Report was nothing more than a
newspaper report that did not show any specific breakdown or computations. While the union

claimed that its cited figure is based on MERALCO’s 10-year income stream, 25 no data or
computation of this 10-year stream appear in the record.

While the Secretary is not expected to accept the company-offered figures wholesale in
determining a wage award, we find it a grave abuse of discretion to completely disregard data
that is based on actual and undisputed record of financial performance in favor of the third-
hand and unfounded claims the Secretary eventually relied upon. At the very least, the
Secretary should have properly justified his disregard of the company figures. The Secretary
should have also reasonably insured that the figure that served as the starting point for his
computation had some substantial basis.

Both parties extensively discussed the factors that the decision maker should consider in
making a wage award. While We do not seek to enumerate in this decision the factors that
should affect wage determination, we must emphasize that a collective bargaining dispute
such as this one requires due consideration and proper balancing of the interests of the
parties to the dispute and of those who might be affected by the dispute. To our mind, the
best way in approaching this task holistically is to consider the available objective facts,
including, where applicable, factors such as the bargaining history of the company, the trends
and amounts of arbitrated and agreed wage awards and the company’s previous CBAs, and
industry trends in general. As a rule, affordability or capacity to pay should be taken into
account but cannot be the sole yardstick in determining the wage award, especially in a public
utility like MERALCO. In considering a public utility, the decision maker must always take into
account the "public interest" aspects of the case; MERALCO’s income and the amount of
money available for operating expenses — including labor costs — are subject to State
regulation. We must also keep in mind that high operating costs will certainly and eventually be
passed on to the consuming public as MERALCO has bluntly warned in its pleadings.

We take note of the "middle ground" approach employed by the Secretary in this case which
we do not necessarily find to be the best method of resolving a wage dispute. Merely finding
the midway point between the demands of the company and the union, and "splitting the
difference" is a simplistic solution that fails to recognize that the parties may already be at
the limits of the wage levels they can afford. It may lead to the danger too that neither of
the parties will engage in principled bargaining; the company may keep its position artificially
low while the union presents an artificially high position, on the fear that a "Solomonic"
solution cannot be avoided. Thus, rather than encourage agreement, a "middle ground
approach" instead promotes a "play safe" attitude that leads to more deadlocks than to
successfully negotiated CBAs.

 After considering the various factors the parties cited, we believe that the interests of both
labor and management are best served by a wage increase of P1,900.00 per month for the
first year and another P1,900.00 per month for the second year of the two-year CBA term.
Our reason for this is that these increases sufficiently protects the interest of the worker
as they are roughly 15% of the monthly average salary of P11,600.00. 26 They likewise
sufficiently consider the employer’s costs and its overall wage structure, while at the same
time, being within the range that will not disrupt the wage trends in Philippine
industries.chanrobles law library

The record shows that MERALCO, throughout its long years of existence, was never remiss in
its obligation towards its employees. In fact, as a manifestation of its strong commitment to
the promotion of the welfare and well-being of its employees, it has consistently improved
their compensation package. For instance, MERALCO has granted salary increases 27 through
the collective bargaining agreement the amount of which since 1980 for both rank-and-file
and supervisory employees were as follows:chanrob1es virtual 1aw library

AMOUNT OF CBA INCREASES DIFFERENCE

CBA

COVERAGE RANK-AND-FILE SUPERVISORY AMOUNT PERCENT

1980 230.00 342.50 112.50 48.91%

1981 210.00 322.50 112.50 53.57

1982 200.00 312.50 112.50 56.25

TOTAL 640.00 977.50 337.50 52.73

1983 320.00 432.50 112.50 35.16

1984 350.00 462.50 112.50 32.14

1985 370.00 482.50 112.50 30.41

TOTAL 1,040.00 1,377.50 337.50 32.45

1986 860.00 972.50 112.50 13.08

1987 640.00 752.50 112.50 17.58

1988 600.00 712.50 112.50 18.75

TOTAL 2,100.00 2,437.50 337.50 16.07

1989 1,100.00 1,212.50 112.50 10.23

1990 1,200.00 1,312.50 112.50 9.38

1991 1,300.00 1,412.50 112.50 8.65

TOTAL 3,600.00 3,937.50 337.50 9.38

1992 1,400.00 1,742.50 342.50 24.46

1993 1,350.00 1,682.50 332.50 24.63

1994 1,150.00 1,442.50 292.50 25.43

TOTAL 3,900.00 4,867.50 967.50 24.81

Based on the above-quoted table, specifically under the column "RANK-AND FILE," it is easily
discernible that the total wage increase of P3,800.00 for 1996 to 1997 which we are granting
in the instant case is significantly higher than the total increases given in 1992 to 1994, or a
span of three (3) years, which is only P3,900.00 a month. Thus, the Secretary’s grant of
P2,200.00 monthly wage increase in the assailed order is unreasonably high a burden for
MERALCO to shoulder.

We now go to the economic issues.

1. CHRISTMAS BONUS

 MERALCO questions the Secretary’s award of "Christmas bonuses" on the ground that what it
had given its employees were special bonuses to mark or celebrate "special occasions," such as
when the Asia Money Magazine recognized MERALCO as the "best managed company in Asia."
These grants were given on or about Christmas time, and the timing of the grant apparently
led the Secretary to the conclusion that what were given were Christmas bonuses given by
way of a "company practice" on top of the legally required 13th month pay.

The Secretary in granting the two-month bonus, considered the following factual finding, to
wit:jgc:chanrobles.com.ph

"We note that each of the grant mentioned in the commonly adopted table of grants has a
special description. Christmas bonuses were given in 1988 and 1989. However, the amounts of
bonuses given differed. In 1988, it was P1,500. In 1989, it was ½ month salary. The use of
"Christmas bonus" title stopped after 1989. In 1990, what was given was a "cash gift" of ½
month’s salary. The grants thereafter bore different titles and were for varying amounts.
Significantly, the Company explained the reason for the 1995 bonuses and this explanation
was not substantially contradicted by the Union.

"What comes out from all these is that while the Company has consistently given some amount
by way of bonuses since 1988, these awards were not given uniformly as Christmas bonuses or
special Christmas grants although they may have been given at or about Christmas time.

"x       x       x

"The Company is not therefore correct in its position that there is no established practice of
giving Christmas bonuses that has ripened to the status of being a term and condition of
employment. Regardless of its nomenclature and purpose, the act of giving this bonus in the
spirit of Christmas has ripened into a Company practice." 28

It is MERALCO’s position that the Secretary erred when he recognized that there was an
"established practice" of giving a two-month Christmas bonus based on the fact that bonuses
were given on or about Christmas time. It points out that the "established practice"
attributed to MERALCO was neither for a considerable period of time nor identical in either
amount or purpose. The purpose and title of the grants were never the same except for the
Christmas bonuses of 1988 and 1989, and were not in the same amounts.

We do not agree.

 As a rule, a bonus is not a demandable and enforceable obligation; 29 it may nevertheless be

granted on equitable considerations 30 as when the giving of such bonus has been the
company’s long and regular practice. 31 To be considered a "regular practice," the giving of the
bonus should have been done over a long period of time, and must be shown to have been
consistent and deliberate. 32 Thus we have ruled in National Sugar Refineries Corporation v.
NLRC: 33

"The test or rationale of this rule on long practice requires an indubitable showing that the
employer agreed to continue giving the benefits knowing fully well that said employees are not
covered by the law requiring payment thereof."cralaw virtua1aw library

In the case at bar, the record shows that MERALCO, aside from complying with the regular
13th month bonus, has further been giving its employees an additional Christmas bonus at the
tail-end of the year since 1988. While the special bonuses differed in amount and bore
different titles, it can not be denied that these were given voluntarily and continuously on or
about Christmas time. The considerable length of time MERALCO has been giving the special
grants to its employees indicates a unilateral and voluntary act on its part, to continue giving
said benefits knowing that such act was not required by law.chanrobles virtual lawlibrary

Indeed, a company practice favorable to the employees has been established and the
payments made by MERALCO pursuant thereto ripened into benefits enjoyed by the
employees. Consequently, the giving of the special bonus can no longer be withdrawn by the
company as this would amount to a diminution of the employee’s existing benefits. 34

We can not, however, affirm the Secretary’s award of a two-month special Christmas bonus to
the employees since there was no recognized company practice of giving a two-month special
grant. The two-month special bonus was given only in 1995 in recognition of the employees’
prompt and efficient response during the calamities. Instead, a one-month special bonus, We
believe, is sufficient, this being merely a generous act on the part of MERALCO.

2. RICE SUBSIDY and RETIREMENT BENEFITS for RETIREES

It appears that the Secretary of Labor originally ordered the increase of the retirement pay,
rice subsidy and medical benefits of MERALCO retirees. This ruling was reconsidered based
on the position that retirees are no longer employees of the company and therefore are no
longer bargaining members who can benefit from a compulsory arbitration award. The

 Secretary, however, ruled that all members of the bargaining unit who retire between August
19, 1996 and November 30, 1997 (i.e., the term of the disputed CBA under the Secretary’s
disputed orders) are entitled to receive an additional rice subsidy.

The question squarely brought in this petition is whether the Secretary can issue an order
that binds the retirement fund. The company alleges that a separate and independent trust
fund is the source of retirement benefits for MERALCO retirees, while the union maintains
that MERALCO controls these funds and may therefore be compelled to improve this benefit
in an arbitral award.

The issue requires a finding of fact on the legal personality of the retirement fund. In the
absence of any evidence on record indicating the nature of the retirement fund’s legal
personality, we rule that the issue should be remanded to the Secretary for reception of
evidence as whether or not the MERALCO retirement fund is a separate and independent
trust fund. The existence of a separate and independent juridical entity which controls an
irrevocable retirement trust fund means that these retirement funds are beyond the scope of
collective bargaining: they are administered by an entity not a party to the collective
bargaining and the funds may not be touched without the trustee’s conformity.

On the other hand, MERALCO control over these funds means that MERALCO may be
compelled in the compulsory arbitration of a CBA deadlock where it is the employer, to
improve retirement benefits since retirement is a term or condition of employment that is a
mandatory subject of bargaining.

3. EMPLOYEES’ COOPERATIVE

The Secretary’s disputed ruling requires MERALCO to provide the employees covered by the
bargaining unit with a loan of 1.5 Million as seed money for the employees formation of a
cooperative under the Cooperative Law, R.A. 6938. We see nothing in this law — whether
expressed or implied — that requires employers to provide funds, by loan or otherwise, that
employees can use to form a cooperative. The formation of a cooperative is a purely voluntary
act under this law, and no party in any context or relationship is required by law to set up a
cooperative or to provide the funds therefor. In the absence of such legal requirement, the
Secretary has no basis to order the grant of a 1.5 million loan to MERALCO employees for the
formation of a cooperative. Furthermore, we do not see the formation of an employees
cooperative, in the absence of an agreement by the collective bargaining parties that this is a

bargainable term or condition of employment, to be a term or condition of employment that

can be imposed on the parties on compulsory arbitration.

4. GHSIP, HMP BENEFITS FOR DEPENDENTS and HOUSING EQUITY LOAN

MERALCO contends that it is not bound to bargain on these benefits because these do not
relate to "wages, hours of work and other terms and conditions of employment" hence, the
denial of these demands cannot result in a bargaining impasse.

The GHSIP, HMP benefits for dependents and the housing equity loan have been the subject
of bargaining and arbitral awards in the past. We do not see any reason why MERALCO should
not now bargain on these benefits. Thus, we agree with the Secretary’s
ruling:jgc:chanrobles.com.ph

". . . Additionally and more importantly, GHSIP and HMP, aside from being contributory plans,
have been the subject of previous rulings from this Office as bargainable matters. At this
point, we cannot do any less and must recognize that GHSIP and HMP are matters where the
union can demand and negotiate for improvements within the framework of the collective
bargaining system." 35

Moreover, MERALCO have long been extending these benefits to the employees and their
dependents that they now become part of the terms and conditions of employment. In fact,
MERALCO even pledged to continue giving these benefits. Hence, these benefits should be
incorporated in the new CBA.

With regard to the increase of the housing equity grant, we find P60,000.00 reasonable
considering the prevailing economic crisis.

5. SIGNING BONUS

On the signing bonus issue, we agree with the positions commonly taken by MERALCO and by
the Office of the Solicitor General that the signing bonus is a grant motivated by the goodwill
generated when a CBA is successfully negotiated and signed between the employer and the
union. In the present case, this goodwill does not exist. In the words of the Solicitor
General:jgc:chanrobles.com.ph

"When negotiations for the last two years of the 1992-1997 CBA broke down and the parties
sought the assistance of the NCMB, but which failed to reconcile their differences, and when
petitioner MERALCO bluntly invoked the jurisdiction of the Secretary of Labor in the
resolution of the labor dispute, whatever goodwill existed between petitioner MERALCO and
respondent union disappeared. . . ." 36

In contractual terms, a signing bonus is justified by and is the consideration paid for the
goodwill that existed in the negotiations that culminated in the signing of a CBA. Without the
goodwill, the payment of a signing bonus cannot be justified and any order for such payment,
to our mind, constitutes grave abuse of discretion. This is more so where the signing bonus is
in the not insignificant total amount of P16 Million.

6. RED-CIRCLE-RATE ALLOWANCE

An RCR allowance is an amount, not included in the basic salary, that is granted by the
company to an employee who is promoted to a higher position grade but whose actual basic
salary at the time of the promotion already exceeds the maximum salary for the position to
which he or she is promoted. As an allowance, it applies only to specific individuals whose
salary levels are unique with respect to their new and higher positions. It is for these reasons
that MERALCO prays that it be allowed to maintain the RCR allowance as a separate benefit
and not be integrated in the basic salary.

The integration of the RCR allowance in the basic salary of the employees had consistently
been raised in the past CBAs (1989 and 1992) and in those cases, the Secretary decreed the
integration of the RCR allowance in the basic salary. We do not see any reason why it should
not be included in the present CBA. In fact, in the 1995 CBA between MERALCO and the
supervisory union (FLAMES), the integration of the RCR allowance was recognized. Thus, Sec.
4 of the CBA provides:jgc:chanrobles.com.ph

"All Red-Circle-Rate Allowance as of December 1, 1995 shall be integrated in the basic salary
of the covered employees who as of such date are receiving such allowance. Thereafter, the
company rules on RCR allowance shall continue to be observed/applied." 37

For purposes of uniformity, we affirm the Secretary’s order on the integration of the RCR
allowance in the basic salary of the employees.

7. SICK LEAVE RESERVE OF 15 DAYS

MERALCO assails the Secretary’s reduction of the sick leave reserve benefit from 25 days to
15 days, contending that the sick leave reserve of 15 days has reached the lowest safe level
that should be maintained to give employees sufficient buffer in the event they fall ill.

We find no compelling reason to deviate from the Secretary’s ruling that the sick leave
reserve is reduced to 15 days, with any excess convertible to cash at the end of the year. The
employee has the option to avail of this cash conversion or to accumulate his sick leave credits
up to 25 days for conversion to cash at his retirement or separation from the service. This
arrangement is, in fact, beneficial to MERALCO. The latter admits that "the diminution of
this reserve does not seriously affect MERALCO because whatever is in reserve are sick leave
credits that are payable to the employee upon separation from service. In fact, it may be to
MERALCO’s financial interest to pay these leave credits now under present salary levels than
pay them at future higher salary levels." 38

8. 40-DAY UNION LEAVE

MERALCO objects to the demanded increase in union leave because the union leave granted to
the union is already substantial. It argues that the union has not demonstrated any real need
for additional union leave.

The thirty (30) days union leave granted by the Secretary, to our mind, constitute sufficient
time within which the union can carry out its union activities such as but not limited to the
election of union officers, selection or election of appropriate bargaining agents, conduct
referendum on union matters and other union-related matters in furtherance of union
objectives. Furthermore, the union already enjoys a special union leave with pay for union
authorized representatives to attend work education seminars, meetings, conventions and
conferences where union representation is required or necessary, and Paid-Time-off for union
officers, stewards and representatives for purpose of handling or processing grievances.

9. HIGH VOLTAGE,/HIGH POLE/TOWING ALLOWANCE

MERALCO argues that there is no justification for the increase of these allowances. The
personnel concerned will not receive any additional risk during the life of the current CBA
that would justify the increase demanded by the union. In the absence of such risk, then
these personnel deserve only the same salary increase that all other members of the
bargaining unit will get as a result of the disputed CBA. MERALCO likewise assails the grant

 of the high voltage/high pole allowance to members of the team who are not exposed to the
high voltage/high pole risks. The risks that justify the higher salary and the added allowance
are personal to those who are exposed to those risks. They are not granted to a team because
some members of the team are not exposed to the given risks.

The increase in the high-voltage allowance (from P45.00 to P55.00), high-pole allowance (from
P30.00 to P40.00), and towing allowance is justified considering the heavy risk the employees
concerned are exposed to. The high-voltage allowance is granted to an employee who is
authorized by the company to actually perform work on or near energized bare lines and bus,
while the high-pole allowance is given to those authorized to climb poles on a height of at least
60 feet from the ground to work thereat. The towing allowance, on the other hand, is granted
to the stockman drivers who tow trailers with long poles and equipment on board. Based on the
nature of the job of these concerned employees, it is imperative to give them these additional
allowances for taking additional risks. These increases are not even commensurate to the
danger the employees concerned are subjected to. Besides, no increase has been given by the
company since 1992. 39

We do not, however, subscribe to the Secretary’s order granting these allowances to the
members of the team who are not exposed to the given risks. The reason is obvious- no risk,
no pay. To award them the said allowances would be manifestly unfair for the company and
even to those who are exposed to the risks, as well as to the other members of the bargaining
unit who do not receive the said allowances.

10. BENEFITS FOR COLLECTORS

MERALCO opposes the Secretary’s grant of benefits for collectors on the ground that this is
grossly unreasonable both in scope and on the premise it is founded.

We have considered the arguments of the opposing parties regarding these benefits and find
the Secretary’s ruling on the (a) lunch allowance; (b) disconnection fee for delinquent
accounts; (c) voluntary performance of other work at the instance of the Company; (d) bobcat
belt bags; and (e) reduction of quota and MAPL during typhoons and other force majeure
events, reasonable considering the risks taken by the company personnel involved, the nature
of the employees’ functions and responsibilities and the prevailing standard of living. We do
not however subscribe to the Secretary’s award on the following:chanrob1es virtual 1aw
library

 (a) Reduction of quota and MAPL when the collector is on sick leave because the previous CBA
has already provided for a reduction of this demand. There is no need to further reduce this.

(b) Deposit of cash bond at MESALA because this is no longer necessary in view of the fact
that collectors are no longer required to post a bond.

We shall now resolve the non-economic issues.

1. SCOPE OF THE BARGAINING UNIT

The Secretary’s ruling on this issue states that:jgc:chanrobles.com.ph

"a. Scope of the collective bargaining unit. The union is demanding that the collective
bargaining unit shall be composed of all regular rank and file employees hired by the company
in all its offices and operating centers through its franchise and those it may employ by
reason of expansion, reorganization or as a result of operational exigencies. The law is that
only managerial employees are excluded from any collective bargaining unit and supervisors are
now allowed to form their own union (Art. 254 of the Labor Code as amended by R.A. 6715).
We grant the union demand."cralaw virtua1aw library

Both MERALCO and the Office of the Solicitor General dispute this ruling because it
disregards the rule We have established on the exclusion of confidential employees from the
rank and file bargaining unit.chanroblesvirtual|awlibrary

In Pier 8 Arrastre v. Confesor and General Maritime and Stevedores Union, 40 we ruled
that:jgc:chanrobles.com.ph

"Put another way, the confidential employee does not share in the same "community of
interests" that might otherwise make him eligible to join his rank and file co-workers,
precisely because of a conflict in those interests."cralaw virtua1aw library

Thus, in Metrolab Industries v. Roldan-Confesor, 41 We ruled:jgc:chanrobles.com.ph

". . . that the Secretary’s order should exclude the confidential employees from the regular
rank and file employees qualified to become members of the MEWA bargaining unit."cralaw
virtua1aw library

 From the foregoing disquisition, it is clear that employees holding a confidential position are
prohibited from joining the union of the rank and file employees.

2. ISSUE OF UNION SECURITY

The Secretary in his Order of August 19, 1996, 42 ruled that:jgc:chanrobles.com.ph

"b. Union recognition and security. — The Union is proposing that it be recognized by the
Company as sole and exclusive bargaining representative of the rank and file employees
included in the bargaining unit for the purpose of collective bargaining regarding rates of pay,
wages, hours of work and other terms and conditions of employment. For this reason, the
Company shall agree to meet only with the Union officers and its authorized representatives
on all matters involving the Union as an organization and all issues arising from the
implementation and interpretation of the new CBA. Towards this end, the Company shall not
entertain any individual or group of individuals on matters within the exclusive domain of the
Union.

Additionally, the Union is demanding that the right of all rank and file employees to join the
Union shall be recognized by the Company. Accordingly, all rank and file employees shall join
the Union.

x       x       x

These demands are fairly reasonable. We grant the same in accordance with the maintenance
of membership principle as a form of union security."cralaw virtua1aw library

The Secretary reconsidered this portion of his original order when he said in his December
28, 1996 order that:jgc:chanrobles.com.ph

". . . . When we decreed that all rank and file employees shall join the Union, we were actually
decreeing the incorporation of a closed shop form of union security in the CBA between the
parties. In Ferrer v. NLRC, 224 SCRA 410, the Supreme Court ruled that a CBA provision for
a closed shop is a valid form of union security and is not a restriction on the right or freedom
of association guaranteed by the Constitution, citing Lirag v. Blanco, 109 SCRA 87."cralaw
virtua1aw library

 MERALCO objected to this ruling on the grounds that: (a) it was never questioned by the
parties; (b) there is no evidence presented that would justify the restriction on employee’s
union membership; and (c) the Secretary cannot rule on the union security demand because
this is not a mandatory subject for collective bargaining agreement.

We agree with MERALCO’s contention.

An examination of the records of the case shows that the union did not ask for a closed shop
security regime; the Secretary in the first instance expressly stated that a maintenance of
membership clause should govern; neither MERALCO nor MEWA raised the issue of union
security in their respective motions for reconsideration of the Secretary’s first disputed
order; and that despite the parties clear acceptance of the Secretary’s first ruling, the
Secretary motu proprio reconsidered his maintenance of membership ruling in favor of the
more stringent union shop regime.

Under these circumstances, it is indubitably clear that the Secretary gravely abused his
discretion when he ordered a union shop in his order of December 28, 1996. The distinctions
between a maintenance of membership regime from a closed shop and their consequences in
the relationship between the union and the company are well established and need no further
elaboration.

Consequently, We rule that the maintenance of membership regime should govern at

MERALCO in accordance with the Secretary’s order of August 19, 1996 which neither party
disputed.

3. THE CONTRACTING OUT ISSUE

This issue is limited to the validity of the requirement that the union be consulted before the
implementation of any contracting out that would last for 6 months or more. Proceeding from
our ruling in San Miguel Employees Union-PTGWO v. Bersamira, 43 (where we recognized that
contracting out of work is a proprietary right of the employer in the exercise of an inherent
management prerogative) the issue we see is whether the Secretary’s consultation
requirement is reasonable or unduly restrictive of the company’s management prerogative. We
note that the Secretary himself has considered that management should not be hampered in
the operations of its business when he said that:jgc:chanrobles.com.ph

"We feel that the limitations imposed by the union advocates are too specific and may not be
applicable to the situations that the company and the union may face in the future. To our
mind, the greater risk with this type of limitation is that it will tend to curtail rather than
allow the business growth that the company and the union must aspire for. Hence, we are for
the general limitations we have stated above because they will allow a calibrated response to
specific future situations the company and the union may face." 44

Additionally, We recognize that contracting out is not unlimited; rather, it is a prerogative

that management enjoys subject to well-defined legal limitations. As we have previously held,
the company can determine in its best business judgment whether it should contract out the
performance of some of its work for as long as the employer is motivated by good faith, and
the contracting out must not have been resorted to circumvent the law or must not have been
the result of malicious or arbitrary action. 45 The Labor Code and its implementing rules also
contain specific rules governing contracting out (Department of Labor Order No. 10, May 30,
1997, Sections. 1-25).

Given these realities, we recognize that a balance already exists in the parties’ relationship
with respect to contracting out; MERALCO has its legally defined and protected management
prerogatives while workers are guaranteed their own protection through specific labor
provisions and the recognition of limits to the exercise of management prerogatives. From
these premises, we can only conclude that the Secretary’s added requirement only introduces
an imbalance in the parties’ collective bargaining relationship on a matter that the law already
sufficiently regulates. Hence, we rule that the Secretary’s added requirement, being
unreasonable, restrictive and potentially disruptive should be struck down.

4. UNION REPRESENTATION IN COMMITTEES

As regards this issue, We quote with approval the holding of the Secretary in his Order of
December 28, 1996, to wit:jgc:chanrobles.com.ph

"We see no convincing reason to modify our original Order on union representation in
committees. It reiterates what the Article 211 (A)(g) of the Labor Code provides: "To ensure
the participation of workers in decision and policy-making processes affecting their rights,
duties and welfare.’Denying this opportunity to the Union is to lay the claim that only
management has the monopoly of ideas that may improve management strategies in enhancing
the Company’s growth. What every company should remember is that there might be one
among the Union members who may offer productive and viable ideas on expanding the

 Company’s business horizons. The Union’s participation in such committees might just be the
opportune time for dormant ideas to come forward. So, the Company must welcome this
development (see also PAL v. NLRC, Et Al., G.R. 85985, August 13, 1995). It must be
understood, however, that the committees referred to here are the Safety Committee, the
Uniform Committee and other committees of a similar nature and purpose involving personnel
welfare, rights and benefits as well as duties."cralaw virtua1aw library

We do not find merit in MERALCO’s contention that the above-quoted ruling of the Secretary
is an intrusion into the management prerogatives of MERALCO. It is worthwhile to note that
all the Union demands and what the Secretary’s order granted is that the Union be allowed to
participate in policy formulation and decision-making process on matters affecting the Union
members’ rights, duties and welfare as required in Article 211 (A) (g) of the Labor Code. And
this can only be done when the Union is allowed to have representatives in the Safety
Committee, Uniform Committee and other committees of a similar nature. Certainly, such
participation by the Union in the said committees is not in the nature of a co-management
control of the business of MERALCO. What is granted by the Secretary is participation and
representation. Thus, there is no impairment of management prerogatives.

5. INCLUSION OF ALL TERMS AND CONDITIONS IN THE CBA

MERALCO also decries the Secretary’s ruling in both the assailed Orders that —

"All other benefits being enjoyed by the Company’s employees but which are not expressly or
impliedly repealed in this new agreement shall remain subsisting and shall likewise be included
in the new collective bargaining agreement to be signed by the parties effective December 1,
1995." 46

claiming that the above-quoted ruling intruded into the employer’s freedom to contract by
ordering the inclusion in the new CBA all other benefits presently enjoyed by the employees
even if they are not incorporated in the new CBA. This matter of inclusion, MERALCO argues,
was never discussed and agreed upon in the negotiations; nor presented as issues before the
Secretary; nor were part of the previous CBA’s between the parties.

We agree with MERALCO.

 The Secretary acted in excess of the discretion allowed him by law when he ordered the
inclusion of benefits, terms and conditions that the law and the parties did not intend to be
reflected in their CBA.

To avoid the possible problems that the disputed orders may bring, we are constrained to rule
that only the terms and conditions already existing in the current CBA and was granted by the
Secretary (subject to the modifications decreed in this decision) should be incorporated in
the CBA, and that the Secretary’s dispute orders should accordingly be modified.

6. RETROACTIVITY OF THE CBA

Finally, MERALCO also assails the Secretary’s order that the effectivity of the new CBA shall
retroact to December 1, 1995, the date of the commencement of the last two years of the
effectivity of the existing CBA. This retroactive date, MERALCO argues, is contrary to the
ruling of this Court in Pier 8 Arrastre and Stevedoring Services, Inc. v. Roldan-Confessor 47
which mandates that the effective date of the new CBA should be the date the Secretary of
Labor has resolved the labor dispute.

On the other hand, MEWA supports the ruling of the Secretary on the theory that he has
plenary power and discretion to fix the date of effectivity of his arbitral award citing our
ruling in St. Lukes Medical Center, Inc. v. Torres. 48 MEWA also contends that if the arbitral
award takes effect on the date of the Secretary Labor’s ruling on the parties’ motion for
reconsideration (i.e., on December 28, 1996), an anomaly situation will result when CBA would
be more than the 5-year term mandated by Article 253-A of the Labor Code.

However, neither party took into account the factors necessary for a proper resolution of
this aspect. Pier 8, for instance, does not involve a mid-term negotiation similar to this case,
while St. Lukes does not take the "hold over" principle into account, i.e., the rule that although
a CBA has expired, it continues to have legal effects as between the parties until a new CBA
has been entered into. 49

Article 253-A serves as the guide in determining when the effectivity of the CBA at bar is to
take effect. It provides that the representation aspect of the CBA is to be for a term of 5
years, while

". . . [A]ll other provisions of the Collective Bargaining Agreement shall be re-negotiated not
later than 3 years after its execution. Any agreement on such other provision of the

 Collective Bargaining Agreement entered into within 6 months from the date of expiry of the
term of such other provisions as fixed in such Collective Bargaining Agreement shall retroact
to the day immediately following such date. If such agreement is entered into beyond 6
months, the parties shall agree on the duration of the effectivity thereof. . . ."cralaw
virtua1aw library

Under these terms, it is clear that the 5-year term requirement is specific to the
representation aspect. What the law additionally requires is that a CBA must be re-negotiated
within 3 years "after its execution." It is in this re-negotiation that gives rise to the present
CBA deadlock.

If no agreement is reached within 6 months from the expiry date of the 3 years that follow
the CBA execution, the law expressly gives the parties — not anybody else — the discretion to
fix the effectivity of the agreement.

Significantly, the law does not specifically cover the situation where 6 months have elapsed
but no agreement has been reached with respect to effectivity. In this eventuality, we hold
that any provision of law should then apply for the law abhors a vacuum. 50

One such provision is the principle of hold over, i.e., that in the absence of a new CBA, the
parties must maintain the status quo and must continue in full force and effect the terms and
conditions of the existing agreement until a new agreement is reached. 51 In this manner, the
law prevents the existence of a gap in the relationship between the collective bargaining
parties. Another legal principle that should apply is that in the absence of an agreement
between the parties, then, an arbitrated CBA takes on the nature of any judicial or quasi-
judicial award; it operates and may be executed only respectively unless there are legal
justifications for its retroactive application.

Consequently, we find no sufficient legal ground on the other justification for the retroactive
application of the disputed CBA, and therefore hold that the CBA should be effective for a
term of 2 years counted from December 28, 1996 (the date of the Secretary of Labor’s
disputed order on the parties’ motion for reconsideration) up to December 27, 1999.

WHEREFORE, the petition is granted and the orders of public respondent Secretary of Labor
dated August 19, 1996 and December 28, 1996 are set aside to the extent set forth above.
The parties are directed to execute a Collective Bargaining Agreement incorporating the
terms and conditions contained in the unaffected portions of the Secretary of Labor’s orders

 of August 19, 1996 and December 28, 1996, and the modifications set forth above. The
retirement fund issue is remanded to the Secretary of Labor for reception of evidence and
determination of the legal personality of the MERALCO retirement fund.

SO ORDERED.chanroblesvirtual|awlibrary

G.R. No. 127598           February 22, 2000

MANILA ELECTRIC COMPANY, petitioner,
vs.
Hon. SECRETARY OF LABOR LEONARDO QUISUMBING and MERALCO EMPLOYEES and
WORKERS ASSOCIATION (MEWA), respondent.
RESOLUTION
YNARES-SANTIAGO, J.:
In the Decision promulgated on January 27, 1999, the Court disposed of the case as follows:
WHEREFORE, the petition is granted and the orders of public respondent Secretary of Labor
dated August 19, 1996 and December 28, 1996 are set aside to the extent set forth above.
The parties are directed to execute a Collective Bargaining Agreement incorporating the
terms and conditions contained in the unaffected portions of the Secretary of Labor's orders
of August 19, 1996 and December 28, 1996, and the modifications set forth above. The
retirement fund issue is remanded to the Secretary of Labor for reception of evidence and
determination of the legal personality of the MERALCO retirement fund.1
The modifications of the public respondent's resolutions include the following:

Secretary's
January 27, 1999 decision
resolution
Wages - P1,900.00 for 1995-96 P2,200.00
X'mas bonus - modified to one month 2 months
Retirees - remanded to the Secretary granted
Loan to coops - denied granted
GHSIP, HMP and
Housing loans - granted up to P60,000.00 granted
Signing bonus - denied granted

 Union leave - 40 days (typo error) 30 days

High voltage/pole - not apply to those who are members of a team
not exposed to the risk
Collectors - no need for cash bond, no
need to reduce quota and MAPL
CBU - exclude confidential employees include
Union security - maintenance of membership closed shop
Contracting out - no need to consult union consult first
All benefits - existing terms and conditions all terms
Retroactivity - Dec. 28, 1996-Dec. 27, 199(9) from Dec. 1, 1995
Dissatisfied with the Decision, some alleged members of private respondent union (Union for
brevity) filed a motion for intervention and a motion for reconsideration of the said Decision.
A separate intervention was likewise made by the supervisor's union (FLAMES2) of petitioner
corporation alleging that it has bona fide legal interest in the outcome of the case.3 The Court
required the "proper parties" to file a comment to the three motions for reconsideration but
the Solicitor-General asked that he be excused from filing the comment because the "petition
filed in the instant case was granted" by the Court.4 Consequently, petitioner filed its own
consolidated comment. An "Appeal Seeking Immediate Reconsideration" was also filed by the
alleged newly elected president of the Union.5 Other subsequent pleadings were filed by the
parties and intervenors.
The issues raised in the motions for reconsideration had already been passed upon by the
Court in the January 27, 1999 decision. No new arguments were presented for consideration
of the Court. Nonetheless, certain matters will be considered herein, particularly those
involving the amount of wages and the retroactivity of the Collective Bargaining Agreement
(CBA) arbitral awards.
Petitioner warns that if the wage increase of P2,200.00 per month as ordered by the
Secretary is allowed, it would simply pass the cost covering such increase to the consumers
through an increase in the rate of electricity. This is a non sequitur. The Court cannot be
threatened with such a misleading argument. An increase in the prices of electric current
needs the approval of the appropriate regulatory government agency and does not
automatically result from a mere increase in the wages of petitioner's employees. Besides,
this argument presupposes that petitioner is capable of meeting a wage increase. The All Asia
Capital report upon which the Union relies to support its position regarding the wage issue

cannot be an accurate basis and conclusive determinant of the rate of wage increase. Section
45 of Rule 130 Rules of Evidence provides:
Commercial lists and the like. — Evidence of statements of matters of interest to persons
engaged in an occupation contained in a list, register, periodical, or other published compilation
is admissible as tending to prove the truth of any relevant matter so stated if that
compilation is published for use by persons engaged in that occupation and is generally used
and relied upon by them therein.
Under the afore-quoted rule, statement of matters contained in a periodical, may be admitted
only "if that compilation is published for use by persons engaged in that occupation and is
generally used and relied upon by them therein." As correctly held in our Decision dated
January 27, 1999, the cited report is a mere newspaper account and not even a commercial
list. At most, it is but an analysis or opinion which carries no persuasive weight for purposes of
this case as no sufficient figures to support it were presented. Neither did anybody testify to
its accuracy. It cannot be said that businessmen generally rely on news items such as this in
their occupation. Besides, no evidence was presented that the publication was regularly
prepared by a person in touch with the market and that it is generally regarded as
trustworthy and reliable. Absent extrinsic proof of their accuracy, these reports are not
admissible.6 In the same manner, newspapers containing stock quotations are not admissible in
evidence when the source of the reports is available.7 With more reason, mere analyses or
projections of such reports cannot be admitted. In particular, the source of the report in this
case can be easily made available considering that the same is necessary for compliance with
certain governmental requirements.
Nonetheless, by petitioner's own allegations, its actual total net income for 1996 was P5.1
billion.8 An estimate by the All Asia financial analyst stated that petitioner's net operating
income for the same year was about P5.7 billion, a figure which the Union relies on to support
its claim. Assuming without admitting the truth thereof, the figure is higher than the P4.171
billion allegedly suggested by petitioner as its projected net operating income. The P5.7 billion
which was the Secretary's basis for granting the P2,200.00 is higher than the actual net
income of P5.1 billion admitted by petitioner. It would be proper then to increase this Court's
award of P1,900.00 to P2,000.00 for the two years of the CBA award. For 1992, the agreed
CBA wage increase for rank-and-file was P1,400.00 and was reduced to P1,350.00; for 1993;
further reduced to P1,150.00 for 1994. For supervisory employees, the agreed wage increase
for the years 1992-1994 are P1,742.50, P1,682.50 and P1,442.50, respectively. Based on the
foregoing figures, the P2,000.00 increase for the two-year period awarded to the rank-and-
file is much higher than the highest increase granted to supervisory employees.9 As mentioned
in the January 27, 1999 Decision, the Court does "not seek to enumerate in this decision the
factors that should affect wage determination" because collective bargaining disputes

 particularly those affecting the national interest and public service "requires due
consideration and proper balancing of the interests of the parties to the dispute and of those
who might be affected by the dispute."10 The Court takes judicial notice that the new amounts
granted herein are significantly higher than the weighted average salary currently enjoyed by
other rank-and-file employees within the community. It should be noted that the relations
between labor and capital is impressed with public interest which must yield to the common
good.11 Neither party should act oppressively against the other or impair the interest or
convenience of the public.12 Besides, matters of salary increases are part of management
prerogative.13
On the retroactivity of the CBA arbitral award, it is well to recall that this petition had its
origin in the renegotiation of the parties' 1992-1997 CBA insofar as the last two-year period
thereof is concerned. When the Secretary of Labor assumed jurisdiction and granted the
arbitral awards, there was no question that these arbitral awards were to be given retroactive
effect. However, the parties dispute the reckoning period when retroaction shall commence.
Petitioner claims that the award should retroact only from such time that the Secretary of
Labor rendered the award, invoking the 1995 decision in Pier 8 case14 where the Court, citing
Union of Filipino Employees v. NLRC,15 said:
The assailed resolution which incorporated the CBA to be signed by the parties was
promulgated on June 5, 1989, the expiry date of the past CBA. Based on the provision of
Section 253-A, its retroactivity should be agreed upon by the parties. But since no agreement
to that effect was made, public respondent did not abuse its discretion in giving the said CBA
a prospective effect. The action of the public respondent is within the ambit of its authority
vested by existing law.
On the other hand, the Union argues that the award should retroact to such time granted by
the Secretary, citing the 1993 decision of St. Luke's.16
Finally, the effectivity of the Order of January 28, 1991, must retroact to the date of the
expiration of the previous CBA, contrary to the position of petitioner. Under the
circumstances of the case, Article 253-A cannot be properly applied to herein case. As
correctly stated by public respondent in his assailed Order of April 12, 1991 dismissing
petitioner's Motion for Reconsideration —
Anent the alleged lack of basis for the retroactivity provisions awarded; we would stress that
the provision of law invoked by the Hospital, Article 253-A of the Labor Code, speaks of
agreements by and between the parties, and not arbitral awards . . .
Therefore, in the absence of a specific provision of law prohibiting retroactivity of the
effectivity of arbitral awards issued by the Secretary of Labor pursuant to Article 263(g) of
the Labor Code, such as herein involved, public respondent is deemed vested with plenary and
discretionary powers to determine the effectivity thereof.

 In the 1997 case of Mindanao Terminal,17 the Court applied the St. Luke's doctrine and ruled
that:
In St. Luke's Medical Center v. Torres, a deadlock also developed during the CBA negotiations
between management and the union. The Secretary of Labor assumed jurisdiction and ordered
the retroaction of the CBA to the date of expiration of the previous CBA. As in this case, it
was alleged that the Secretary of Labor gravely abused its discretion in making his award
retroactive. In dismissing this contention this Court held:
Therefore, in the absence of a specific provision of law prohibiting retroactive of the
effectivity of arbitral awards issued by the Secretary of Labor pursuant to Article 263(g) of
the Labor Code, such as herein involved, public respondent is deemed vested with plenary and
discretionary powers to determine the effectivity thereof.
The Court in the January 27, 1999 Decision, stated that the CBA shall be "effective for a
period of 2 years counted from December 28, 1996 up to December 27, 1999."
Parenthetically, this actually covers a three-year period. Labor laws are silent as to when an
arbitral award in a labor dispute where the Secretary had assumed jurisdiction by virtue of
Article 263 (g) of the Labor Code shall retroact. In general, a CBA negotiated within six
months after the expiration of the existing CBA retroacts to the day immediately following
such date and if agreed thereafter, the effectivity depends on the agreement of the
parties.18 On the other hand, the law is silent as to the retroactivity of a CBA arbitral award
or that granted not by virtue of the mutual agreement of the parties but by intervention of
the government. Despite the silence of the law, the Court rules herein that CBA arbitral
awards granted after six months from the expiration of the last CBA shall retroact to such
time agreed upon by both employer and the employees or their union. Absent such an
agreement as to retroactivity, the award shall retroact to the first day after the six-month
period following the expiration of the last day of the CBA should there be one. In the absence
of a CBA, the Secretary's determination of the date of retroactivity as part of his
discretionary powers over arbitral awards shall control.
It is true that an arbitral award cannot per se be categorized as an agreement voluntarily
entered into by the parties because it requires the interference and imposing power of the
State thru the Secretary of Labor when he assumes jurisdiction. However, the arbitral award
can be considered as an approximation of a collective bargaining agreement which would
otherwise have been entered into by the parties.19 The terms or periods set forth in Article
253-A pertains explicitly to a CBA. But there is nothing that would prevent its application by
analogy to an arbitral award by the Secretary considering the absence of an applicable law.
Under Article 253-A: "(I)f any such agreement is entered into beyond six months, the parties
shall agree on the duration of retroactivity thereof." In other words, the law contemplates
retroactivity whether the agreement be entered into before or after the said six-month

period. The agreement of the parties need not be categorically stated for their acts may be
considered in determining the duration of retroactivity. In this connection, the Court
considers the letter of petitioner's Chairman of the Board and its President addressed to
their stockholders, which states that the CBA "for the rank-and-file employees covering the
period December 1, 1995 to November 30, 1997 is still with the Supreme Court,"20 as
indicative of petitioner's recognition that the CBA award covers the said period. Earlier,
petitioner's negotiating panel transmitted to the Union a copy of its proposed CBA covering
the same period inclusive.21 In addition, petitioner does not dispute the allegation that in the
past CBA arbitral awards, the Secretary granted retroactivity commencing from the period
immediately following the last day of the expired CBA. Thus, by petitioner's own actions, the
Court sees no reason to retroact the subject CBA awards to a different date. The period is
herein set at two (2) years from December 1, 1995 to November 30, 1997.
On the allegation concerning the grant of loan to a cooperative, there is no merit in the
union's claim that it is no different from housing loans granted by the employer. The award of
loans for housing is justified because it pertains to a basic necessity of life. It is part of a
privilege recognized by the employer and allowed by law. In contrast, providing seed money for
the establishment of the employee's cooperative is a matter in which the employer has no
business interest or legal obligation. Courts should not be utilized as a tool to compel any
person to grant loans to another nor to force parties to undertake an obligation without
justification. On the contrary, it is the government that has the obligation to render financial
assistance to cooperatives and the Cooperative Code does not make it an obligation of the
employer or any private individual.22
Anent the 40-day union leave, the Court finds that the same is a typographical error. In order
to avoid any confusion, it is herein declared that the union leave is only thirty (30) days as
granted by the Secretary of Labor and affirmed in the Decision of this Court.
The added requirement of consultation imposed by the Secretary in cases of contracting out
for six (6) months or more has been rejected by the Court. Suffice it to say that the
employer is allowed to contract out services for six months or more. However, a line must be
drawn between management prerogatives regarding business operations per se and those
which affect the rights of employees, and in treating the latter, the employer should see to it
that its employees are at least properly informed of its decision or modes of action in order
to attain a harmonious labor-management relationship and enlighten the workers concerning
their rights.23 Hiring of workers is within the employer's inherent freedom to regulate and is
a valid exercise of its management prerogative subject only to special laws and agreements on
the matter and the fair standards of justice.24 The management cannot be denied the faculty
of promoting efficiency and attaining economy by a study of what units are essential for its
operation. It has the ultimate determination of whether services should be performed by its

 personnel or contracted to outside agencies. While there should be mutual consultation,

eventually deference is to be paid to what management decides.25 Contracting out of services
is an exercise of business judgment or management prerogative.26 Absent proof that
management acted in a malicious or arbitrary manner, the Court will not interfere with the
exercise of judgment by an employer.27 As mentioned in the January 27, 1999 Decision, the
law already sufficiently regulates this matter.28 Jurisprudence also provides adequate
limitations, such that the employer 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 or
arbitrary actions.29 These are matters that may be categorically determined only when an
actual suit on the matter arises.
WHEREFORE, the motion for reconsideration is PARTIALLY GRANTED and the assailed
Decision is MODIFIED as follows: (1) the arbitral award shall retroact from December 1, 1995
to November 30, 1997; and (2) the award of wage is increased from the original amount of
One Thousand Nine Hundred Pesos (P1,900.00) to Two Thousand Pesos (P2,000.00) for the
years 1995 and 1996. This Resolution is subject to the monetary advances granted by
petitioner to its rank-and-file employees during the pendency of this case assuming such
advances had actually been distributed to them. The assailed Decision is AFFIRMED in all
other respects.1âwphi1.nêt
SO ORDERED.
Davide, Jr., C.J., Melo, Kapunan and Pardo, JJ., concur.

NEW PACIFIC TIMBER & SUPPLY COMPANY, CO., INC., Petitioner, v. NATIONAL
LABOR RELATIONS COMMISSION, MUSIB M. BUAT, LEON G. GONZAGA, JR., ET
AL., NATIONAL FEDERATION OF LABOR, MARIANO AKILIT and 350 OTHERS,
Respondents.

D E C I S I O N

KAPUNAN, J.:

May the term of a Collective Bargaining Agreement (CBA) as to its economic provisions be
extended beyond the term expressly stipulated therein, and, in the absence of a new CBA,
even beyond the three-year period provided by law? Are employees hired after the stipulated
term of a CBA entitled to the benefits provided thereunder?

These are the issues at the heart of the instant petition for certiorari with prayer for the
issuance of preliminary injunction and/or temporary restraining order filed by petitioner New
Pacific Timber & Supply Company, Incorporated against the National Labor Relations
Commission NLRC, Et. Al. and the National Federation of Labor, Et.
Al.chanroblesvirtuallawlibrary

The antecedent facts, as found by the NLRC, are as follows:chanrob1es virtual 1aw library

The National Federation of Labor (NFL, for brevity) was certified as the sole and exclusive
bargaining representative of all the regular rank-and-file employees of New Pacific Timber &
Supply Co., Inc. (hereinafter referred to as petitioner Company). 1 As such, NFL started to
negotiate for better terms and conditions of employment for the employees in the bargaining
unit which it represented. However, the same was allegedly met with stiff resistance by
petitioner Company, so that the former was prompted to file a complaint for unfair labor
practice (ULP) against the latter on the ground of refusal to bargain collectively. 2

On March 31, 1987, then Executive Labor Arbiter Hakim S. Abulwahid issued an order
declaring (a) herein petitioner Company guilty of ULP; and (b) the CBA proposals submitted by
the NFL as the CBA between the regular rank-and-file employees in the bargaining unit and
petitioner Company. 3

Petitioner Company appealed the above order to the NLRC. On November 15, 1989, the NLRC
rendered a decision dismissing the appeal for lack of merit. A motion for reconsideration
thereof was, likewise, denied in a Resolution, dated November 12, 1990. 4

Unsatisfied, petitioner Company filed a petition for certiorari with this Court. But the Court
dismissed said petition in a Resolution, dated January 21, 1991. 5

Thereafter, the records of the case were remanded to the arbitration branch of origin for
the execution of Labor Arbiter Abulwahid’s Order, dated March 31, 1987, granting monetary
benefits consisting of wage increases, housing allowances, bonuses, etc. to the regular rank-
and-file employees. Following a series of conferences to thresh out the details of
computation, Labor Arbiter Reynaldo S. Villena issued an Order, dated October 18, 1993,
directing petitioner Company to pay the 142 employees entitled to the aforesaid benefits the
respective amounts due them under the CBA. Petitioner Company complied; and, the
corresponding quitclaims were executed. The case was considered closed following NFL’s

 manifestation that it will no longer appeal the October 18, 1993 Order of Labor Arbiter
Villena. 6

However, notwithstanding such manifestation, a "Petition for Relief" was filed in behalf of 186
of the private respondents "Mariano J. Akilit and 350 others” on May 12, 1994. In their
petition, they claimed that they were wrongfully excluded from enjoying the benefits under
the CBA since the agreement with NFL and petitioner Company limited the CBA’s
implementation to only the 142 rank-and-file employees enumerated. They claimed that NFL’s
misrepresentations had precluded them from appealing their exclusion. 7

Treating the petition for relief as an appeal, the NLRC entertained the same. On August 4,
1994, said commission issued a resolution 8 declaring that the 186 excluded employees "form
part and parcel of the then existing rank-and-file bargaining unit" and were, therefore,
entitled to the benefits under the CBA. The NLRC held, thus:chanrob1es virtual 1aw library

WHEREFORE, the appeal is hereby granted and the Order of the Labor arbiter dated
October 18, 1993 is hereby Set Aside and Vacated. In lieu hereof, a new Order is hereby
issued directing respondent New Pacific Timber & Supply Co., Inc. to pay all its regular rank-
and-file workers their wage differentials and other benefits arising from the decreed CBA as
explained above, within ten (10) days from receipt of this order.

SO ORDERED. 9

Petitioner Company filed a motion for reconsideration of the aforequoted resolution.

Meanwhile, four separate groups of the private respondents, including the original 186 who
had filed the "Petition for Relief” filed individual money claims, docketed as NLRC Cases Nos.
M-001991-94 to M-001994-94, before the Arbitration Branch of the NLRC, Cagayan de Oro
City. However, Labor Arbiter Villena dismissed these cases in Orders, dated March 11, 1994;
April 13, 1994; March 9, 1994, and, May 10, 1994. The employees appealed the respective
dismissals of their complaints to the NLRC The latter consolidated these appeals with the
aforementioned motion for reconsideration filed by petitioner Company.

On February 29, 1996, the NLRC issued a resolution, the dispositive portion of which reads as
follows:chanrob1es virtual 1aw library

 WHEREFORE, the instant petition for reconsideration of respondent is Denied for lack of
merit and the Resolution of this Commission dated August 4, 1994 Sustained. The separate
orders of the Labor Arbiter dated March 11, 1994, April 13, 1994, March 9, 1994 and May 10,
1994, respectively, in NLRC Cases Nos. M-001991-94 to M-001994-94 are Set Aside and
Vacated for lack of legal bases.chanrobles virtuallawlibrary:red

Conformably, respondent New Pacific Timber and Supply Co., Inc. is hereby directed to pay
individual complainants their CBA benefits in the aggregate amount of P13,559,510.37, the
detailed computation thereof is contained in Annex "A" which forms an integral part of this
resolution, plus ten (10%) percent thereof as Attorney’s fees.

SO ORDERED. 10

Hence, the instant petition wherein petitioner Company raises the following issues:chanrob1es
virtual 1aw library

THE PUBLIC RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION IN

ALLOWING THE "PETITION FOR RELIEF" TO PROSPER.

II

THE PUBLIC RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION IN

RULING THAT PRIVATE RESPONDENTS MARIANO AKILIT AND 350 OTHERS ARE
ENTITLED TO BENEFITS UNDER THE COLLECTIVE BARGAINING AGREEMENT IN SPITE
OF THE FACT THAT THEY WERE NOT EMPLOYED BY THE PETITIONER MUCH LESS
WERE THEY MEMBERS OF THE BARGAINING UNIT DURING THE TERM OF THE CBA.

III

PUBLIC RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION IN MAKING

FACTUAL FINDINGS WITHOUT BASIS.

 IV

THE DISPOSITIVE PORTIONS OF THE ASSAILED RESOLUTIONS ARE DEFECTIVE AND/

OR REVEAL THE GRAVE ABUSE OF DISCRETION COMMITTED BY PUBLIC RESPONDENT.
11

Petitioner Company contends that a "Petition for Relief" is not the proper mode of seeking a
review of a decision rendered by the arbitration branch of the NLRC. 12 According to the
petitioner, nowhere in the Labor Code or in the NLRC Rules of Procedure is there such a
pleading. Rather, the remedy of a party aggrieved by an unfavorable ruling of the labor
arbiter is to appeal said judgment to the NLRC. 13

Petitioner asseverates that even assuming that the NLRC correctly treated the petition for
relief as an appeal, still, it should not have allowed the same to prosper, because the petition
was filed several months after the ten-day reglementary period for filing an appeal had
expired; and, therefore, it failed to comply with the requirements of an appeal under the
Labor Code and the NLRC Rules of Procedure.

Petitioner Company further contends that in filing separate complaints and/or money claims at
the arbitration level in spite of their pending petition for relief and in spite of the final order,
dated October 18, 1993, in NLRC Case No. RAB-IX-0334-82, the private respondents were in
fact forum-shopping, an act which is proscribed as trifling with the courts and abusing their
practices.

Anent the second issue, petitioner argues that the private respondents are not entitled to the
benefits under the CBA because employees hired after the term of a CBA are not parties to
the agreement, and therefore, may not claim benefits thereunder, even if they subsequently
become members of the bargaining unit.

As for the term of the CBA, petitioner maintains that Article 253 of the Labor Code refers
to the continuation in full force and effect of the previous CBA’s terms and conditions. By
necessity, it could not possibly refer to terms and conditions which, as expressly stipulated,
ceased to have force and effect. 14

According to petitioner, the provision on wage increase in the 1981 to 1984 CBA between
petitioner Company and NFL provided for yearly wage increases. Logically, these provisions

ended in the year 1984 — the last year that the economic provisions of the CBA were,
pursuant to contract and law, effective. Petitioner claims that there is no contractual basis
for the grant of CBA benefits such as wage increases in 1985 and subsequent years, since the
CBA stipulates only the increases for the years 1981 to 1984.

Moreover, petitioner alleges that it was through no fault of theirs that no new CBA was
entered pending appeal of the decision in NLRC Case No. RAB-IX-0334-82.

Finally, petitioner Company claims that it was never given the opportunity to submit a counter-
computation of the benefits supposedly due the private respondents. Instead, the NLRC
allegedly relied on the self-serving computations of private respondents.

Petitioner’s contentions are untenable.

We find no grave abuse of discretion on the part of the NLRC, when it entertained the
petition for relief filed by the private respondents and treated it as an appeal, even if it was
filed beyond the reglementary period for filing an appeal. Ordinarily, once a judgment has
become final and executory, it can no longer be disturbed, altered or modified. However, a
careful scrutiny of the facts and circumstances of the instant case warrants liberality in the
application of technical rules and procedure. It would be a greater injustice to deprive the
concerned employees of the monetary benefits rightly due them because of a circumstance
over which they had no control. As stated above, private respondents, in their petition for
relief, claimed that they were wrongfully excluded from the list of those entitled to the CBA
benefits by their union, NFL, without their knowledge; and, because they were under the
impression that they were ably represented, they were not able to appeal their case on
time.chanrobles virtual lawlibrary

The Supreme Court has allowed appeals from decisions of the labor arbiter to the NLRC, even
if filed beyond the reglementary period, in the interest of justice. 15 Moreover, under Article
218 (c) of the Labor Code, the NLRC may, in the exercise of its appellate powers, "correct,
amend or waive any error, defect or irregularity whether in substance or in form." Further,
Article 221 of the same provides that: "In any proceeding before the Commission or any of
the Labor Arbiters, the rules of evidence prevailing in courts of law or equity shall not be
controlling and it is the spirit and intention of this Code that the Commission and its members
and the Labor Arbiters shall use every and all reasonable means to ascertain the facts in each
case speedily and objectively and without regard to technicalities of law or procedure, all in
the interest of due process. . . ." 16

 Anent the issue of whether or not the term of an existing CBA, particularly as to its economic
provisions, can be extended beyond the period stipulated therein, and even beyond the three-
year period prescribed by law, in the absence of a new agreement, Article 253 of the Labor
Code explicitly provides:chanrob1es virtual 1aw library

ARTICLE 253. Duty to bargain collectively when there exists a collective bargaining
agreement. — When there is a collective bargaining agreement, the duty to bargain
collectively shall also mean that neither party shall terminate nor modify such agreement
during its lifetime. However, either party can serve a written notice to terminate or modify
the agreement at least sixty (60) days prior to its expiration date. 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.(Emphasis supplied.)

It is clear from the above provision of law that until a new Collective Bargaining Agreement
has been executed by and between the parties, they are duty-bound to keep the status quo
and to continue in full force and effect the terms and conditions of the existing agreement.
The law does not provide for any exception nor qualification as to which of the economic
provisions of the existing agreement are to retain force and effect; therefore, it must be
understood as encompassing all the terms and conditions in the said agreement.

In the case at bar, no new agreement was entered into by and between petitioner Company
and NFL pending appeal of the decision in NLRC Case No. RAB-IX-0334-82; nor were any of
the economic provisions and/or terms and conditions pertaining to monetary benefits in the
existing agreement modified or altered. Therefore, the existing CBA in its entirety, continues
to have legal effect.

In a recent case, the Court had occasion to rule that Articles 253 and 253-A 17 mandate the
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 prior to the expiration of the
old CBA and/or until a new agreement is reached by the parties. Consequently, the automatic
renewal clause provided for by the law, which is deemed incorporated in all CBA’s, provides
the reason why the new CBA can only be given a prospective effect. 18

In the case of Lopez Sugar Corporation v. Federation of Free Workers, Et Al., 19 this Court
reiterated the rule that although a CBA has expired, it continues to have legal effects as

 between the parties until a new CBA has been entered into. It is the duty of both parties to
the CBA to keep the status quo, and to continue in full force and effect the terms and
conditions of the existing agreement during the 60-day period and/or until a new agreement is
reached by the parties. 20

To rule otherwise, i.e., that the economic provisions of the existing CBA in the instant case
ceased to have force and effect in the year 1984, would be to create a gap during which no
agreement would govern, from the time the old contract expired to the time a new agreement
shall have been entered into. For if, as contended by the petitioner, the economic provisions
of the existing CBA were to have no legal effect, what agreement as to wage increases and
other monetary benefits would govern at all? None, it would seem, if we are to follow the logic
of petitioner Company. Consequently, the employees from the year 1985 onwards would be
deprived of a substantial amount of monetary benefits which they could have enjoyed had the
terms and conditions of the CBA remained in force and effect. Such a situation runs contrary
to the very intent and purpose of Articles 253 and 253-A of the Labor Code which is to curb
labor unrest and to promote industrial peace, as can be gleaned from the discussions of the
legislators leading to the passage of said laws, thus:chanrob1es virtual 1aw library

HON. CHAIRMAN HERRERA:chanrob1es virtual 1aw library

Pag nag-survey tayo sa mga unyon, ganoon ang mangyayari. And I think our responsibility here
is to create a legal framework to promote industrial peace and to develop responsible and fair
labor movement.

HON. CHAIRMAN VELOSO:chanrob1es virtual 1aw library

In other words, the longer the period of the effectivity. . . .

x       x       x

HON. CHAIRMAN VELOSO:chanrob1es virtual 1aw library

(continuing). . . . in other words, the longer the period of effectivity of the CBA, the better
for industrial peace.chanrobles virtual lawlibrary

x       x       x. 21

 Having established that the CBA between petitioner Company and NFL remained in full force
and effect even beyond the stipulated term, in the absence of a new agreement; and,
therefore, that the economic provisions such as wage increases continued to have legal effect,
we are now faced with the question of who are entitled to the benefits provided thereunder.

Petitioner Company insists that the rank-and-file employees hired after the term of the CBA
in spite of their subsequent membership in the bargaining unit, are not parties to the
agreement, and certainly may not claim the benefits thereunder.

We do not agree. In a long line of cases, this Court has held that when a collective bargaining
contract is entered into by the union representing the employees and the employer, even the
non-member employees are entitled to the benefits of the contract. To accord its benefits
only to members of the union without any valid reason would constitute undue discrimination
against nonmembers. 22 It is even conceded, that a laborer can claim benefits from a CBA
entered into between the company and the union of which he is a member at the time of the
conclusion of the agreement, after he has resigned from said union. 23

In the same vein, the benefits under the CBA in the instant case should be extended to those
employees who only became such after the year 1984. To exclude them would constitute undue
discrimination and deprive them of monetary benefits they would otherwise be entitled to
under a new collective bargaining contract to which they would have been parties. Since in this
particular case, no new agreement had been entered into after the CBA’s stipulated term, it is
only fair and just that the employees hired thereafter be included in the existing CBA. This is
in consonance with our ruling that the terms and conditions of a collective bargaining
agreement continue to have force and effect even beyond the stipulated term when no new
agreement is executed by and between the parties to avoid or prevent the situation where no
collective bargaining agreement at all would govern between the employer company and its
employees.

Anent the other issues raised by petitioner Company, the Court finds that these pertain to
questions of fact that have already been passed upon by the NLRC. It is axiomatic that, the
factual findings of the National Labor Relations Commission, which have acquired expertise
because its jurisdiction is confined to specific matters, are accorded respect and finality by
the Supreme Court, when these are supported by substantial evidence. A perusal of the
assailed resolution reveals that the same was reached on the basis of the required quantum of
evidence.chanrobles.com : virtual law library

 WHEREFORE, in view of the foregoing, the instant petition for certiorari is hereby
DISMISSED for lack of merit.

SO ORDERED.

SECOND DIVISION

[G.R. No. 111809. May 5, 1997.]

MINDANAO TERMINAL AND BROKERAGE SERVICES, INC., Petitioner, v. HON. MA.

NIEVES ROLDAN-CONFESOR, in her capacity as Secretary of Labor and Employment,
and ASSOCIATED LABOR UNIONS (ALU-TUCP), Respondents.

Froilan M . Bacungan & Associates for Petitioner.

Seno, Mendoza and Associates Law Offices for Private Respondent.

SYLLABUS

1. CIVIL LAW; CONTRACTS; EVEN WITHOUT ANY WRITTEN EVIDENCE OF THE

COLLECTIVE BARGAINING AGREEMENT MADE BY THE PARTIES, A VALID AGREEMENT
EXISTED IN THIS CASE FROM THE MOMENT THE MINDS OF THE PARTIES MEET ON
ALL MATTERS THEY SET OUT TO DISCUSS. — The fact that no agreement was then signed
is of no moment. Art. 253-A refers merely to an "agreement" which, according to Black’s Law
Dictionary is "a coming together of minds; the coming together in accord of two minds on a
given proposition." This is similar to Art. 1305 of the Civil Code’s definition of "contract" as "a
meeting of minds between two persons." The two terms, "agreement" and "contract," are
indeed similar, although the former is broader than the latter because an agreement may not
have all the elements of a contract. As in the case of contracts, however, agreements may be
oral or written. Hence, even without any written evidence of the Collective Bargaining
Agreement made by the parties, a valid agreement existed in this case from the moment the
minds of the parties met on all matters they set out to discuss. As Art. 1315 of the Civil Code
states: Contracts are perfected by mere consent, and from that moment, the parties are
bound not only to the fulfillment of what has been expressly stipulated but also to all the

 consequences which, according to their nature, may be in keeping with good faith, usage and
law.

2. LABOR AND SOCIAL LEGISLATION; LABOR RELATIONS; STRIKES AND LOCKOUTS;

ARBITRAL AWARD; BINDING ON THE PARTIES; CASE AT BAR. — The order of the
Secretary of Labor may be considered in the nature of an arbitral award, pursuant to Art.
263(g) of the Labor Code, and, therefore, binding on the parties. After all, the Secretary of
Labor assumed jurisdiction over the dispute because petitioner asked the Secretary of Labor
to do so after the NCMB failed to make the parties come to an agreement. It is also conceded
that the industry in which the petitioner is engaged is vital to the national interest.

3. ID.; ID.; ID.; ID.; THE SECRETARY OF LABOR IS DEEMED VESTED WITH PLENARY AND
DISCRETIONARY POWERS TO DETERMINE THE EFFECTIVITY OF AN ARBITRAL
AWARD. — In St. Luke’s Medical Center, Inc. v. Torres, a deadlock also developed during the
CBA negotiations between management and the union. The Secretary of Labor assumed
jurisdiction and ordered the retroaction of their CBA to the date of expiration of the
previous CBA. As in this case, it was alleged that the Secretary of Labor gravely abused his
discretion in making his award retroactive. In dismissing this contention, this Court held:
Therefore, in the absence of a specific provision of law prohibiting retroactivity of the
effectivity of arbitral awards issued by the Secretary of Labor pursuant to Article 263(g) of
the Labor Code, such as herein involved, public respondent is deemed vested with plenary and
discretionary powers to determine the effectivity thereof. This case is controlled by the
ruling in that case.

4. ID.; LABOR STANDARDS; CREDITING OF WAGE INCREASES IN CBA AS COMPLIANCE

WITH FUTURE MANDATED INCREASES IS THE EXCEPTION RATHER THAN THE RULE;
THE GENERAL RULE IS THAT SUCH INCREASES ARE OVER AND ABOVE ANY INCREASES
THAT MAY BE GRANTED BY LAW OR WAGE ORDER. — With respect to the issue of the
creditability of the fourth and fifth year wage increases, the Court takes cognizance of the
fact that the question was raised by the Company only when the six-month period was almost
over and all that was left to be done by the parties was to sign their agreement. Before that,
the Company did not qualify its position. It should have known that crediting of wage increases
in the CBA as compliance with future mandated increases is the exception rather than the
rule. For the general rule is that such increases are over and above any increase that may be
granted by law or wage order. As held in Meycauayan College v. Drilon: Increments to the
laborers’ financial gratification, be they in the form of salary increases or changes in the
salary scale are aimed at one thing — improvement of the economic predicament of the

 laborers. As such they should be viewed in the light of the State’s avowed policy to protect
labor. Thus, having entered into an agreement with its employees, an employer may not be
allowed to renege on its obligation under a collective bargaining agreement should, at the same
time, the law grant the employees the same or better terms and conditions of employment.
Employee benefits derived from law are exclusive of benefits arrived at through negotiation
and agreement unless otherwise provided by the agreement itself or by law.

D E C I S I O N

MENDOZA, J.:

This is a petition for certiorari to set aside the order of respondent Honorable Secretary of
Labor and Employment, declaring (1) wage increases granted by petitioner to its employees not
creditable as compliance by the company with future mandated wage increases, and (2) the
increases to be retroactive, in the case of the fourth year wage increase, to August 1, 1992 to
be implemented until July 31, 1993 and, in the case of the fifth year wage increase, to August
1, 1993 to be implemented until the expiration of the CBA on July 31, 1994.

Petitioner Mindanao Terminal and Brokerage Service, Inc., (hereafter referred to as the
Company) and respondent Associated Labor Unions, (hereafter referred to as the Union)
entered into a collective bargaining agreement for a period of five (5) years, starting on
August 1, 1989 and ending July 31, 1994.

On the third year of the CBA on August 1, 1992, the Company and the Union met to
renegotiate the provisions of the CBA for the fourth and fifth years. The parties, however,
failed to resolve some of their differences, as a result of which a deadlock developed.

On November 12, 1992, a formal notice of deadlock was sent to the Company on the following
issues: wages, vacation leave, sick leave, hospitalization, optional retirement, 13th month pay
and signing bonus.

On November 18, 1992, the Company announced a cost-cutting or retrenchment program.

 Charging unfair labor practice and citing the deadlock in the negotiations, the Union filed, on
December 3, 1992, a notice of strike with the National Conciliation and Mediation Board
(NCMB).

On December 18, 1992, as a result of a conference called by the NCMB, the Union and the
Company went back to the bargaining table and agreed on the following provisions:chanrob1es
virtual 1aw library

a. Wage Increase (Article V, Section 2, CBA) — P3.00/day for the fourth year of the CBA and
P3.00/day for the fifth Year of the CBA:chanrob1es virtual 1aw library

b. Vacation and Sick Leaves (Article VII, Section 1(c), CBA) — 1,100 hours of aggregate
service instead of the existing 1,500 hours within a year to be entitled to leave benefits but
subject to reversion to the previous CBA if majority of the gangs average eight (8) vessels a
month;

c. Hospitalization (Article VIII, Section 1, CBA) — Maximum aggregate of 1,100 hours instead
of the 1,500 hours and up to be entitled to the benefit of P2,500.00 with the lower brackets
adjusted accordingly but subject to reversion to the previous CBA if majority of the gangs
average eight (8) vessels a month;

d. 13th Month Pay (Article XIII, Section 1, CBA) — Average of six (6) vessels instead of the
existing eight (8) vessels to be entitled to eleven (11) days basic pay but subject to reversion
to the previous CBA if majority of the gangs average eight (8) vessels a month,

e. Signing bonus; and

f. Seniority.

The agreement left only one issue for resolution of the parties, namely, retirement. Even this
issue was soon settled as the parties met before the NCMB on January 14, 1993 and then
agreed on an improved Optional Retirement Clause by giving the employees the option to
retire after rendering eighteen (18) years of service instead of the previous twenty (20)
years, and granting the employees retirement benefits equivalent to sixteen (16) days for
every year of service. Thus, as the Med-Arbiter noted in the record of the January 14, 1993
conference, "the issues raised by the notice of strike had been settled and said notice is thus
terminated."cralaw virtua1aw library

But no sooner had he stated this than the Company claimed that the wage increases which it
had agreed to give to the employees should be creditable as compliance with future mandated
wage increases. In addition, it maintained that such increases should not be retroactive.

Reacting to this development, the Union again filed a Notice of Strike on January 28, 1993,
with the NCMB. On March 7, 1993, the Union staged a strike.

The NCMB tried to settle the issues of creditability and retroactivity, calling for this purpose
a conciliation conference on March 9, 1993. As conciliation proved futile, the Company
petitioned respondent Secretary of Labor and Employment (hereafter Secretary of Labor) to
assume jurisdiction over the dispute. On March 10, 1993, respondent assumed jurisdiction
over the dispute and ordered the parties to submit their respective position papers on the
two unresolved issues.

After submission by the parties of their position papers, the Secretary of Labor issued an
Order dated May 14, 1993, ordering the Company and the Union to incorporate into their
existing collective bargaining agreement all improvements reached by them in the course of
renegotiations. The Secretary of Labor held that the wage increases for the fourth and fifth
years of the CBA were not to be credited as compliance with future mandated increases. In
addition, the fourth year wage increase was to be retroactive to August 1992 and was to be
implemented until July 31, 1993, while the fifth year wage increase was to take effect on
August 1, 1993 until the expiration of the CBA. 1

On May 31, 1993, the Company sought reconsideration of the May 14, 1993 order. The motion
was denied for lack of merit by the Secretary of Labor in a resolution dated July 7, 1993.
Hence, this petition for certiorari, alleging grave abuse of discretion on the part of
respondent Secretary of Labor.

The petitioner contends that respondent erred in making the fourth year wage increase
retroactive to August 1, 1992. It denies the power of the Secretary of Labor to decree
retroaction of the wage increases, as the respondent herself had stated in her order subject
of this petition, that it had been more than six (6) months since the expiration of the third
anniversary of the CBA and, therefore, the automatic renewal clause of Art. 253-A of the
Labor Code had no application. Although petitioner originally opposed giving retroactive effect
to their agreement, it subsequently modified its stand and agreed that the fourth year wage

 increase and the other provisions of the CBA be made retroactive to the date the Secretary
of Labor assumed jurisdiction of the dispute on March 10, 1993.

The petition is without merit. Art. 253-A of the Labor Code reads:chanrob1es virtual 1aw
library

Terms of a collective bargaining agreement. — Any Collective Bargaining Agreement that the
parties may enter into shall, insofar as the representation aspect is concerned, be for a term
of five (5) years. No petition questioning the majority status of the incumbent bargaining
agent shall be entertained and no certification election shall be conducted by the Department
of Labor and Employment outside of the sixty-day period immediately before the date of
expiry of such five year term of the Collective Bargaining Agreement. All other provisions of
the Collective Bargaining Agreement shall be renegotiated not later than three (3) years after
its execution. Any agreement on such other provisions of the Collective Bargaining Agreement
entered into within six (6) months from the date of expiry of the term of such other
provisions as fixed in such Collective Bargaining Agreement, shall retroact to the day
immediately following such date. If any such agreement is entered into beyond six months, the
parties shall agree on the duration of retroactivity thereof. In case of a deadlock in the
renegotiation of the collective bargaining agreement, the parties may exercise their rights
under this Code.

The respondent indeed stated in her order of May 14, 1993 that "this case is clearly beyond
the scope of the automatic renewal clause," 2 but she also stated in the same order that "the
parties have reached an agreement on all the renegotiated provisions of the CBA" on January
14, 1993, i.e., within six (6) months of the expiration of the third year of the CBA.

The signing of the CBA is not determinative of the question whether "the agreement was
entered into within six months from the date of expiry of the term of such other provisions
as fixed in such collective bargaining agreement" within the contemplation of Art. 253-A.

As already stated, on November 12, 1992, the Union sent the Company a notice of deadlock in
view of their inability to reconcile their positions on the main issues, 3 particularly on wages.
The Union filed a notice of strike. However, on December 18, 1992, in a conference called by
the NCMB, the Union and the Company agreed on a number of provisions of the CBA, including
the provision on wage increase, 4 leaving only the issue of retirement to be threshed out. In
time, this, too, was settled, so that in his record of the January 14, 1993 conference, the
Med-Arbiter noted that "the issues raised by the notice of strike had been settled and said

 notice is thus terminated." It would therefore seem that at that point, there was already a
meeting of the minds of the parties, which was before the February 1993 end of the six-
month period provided in Art. 253-A.

The fact that no agreement was then signed is of no moment. Art. 253-A refers merely to an
"agreement" which, according to Black’s Law Dictionary is "a coming together of minds; the
coming together in accord of two minds on a given proposition." 5 This is similar to Art. 1305
of the Civil Code’s definition of "contract" as "a meeting of minds between two persons."
chanrobles.com : virtual law library

The two terms, "agreement" and "contract," are indeed similar, although the former is
broader than the latter because an agreement may not have all the elements of a contract. As
in the case of contracts, however, agreements may be oral or written. 6 Hence, even without
any written evidence of the Collective Bargaining Agreement made by the parties, a valid
agreement existed in this case from the moment the minds of the parties met on all matters
they set out to discuss. As Art. 1315 of the Civil Code states:chanrob1es virtual 1aw library

Contracts are perfected by mere consent, and from that moment, the parties are bound not
only to the fulfillment of what has been expressly stipulated but also to all the consequences
which, according to their nature, may be in keeping with good faith, usage and law.

The Secretary of Labor found that "as early as January 14, 1993, well within the six (6)
month period provided by law, the Company and the Union have perfected their agreement." 7
The claim of petitioner to the contrary notwithstanding, this is a finding of an administrative
agency which, in the absence of evidence to the contrary, must be affirmed.

Moreover, the order of the Secretary of Labor may be considered in the nature of an arbitral
award, pursuant to Art. 263(g) of the Labor Code, and, therefore, binding on the parties.
After all, the Secretary of Labor assumed jurisdiction over the dispute because petitioner
asked the Secretary of Labor to do so after the NCMB failed to make the parties come to an
agreement. It is also conceded that the industry in which the petitioner is engaged is vital to
the national interest. As stated in the Order issued by the Secretary of Labor on March 10,
1993: 8

The services being provided by the Company evidently reflect their indispensability to the
normal operations of the Davao City Pier where millions of crates and boxes of goods are
loaded and unloaded monthly. The current disruption, therefore, of the Company’s services, if

 allowed to continue, will cause serious prejudice and damages to the agricultural exporters,
the cargo handlers, the vessel owners, the foreign buyers of agricultural products and the
entire business sector in the area. These considerations and the dispute’s implications on the
national economy warrant the intervention by this Office to exercise its power under Article
263(g) of the Labor Code, as amended.

In St. Luke’s Medical Center, Inc. v. Torres, 9 a deadlock also developed during the CBA
negotiations between management and the union. The Secretary of Labor assumed jurisdiction
and ordered the retroaction of their CBA to the date of expiration of the previous CBA. As in
this case, it was alleged that the Secretary of Labor gravely abused his discretion in making
his award retroactive. In dismissing this contention this Court held:chanrob1es virtual 1aw
library

Therefore, in the absence of a specific provision of law prohibiting retroactivity of the

effectivity of arbitral awards issued by the Secretary of Labor pursuant to Article 263(g) of
the Labor Code, such as herein involved, public respondent is deemed vested with plenary and
discretionary powers to determine the effectivity thereof.

This case is controlled by the ruling in that case.

With respect to the issue of the creditability of the fourth and fifth year wage increases,
the Court takes cognizance of the fact that the question was raised by the Company only when
the six-month period was almost over and all that was left to be done by the parties was to
sign their agreement. Before that, the Company did not qualify its position. It should have
known that crediting of wage increases in the CBA as compliance with future mandated
increases is the exception rather than the rule. For the general rule is that such increases are
over and above any increase that may be granted by law or wage order. As held in Meycauayan
College v. Drilon: 10

Increments to the laborers’ financial gratification, be they in the form of salary increases or
changes in the salary scale are aimed at one thing — improvement of the economic
predicament of the laborers. As such they should be viewed in the light of the States avowed
policy to protect labor. Thus, having entered into an agreement with its employees, an
employer may not be allowed to renege on its obligation under a collective bargaining
agreement should, at the same time, the law grant the employees the same or better terms
and conditions of employment. Employee benefits derived from law are exclusive of benefits

 arrived at through negotiation and agreement unless otherwise provided by the agreement
itself or by law.

For making a belated issue of "creditability," petitioner is correctly said to have "delay[ed]
the agreement beyond the six (6) month period so as to minimize its expenses to the
detriment of its workers" and its conduct to smack of "bad faith and [to run counter] to the
good faith required in Collective Bargaining." 11 If petitioner wanted to be given credit for
the wage increases in the event of future mandated wage increases, it should have expressly
stated its reservation during the early part of the CBA negotiations.

WHEREFORE, the instant petition is hereby DISMISSED for lack of

merit.chanroblesvirtuallawlibrary:red

SO ORDERED.

THIRD DIVISION
G.R. No. 113856. September 7, 1998
SAMAHANG MANGGAGAWA SA TOP FORM MANUFACTURING UNITED WORKERS OF
THE PHILIPPINES (SMTFM-UWP), its officers and members, Petitioners, v. NATIONAL
LABOR RELATIONS COMMISSION, HON. JOSE G. DE VERA and TOP FORM
MANUFACTURING PHIL., INC., Respondents.
D E C I S I O N
ROMERO, J.:
The issue in this petition for certiorari is whether or not an employer committed an unfair
labor practice by bargaining in bad faith and discriminating against its employees. The charge
arose from the employers refusal to grant across-the-board increases to its employees in
implementing Wage Orders Nos. 01 and 02 of the Regional Tripartite Wages and Productivity
Board of the National Capital Region (RTWPB-NCR). Such refusal was aggravated by the fact
that prior to the issuance of said wage orders, the employer allegedly promised at the
collective bargaining conferences to implement any government-mandated wage increases on
an across-the-board basis.
Petitioner Samahang Manggagawa sa Top Form Manufacturing United Workers of the
Philippines (SMTFM) was the certified collective bargaining representative of all regular rank
and file employees of private respondent Top Form Manufacturing Philippines, Inc. At the
collective bargaining negotiation held at the Milky Way Restaurant in Makati, Metro Manila on
February 27, 1990, the parties agreed to discuss unresolved economic issues. According to

 the minutes of the meeting, Article VII of the collective bargaining agreement was discussed.
The following appear in said Minutes:
ARTICLE VII. Wages
Section 1. Defer
Section 2. Status quo
Section 3. Union proposed that any future wage increase given by the government should be
implemented by the company across-the-board or non-conditional.
Management requested the union to retain this provision since their sincerity was already
proven when the P25.00 wage increase was granted across-the-board. The union acknowledges
managements sincerity but they are worried that in case there is a new set of management,
they can just show their CBA. The union decided to defer this provision.1cräläwvirtualibräry
In their joint affidavit dated January 30, 1992,2 union members Salve L. Barnes, Eulisa
Mendoza, Lourdes Barbero and Concesa Ibaez affirmed that at the subsequent collective
bargaining negotiations, the union insisted on the incorporation in the collective bargaining
agreement (CBA) of the union proposal on automatic across-the-board wage increase. They
added that:
11. On the strength of the representation of the negotiating panel of the company and the
above undertaking/promise made by its negotiating panel, our union agreed to drop said
proposal relying on the undertakings made by the officials of the company who negotiated
with us, namely, Mr. William Reynolds, Mr. Samuel Wong and Mrs. Remedios Felizardo. Also, in
the past years, the company has granted to us government mandated wage increases on
across-the-board basis.
On October 15, 1990, the RTWPB-NCR issued Wage Order No. 01 granting an increase of
P17.00 per day in the salary of workers. This was followed by Wage Order No. 02 dated
December 20, 1990 providing for a P12.00 daily increase in salary.
As expected, the union requested the implementation of said wage orders. However, they
demanded that the increase be on an across-the-board basis. Private respondent refused to
accede to that demand. Instead, it implemented a scheme of increases purportedly to avoid
wage distortion. Thus, private respondent granted the P17.00 increase under Wage Order No.
01 to workers/employees receiving salary of P125.00 per day and below. The P12.00 increase
mandated by Wage Order No. 02 was granted to those receiving the salary of P140.00 per day
and below. For employees receiving salary higher than P125.00 or P140.00 per day, private
respondent granted an escalated increase ranging from P6.99 to P14.30 and from P6.00 to
P10.00, respectively.3cräläwvirtualibräry
On October 24, 1991, the union, through its legal counsel, wrote private respondent a letter
demanding that it should fulfill its pledge of sincerity to the union by granting an across-the-
board wage increases (sic) to all employees under the wage orders. The union reiterated that

it had agreed to retain the old provision of CBA on the strength of private respondents
promise and assurance of an across-the-board salary increase should the government mandate
salary increases.4 Several conferences between the parties notwithstanding, private
respondent adamantly maintained its position on the salary increases it had granted that were
purportedly designed to avoid wage distortion.
Consequently, the union filed a complaint with the NCR NLRC alleging that private respondents
act of reneging on its undertaking/promise clearly constitutes an act of unfair labor practice
through bargaining in bad faith. It charged private respondent with acts of unfair labor
practices or violation of Article 247 of the Labor Code, as amended, specifically bargaining in
bad faith, and prayed that it be awarded actual, moral and exemplary damages.5 In its position
paper, the union added that it was charging private respondent with violation of Article 100 of
the Labor Code.6cräläwvirtualibräry
Private respondent, on the other hand, contended that in implementing Wage Orders Nos. 01
and 02, it had avoided the existence of a wage distortion that would arise from such
implementation. It emphasized that only after a reasonable length of time from the
implementation of the wage orders that the union surprisingly raised the question that the
company should have implemented said wage orders on an across-the-board basis. It asserted
that there was no agreement to the effect that future wage increases mandated by the
government should be implemented on an across-the-board basis. Otherwise, that agreement
would have been incorporated and expressly stipulated in the CBA. It quoted the provision of
the CBA that reflects the parties intention to fully set forth therein all their agreements
that had been arrived at after negotiations that gave the parties unlimited right and
opportunity to make demands and proposals with respect to any subject or matter not
removed by law from the area of collective bargaining. The same CBA provided that during its
effectivity, the parties each voluntarily and unqualifiedly waives the right, and each agrees
that the other shall not be obligated, to bargain collectively, with respect to any subject or
matter not specifically referred to or covered by this Agreement, even though such subject
or matter may not have been within the knowledge or contemplation of either or both of the
parties at the time they negotiated or signed this Agreement.7cräläwvirtualibräry
On March 11, 1992, Labor Arbiter Jose G. de Vera rendered a decision dismissing the
complaint for lack of merit.8 He considered two main issues in the case: (a) whether or not
respondents are guilty of unfair labor practice, and (b) whether or not the respondents are
liable to implement Wage Orders Nos. 01 and 02 on an across-the-board basis. Finding no
basis to rule in the affirmative on both issues, he explained as follows:
The charge of bargaining in bad faith that the complainant union attributes to the
respondents is bereft of any certitude inasmuch as based on the complainant unions own
admission, the latter vacillated on its own proposal to adopt an across-the-board stand or

 future wage increases. In fact, the union acknowledges the managements sincerity when the
latter allegedly implemented Republic Act 6727 on an across-the-board basis. That such union
proposal was not adopted in the existing CBA was due to the fact that it was the union itself
which decided for its deferment. It is, therefore, misleading to claim that the management
undertook/promised to implement future wage increases on an across-the-board basis when as
the evidence shows it was the union who asked for the deferment of its own proposal to that
effect.
The alleged discrimination in the implementation of the subject wage orders does not inspire
belief at all where the wage orders themselves do not allow the grant of wage increases on an
across-the-board basis. That there were employees who were granted the full extent of the
increase authorized and some others who received less and still others who did not receive
any increase at all, would not ripen into what the complainants termed as discrimination. That
the implementation of the subject wage orders resulted into an uneven implementation of
wage increases is justified under the law to prevent any wage distortion. What the
respondents did under the circumstances in order to deter an eventual wage distortion
without any arbitral proceedings is certainly commendable.
The alleged violation of Article 100 of the Labor Code, as amended, as well as Article XVII,
Section 7 of the existing CBA as herein earlier quoted is likewise found by this Branch to have
no basis in fact and in law. No benefits or privileges previously enjoyed by the employees were
withdrawn as a result of the implementation of the subject orders. Likewise, the alleged
company practice of implementing wage increases declared by the government on an across-
the-board basis has not been duly established by the complainants evidence. The complainants
asserted that the company implemented Republic Act No. 6727 which granted a wage increase
of P25.00 effective July 1, 1989 on an across-the-board basis. Granting that the same is true,
such isolated single act that respondents adopted would definitely not ripen into a company
practice. It has been said that `a sparrow or two returning to Capistrano does not a summer
make.
Finally, on the second issue of whether or not the employees of the respondents are entitled
to an across-the-board wage increase pursuant to Wage Orders Nos. 01 and 02, in the face of
the above discussion as well as our finding that the respondents correctly applied the law on
wage increases, this Branch rules in the negative.
Likewise, for want of factual basis and under the circumstances where our findings above are
adverse to the complainants, their prayer for moral and exemplary damages and attorneys
fees may not be granted.
Not satisfied, petitioner appealed to the NLRC that, in turn, promulgated the assailed
Resolution of April 29, 19939 dismissing the appeal for lack of merit. Still dissatisfied,

 petitioner sought reconsideration which, however, was denied by the NLRC in the Resolution
dated January 17, 1994. Hence, the instant petition for certiorari contending that:
-A-
THE PUBLIC RESPONDENTS GROSSLY ERRED IN NOT DECLARING THE PRIVATE
RESPONDENTS GUILTY OF ACTS OF UNFAIR LABOR PRACTICES WHEN, OBVIOUSLY,
THE LATTER HAS BARGAINED IN BAD FAITH WITH THE UNION AND HAS VIOLATED
THE CBA WHICH IT EXECUTED WITH THE HEREIN PETITIONER UNION.
-B-
THE PUBLIC RESPONDENTS SERIOUSLY ERRED IN NOT DECLARING THE PRIVATE
RESPONDENTS GUILTY OF ACTS OF DISCRIMINATION IN THE IMPLEMENTATION OF
NCR WAGE ORDER NOS. 01 AND 02.
-C-
THE PUBLIC RESPONDENTS SERIOUSLY ERRED IN NOT FINDING THE PRIVATE
RESPONDENTS GUILTY OF HAVING VIOLATED SECTION 4, ARTICLE XVII OF THE
EXISTING CBA.
-D-
THE PUBLIC RESPONDENTS GRAVELY ERRED IN NOT DECLARING THE PRIVATE
RESPONDENTS GUILTY OF HAVING VIOLATED ARTICLE 100 OF THE LABOR CODE OF
THE PHILIPPINES, AS AMENDED.
-E-
ASSUMING, WITHOUT ADMITTING THAT THE PUBLIC RESPONDENTS HAVE
CORRECTLY RULED THAT THE PRIVATE RESPONDENTS ARE GUILTY OF ACTS OF
UNFAIR LABOR PRACTICES, THEY COMMITTED SERIOUS ERROR IN NOT FINDING
THAT THERE IS A SIGNIFICANT DISTORTION IN THE WAGE STRUCTURE OF THE
RESPONDENT COMPANY.
-F-
THE PUBLIC RESPONDENTS ERRED IN NOT AWARDING TO THE PETITIONERS HEREIN
ACTUAL, MORAL, AND EXEMPLARY DAMAGES AND ATTORNEYS FEES.
As the Court sees it, the pivotal issues in this petition can be reduced into two, to wit: (a)
whether or not private respondent committed an unfair labor practice in its refusal to grant
across-the-board wage increases in implementing Wage Orders Nos. 01 and 02, and (b)
whether or not there was a significant wage distortion of the wage structure in private
respondent as a result of the manner by which said wage orders were implemented.
With respect to the first issue, petitioner union anchors its arguments on the alleged
commitment of private respondent to grant an automatic across-the-board wage increase in
the event that a statutory or legislated wage increase is promulgated. It cites as basis
therefor, the aforequoted portion of the Minutes of the collective bargaining negotiation on

February 27, 1990 regarding wages, arguing additionally that said Minutes forms part of the
entire agreement between the parties.
The basic premise of this argument is definitely untenable. To start with, if there was indeed
a promise or undertaking on the part of private respondent to obligate itself to grant an
automatic across-the-board wage increase, petitioner union should have requested or
demanded that such promise or undertaking be incorporated in the CBA. After all, petitioner
union has the means under the law to compel private respondent to incorporate this specific
economic proposal in the CBA. It could have invoked Article 252 of the Labor Code defining
duty to bargain, thus, the duty includes executing a contract incorporating such agreements if
requested by either party. Petitioner unions assertion that it had insisted on the incorporation
of the same proposal may have a factual basis considering the allegations in the
aforementioned joint affidavit of its members. However, Article 252 also states that the
duty to bargain does not compel any party to agree to a proposal or make any concession. Thus,
petitioner union may not validly claim that the proposal embodied in the Minutes of the
negotiation forms part of the CBA that it finally entered into with private respondent.
The CBA is the law between the contracting parties10 the collective bargaining representative
and the employer-company. Compliance with a CBA is mandated by the expressed policy to give
protection to labor.11 In 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."12 This is founded on the dictum that a CBA is not an ordinary contract
but one impressed with public interest.13 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,14 it is not a part thereof and the proponent
has no claim whatsoever to its implementation.
Hence, petitioner unions contention that the Minutes of the collective bargaining negotiation
meeting forms part of the entire agreement is pointless. The Minutes reflects the
proceedings and discussions undertaken in the process of bargaining for worker benefits in
the same way that the minutes of court proceedings show what transpired therein.15 At the
negotiations, it is but natural for both management and labor to adopt positions or make
demands and offer proposals and counter-proposals. However, nothing is considered final until
the parties have reached an agreement. In fact, one of managements usual negotiation
strategies is to x x x agree tentatively as you go along with the understanding that nothing is
binding until the entire agreement is reached.16 If indeed private respondent promised to
continue with the practice of granting across-the-board salary increases ordered by the
government, such promise could only be demandable in law if incorporated in the CBA.

Moreover, by making such promise, private respondent may not be considered in bad faith or
at the very least, resorting to the scheme of feigning to undertake the negotiation
proceedings through empty promises. As earlier stated, petitioner union had, under the law,
the right and the opportunity to insist on the foreseeable fulfillment of the private
respondents promise by demanding its incorporation in the CBA. Because the proposal was
never embodied in the CBA, the promise has remained just that, a promise, the implementation
of which cannot be validly demanded under the law.
Petitioners reliance on this Courts pronouncements17 in Kiok Loy v. NLRC18 is, therefore,
misplaced. In that case, the employer refused to bargain with the collective bargaining
representative, ignoring all notices for negotiations and requests for counter proposals that
the union had to resort to conciliation proceedings. In that case, the Court opined that (a)
Companys refusal to make counter-proposal, if considered in relation to the entire bargaining
process, may indicate bad faith and this is specially true where the Unions request for a
counter-proposal is left unanswered. Considering the facts of that case, the Court concluded
that the company was unwilling to negotiate and reach an agreement with the
Union.19cräläwvirtualibräry
In the case at bench, however, petitioner union does not deny that discussion on its proposal
that all government-mandated salary increases should be on an across-the-board basis was
deferred, purportedly because it relied upon the undertaking of the negotiating panel of
private respondent.20 Neither does petitioner union deny the fact that there is no provision of
the 1990 CBA containing a stipulation that the company will grant across-the-board to its
employees the mandated wage increase. They simply assert that private respondent
committed acts of unfair labor practices by virtue of its contractual commitment made during
the collective bargaining process.21 The mere fact, however, that the proposal in question was
not included in the CBA indicates that no contractual commitment thereon was ever made by
private respondent as no agreement had been arrived at by the parties. Thus:
Obviously the purpose of collective bargaining is the reaching of an agreement resulting in a
contract binding on the parties; but the failure to reach an agreement after negotiations
continued for a reasonable period does not establish a lack of good faith. The statutes invite
and contemplate a collective bargaining contract, but they do not compel one. The duty to
bargain does not include the obligation to reach an agreement. x x x.22cräläwvirtualibräry
With the execution of the CBA, bad faith bargaining can no longer be imputed upon any of the
parties thereto. All provisions in the CBA are supposed to have been jointly and voluntarily
incorporated therein by the parties. This is not a case where private respondent exhibited an
indifferent attitude towards collective bargaining because the negotiations were not the
unilateral activity of petitioner union. The CBA is proof enough that private respondent
exerted reasonable effort at good faith bargaining.23cräläwvirtualibräry

 Indeed, the adamant insistence on a bargaining position to the point where the negotiations
reach an impasse does not establish bad faith. Neither can bad faith be inferred from a
partys insistence on the inclusion of a particular substantive provision unless it concerns
trivial matters or is obviously intolerable.24cräläwvirtualibräry
The question as to what are mandatory and what are merely permissive subjects of collective
bargaining is of significance on the right of a party to insist on his position to the point of
stalemate. A party may refuse to enter into a collective bargaining contract unless it includes
a desired provision as to a matter which is a mandatory subject of collective bargaining; but a
refusal to contract unless the agreement covers a matter which is not a mandatory subject is
in substance a refusal to bargain about matters which are mandatory subjects of collective
bargaining; and it is no answer to the charge of refusal to bargain in good faith that the
insistence on the disputed clause was not the sole cause of the failure to agree or that
agreement was not reached with respect to other disputed clauses."25cräläwvirtualibräry
On account of the importance of the economic issue proposed by petitioner union, it could
have refused to bargain and to enter into a CBA with private respondent. On the other hand,
private respondents firm stand against the proposal did not mean that it was bargaining in bad
faith. It had the right to insist on (its) position to the point of stalemate. On the part of
petitioner union, the importance of its proposal dawned on it only after the wage orders were
issued after the CBA had been entered into. Indeed, from the facts of this case, the charge
of bad faith bargaining on the part of private respondent was nothing but a belated reaction
to the implementation of the wage orders that private respondent made in accordance with
law. In other words, petitioner union harbored the notion that its members and the other
employees could have had a better deal in terms of wage increases had it relentlessly pursued
the incorporation in the CBA of its proposal. The inevitable conclusion is that private
respondent did not commit the unfair labor practices of bargaining in bad faith and
discriminating against its employees for implementing the wage orders pursuant to law.
The Court likewise finds unmeritorious petitioner unions contention that by its failure to
grant across-the-board wage increases, private respondent violated the provisions of Section
5, Article VII of the existing CBA26 as well as Article 100 of the Labor Code. The CBA
provision states:
Section 5. The COMPANY agrees to comply with all the applicable provisions of the Labor
Code of the Philippines, as amended, and all other laws, decrees, orders, instructions,
jurisprudence, rules and regulations affecting labor.
Article 100 of the Labor Code on prohibition against elimination or diminution of benefits
provides that (n)othing in this Book shall be construed to eliminate or in any way diminish
supplements, or other employee benefits being enjoyed at the time of promulgation of this
Code.

We agree with the Labor Arbiter and the NLRC that no benefits or privileges previously
enjoyed by petitioner union and the other employees were withdrawn as a result of the
manner by which private respondent implemented the wage orders. Granted that private
respondent had granted an across-the-board increase pursuant to Republic Act No. 6727, that
single instance may not be considered an established company practice. Petitioner unions
argument in this regard is actually tied up with its claim that the implementation of Wage
Orders Nos. 01 and 02 by private respondent resulted in wage distortion.
The issue of whether or not a wage distortion exists is a question of fact27 that is within the
jurisdiction of the quasi-judicial tribunals below. Factual findings of administrative agencies
are accorded respect and even finality in this Court if they are supported by substantial
evidence.28 Thus, in Metropolitan Bank and Trust Company, Inc. v. NLRC, the Court said:
The issue of whether or not a wage distortion exists as a consequence of the grant of a wage
increase to certain employees, we agree, is, by and large, a question of fact the determination
of which is the statutory function of the NLRC. Judicial review of labor cases, we may add,
does not go beyond the evaluation of the sufficiency of the evidence upon which the labor
officials findings rest. As such, the factual findings of the NLRC are generally accorded not
only respect but also finality provided that its decisions are supported by substantial evidence
and devoid of any taint of unfairness or arbitrariness. When, however, the members of the
same labor tribunal are not in accord on those aspects of a case, as in this case, this Court is
well cautioned not to be as so conscious in passing upon the sufficiency of the evidence, let
alone the conclusions derived therefrom.29cräläwvirtualibräry
Unlike in above-cited case where the Decision of the NLRC was not unanimous, the NLRC
Decision in this case which was penned by the dissenter in that case, Presiding Commissioner
Edna Bonto-Perez, unanimously ruled that no wage distortions marred private respondents
implementation of the wage orders. The NLRC said:
On the issue of wage distortion, we are satisfied that there was a meaningful implementation
of Wage Orders Nos. 01 and 02. This debunks the claim that there was wage distortion as
could be shown by the itemized wages implementation quoted above. It should be noted that
this itemization has not been successfully traversed by the appellants. x x
x.30cräläwvirtualibräry
The NLRC then quoted the labor arbiters ruling on wage distortion.
We find no reason to depart from the conclusions of both the labor arbiter and the NLRC. It
is apropos to note, moreover, that petitioners contention on the issue of wage distortion and
the resulting allegation of discrimination against the private respondents employees are
anchored on its dubious position that private respondents promise to grant an across-the-
board increase in government-mandated salary benefits reflected in the Minutes of the
negotiation is an enforceable part of the CBA.

 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.31 The Court is likewise guided by the goal of attaining industrial peace by
the proper application of the law. 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 Courts power to rule beyond the ambit of the law.
WHEREFORE, the instant petition for certiorari is hereby DISMISSED and the questioned
Resolutions of the NLRC AFFIRMED. No costs.
SO ORDERED.

SECOND DIVISION
G.R. No. 135547 : January 23, 2002
GERARDO F. RIVERA, ALFRED A. RAMISO, AMBROCIO PALAD, DENNIS R. ARANAS,
DAVID SORIMA, JR., JORGE P. DELA ROSA, and ISAGANI ALDEA, petitioners, vs.
HON. EDGARDO ESPIRITU in his capacity as Chairman of the PAL Inter-Agency Task
Force created under Administrative Order No. 16; HON. BIENVENIDO LAGUESMA in
his capacity as Secretary of Labor and Employment; PHILIPPINE AIRLINES (PAL),
LUCIO TAN, HENRY SO UY, ANTONIO V. OCAMPO, MANOLO E. AQUINO, JAIME J.
BAUTISTA, and ALEXANDER O. BARRIENTOS, Respondents.
D E C I S I O N
QUISUMBING, J.:
In this special civil action for certiorari and prohibition, petitioners charge public respondents
with grave abuse of discretion amounting to lack or excess of jurisdiction for acts taken in
regard to the enforcement of the agreement dated September 27, 1998, between Philippine
Airlines (PAL) and its union, the PAL Employees Association (PALEA).
The factual antecedents of this case are as follows:
On June 5, 1998, PAL pilots affiliated with the Airline Pilots Association of the Philippines
(ALPAP) went on a three-week strike, causing serious losses to the financially beleaguered
flag carrier. As a result, PALs financial situation went from bad to worse. Faced with

 bankruptcy, PAL adopted a rehabilitation plan and downsized its labor force by more than one-
third.
On July 22, 1998, PALEA went on strike to protest the retrenchment measures adopted by
the airline, which affected 1,899 union members. The strike ended four days later, when PAL
and PALEA agreed to a more systematic reduction in PALs work force and the payment of
separation benefits to all retrenched employees.
On August 28, 1998, then President Joseph E. Estrada issued Administrative Order No. 16
creating an Inter-Agency Task Force (Task Force) to address the problems of the ailing flag
carrier. The Task Force was composed of the Departments of Finance, Labor and Employment,
Foreign Affairs, Transportation and Communication, and Tourism, together with the
Securities and Exchange Commission (SEC). Public respondent Edgardo Espiritu, then the
Secretary of Finance, was designated chairman of the Task Force. It was empowered to
summon all parties concerned for conciliation, mediation (for) the purpose of arriving at a
total and complete solution of the problem.[1 Conciliation meetings were then held between
PAL management and the three unions representing the airlines employees,[2 with the Task
Force as mediator.
On September 4, 1998, PAL management submitted to the Task Force an offer by private
respondent Lucio Tan, Chairman and Chief Executive Officer of PAL, of a plan to transfer
shares of stock to its employees. The pertinent portion of said plan reads:
1. From the issued shares of stock within the group of Mr. Lucio Tans holdings, the ownership
of 60,000 fully paid shares of stock of Philippine Airlines with a par value of PHP5.00/share
will be transferred in favor of each employee of Philippine Airlines in the active payroll as of
September 15, 1998. Should any share-owning employee leave PAL, he/she has the option to
keep the shares or sells (sic) his/her shares to his/her union or other employees currently
employed by PAL.
2. The aggregate shares of stock transferred to PAL employees will allow them three (3)
members to (sic) the PAL Board of Directors. We, thus, become partners in the boardroom
and together, we shall address and find solutions to the wide range of problems besetting
PAL.
3. In order for PAL to attain (a) degree of normalcy while we are tackling its problems, we
would request for a suspension of the Collective Bargaining Agreements (CBAs) for 10 years.
[3cräläwvirtualibräry
On September 10, 1998, the Board of Directors of PALEA voted to accept Tans offer and
requested the Task Forces assistance in implementing the same. Union members, however,
rejected Tans offer. Under intense pressure from PALEA members, the unions directors
subsequently resolved to reject Tans offer.

 On September 17, 1998, PAL informed the Task Force that it was shutting down its
operations effective September 23, 1998, preparatory to liquidating its assets and paying off
its creditors. The airline claimed that given its labor problems, rehabilitation was no longer
feasible, and hence, the airline had no alternative but to close shop.
On September 18, 1998, PALEA sought the intervention of the Office of the President in
immediately convening the parties, the PAL management, PALEA, ALPAP, and FASAP, including
the SEC under the direction of the Inter-Agency Task Force, to prevent the imminent closure
of PAL.[4cräläwvirtualibräry
On September 19, 1998, PALEA informed the Department of Labor and Employment (DOLE)
that it had no objection to a referendum on the Tans offer. 2,799 out of 6,738 PALEA
members cast their votes in the referendum under DOLE supervision held on September
21-22, 1998. Of the votes cast, 1,055 voted in favor of Tans offer while 1,371 rejected it.
On September 23, 1998, PAL ceased its operations and sent notices of termination to its
employees.
Two days later, the PALEA board wrote President Estrada anew, seeking his intervention.
PALEA offered a 10-year moratorium on strikes and similar actions and a waiver of some of
the economic benefits in the existing CBA.[5 Tan, however, rejected this counter-offer.
On September 27, 1998, the PALEA board again wrote the President proposing the following
terms and conditions, subject to ratification by the general membership:
1. Each PAL employee shall be granted 60,000 shares of stock with a par value of P5.00, from
Mr. Lucio Tans shareholdings, with three (3) seats in the PAL Board and an additional seat
from government shares as indicated by His Excellency;
2. Likewise, PALEA shall, as far as practicable, be granted adequate representation in
committees or bodies which deal with matters affecting terms and conditions of employment;
3. To enhance and strengthen labor-management relations, the existing Labor-Management
Coordinating Council shall be reorganized and revitalized, with adequate representation from
both PAL management and PALEA;
4. To assure investors and creditors of industrial peace, PALEA agrees, subject to the
ratification by the general membership, (to) the suspension of the PAL-PALEA CBA for a
period of ten (10) years, provided the following safeguards are in place:
a. PAL shall continue recognizing PALEA as the duly certified bargaining agent of the regular
rank-and-file ground employees of the Company;
b. The union shop/maintenance of membership provision under the PAL-PALEA CBA shall be
respected.
c. No salary deduction, with full medical benefits.

 5. PAL shall grant the benefits under the 26 July 1998 Memorandum of Agreement forged by
and between PAL and PALEA, to those employees who may opt to retire or be separated from
the company.
6. PALEA members who have been retrenched but have not received separation benefits shall
be granted priority in the hiring/rehiring of employees.
7. In the absence of applicable Company rule or regulation, the provisions of the Labor Code
shall apply.[6cräläwvirtualibräry
Among the signatories to the letter were herein petitioners Rivera, Ramiso, and Aranas, as
officers and/or members of the PALEA Board of Directors. PAL management accepted the
PALEA proposal and the necessary referendum was scheduled.
On October 2, 1998, 5,324 PALEA members cast their votes in a DOLE-supervised
referendum. Of the votes cast, 61% were in favor of accepting the PAL-PALEA agreement,
while 34% rejected it.
On October 7, 1998, PAL resumed domestic operations. On the same date, seven officers and
members of PALEA filed this instant petition to annul the September 27, 1998 agreement
entered into between PAL and PALEA on the following grounds:
I
PUBLIC RESPONDENTS GRAVELY ABUSED THEIR DISCRETION AND EXCEEDED THEIR
JURISDICTION IN ACTIVELY PURSUING THE CONCLUSION OF THE PAL-PALEA
AGREEMENT AS THE CONSTITUTIONAL RIGHTS TO SELF-ORGANIZATION AND
COLLECTIVE BARGAINING, BEING FOUNDED ON PUBLIC POLICY, MAY NOT BE WAIVED,
NOR THE WAIVER, RATIFIED.
II
PUBLIC RESPONDENTS GRAVELY ABUSED THEIR DISCRETION AND EXCEEDED THEIR
JURISDICTION IN PRESIDING OVER THE CONCLUSION OF THE PAL-PALEA
AGREEMENT UNDER THREAT OF ABUSIVE EXERCISE OF PALS MANAGEMENT
PREROGATIVE TO CLOSE BUSINESS USED AS SUBTERFUGE FOR UNION-BUSTING.
The issues now for our resolution are:
(1) Is an original action for certiorari and prohibition the proper remedy to annul the PAL-
PALEA agreement of September 27, 1998;
(2) Is the PAL-PALEA agreement of September 27, 1998, stipulating the suspension of the
PAL-PALEA CBA unconstitutional and contrary to public policy?
Anent the first issue, petitioners aver that public respondents as functionaries of the Task
Force, gravely abused their discretion and exceeded their jurisdiction when they actively
pursued and presided over the PAL-PALEA agreement.
Respondents, in turn, argue that the public respondents merely served as conciliators or
mediators, consistent with the mandate of A.O. No. 16 and merely supervised the conduct of

the October 3, 1998 referendum during which the PALEA members ratified the agreement.
Thus, public respondents did not perform any judicial and quasi-judicial act pertaining to
jurisdiction. Furthermore, respondents pray for the dismissal of the petition for violating the
hierarchy of courts doctrine enunciated in People v. Cuaresma[7and Enrile v. Salazar.
[8cräläwvirtualibräry
Petitioners allege grave abuse of discretion under Rule 65 of the 1997 Rules of Civil
Procedure. 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
functions; (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.[9 For writs
of prohibition, the requisites are: (1) the impugned act must be that of a tribunal, corporation,
board, officer, or person, whether exercising judicial, quasi-judicial or ministerial functions;
and (2) there is no plain, speedy, and adequate remedy in the ordinary course of law.
[10cräläwvirtualibräry
The assailed agreement is clearly not the act of a tribunal, board, officer, or person
exercising judicial, quasi-judicial, or ministerial functions. It is not the act of public
respondents Finance Secretary Edgardo Espiritu and Labor Secretary Bienvenido Laguesma as
functionaries of the Task Force. Neither is there a judgment, order, or resolution of either
public respondents involved. Instead, what exists is a contract between a private firm and one
of its labor unions, albeit entered into with the assistance of the Task Force. The first and
second requisites for certiorari and prohibition are therefore not present in this case.
Furthermore, there is available to petitioners a plain, speedy, and adequate remedy in the
ordinary course of law. While the petition is denominated as one for certiorari and prohibition,
its object is actually the nullification of the PAL-PALEA agreement. As such, petitioners
proper remedy is an ordinary civil action for annulment of contract, an action which properly
falls under the jurisdiction of the regional trial courts.[11 Neither certiorari nor prohibition is
the remedy in the present case.
Petitioners further assert that public respondents were partial towards PAL management.
They allegedly pressured the PALEA leaders into accepting the agreement. Petitioners ask
this Court to examine the circumstances that led to the signing of said agreement. This would
involve review of the facts and factual issues raised in a special civil action for certiorari
which is not the function of this Court.[12cräläwvirtualibräry
Nevertheless, considering the prayer of the parties principally we shall look into the
substance of the petition, in the higher interest of justice[13 and in view of the public
interest involved, inasmuch as what is at stake here is industrial peace in the nations premier
airline and flag carrier, a national concern.

On the second issue, petitioners contend that the controverted PAL-PALEA agreement is void
because it abrogated the right of workers to self-organization[14 and their right to collective
bargaining.[15 Petitioners claim that the agreement was not meant merely to suspend the
existing PAL-PALEA CBA, which expires on September 30, 2000, but also to foreclose any
renegotiation or any possibility to forge a new CBA for a decade or up to 2008. It violates the
protection to labor policy[16 laid down by the Constitution.
Article 253-A of the Labor Code reads:
ART. 253-A. Terms of a Collective Bargaining Agreement. Any Collective Bargaining
Agreement that the parties may enter into shall, insofar as the representation aspect is
concerned, be for a term of five (5) years. No petition questioning the majority status of the
incumbent bargaining agent shall be entertained and no certification election shall be
conducted by the Department of Labor and Employment outside of the sixty-day period
immediately before the date of expiry of such five-year term of the Collective Bargaining
Agreement. All other provisions of the Collective Bargaining Agreement shall be renegotiated
not later than three (3) years after its execution. Any agreement on such other provisions of
the Collective Bargaining Agreement entered into within six (6) months from the date of
expiry of the term of such other provisions as fixed in such Collective Bargaining Agreement,
shall retroact to the day immediately following such date. If any such agreement is entered
into beyond six months, the parties shall agree on the duration of the retroactivity thereof.
In case of a deadlock in the renegotiation of the collective bargaining agreement, the parties
may exercise their rights under this Code.
Under this provision, insofar as representation is concerned, a CBA has a term of five years,
while the other provisions, except for representation, may be negotiated not later than three
years after the execution.[17 Petitioners submit that a 10-year CBA suspension is inordinately
long, way beyond the maximum statutory life of a CBA, provided for in Article 253-A. By
agreeing to a 10-year suspension, PALEA, in effect, abdicated the workers constitutional right
to bargain for another CBA at the mandated time.
We find the argument devoid of merit.
A CBA is a contract executed upon request of either the employer or the exclusive bargaining
representative incorporating the agreement reached after negotiations 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.[18 The primary
purpose of a CBA is the stabilization of labor-management relations in order to create a
climate of a sound and stable industrial peace.[19 In construing a CBA, the courts must be
practical and realistic and give due consideration to the context in which it is negotiated and
the purpose which it is intended to serve.[20cräläwvirtualibräry

 The assailed PAL-PALEA agreement was the result of voluntary collective bargaining
negotiations undertaken in the light of the severe financial situation faced by the employer,
with the peculiar and unique intention of not merely promoting industrial peace at PAL, but
preventing the latters closure. We find no conflict between said agreement and Article 253-A
of the Labor Code. Article 253-A has a two-fold purpose. One is to promote industrial
stability and predictability. Inasmuch as the agreement sought to promote industrial peace at
PAL during its rehabilitation, said agreement satisfies the first purpose of Article 253-A. The
other is to assign specific timetables wherein negotiations become a matter of right and
requirement. Nothing in Article 253-A, prohibits the parties from waiving or suspending the
mandatory timetables and agreeing on the remedies to enforce the same.
In the instant case, it was PALEA, as the exclusive bargaining agent of PALs ground
employees, that voluntarily entered into the CBA with PAL. It was also PALEA that voluntarily
opted for the 10-year suspension of the CBA. Either case was the unions exercise of its right
to collective bargaining. The right to free collective bargaining, after all, includes the right to
suspend it.
The acts of public respondents in sanctioning the 10-year suspension of the PAL-PALEA CBA
did not contravene the protection to labor policy of the Constitution. The agreement afforded
full protection to labor; promoted the shared responsibility between workers and employers;
and the exercised voluntary modes in settling disputes, including conciliation to foster
industrial peace."[21cräläwvirtualibräry
Petitioners further allege that the 10-year suspension of the CBA under the PAL-PALEA
agreement virtually installed PALEA as a company union for said period, amounting to unfair
labor practice, in violation of Article 253-A of the Labor Code mandating that an exclusive
bargaining agent serves for five years only.
The questioned proviso of the agreement reads:
a. PAL shall continue recognizing PALEA as the duly certified-bargaining agent of the regular
rank-and-file ground employees of the Company;
Said proviso cannot be construed alone. In construing an instrument with several provisions, a
construction must be adopted as will give effect to all. Under Article 1374 of the Civil Code,
[22 contracts cannot be construed by parts, but clauses must be interpreted in relation to one
another to give effect to the whole. The legal effect of a contract is not determined alone by
any particular provision disconnected from all others, but from the whole read together.
[23The aforesaid provision must be read within the context of the next clause, which
provides:
b. The union shop/maintenance of membership provision under the PAL-PALEA CBA shall be
respected.

 The aforesaid provisions, taken together, clearly show the intent of the parties to maintain
union security during the period of the suspension of the CBA. Its objective is to assure the
continued existence of PALEA during the said period. We are unable to declare the objective
of union security an unfair labor practice. 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
interests vis--vis the employer.[24cräläwvirtualibräry
Petitioners contention that the agreement installs PALEA as a virtual company union is also
untenable. Under Article 248 (d) of the Labor Code, a company union exists when the
employer acts [t]o 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. The case records are bare of any showing of such acts by
PAL.
We also do not agree that the agreement violates the five-year representation limit mandated
by Article 253-A. Under said article, the representation limit for the exclusive bargaining
agent applies only when there is an extant CBA in full force and effect. In the instant case,
the parties agreed to suspend the CBA and put in abeyance the limit on the representation
period.
In sum, we are of the view that the PAL-PALEA agreement dated September 27, 1998, is a
valid exercise of the freedom to contract. Under the principle of inviolability of contracts
guaranteed by the Constitution,[25 the contract must be upheld.
WHEREFORE, there being no grave abuse of discretion shown, the instant petition is
DISMISSED. No pronouncement as to costs.
SO ORDERED.