LABOR LAW REVIEW – 2ND EXAM organization.

Supervisory employees shall not be eligible for

membership in the collective bargaining unit of the rank-and-file
Xandredg Sumpt L. Latog employees but may join, assist or form separate collective bargaining
units and/or legitimate labor organizations of their own. The rank-and-
file union and the supervisors' union operating within the same
I establishment may join the same federation or national union.
RIGHT TO SELF-ORGANIZATION
Article 292(c) provides:
The Right to Self-Organization includes:
(c) Any employee, whether employed for a definite
a. The right to form, join, or assist labor organizations period or not, shall, beginning on his first day of service, be
of their own choosing for purposes of collective considered as an employee for purposes of membership in
bargaining; any labor union.
b. The right not to join any union;
c. The right to vote by 2/3 majority of its general An exception to Article 292(c) is when the position is not
membership to cancel registration of its union in a covered by the union and when there is qualification in the union
meeting called for the purpose; itself.
d. The right to file a petition for cancellation of union
registration and/or de-certification of the union on 2. Government Employees
grounds provided for by law.
a. Constitutional Bases
A. CONSTITUTIONAL PROVISIONS Article IX-B, Section 2(5) provides:

1. Right to Self-Organization in the Private Sector (5) The right to self-organization shall not be denied
to government employees.
a. Constitutional Bases
Article II, Section 18 provides: Article XI, Section 1 also provides:

SECTION 18. The State affirms labor as a primary
social economic force. It shall protect the rights of workers and
promote their welfare.
Article III, Section 8 also provides:
SECTION 8. The right of the people, including those
employed in the public and private sectors, to form unions,
associations, or societies for purposes not contrary to law shall
not be abridged.
Lastly, Article XIII, Section 3 provides:
SECTION 3. The State shall afford full protection to
labor, local and overseas, organized and unorganized, and
promote full employment and equality of employment
opportunities for all.
It shall guarantee the rights of all workers to self-
organization, collective bargaining and negotiations, and
peaceful concerted activities, including the right to strike in
accordance with law. They shall be entitled to security of tenure,
humane conditions of work, and a living wage. They shall also
participate in policy and decision-making processes affecting
their rights and benefits as may be provided by law.
XXX
SECTION 1. Public office is a public trust. Public
officers and employees must at all times be accountable to the
people, serve them with utmost responsibility, integrity, loyalty,
and efficiency, act with patriotism and justice, and lead modest
lives.
b. Labor Code Bases
Article 254. [244] Right of Employees in the Public Service.
Employees of government corporations established under the
Corporation Code shall have the right to organize and to bargain
collectively with their respective employers. All other employees in the
civil service shall have the right to form associations for purposes not
contrary to law.
Article 291. [276] Government Employees. The terms and
conditions of employment of all government employees, including
employees of government-owned and controlled corporations, shall be
governed by the Civil Service Law, rules and regulations. Their
salaries shall be standardized by the National Assembly as provided for
in the New Constitution. However, there shall be no reduction of
existing wages, benefits and other terms and conditions of employment
being enjoyed by them at the time of the adoption of this Code.
Right to Self-Organization vs. Freedom of Association

b. Labor Code Bases Right to Self- Freedom of

Organization Association
Article 253. [243] Coverage and Employees' Right to Self- Basis Statutory: Labor Constitutional: Bill of
Organization. All persons employed in commercial, industrial and Code Rights
agricultural enterprises and in religious, charitable, medical, or Purpose “in whole or in part” Any lawful purpose
educational institutions, whether operating for profit or not, shall have for the purpose of
the right to self-organization and to form, join, or assist labor collective bargaining
organizations of their own choosing for purposes of collective Right involved Economic right; Privileged right
bargaining. Ambulant, intermittent and itinerant workers, self- protected right
employed people, rural workers and those without any definite Juridical Carries with it the Does not carry with it
personality creation of a separate the right to have a
employers may form labor organizations for their mutual aid and
and distinct separate and distinct
protection.
personality by virtue personality
of registration
Article 255. [245] Ineligibility of Managerial Employees to E-Er Relationship Must exist Need not exist
Join any Labor Organization; Right of Supervisory Employees. Abridgement by Can be abridged and Cannot be abridged
Managerial employees are not eligible to join, assist or form any labor State regulated

Page 1 of 117
 Who can exercise Private sector Private and
employees only government
employees
What it is called Labor Workers
Organization/Union Association/Union in
under the Labor Code General
B. COVERAGE
Rule II, Section 2 of DO 40-03 provides:
Section 2. Who may join labor unions and workers’
associations. – All persons employed in commercial, industrial
and agricultural enterprises, including employees of government
owned or controlled corporations without original charters
established under the Corporation Code, as well as employees of
religious, charitable, medical or educational institutions whether
operating for profit or not, shall have the right to self-
organization and to form, join or assist labor unions for purposes
of collective bargaining: provided, however, that supervisory
employees shall not be eligible for membership in a labor union
of the rank-and-file employees but may form, join or assist
separate labor unions of their own. Managerial employees shall
not be eligible to form, join or assist any labor unions for
purposes of collective bargaining.
Alien employees with valid working permits issued
by the Department may exercise the right to self-organization
and join or assist labor unions for purposes of collective
bargaining if they are nationals of a country which grants the
same or similar rights to Filipino workers, as certified by the
Department of Foreign Affairs, or which has ratified either ILO
Convention No. 87 and ILO Convention No. 98.
For purposes of this section, any employee, whether
employed for a definite period or not, shall beginning on the
first day of his/her service, be eligible for membership in any
labor organization.
All other workers, including ambulant, intermittent
and other workers, the self-employed, rural workers and those
without any definite employers may form labor organizations
for their mutual aid and protection and other legitimate purposes
except collective bargaining.”
1. Labor Organization and Its Purpose
Article 219(g) of the Labor Code provides:
(g) "Labor organization" means any union or
association of employees which exists in whole or in part for the
purpose of collective bargaining or of dealing with employers
concerning terms and conditions of employment.
2. In the Private Sector
Article 253. [243] Coverage and Employees' Right to Self-
Organization. All persons employed in commercial, industrial and
agricultural enterprises and in religious, charitable, medical, or
educational institutions, whether operating for profit or not, shall have
the right to self-organization and to form, join, or assist labor
organizations of their own choosing for purposes of collective
bargaining. Ambulant, intermittent and itinerant workers, self-
employed people, rural workers and those without any definite
employers may form labor organizations for their mutual aid and
protection.
Article 254. [244] Right of Employees in the Public Service.
Employees of government corporations established under the
Corporation Code shall have the right to organize and to bargain
collectively with their respective employers. All other employees in the
civil service shall have the right to form associations for purposes not
contrary to law.
Article 255. [245] Ineligibility of Managerial Employees to
Join any Labor Organization; Right of Supervisory Employees.
Managerial employees are not eligible to join, assist or form any labor
Page 2 of 117
organization. Supervisory employees shall not be eligible for
membership in the collective bargaining unit of the rank-and-file
employees but may join, assist or form separate collective bargaining
units and/or legitimate labor organizations of their own. The rank and
file union and the supervisors' union operating within the same
establishment may join the same federation or national union.
The following are eligible to join, form or assist a labor
organization in the private sector:
a. All persons employed in commercial,
industrial and agricultural enterprises;
b. Employees of religious, charitable, medical
or educational institutions, whether
operating for profit or not;
c. Front-line managers, commonly known as
supervisory employees;
There is no prohibition in the law or in the implementing
rules regarding the right of supervisory employees to organize a
labor organization or workers’ association of their own. They are,
however, not allowed to become members of a labor union
composed of rank-and-file employees. This is clear under Article
255 of the Labor Code. In case there is mixed membership of
supervisors and rank-and-file employees in one union, the new rule
enunciated in Article 256 of the Labor Code, unlike in the old law,
is that it cannot be invoked as a ground for the cancellation of the
registration of the union. The employees so improperly included
are automatically deemed removed from the list of members of said
union. In other words, their removal from the said list is by
operation of law.
d. Alien employees;
Article. 284. [269] Prohibition Against Aliens; Exceptions. -
All aliens, natural or juridical, as well as foreign organizations are
strictly prohibited from engaging directly or indirectly in all forms of
trade union activities without prejudice to normal contacts between
Philippine labor unions and recognized international labor centers:
Provided, however, That aliens working in the country with valid
permits issued by the Department of Labor and Employment, may
exercise the right to self-organization and join or assist labor
organizations of their own choosing for purposes of collective
bargaining: Provided, further, That said aliens are nationals of a
country which grants the same or similar rights to Filipino workers.
As a general rule, all aliens, natural or juridical, as well
as foreign organizations are strictly prohibited from engaging
directly or indirectly in all forms of trade union activities without
prejudice to normal contacts between Philippine labor unions and
recognized international labor centers.
For an alien employee to exercise his right to self-
organize, the following requisites should be complied with:
(i) He should have a valid working permit issued
by the DOLE; and
(ii) He is a national of a country which grants the
same or similar rights to Filipino workers or
which has ratified either ILO Convention No.
87 or ILO Convention No. 98, as certified by
the Philippine Department of Foreign Affairs.
e. Working children;
Working children have the same freedom as adults to
join the collective bargaining union of their own choosing in
accordance with existing law. Under PD 603, it is clearly provided
that neither management nor any collective bargaining union shall
threaten or coerce working children to join, continue or withdraw
as members of such union.
However, children cannot be officers of a union or labor
organization.
f. Homeworkers;
Homeworkers have the right to form, join or assist
organizations of their own choosing in accordance with law. The
registration of homeworkers’ organizations or associations
following the requirements prescribed by law will vest legal
personality thereto.
Household workers or domestic workers are excluded.
Homeworkers Household workers
Place of work Home of employee Home of the
employer
Classification Industrial worker Non-industrial
History Product of Industrial Antedates Industrial
Revolution Revolution
DOLE Inspection Subject to Not subject to
and Visitorial
Powers
Right to self- Yes No
organization
g. Employees of cooperatives;
Members of a cooperative have no right to form or join
labor organizations for purposes of collective bargaining for being
themselves co-owners of the cooperative. This prohibition covers
employees of the cooperative who are at the same time members
thereof [Cooperative Rural Bank v. Ferrer-Calleja]. However,
insofar as the cooperative’s employees who are not members or co-
owners thereof are concerned, they are entitled to exercise their
right to self-organization and collective bargaining as guaranteed in
the Constitution and existing laws. It is the fact of ownership of the
cooperative and not involvement in the management thereof which
disqualifies a member from joining any labor organization within
the cooperative. But employee-members of a cooperative may
withdraw as members of the cooperative for purposes of joining a
labor union [Central negros Electric Corporation v. Secretary of
Labor].
h. Employees of legitimate contractors – not
with the principals but with the
contractors.
An employee of a legitimate job contractor is entitled to
all the rights and privileges due a regular employee as provided in
the Labor Code, such as the right to self-organization, collective
bargaining and peaceful concerted activities, including the right to
strike. But this right cannot be exercised and invoked against the
principal but only against the independent contractor which
employed them, except if there is labor-only contracting.
i. Employees of GOCCs without original
charters established under the Corporation
Code; Charter Test
Under the present state of the law, the test in determining
whether a government–owned or controlled corporation is subject
to the Civil Service Law is the manner of its creation such that
government corporations created by special charter are subject to
its provisions while those incorporated under the general
Corporation Law are not within its coverage.
However, the Philippine Society for Prevention of
Cruelty to Animals, GOCCs with original charters severally liable
under Article 106 and 107 of the Labor Code, and the Philippine
National Red Cross are within the coverage of the Labor Code,
despite having original charters.
Page 3 of 117
Philippine Society for Prevention of Cruelty to Animals v.
Commission on Audit
Held: The petitioner is correct in stating that the charter test is
predicated, at best, on the legal regime established by the 1935
Constitution, Section 7, Article XIII, which states:
Sec. 7.  The National Assembly shall not, except by general law,
provide for the formation, organization, or regulation of private
corporations, unless such corporations are owned or controlled by the
Government or any subdivision or instrumentality thereof.
The foregoing proscription has been carried over to the 1973
and the 1987 Constitutions.  Section 16 of Article XII of the present
Constitution provides:
Sec. 16.  The Congress shall not, except by general law, provide
for the formation, organization, or regulation of private corporations. 
Government-owned or controlled corporations may be created or
established by special charters in the interest of the common good and
subject to the test of economic viability.
Section 16 is essentially a re-enactment of Section 7 of Article
XVI of the 1935 Constitution and Section 4 of Article XIV of the 1973
Constitution.
During the formulation of the 1935 Constitution, the Committee
on Franchises recommended the foregoing proscription to prevent the
pressure of special interests upon the lawmaking body in the creation of
corporations or in the regulation of the same. To permit the lawmaking
body by special law to provide for the organization, formation, or
regulation of private corporations would be in effect to offer to it the
temptation in many cases to favor certain groups, to the prejudice of others
or to the prejudice of the interests of the country.
And since the underpinnings of the charter test had been
introduced by the 1935 Constitution and not earlier, it follows that the test
cannot apply to the petitioner, which was incorporated by virtue of Act No.
1285, enacted on January 19, 1905. Settled is the rule that laws in general
have no retroactive effect, unless the contrary is provided. All statutes are
to be construed as having only a prospective operation, unless the purpose
and intention of the legislature to give them a retrospective effect is
expressly declared or is necessarily implied from the language used. In case
of doubt, the doubt must be resolved against the retrospective effect.
There are a few exceptions.  Statutes can be given retroactive
effect in the following cases: (1) when the law itself so expressly provides;
(2) in case of remedial statutes; (3) in case of curative statutes; (4) in case
of laws interpreting others; and (5) in case of laws creating new rights.
None of the exceptions is present in the instant case.
The general principle of prospectivity of the law likewise
applies to Act No. 1459, otherwise known as the Corporation Law, which
had been enacted by virtue of the plenary powers of the Philippine
Commission on March 1, 1906, a little over a year after January 19, 1905,
the time the petitioner emerged as a juridical entity.  Even the Corporation
Law respects the rights and powers of juridical entities organized
beforehand, viz:
SEC. 75.  Any corporation or sociedad anonima formed,
organized, and existing under the laws  of the  Philippine  Islands and  
lawfully  transacting business   in   the Philippine Islands on the date of the
passage of this Act, shall be subject to the provisions hereof so far as such
provisions  may  be applicable  and  shall be entitled   at  its option either
to continue business as such corporation or to reform and organize under
and by virtue of the provisions of this Act, transferring all corporate
interests to the new corporation which, if a stock corporation, is authorized
to issue its shares of stock at par to the stockholders or members of the old
corporation according to their interests.  (Emphasis supplied).
As pointed out by the OSG, both the 1935 and 1987
Constitutions contain transitory provisions maintaining all laws issued not
inconsistent therewith until amended, modified or repealed.
In a legal regime where the charter test doctrine cannot be
applied, the mere fact that a corporation has been created by virtue of a
special law does not necessarily qualify it as a public corporation.
What then is the nature of the petitioner as a corporate entity? 
What legal regime governs its rights, powers, and duties?
As stated, at the time the petitioner was formed, the applicable
law was the Philippine Bill of 1902, and, emphatically, as also stated above,
no proscription similar to the charter test can be found therein.
The textual foundation of the charter test, which placed a
limitation on the power of the legislature, first appeared in the 1935
Constitution.  However, the petitioner was incorporated in 1905 by virtue of
Act No. 1258, a law antedating the Corporation Law (Act No. 1459) by a
year, and the 1935 Constitution, by thirty years.  There being neither a
general law on the formation and organization of private corporations nor a
restriction on the legislature to create private corporations by direct
legislation, the Philippine Commission at that moment in history was well
within its powers in 1905 to constitute the petitioner as a private juridical
entity.
Time and again the Court must caution even the most brilliant
scholars of the law and all constitutional historians on the danger of
imposing legal concepts of a later date on facts of an earlier date.
The amendments introduced by C.A. No. 148 made it clear that
the petitioner was a private corporation and not an agency of the
government.  This was evident in Executive Order No. 63, issued by then
President of the Philippines Manuel L. Quezon, declaring that the
revocation of the powers of the petitioner to appoint agents with powers of
arrest "corrected a serious defect" in one of the laws existing in the statute
books.
3. In the Public Sector
Article 254. Right of Employees in the Public Service.
Employees of government corporations established under the
Corporation Code shall have the right to organize and to bargain
collectively with their respective employers. All other employees in the
civil service shall have the right to form associations for purposes not
contrary to law,
In the public sector, all rank-and-file employees of all
branches, subdivisions, instrumentalities, and agencies of
government, including government-owned and/or controlled
corporations with original charters, can form, join or assist labor
organizations called “employees organizations” of their own
choosing.
As to collective bargaining, it is the legislature or, in
proper cases, the administrative heads of government and not the
collective bargaining process nor the concessions wrung by labor
unions from management that determine how much the workers in
government-owned or controlled corporations may receive in terms
of salaries, 13th-month pay, and other conditions or terms of
employment. There are government institutions which can afford to
pay two weeks, three weeks, or even 13th-month salaries to their
personnel from their budgetary appropriations. However, these
payments must be pursuant to law or regulation [Alliance of
Government Workers v. Minister of Labor].
The general rule in the past and up to the present is that
"the terms and conditions of employment in the Government,
including any political subdivision or instrumentality thereof are
governed by law" (Section 11, the Industrial Peace Act, R.A. No.
875, as amended and Article 277, the Labor Code, P.D. No. 442, as
amended). Since the terms and conditions of government
employment are fixed by law, government workers cannot use the
same weapons employed by workers in the private sector to secure
concessions from their employers. The principle behind labor
unionism in private industry is that industrial peace cannot be
secured through compulsion by law. Relations between private
employers and their employees rest on an essentially voluntary
basis. Subject to the minimum requirements of wage laws and
other labor and welfare legislation, the terms and conditions of
employment in the unionized private sector are settled through the
process of collective bargaining. In government employment,
however, it is the legislature and, where properly given delegated
power, the administrative heads of government which fix the terms
and conditions of employment. And this is effected through statutes
or administrative circulars, rules, and regulations, not through
collective bargaining agreements [Ibid].
In GSIS v. Villanueva, it was held that the right to self-
organization is not limited to private employees and encompasses
all workers in both the public and private sectors, as shown by the
Page 4 of 117
clear declaration in Article IX(B), Section 2(5) that "the right to
self organization shall not be denied to government employees."
Article III, Section 8 of the Bill of Rights likewise states, "[t]he
right of the people, including those employed in the public and
private sectors, to form unions, associations, or societies for
purposes not contrary to law shall not be abridged."
While the right to self-organization is absolute, the right
of government employees to collective bargaining and negotiation
is subject to limitations. Collective bargaining is a series of
negotiations between an employer and a representative of the
employees to regulate the various aspects of the employer-
employee relationship such as working hours, working conditions,
benefits, economic provisions, and others [Ibid].
Social Security System Employees Association v. Court
of Appeals explains that instead of a collective bargaining
agreement or negotiation, government employees must course their
petitions for a change in the terms and conditions of their
employment through the Congress for the issuance of new laws,
rules, or regulations to that effect: Government employees may,
therefore, through their unions or associations, either petition the
Congress for the betterment of the terms and conditions of
employment which are within the ambit of legislation or negotiate
with the appropriate government agencies for the improvement of
those which are not fixed by law.
In PCSO v. Chairperson Pulido-Tan, et al., the
Commission on Audit disallowed the monthly cost of living
allowance being received by Philippine Charity Sweepstakes
Office's officials and employees. This Court held that the
Philippine Charity Sweepstakes Office's charter does not allow its
Board complete liberty to set the salaries and benefits of its
officials and employees. This Court emphasized that as a
government-owned and controlled corporation, the Philippine
Charity Sweepstakes Office is covered by the compensation and
position standards issued by the Department of Budget and
Management and applicable laws. PCSO underscored that the
power of a government-owned or controlled corporation to fix
salaries or allowances of its employees is subject to and must
conform to the compensation and classification standards laid
down by applicable law: Upon the effectivity of R.A. No. 6758,
GOCCs like the PCSO are included in the Compensation and
Position Classification System because Section 16 of the law
repeals all laws, decrees, executive orders, corporate charters, and
other issuances or parts thereof, that exempt agencies from the
coverage of the System, or that authorize and fix position
classification, salaries, pay rates or allowances of specified
positions, or groups of officials and employees or of agencies,
which are inconsistent with the System, including
the proviso under Section 2 and Section 16 of P.D. No. 985.
4. Labor Organization Only For Mutual Aid And
Protection and Not For Collective Bargaining
Purposes
Article 253. [243] Coverage and Employees' Right to Self-
Organization. All persons employed in commercial, industrial and
agricultural enterprises and in religious, charitable, medical, or
educational institutions, whether operating for profit or not, shall have
the right to self-organization and to form, join, or assist labor
organizations of their own choosing for purposes of collective
bargaining. Ambulant, intermittent and itinerant workers, self-
employed people, rural workers and those without any definite
employers may form labor organizations for their mutual aid and
protection.
This refers to the right to engage in group action,
provided it is peaceful, to support the organization's objective
which is not necessarily collective bargaining but, simply, to aid
and protect its members. But this kind of group action must be
differentiated from strike which, because it is work stoppage, must
observe certain regulations; otherwise, the strike may be declared
illegal and its leaders may be thrown out of their jobs.
However, nothing in the foregoing implementing rules
which provides that workers, with definite employers, cannot form
or join a workers' association for mutual aid and protection. Section
2 thereof even broadens the coverage of workers who can form or
join a workers'... association. Thus, the Court agrees with
Samahan's argument that the right to form a workers' association is
not exclusive to ambulant, intermittent and itinerant workers. The
option to form or join a union or a workers' association lies with
the workers themselves, and whether... they have definite
employers or not [Samahan v. BLR].
C. PERSONS WHO DON’T HAVE THE RIGHT TO SELF-
ORGANIZATION
1. Managerial Employees
Article 255. [245] Ineligibility of Managerial Employees to
Join any Labor Organization; Right of Supervisory Employees.
Managerial employees are not eligible to join, assist or form any labor
organization. Supervisory employees shall not be eligible for
membership in the collective bargaining unit of the rank-and-file
employees but may join, assist or form separate collective bargaining
units and/or legitimate labor organizations of their own. The rank-and-
file union and the supervisors' union operating within the same
establishment may join the same federation or national union.
Article 219(m) provides:
(m) "Managerial employee" is one who is vested
with the powers or prerogatives to lay down and execute
management policies and/or to hire, transfer, suspend, lay-off,
recall, discharge, assign or discipline employees. Supervisory
employees are those who, in the interest of the employer,
effectively recommend such managerial actions if the exercise
of such authority is not merely routinary or clerical in nature but
requires the use of independent judgment. All employees not
falling within any of the above definitions are considered rank-
and-file employees for purposes of this Book
Article 255 is constitutional
Although the definition of "supervisory employees"
seems to have been unduly restricted to the last phrase of the
definition in the Industrial Peace Act, the legal significance given
to the phrase "effectively recommends" remains the same. In fact,
the distinction between top and middle managers, who set
management policy, and front-line supervisors, who are merely
responsible for ensuring that such policies are carried out by the
rank and file, is articulated in the present definition. When read in
relation to this definition in Art. 212(m), it will be seen that Art.
245 faithfully carries out the intent of the Constitutional
Commission in framing Art. III, 8 of the fundamental law [United
Pepsi-Cola v. Laguesma].
Nor is the guarantee of organizational right in Art. III, 8
infringed by a ban against managerial employees forming a union.  (iii) First-Line Management
The right guaranteed in Art. III, 8 " is subject to the condition that
its exercise should be for purposes not contrary to law."  organization at which individuals are responsible for the work of
Rational Basis of prohibiting managerial employees
In the case of Art. 245, there is a rational basis for
prohibiting managerial employees from forming or joining labor
organizations.  large office. First-level managers are often called supervisors.
As Justice Davide, Jr., himself a constitutional
commissioner, said in his ponencia in Philips Industrial
Development, Inc. v. NLRC: 
Page 5 of 117
In the first place, all these employees, with the exception
of the service engineers and the sales force personnel, are confidential
employees. Their classification as such is not seriously disputed by
PEO-FFW; the five (5) previous CBAs between PIDI and PEO-FFW
explicitly considered them as confidential employees. By the very
nature of their functions, they assist and act in a confidential capacity
to, or have access to confidential matters of, persons who exercise
managerial functions in the field of labor relations. As such, the
rationale behind the ineligibility of managerial employees to form,
assist or joint a labor union equally applies to them.
In Bulletin Publishing
Co., Inc. v. Hon. Augusto Sanchez, this Court elaborated on this
rationale, thus:
. . . The rationale for this inhibition has been stated to
be, because if these managerial employees would belong to or
be affiliated with a Union, the latter might not be assured of
their loyalty to the Union in view of evident conflict of interests.
The Union can also become company-dominated with the
presence of managerial employees in Union membership.  
To be sure, the Court in Philips Industrial was
dealing with the right of confidential employees to organize. But
the same reason for denying them the right to organize justifies
even more the ban on managerial employees from forming
unions. After all, those who qualify as top or middle managers
are executives who receive from their employers information
that not only is confidential but also is not generally available to
the public, or to their competitors, or to other employees. It is
hardly necessary to point out that to say that the first sentence of
Art. 245 is unconstitutional would be to contradict the decision
in that case.
a. Types of Managerial Employees
There are three (3) types of managerial employees for
purposes of determining whether they could exercise their right to
self-organization.
(i) Top Management
Top management is composed of a comparatively small
group of executives. It is responsible for the overall management of
the organization. It establishes operating policies and guides the
organization’s interactions with its environment. Typical titles of
top managers are CEO, President, or Senior VP. Actual titles vary
from one organization to another and are not always a reliable
guide to membership in the management classification.
(ii) Middle Management
Middle management refers to more than one level in an
organization. Middle managers direct the activities of other
managers and sometimes also those of operating employees. The
middle managers’ principal responsibilities are to direct the
activities that implement their organization’s policies and to
balance the demands of their superiors with the capacities of their
subordinates. A plant manager in an electronic firm is an example
of a middle manager.
First-line management is the lowest level in an
others. First-line managers direct operating employees only; they
do not supervise other managers. Examples are the “foreman” or
production supervisor in a manufacturing plant, the technical
supervisor in a research department, and the clerical supervisor in a
b. Supervisory Employee Rule
 Supervisors may organize their own union but are
prohibited from joining the rank-and-file union. The reason for the
segregation of supervisory and rank-and-file employees with
respect to the exercise of their right to self-organization is the
difference in interests. Supervisory employees are more closely
identified with the employer than with the rank-and-file employees.
If supervisory and rank-and-file employees in a company are
allowed to form a single union, the conflicting interests of these
groups impair their relationship and adversely affect discipline,
collective bargaining, and strikes. These consequences can obtain
not only in cases where supervisory and rank-and-file employees in
the same company belonging to a single union but also where
unions formed independently by supervisory and rank-and-file
employees of a company are allowed to affiliate with the same
national federation [La Salle University v. Laguesma].
Managerial Employees vs. Supervisory Employees
Managerial Supervisory
Have the power to decide and do Have the power only to
managerial acts recommend managerial acts such
as laying down policy, hiring, and
dismissal of employees and the
like
Not allowed to join any labor Allowed to join a supervisory
organization union but not the union of rank-
and-file employees and vice versa
Under Labor Standards, a supervisory employee is a
managerial employee. In Labor Relations, however, a managerial
employee is not a supervisory employee in the sense that he cannot
join any labor organization because supervisory employees can join
unions different from rank-and-file employees.
PMTI v. Ferrer-Calleja
Held: Members of the union are rank and file and not
managerial employees notwithstanding their title or nomenclature in
position because:
They do not have the power to lay down and execute
management policies as they are given ready policies merely to execute and
standard practices to observe;
They do not have the power to hire, transfer, suspend, lay-off,
recall, discharge, assign or discipline employees but only to recommend for
such actions as the power rests upon the personnel manager; and
They do not have the power to effectively recommend any
managerial actions as their recommendations have to pass through the
department manager for review, the personnel manager for attestation and
general manager/president for final actions.
The recent amendments to the Labor Code contain separate
definitions for managerial and supervisory employees. Section 4 of
Republic Act No. 6715 states that:
"Managerial Employee"- is one who is vested with powers or
prerogatives to lay down and execute management policies and/or to hire,
transfer, suspend, lay-off, recall, discharge, assign or discipline employees.
“Supervisory Employees”- are those who, in the interest of the
employer, effectively recommend such management actions if the exercise
of such authority is not merely routinary or clerical in nature but requires
the use of independent judgment.
All employees not falling within any of the above definitions are
considered rank and file employees for purposes of this Book. Section 18
retains the provision on the ineligibility of managerial employees to join
any labor organization. Supervisory employees shall not be eligible for
membership in a labor organization of the rank-and-file employees but may
join, assist or form separate labor organizations of their own.
United Pepsi Cola v. Laguesma
Held: The Court with the finding of the Secretary of Labor that
the route managers are managerial employees as this is supported by
substantial evidence
The Court now finds that the job evaluation made by the
Secretary of Labor is indeed supported by substantial evidence. The nature
Page 6 of 117
of the job of route managers is given in a four-page pamphlet, prepared by
the company, called "Route Manager Position Description.
The route managers as compared to the supervisors in this case
Unlike supervisors who basically merely direct operating
employees in line with set tasks assigned to them, route managers are
responsible for the success of the company's main line of business through
management of their respective sales teams. Such management necessarily
involves the planning, direction, operation and evaluation of their
individual teams and areas which the work of supervisors does not entail.
The route managers cannot thus possibly be classified as mere
supervisors because their work does not only involve, but goes far beyond,
the simple direction or supervision of operating employees to accomplish
objectives set by those above them. They are not mere functionaries with
simple oversight functions but business administrators in their own right.
Thus, the route managers in this case are managerial employees.
c. Separation of Unions Doctrine
RA 9481 amended Article 255 by adding the phrase:
“The rank-and-file union and the supervisors’ union operating
within the same establishment may join the same federation or
national union.” By reason of this amendment, the so-called
“separation of unions doctrine” enunciated in Atlas Litographic
Services v. Laguesma, and in other related cases no longer applies.
This doctrine prohibits the situation where the supervisory union
and the rank-and-file union operating within the same
establishment are both affiliated with one and the same federation
because of the possible conflict of interest which may arise in the
areas, inter alia, of discipline, collective bargaining and strike.
Thus, if the intent of the law is to avoid a situation where
supervisors would merge with the rank-and-file or where the
supervisors’ labor union would represent conflicting interests, then
a local supervisors’ union should not be allowed to affiliate with
the federation with which the rank-and-file union is also affiliated
and where the federation actively participates in the union activities
in the company. The intent of the law is clear especially where the
supervisors will be co-mingling with the rank-and-file employees
whom they directly supervise in their own bargaining unit [Pepsi
Cola v. Secretary of Labor].
The law now explicitly allows the more extreme situation
of a rank-and-file union and a supervisors’ union operating within
the same establishment joining one and the same federation or
national union as affiliates thereof.
d. Effect of Inclusion as Members of Employees
Outside Bargaining Unit
Article 256. [245-A] Effect of Inclusion as Members of
Employees Outside the Bargaining Unit. - The inclusion as union
members of employees outside the bargaining unit shall not be a
ground for the cancellation of the registration of the union. Said
employees are automatically deemed removed from the list of
membership of said union.
The inclusion in a union of disqualified employees is not
among the grounds for cancellation, unless such inclusion is due to
misrepresentation, false statement or fraud under the circumstances
enumerated in Sections (a) and (c) of Article 247 of the Labor
Code [Air Philippines v. Bureau of Labor Relations].
Clearly then, for the purpose of de-certifying a union, it
is not enough to establish that the rank-and-file union includes
ineligible employees in its membership. Pursuant to Article 247 (a)
and (c) of the Labor Code, it must be shown that there was
misrepresentation, false statement or fraud in connection with the
adoption or ratification of the constitution and by-laws or
amendments thereto, the minutes of ratification, or in connection
with the election of officers, minutes of the election of officers, the
list of voters, or failure to submit these documents together with the
list of the newly elected-appointed officers and their postal
addresses to the BLR [Ibid].
e. Managerial Employees in the Public Sector
Executive Order No. 180
Sec. 1. This Executive Order applies to all employees of all
branches, subdivisions, instrumentalities, and agencies, of the Government,
including government-owned or controlled corporations with original
charters. For this purpose, employees, covered by this Executive Order
shall be referred to as "government employees".
Sec. 2. All government employees can form, join or assist
employees' organizations of their own choosing for the furtherance and
protection of their interests. They can also form, in conjunction with
appropriate government authorities, labor-management committees, works
councils and other forms of workers' participation schemes to achieve the
same objectives.
Sec. 3. High-level employees whose functions are normally
considered as policy-making or managerial or whose duties are of a highly
confidential nature shall not be eligible to join the organization of rank-and-
file government employees.
Sec. 4. The Executive Order shall not apply to the members of
the Armed Forces of the Philippines, including police officers, policemen,
firemen and jail guards.
Sec. 15. A Public Sector Labor Management Council,
hereinafter referred to as the Council, is hereby constituted to be composed
of the following:
1) Chairman, Civil Service Commission Chairman
2) Secretary, Department of Labor and Employment Vice
Chairman
3) Secretary, Department of Finance Member
4) Secretary, Department of Justice Member
5) Secretary, Department of Budget and Management Member
The Council shall implement and administer the provisions of
this Executive Order. For this purpose, the Council shall promulgate the
necessary rules and regulations to implement this Executive Order.
Sec. 16. The Civil Service and labor laws and procedures,
whenever applicable, shall be followed in the resolution of complaints,
grievances and cases involving government employees. In case any dispute
remains unresolved after exhausting all the available remedies under
existing laws and procedures, the parties may jointly refer the dispute to the
Council, for appropriate action.
2. Confidential Employees
Within the context of labor relations, confidential
employees are those who meet the following criteria:
a. They assist or act in a confidential capacity;
b. To persons or officers who formulate, determine,
and effectuate management policies specifically in
the field of labor relations.
The two (2) criteria are cumulative and both must be met
if an employee is to be considered a confidential employee that
would deprive him of his right to form, join, or assist a labor
organization [TPMAB v. Asia Brewery].
A confidential employee may be a rank-and-file or
supervisory employee but because in the normal course of his
duties, he becomes aware of management policies relating to labor
relations, he is not allowed to assist, form or join a rank-and-file
union or supervisory union, as the case may be. To allow him to
join a union would give rise to a potential conflict of interest.
Management should not be required to handle labor relations
matters through employees who are represented by the union with
which the company is required to deal and who, in the normal
performance of their duties, may obtain advance information on the
company’sn position with regard to collective bargaining
negotiations, the disposition of grievances, or other labor relations
matter [San Miguel Supervisors and Exempt Employees Union v.
Laguesma].
Page 7 of 117
However, the mere access of an employee to confidential
labor relations information which is merely incidental to his duties
and, therefore, knowledge thereof is not necessary in the
performance of said duties, does not make such employee a
confidential employee. If access to confidential labor relations
information is to be a factor in the determination of an employee’s
confidential status, such information must relate to the employer’s
labor relations policies. Therefore, access to information which is
regarded by the employer to be confidential from the business
standpoint, such as financial information or technical trade secrets,
will not render an employee a confidential employee under this
rule. An employee may not be excluded from an appropriate
bargaining unit merely because he has access to confidential
information concerning the employer’s internal business operations
which is not related to the field of labor relations [NATU-Republic
Planters Bank Supervisors v. Secretary].
Confidential employees cannot be classified as rank and
file. As previously discussed, the nature of employment of
confidential employees is quite distinct from the rank and file, thus,
warranting a separate category. Excluding confidential employees
from the rank and file bargaining unit, therefore, is not tantamount
to discrimination [Metrolab v. Confesor].
Sugbuanon Rural Bank v. Laguesma
Held: Petitioner contends that it has only 5 officers running its
day-to-day affairs. They assist in confidential capacities and have complete
access to the bank's confidential data. They form the core of the bank's
management team. Petitioner explains that:
"...Specifically: (1) the Head or the Loans Department initially
approves the loan applications before they are passed on to the Board for
confirmation. As such, no loan application is even considered by the Board
and approved by petitioner without his stamp of approval based upon his
interview of the applicant and determination of his (applicant's) credit
standing and financial capacity. The same holds true with respect to
renewals or restructuring of loan accounts. He himself determines what
account should be collected, whether extrajudicially or judicially, and
settles the problem or complaints of borrowers regarding their accounts;
"(2) the Cashier is one of the approving officers and authorized
signatories of petitioner. He approves the opening of accounts, withdrawals
and encashment, and acceptance of check deposits, He deals with other
banks and, in the absence of the regular Manager, manages the entire office
or branch and approves disbursements of funds for expenses; and
"(3) the Accountant, who heads the Accounting Department, is
also one of the authorized signatories of petitioner and, in the absence of
the Manager or Cashier, acts as substitute approving officer and assumes
the management of the entire office. She handles the financial reports and
reviews the debit/credit tickets submitted by the other departments."
Petitioner's explanation, however, does not state who among the
employees has access to information specifically relating to its labor
relations policies. Even Cashier Patricia Maluya, who serves as the
secretary of the bank's Board of Directors may not be so classified. True,
the board of directors is responsible for corporate policies, the exercise of
corporate powers, and the general management of the business and affairs
of the corporation. As secretary of the bank's governing body, Patricia
Maluya serves the bank's management, but could not be deemed to have
access to confidential information specifically relating to SRBI's labor
relations policies, absent a clear showing on this matter. Thus, while
petitioner's explanation confirms the regular duties of the concerned
employees, it shows nothing about any duties specifically connected to
labor relations.
Southern Philippines Federation of Labor v. Ferrer-
Calleja
Held: As regards the employees in the confidential payroll,
the petitioner has not shown that the nature of their jobs is classified as
managerial except for its allegation that they are considered by management
as occupying managerial positions and highly confidential.  Neither can
payment or non-payment of union dues be the determining factor of
whether the challenged employees should be excluded from the bargaining
unit since the union shop provision in the CBA applies only to newly hired
employees but not to members of the bargaining unit who were not
members of the union at the time of the signing of the CBA.  It is, therefore,
not impossible for employees to be members of the bargaining unit even
though they are non-union members or not paying union dues.
Filoil Refinery v. Filoil Supervisory & Confidential
Employees Association
Held: The other principal ground of petitioner's appeal
questioning the confidential employees' inclusion in the supervisors'
bargaining unit is equally untenable.  Respondent court correctly held that
since the confidential employees are very few in number and are by practice
and tradition identified with the supervisors in their role as representatives
of management vis-a-vis the rank and file employees, such identity of
interest has allowed their inclusion in the bargaining unit of supervisors-
managers for purposes of collective bargaining in turn as employees in
relation to the company as their employer.
No arbitrariness or grave abuse of discretion can be attributed
against respondent court's allowing the inclusion of the confidential
employees in the supervisors' association for as admitted by petitioner
itself, supra, the supervisors and confidential employees enjoy its trust and
confidence.  This identity of interest logically calls for their inclusion in the
same bargaining unit and at the same time fulfills the law's objective of
insuring to them the full benefit of their right to self-organization and to
collective bargaining, which could hardly be accomplished if the
respondent association's membership were to be broken up into five
separate ineffective tiny units, as urged by petitioner.
Doctrine of Necessary Implication
The doctrine of necessary implication is the legal basis
for the ineligibility of a confidential employee to join a union. The
disqualification of managerial and confidential employees from
joining a bargaining unit of rank-and-file employees or supervisory
employees is already well-entrenched in jurisprudence. While
Article 255 of the Labor Code limits the ineligibility to join, assist,
or form a labor organization to managerial employees,
jurisprudence has extended this prohibition to confidential
employees or those who, by reason of their positions or nature of
work, are required to assist or act in a fiduciary manner to
managerial employees, and, therefore, are likewise privy to
sensitive and highly confidential records [Standard Chartered
Bank Employees Union v. Standard Chartered Bank].
Article 255 of the Labor Code does not directly prohibit
confidential employees from engaging in union activities. Their
disqualification proceeds merely from the application of this
doctrine because what Article 255 singles out as ineligible to join,
assist or form any labor organization are managerial employees. By
necessary implication, confidential employees are similarly
disqualified. This doctrine states that what is implied in a statute is
as much a part thereof as that which is expressed [Chua v. Civil
Service Commission].
NATU-Republic Planters Bank Supervisors v.
Secretary
Held: As regards the other claim of respondent Bank that
Branch Managers/OICs, Cashiers and Controllers are confidential
employees, having control, custody and/or access to confidential matters,
e.g., the branch's cash position, statements of financial condition, vault
combination, cash codes for telegraphic transfers, demand drafts and other
negotiable instruments, pursuant to Sec. 1166.4 of the Central Bank Manual
regarding joint custody, this claim is not even disputed by petitioner. A
confidential employee is one entrusted with confidence on delicate matters,
or with the custody, handling, or care and protection of the employer's
property. While Art. 245 of the Labor Code singles out managerial
employees as ineligible to join, assist or form any labor organization, under
the doctrine of necessary implication, confidential employees are similarly
disqualified. This doctrine states that what is implied in a statute is as much
a part thereof as that which is expressed, as elucidated in several cases the
latest of which is Chua v. Civil Service Commission where we said:
No statute can be enacted that can provide all the details
involved in its application. There is always an omission that may not meet a
particular situation. What is thought, at the time of enactment, to be an all-
Page 8 of 117
embracing legislation may be inadequate to provide for the unfolding
events of the future. So-called gaps in the law develop as the law is
enforced. One of the rules of statutory construction used to fill in the gap is
the doctrine of necessary implication x x x x Every statute is understood, by
implication, to contain all such provisions as may be necessary to effectuate
its object and purpose, or to make effective rights, powers, privileges or
jurisdiction which it grants, including all such collateral and subsidiary
consequences as may be fairly and logically inferred from its
terms. Ex  necessitate legis x x x x
In applying the doctrine of necessary implication, we took into
consideration the rationale behind the disqualification of managerial
employees expressed in Bulletin Publishing Corporation v. Sanchez thus:
"x x x if these managerial employees would belong to or be affiliated with a
Union, the latter might not be assured of their loyalty to the Union in view
of evident conflict of interests. The Union can also become company-
dominated with the presence of managerial employees in Union
membership." Stated differently, in the collective bargaining process,
managerial employees are supposed to be on the side of the employer, to
act as its representatives, and to see to it that its interests are well protected.
The employer is not assured of such protection if these employees
themselves are union members. Collective bargaining in such a situation
can become one-sided. It is the same reason that impelled this Court to
consider the position of confidential employees as included in the
disqualification found in Art. 245 as if the disqualification of confidential
employees were written in the provision. If confidential employees could
unionize in order to bargain for advantages for themselves, then they could
be governed by their own motives rather than the interest of the employers.
Moreover, unionization of confidential employees for the purpose of
collective bargaining would mean the extension of the law to persons or
individuals who are supposed to act "in the interest of" the employers. It is
not farfetched that in the course of collective bargaining, they might
jeopardize that interest which they are duty-bound to protect. Along the
same line of reasoning we held in Golden Farms, Inc. v. Ferrer-
Calleja reiterated in Philips Industrial Development, Inc. v. NLRC, that
"confidential employees such as accounting personnel, radio and telegraph
operators who, having access to confidential information, may become the
source of undue advantage. Said employee(s) may act as spy or spies of
either party to a collective bargaining agreement."
In fine, only the Branch Managers/OICs, Cashiers and
Controllers of respondent Bank, being confidential employees, are
disqualified from joining or assisting petitioner Union, or joining, assisting
or forming any other labor organization. But this ruling should be
understood to apply only to the present case based on the evidence of the
parties, as well as to those similarly situated. It should not be understood in
any way to apply to banks in general.
3. Members-Employees of Cooperatives
The right to collective bargaining is not available to an
employee of a cooperative who at the same time is a member and
co-owner thereof. With respect, however, to employees who are
neither members nor co-owners of the cooperative they are entitled
to exercise the rights to self-organization, collective bargaining and
negotiation as mandated by the 1987 Constitution and applicable
statutes. It is the fact of ownership of the cooperative, and not
involvement in the management thereof, which disqualifies a
member from joining any labor organization within the
cooperative. Thus, irrespective of the degree of their participation
in the actual management of the cooperative, all members thereof
cannot form, assist or join a labor organization for the purpose of
collective bargaining [BENECO v. Calleja].
Membership in the cooperative; distinguished from
stockholders of ordinary corporations
While cooperatives may exercise some of the rights and
privileges given to ordinary corporations provided under existing
laws, such cooperatives enjoy other privileges not granted to the
latter [Cooperative Rural Bank of Davao City v. Ferrer-Calleja].
Similarly, members of cooperatives have rights and obligations
different from those of stockholders of ordinary corporations. The
Court held that: A cooperative . . . is by its nature different from an
ordinary business concern being run either by persons,
partnerships, or corporations. Its owners and/or members are the
ones who run and operate the business while the others are its
employees. As above stated, irrespective of the number of shares
owned by each member they are entitled to cast one vote each in
deciding upon the affairs of the cooperative. Their share capital
earn limited interest. They enjoy special privileges as — exemption
from income tax and sales taxes, preferential light to supply their
products to State agencies and even exemption from the minimum
wage laws. An employee therefore of such a cooperative who is a
member and co-owner thereof cannot invoke the right to collective
bargaining for certainly an owner cannot bargain with himself or
his co-owners [Ibid].
II
STEPS IN EXERCISING THE RIGHT TO SELF-
ORGANIZATION
A. EMPLOYER-EMPLOYEE RELATIONSHIP
The question of whether employer-employee relationship
exists is a primordial consideration before extending labor benefits
under the workmen's compensation, social security, medicare,
termination pay and labor relations law. It is important in the
determination of who shall be included in a proposed bargaining
unit because, it is the sine qua non, the fundamental and essential
condition that a bargaining unit be composed of employees. Failure
to establish this juridical relationship between the union members
and the employer affects the legality of the union itself. It means
the ineligibility of the union members to present a petition for
certification election as well as to vote therein [Singer Sewing v.
Drilon].
If the union members are not employees, no right to
organize for purposes of bargaining, nor to be certified as
bargaining agent can be recognized. Since the persons involved are
not employees of the company, we held that they are not entitled to
the constitutional right to join or form a labor organization for
purposes of collective bargaining [Republic v. Laguesma].
In Hijo Resources v. Mejares, the Court is tasked to
resolve the issue of whether the Labor Arbiter, in the illegal
dismissal case, is bound by the ruling of the Med-Arbiter regarding
the existence or non-existence of employer-employee relationship
between the parties in the certification election case.  To dismiss
the illegal dismissal case filed before the Labor Arbiter on the basis
of the pronouncement of the Med-Arbiter in the certification
election case that there was no employer-employee relationship
between the parties, which the respondent union could not even
appeal to the DOLE Secretary because of the dismissal of its
members, would be tantamount to denying due process to the
complainants in the illegal dismissal case. This, we cannot allow.
B. DETERMINATION OF APPROPRIATE OR
COLLECTIVE BARGAINING UNIT (ABU/CBU
As defined in Department Order No. 40-03 which is now
the revised Book V of the Rules Implementing the Labor Code,
"bargaining unit" refers to a group of employees sharing mutual
interests within a given employer unit, comprised of all or less than
all of the entire body of employees in the employer unit or any
specific occupational or geographical grouping within such
employer unit.
It may also refer to a group of employees of a given
employer, comprise of all or less than all of the entire body of
employees, which the collective interests of all the employees,
consistent with equity to the employer, indicated to be best suited
to serve reciprocal rights and duties of the parties under the
collective bargaining provisions of the law [Belyca Corporation v.
Ferrer-Calleja].
Page 9 of 117
An employee does not become a member of a bargaining
unit. He becomes a member of the union. His position falls under
the positions covered by the bargaining unit being represented by
the union. If the employee does not belong to that community of
interest represented by the bargaining unit, the union has the
freedom to reject him. The union may, however, accept him but he
is not covered by the benefits of the CBA.
There is no hard and fast rule in how the Med-Arbiter
should determine an appropriate ( not most appropriate) bargaining
unit. The test whether the designation of a bargaining unit is
appropriate is whether it will best assure to all employees the
exercise of their collective bargaining rights. There should be a
community of interest which should be reflected in groups having
substantial similarity of work and duties or similarity of
compensation and working conditions, among other criteria
[Democratic Labor Association v. Cebu Stevedoring].
In International School Alliance of Educators v.
Quisumbing, there are certain tests which may be used in
determining the appropriate collective bargaining unit, to wit:
a. Community or mutuality of interest doctrine;
b. Globe doctrine;
c. Collective bargaining history doctrine; and
d. Employment status doctrine
Inclusion of excluded employees
In DLSU v. DLSU Employees Association, it was held:
The Court agrees with the Solicitor General that the
express exclusion of the computer operators and discipline officers
from the bargaining unit of rank-and-file employees in the 1986
collective bargaining agreement does not bar any re-negotiation for
the future inclusion of the said employees in the bargaining unit.
During the freedom period, the parties may not only renew the
existing collective bargaining agreement but may also propose and
discuss modifications or amendments thereto. With regard to the
alleged confidential nature of the said employees’ functions, after a
careful consideration of the pleadings filed before this Court, we rule
that the said computer operators and discipline officers are not
confidential employees. As carefully examined by the Solicitor
General, the service record of a computer operator reveals that his
duties are basically clerical and non-confidential in nature. As to the
discipline officers, we agree with the voluntary arbitrator that based
on the nature of their duties, they are not confidential employees and
should therefore be included in the bargaining unit of rank-and-file
employees.
The Court also affirms the findings of the voluntary
arbitrator that the employees of the College of St. Benilde should be
excluded from the bargaining unit of the rank-and-file employees of
Dela Salle University, because the two educational institutions have
their own separate juridical personality and no sufficient evidence was
shown to justify the piercing of the veil of corporate fiction.
1. Substantial Mutual Interests Rule
Under this doctrine, the employees sought to be
represented by the collective bargaining agent must have
community or mutuality of interest in terms of employment and
working conditions as evinced by the type of work they perform. It
is characterized by similarity of employment status, same duties
and responsibilities and substantially similar compensation and
working conditions [San Miguel Corporation Employees Union v.
Confesor].
In San Miguel Corporation v. Laguesma, the Supreme
Court applied this principle in the petition of the union which seeks
to represent the sales personnel in the various Magnolia sales office
in Northern Luzon. Petitioner took the position that each sales
office should constitute one bargaining unit. In disagreeing this
proposition of petitioner, the Court said: “What greatly militates
against this position is the meager number of sales personnel in
each of the Magnolia sales office in Northern Luzon. Even the
bargaining unit sought to be represented by respondent union in the
entire Northern Luzon sales area consists only of approximately 55
employees. Surely, it would not be for the best interest of these
employees if they would further be fractionalized. The adage ‘there
is strength in number’ is the very rationale underlying the
formation of a labor union.”
In San Miguel Corporation Supervisors and Exempt
Employees Union v. Laguesma, the fact that the 3 plants
comprising the bargaining unit are located in 3 different places was
declared immaterial. Geographical location can be completely
disregarded if the communal or mutual interests of the employees
are not sacrificed. The distance among the 3 plants is not
productive of insurmountable difficulties in the administration of
union affairs. Neither are there regional differences that are likely
to impede the operations of a single bargaining representative.
In University of the Philippines v. Ferrer-Calleja, all
non-academic rank-and-file employees of UP Diliman, Quezon
City, Padre Faura, Manila, Los Banos, Laguna and the Visayas
were allowed to participate in a certification election as one
bargaining unit.
San Miguel Corporation v. San Miguel Supervisors
Held: Thus, applying the ruling to the present case, the Court
affirms the finding of the CA that there should be only one bargaining unit
for
the employees in Cabuyao, San Fernando, and Otis 25 of
Magnolia Poultry Products Plant involved in "dressed" chicken processing
and Magnolia Poultry Farms engaged in "live" chicken operations. Certain
factors, such as specific line of work, working conditions, location of work,
mode of compensation, and other relevant conditions do not affect or
impede their commonality of interest. Although they seem separate and
distinct from each other, the specific tasks of each division are actually
interrelated and there exists mutuality of interests which warrants the
formation of a single bargaining unit.
Petitioner asserts that the CA erred in not excluding the position
of Payroll Master in the definition of a confidential employee and, thus,
prays that the said position and all other positions with access to salary and
compensation data be excluded from the bargaining unit.
This argument must fail. Confidential employees are defined as
those who (1) assist or act in a confidential capacity, in regard (2) to
persons who formulate, determine, and effectuate management policies in
the field of labor relations.26 The two criteria are cumulative, and both must
be met if an employee is to be considered a confidential employee - that is,
the confidential relationship must exist between the employee and his
supervisor, and the supervisor must handle the prescribed responsibilities
relating to labor relations. The exclusion from bargaining units of
employees who, in the normal course of their duties, become aware of
management policies relating to labor relations is a principal objective
sought to be accomplished by the "confidential employee rule."
San Miguel Corporation Employees Union v. Confesor
Held: 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 operate 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 in its letter addressed to the employees dated August 13, 1991:
x x x 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 businesses 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.
xxx
Page 10 of 117
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:
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.
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. We elucidate:
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 that:
[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.
xxx
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 x x.
x x 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) x x.
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:
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).
University of the Philippines v. Ferrer-Calleja
Held: When first confronted with the task of determining the
proper collective bargaining unit in a particular controversy, the Court had
perforce to rely on American jurisprudence. In Democratic Labor
Association vs. Cebu Stevedoring Company, Inc., decided on February 28,
1958, the Court observed that "the issue of how to determine the proper
collective bargaining unit and what unit would be appropriate to be the
collective bargaining agency" * * * "is novel in this jurisdiction; however,
American precedents on the matter abound ** (to which resort may be had)
considering that our present Magna Carta has been patterned after the
American law on the subject." Said the Court:
" * * Under these precedents, there 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. * *.
" * * * * * *
"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. * *.
Page 11 of 117
" * * 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). * *. "
The Court further explained that "(t)he test of the grouping is
community or mutuality of interests. And this is so because ‘the basic test
of an asserted bargaining unit's acceptability is whether or not it is
fundamentally the combination which will best assure to all employees the
exercise of their collective bargaining rights’ (Rothenberg on Labor
Relations, 490)." Hence, in that case, the Court upheld the trial court's
conclusion that two separate bargaining units should be formed, one
consisting of regular and permanent employees and another consisting of
casual laborers or stevedores.
Since then, the "community or mutuality of interests" test has
provided the standard in determining the proper constituency of a collective
bargaining unit. In Alhambra Cigar & Cigarette Manufacturing Company,
et al. vs. Alhambra Employees' Association (PAFLU), 107 Phil. 23, the
Court, noting that the employees in the administrative, sales and dispensary
departments of a cigar and cigarette manufacturing firm perform work
which have nothing to do with production and maintenance, unlike those in
the raw lead (malalasi), cigar, cigarette, packing (precintera) and
engineering and garage departments, authorized the formation of the former
set of employees into a separate collective bargaining unit. The ruling in
the Democratic Labor Association case, supra, was reiterated in Philippine
Land-Air-Sea Labor Union vs. Court of Industrial Relations, 110 Phil. 176,
where casual employees were barred from joining the union of the
permanent and regular employees.
Applying the same "community or mutuality of interests" test,
but resulting in the formation of only one collective bargaining unit is the
case of National Association of Free Trade Unions vs. Mainit Lumber
Development Company Workers Union-United Lumber and General
Workers of the Phils., G.R. No. 79526, December 21, 1990, 192 SCRA
598. In said case, the Court ordered the formation of a single bargaining
unit consisting of the Sawmill Division in Butuan City and the Logging
Division in Zapanta Valley, Kitcharao, Agusan Norte of the Mainit Lumber
Development Company. The Court reasoned:
"Certainly, there is a mutuality of interest among the employees
of the Sawmill Division and the Logging Division. Their functions mesh
with one another. One group needs the other in the same way that the
company needs them both. There may be difference as to the nature of their
individual assignments but the distinctions are not enough to warrant the
formation of a separate bargaining unit."
In the case at bar, the University employees may, as already
suggested, quite easily be categorized into two general classes: one, the
group composed of employees whose functions are non-academic, i.e.,
janitors, messengers, typists, clerks, receptionists, carpenters, electricians,
grounds-keepers, chauffeurs, mechanics, plumbers; and two, the group
made up of those performing academic functions, i.e., full professors,
associate professors, assistant professors, instructors -- who may be judges
or government executives -- and research, extension and professorial
staff. Not much reflection is needed to perceive that the community or
mutuality of interests which justifies the formation of a single collective
bargaining unit is wanting between the academic and non-academic
personnel of the university. It would seem obvious that teachers would find
very little in common with the University clerks and other non-academic
employees as regards responsibilities and functions, working conditions,
compensation rates, social life and interests, skills and intellectual pursuits,
cultural activities, etc. On the contrary, the dichotomy of interests, the
dissimilarity in the nature of the work and duties as well as in the
compensation and working conditions of the academic and non-academic
personnel dictate the separation of these two categories of employees for
purposes of collective bargaining. The formation of two separate bargaining
units, the first consisting of the rank-and-file non-academic personnel, and
the second, of the rank-and-file academic employees, is the set-up that will
best assure to all the employees the exercise of their collective bargaining
rights. These special circumstances, i.e., the dichotomy of interests and
concerns as well as the dissimilarity in the nature and conditions of work,
wages and compensation between the academic and non-academic
personnel, bring the case at bar within the exception contemplated in
Section 9 of Executive Order No. 180. It was grave abuse of discretion on
the part of the Labor Relations Director to have ruled otherwise, ignoring
plain and patent realities.
 Belyca Corporation v. Ferrer-Calleja
Held: Hence, still later following the substantial-mutual interest
test, the Court ruled that there is a substantial difference between the work
performed by musicians and that of other persons who participate in the
production of a film which suffice to show that they constitute a proper
bargaining unit. (LVN Pictures, Inc. v. Philippine Musicians Guild 1 SCRA
132 (1961]).
Coming back to the case at bar, it is beyond question that the
employees of the livestock and agro division of petitioner corporation
perform work entirely different from those performed by employees in the
supermarts and cinema. Among others, the noted difference are: their
working conditions, hours of work, rates of pay, including the categories of
their positions and employment status. As stated by petitioner corporation
in its position paper, due to the nature of the business in which its livestock-
agro division is engaged very few of its employees in the division are
permanent, the overwhelming majority of which are seasonal and casual
and not regular employees (Rollo, p. 26). Definitely, they have very little in
common with the employees of the supermarts and cinemas. To lump all
the employees of petitioner in its integrated business concerns cannot result
in an efficacious bargaining unit comprised of constituents enjoying a
community or mutuality of interest. Undeniably, the rank and file
employees of the livestock-agro division fully constitute a bargaining unit
that satisfies both requirements of classification according to employment
status and of the substantial, similarity of work and duties which will
ultimately assure its members the exercise of their collective bargaining
rights.
2. Globe Doctrine
This principle is based on the will of the employees. It is
called Globe doctrine because this principle was first enunciated in
the United States case of Globe Machine and Stamping Co., where
it was ruled, in defining the appropriate bargaining unit, that in a
case where the company’s production workers can be considered
either as a single bargaining unit appropriate for purposes of
collective bargaining or as three (3) separate and distinct
bargaining units, the determining factor is the desire of the
workers themselves consequently, a certification election should be
held separately to choose which representative union will be
chosen by the workers [Mechanical Department Labor Union v.
CIR].
In International School Alliance of Educators v.
Quisumbing, the High Court ruled that foreign-hired teachers do
not belong to the bargaining unit of the local hires because the
former have not indicated their intention to be grouped with the
latter for purposes of collective bargaining. Moreover, the
collective bargaining history of the school also shows that these
groups were always treated separately.
3. Collective Bargaining History Doctrine
This principle puts premium to the prior collective
bargaining history and affinity of the employees in determining the
appropriate bargaining unit. However, the existence of a prior
collective bargaining history has been held as neither decisive nor
conclusive in the determination of what constitutes an appropriate
bargaining unit [San Miguel Corporation v. Laguesma].
It was ruled in National Association of Free Trade
Unions v. Mainit Lumber Development Company Workers Union
that there is mutuality of interest among the workers in the sawmill
division and logging division as to justify their formation of a
single bargaining unit. This holds true despite the history of said
two divisions being treated as separate units and notwithstanding
their geographical distance from each other.
In San Miguel v. Laguesma, despite the collective
bargaining history of having a separate bargaining unit for each
sales office, the Supreme Court applied the principle of mutuality
or commonality of interests in holding that the appropriate
bargaining unit is comprised of all the sales force in the whole of
Northern Luzon.
Page 12 of 117
4. Employment Status Doctrine
The determination of the appropriate bargaining unit
based on the employment status of the employees is considered an
acceptable mode. For instance, casual employees and those
employed on a day-to-day basis do not have the mutuality or
community of interest with regular and permanent employees.
Hence, their inclusion in the bargaining unit composed of the latter
is not justified [Philippine Land-Air-Sea Labor Union v. CIR].
International School Alliance of Educators v. Quisumbing
Held: A bargaining unit  is "a group of employees of a given
employer, comprised of all or less than all of the entire body of employees,
consistent with equity to the employer indicate to be the best suited to serve
the reciprocal rights and duties of the parties under the collective bargaining
provisions of the law." The factors in determining the appropriate collective
bargaining unit are (1) the will of the employees (Globe Doctrine); (2)
affinity and unity of the employees' interest, such as substantial similarity
of work and duties, or similarity of compensation and working conditions
(Substantial Mutual Interests Rule); (3) prior collective bargaining history;
and (4) similarity of employment status. The basic test of an asserted
bargaining unit's acceptability is whether or not it is fundamentally the
combination which will best assure to all employees the exercise of their
collective bargaining rights.
It does not appear that foreign-hires have indicated their
intention to be grouped together with local-hires for purposes of collective
bargaining. The collective bargaining history in the School also shows that
these groups were always treated separately. Foreign-hires have limited
tenure; local-hires enjoy security of tenure. Although foreign-hires perform
similar functions under the same working conditions as the local-hires,
foreign-hires are accorded certain benefits not granted to local-hires. These
benefits, such as housing, transportation, shipping costs, taxes, and home
leave travel allowance, are reasonably related to their status as foreign-
hires, and justify the exclusion of the former from the latter. To include
foreign-hires in a bargaining unit with local-hires would not assure either
group the exercise of their respective collective bargaining rights.
C. FORMATION OF LABOR ORGANIZATIONS
1. Definition of Terms
a. Union
"Company union" means any labor organization whose
formation, function or administration has been assisted by any act
defined as unfair labor practice by this Code [Article 219].
“Union” refers to any labor organization in the private
sector organized for collective bargaining and for other legitimate
purposes [IRR].
b. Labor Organization
"Labor organization" means any union or association of
employees which exists in whole or in part for the purpose of
collective bargaining or of dealing with employers concerning
terms and conditions of employment [Article 219].
"Labor organization" means any union or association of
employees in the private sector which exists in whole or in part for
the purpose of collective bargaining, mutual aid, interest,
cooperation, protection, or other lawful purposes [IRR].
c. Legitimate Labor Organization (LLO)
"Legitimate labor organization" means any labor
organization duly registered with the Department of Labor and
Employment, and includes any branch or local thereof. [Article
219].
"Legitimate labor organization" means any labor
organization in the private sector registered or reported with the
Department of Labor and Employment [IRR].
d. Workers’ Association
 “Workers’ Association” refers to an association of
workers organized for the mutual aid and protection of its members (iii) Trade Union Center
or for any other purpose other than collective bargaining [IRR]. Any group registered national unions or federations
organized for mutual aid and protection of its members, assisting in
e. Legitimate Workers’ Association such collective bargaining or participating in the formulation of
“Legitimate Workers’ Association” refers to an social and employment policies, standards and programs, duly
association of workers organized for the mutual aid and protection registered with the DOLE.
of its members or for any other purpose other than collective
bargaining registered with the Department [IRR]. Electromat v. Lagunzad
Held: We resolve the core issue of whether D.O. 40-03 is a
Labor Organization vs. Workers’ Association valid exercise of the rule-making power of the DOLE.
We rule in the affirmative. Earlier in Progressive
As to Labor Workers’ Development Corporation v. Secretary, Department of Labor and
Employment, the Court encountered a similar question on the validity of the
Organization Association
old Section 3, Rule II, Book  V of the Rules Implementing the Labor
Existence of Er-E Necessary Not necessary
Relationship Code which stated:
Purpose In whole or in part, For mutual aid and Union affiliation; direct membership with a national union. -
for collective protection The affiliate of a labor federation or national union may be a local or
bargaining chapter thereof or an independently registered union.
Formation or Can be registered as Registration is a) The labor federation or national union concerned shall issue a
registration an independent union provided under the charter certificate indicating the creation or establishment of a local or
or become a IRR chapter, copy of which shall be submitted to the Bureau of Labor Relations
chartered local under within thirty (30) days from issuance of such charter certificate.
the Labor Code xxxx
Right to file a Can file Cannot file e)  The local or chapter of a labor federation or national union
Petition for shall have and maintain a constitution and by-laws, set of officers and
Certification books of accounts. For reporting purposes, the procedure governing the
Election reporting of independently registered unions, federations or national unions
Basis Right to Self- Constitutional right shall be observed.
Organization of Freedom of
Interpreting these provisions of the old rules, the Court said that
Association
by force of law,  the local or chapter of a labor federation or national union
becomes a legitimate labor organization upon compliance with Section 3,
2. Classifications Rule II, Book V of the Rules Implementing the Labor Code, the only
requirement being the submission of the charter certificate to the BLR.
a. As to How Formed Further, the Court noted that Section 3 omitted several requirements which
are otherwise required for union registration, as follows:
(i) Independent Union 1) The requirement that the application for registration
This refers to a labor organization operating at the must be signed by at least 20% of the employees in the appropriate
bargaining unit;
enterprise level that acquired legal personality through independent
2) The submission of officers' addresses, principal
registration via issuance of Certificate of Registration [Article address of the labor organization, the minutes of organization meetings and
240]. the list of the workers who participated in such meetings;
3) The submission of the minutes of the adoption or
(ii) Chartered Local ratification of the constitution and by-laws and the list of the members who
This refers to a labor organization in the private sector participated in it.
operating at the enterprise level that acquired legal personality Notwithstanding these omissions, the Court upheld the
through the issuance of a charter certificate by a duly registered government's implementing policy expressed in the old rules when it
declared in Progressive Development -
federation or national union, and reported to the national office
Undoubtedly, the intent of the law in imposing lesser
[IRR]. requirements in the case of a branch or local of a registered federation or
national union is to encourage the affiliation of a local union with a
(iii) Affiliate federation or national union in order to increase the local union's bargaining
This refers to (1) an independent union affiliated with a powers respecting terms and conditions of labor.
federation, national union or (2) a chartered local which was It was this same Section 3 of the old rules that D.O. 40-03 fine-
subsequently granted independent registration but did not tuned when the DOLE amended the rules on Book V of the Labor Code,
disaffiliate from its federation, reported to the Regional Office and thereby modifying the government's implementing policy on the
registration of locals or chapters of labor federations or national unions.
the Bureau [IRR].
The company now assails this particular amendment as an invalid exercise
of the DOLE's rule-making power.
b. As to Components We disagree. As in the case of D.O. 9 (which introduced the
above-cited Section 3 of the old rules) in Progressive Development, D.O.
(i) Federation 40-03 represents an expression of the government's implementing policy on
A group of legitimate labor unions in a private trade unionism.  It builds upon the old rules by further simplifying the
establishment organized for collective bargaining or for dealing requirements for the establishment of locals or chapters. As in D.O. 9, we
with employers concerning terms and conditions of employment see nothing contrary to the law or the Constitution in the adoption by the
Secretary of Labor and Employment of D.O. 40-03 as this department order
for their member unions registered with the BLR.
is consistent with the intent of the government to encourage the affiliation
of a local union with a federation or national union to enhance the local's
(ii) National Union (Labor Center) bargaining power. If changes were made at all, these were those made to
A group of legitimate labor unions in a private recognize the distinctions made in the law itself between federations and
establishment organized not for collective bargaining but for their local chapters, and independent unions; local chapters seemingly have
participating in the formulation of social and employment policies, lesser requirements because they and their members are deemed to be direct
standards and programs, registered with the BLR.

Page 13 of 117
members of the federation to which they are affiliated, which federations
are the ones subject to the strict registration requirements of the law.
In any case, the local union in the present case has more than
satisfied the requirements the petitioner complains about; specifically, the
union has submitted: (1) copies of the ratified CBL; (2) the minutes of the
CBL's adoption and ratification; (3) the minutes of the organizational
meetings; (4) the names and addresses of the union officers; (5) the list of
union members; (6) the list of rank-and-file employees in the company; (7)
a certification of non-existence of a CBA in the company; (8) the resolution
of affiliation with WASTO and the latter's acceptance; and (9) their Charter
Certificate. These submissions were properly verified as required by the
rules. In sum, the petitioner has no factual basis for questioning the union's
registration, as even the requirements for registration as an independent
local have been substantially complied with.
We, thus, find no compelling justification to nullify D.O. 40-03.
3. Registration
a. Requirements
Article 240. [234] Requirements of Registration. - A
federation, national union or industry or trade union center or an
independent union shall acquire legal personality and shall be entitled
to the rights and privileges granted by law to legitimate labor
organizations upon issuance of the certificate of registration based on
the following requirements:
(a) Fifty pesos (P50.00) registration fee;
(b) The names of its officers, their addresses, the principal
address of the labor organization, the minutes of the organizational
meetings and the list of the workers who participated in such meetings;
(c) In case the applicant is an independent union, the names
of all its members comprising at least twenty percent (20%) of all the
employees in the bargaining unit where it seeks to operate;
(d) If the applicant union has been in existence for one or
more years, copies of its annual financial reports; and
(e) Four copies of the constitution and by-laws of the
applicant union, minutes of its adoption or ratification, and the list of
the members who participated in it.
The certification and attestation requirements are
preventive measures against the commission of fraud. They
likewise afford a measure of protection to unsuspecting employees
who may be lured into joining unscrupulous or fly-by-night unions
whose sole purpose is to control union funds or to use the union for
dubious ends [Progressive Development Corporation v. Secretary].
b. Effect of Registration
Rule IV, Section 8 of the IRR provides:
Section 8. Effect of Registration. – The labor union
or workers’ association shall be deemed registered and vested
with legal personality on the date of the issuance of its
certificate of registration or certificate of creation of chartered
local.
Such legal personality may be questioned only
through an independent petition for cancellation of union
registration in accordance with Rule XIV of these Rules, and not
by way of collateral attack in petition for certification election
proceedings under Rule VIII.
After a certificate of registration is issued to a union, its
legal personality cannot be subject to collateral attack. It may be
questioned only in an independent petition for cancellation The
inclusion in a union of disqualified employees is not among the
grounds for cancellation, unless such inclusion is due to
misrepresentation, false statement or fraud under the
circumstances enumerated [Tagaytay Highlands v. Tagaytay
Highlands Employees Union].
Registration under the Corporation Code
Page 14 of 117
A labor organization may be organized under the
Corporation Law as a nonstock corporation and issued a certificate
of incorporation by the Securities and Exchange Commission. But
such incorporation has only the effect of giving to it juridical
personality before regular courts of justice. Such incorporation
does not grant the rights and privileges of a legitimate labor
organization.
Cebu Seamen’s Association, Inc. v. Ferrer-Calleja
Held: The determinative issue in this case is who is entitled to
the collection and custody of the union dues? Cebu Seamen's Association
headed by Gabayoyo or Seamen's Association of the Philippines headed by
Nacua.
As stated in the findings of fact in the questioned resolution of
Director Pura Ferrer-Calleja on October 23, 1950, a group of deck officers
organized the Cebu Seamen's Association, Inc., (CSAI), a non-stock
corporation and registered it with the Securities and Exchange Commission
(SEC). The same group registered the organization with the Bureau of
Labor Relations (BLR) as Seamen's Association of the Philippines (SAPI).
It is the registration of the organization with the BLR and not with the SEC
which made it a legitimate labor organization with rights and privileges
granted under the Labor Code.
We gathered from the records that CSAI, the corporation was
already inoperational before the controversy in this case arose. In fact, on
August 24, 1984, the SEC ordered the CSAI to show cause why its
certificate of registration should not be revoked for continuous inoperation
(p. 343, Rollo). There is nothing in the records which would show that
CSAI answered said show-cause order.
Also, before the controversy, private respondent Dominica
Nacua was elected president of the labor union, SAPI. It had an existing
CBA with Aboitiz Shipping Corporation. Before the end of the term of
private respondent Nacua, some members of the union which included
Domingo Machacon and petitioner Manuel Gabayoyo showed signs of
discontentment with the leadership of Nacua. This break-away group
revived the moribund corporation and issued an undated resolution
expelling Nacua from the association (pp. 58-59, Rollo). Sometime in
February, 1987, it held its own election of officers supervised by the
Securities and Exchange Commission. It also filed a case of estafa against
Nacua sometime in May, 1986 (p. 52, Rollo).
The expulsion of Nacua from the corporation, of which she
denied being a member, has however, not affected her membership with the
labor union. In fact, in the elections of officers for 1987-1989, she was re-
elected as the president of the labor union. In this connection, We cannot
agree with the contention of Gabayoyo that Nacua was already expelled
from the union. Whatever acts their group had done in the corporation do
not bind the labor union. Moreover, Gabayoyo cannot claim leadership of
the labor group by virtue of his having been elected as a president of the
dormant corporation CSAI.
Under the principles of administrative law in force in this
jurisdiction, decisions of administrative officers shall not be disturbed by
courts, except when the former acted without or in excess of their
jurisdiction or with grave abuse of discretion.
Public respondent Bureau of Labor Relations correctly ruled on
the basis of the evidence presented by the parties that SAPI, the legitimate
labor union, registered with its office, is not the same association as CSAI,
the corporation, insofar as their rights under the Labor Code are concerned.
Hence, the former and not the latter association is entitled to the release and
custody of union fees with Aboitiz Shipping and other shipping companies
with whom it had an existing CBA. As correctly held by public respondent:
"It is undisputed from the records that the election of the so
called set of officers headed by Manuel Gabayoyo was conducted under the
supervision of the SEC, presumably in accordance with its constitution and
by-laws as well as the articles of incorporation of respondent CSAI, and the
Corporation Code. That had been so precisely on the honest belief of the
participants therein that they were acting in their capacity as members of
the said corporation. That being the case, the aforementioned set of officers
is of the respondent corporation and not of the complainant union.
It follows, then, that any proceedings and actions taken by said set of
officers can not, in any manner, affect the union and its members.
"On the other hand, we rule and so hold that the other set of
officers headed by Dominica C. Nacua is the lawful set of officers of SAPI
and therefore, is entitled to the release and custody of the union dues as
well as the agency fees, if any, there be. A record check with the Labor
Organizations (LOD), this Bureau, shows that SAPI has submitted to it for
file the list of this new set of officers, in compliance with the second
paragraph of Article 242 (c) of the Labor Code. This list sufficiently
sustains the view that said officers were lawfully elected, in the absence of
clear and convincing proof to the contrary." (pp. 9-10, Rollo)
c. Where to File Registration
Applications for registration of independent labor unions,
chartered locals, workers’ associations shall be filed with the
Regional Office where the applicant principally operates. It shall be
processed by the Labor Relations Division at the Regional Office.
Applications for registration of federations, national
unions, or workers’ associations operating in more than one region
shall be filed with the Bureau or the Regional offices, but shall be
processed by the Bureau.
d. Requirements for Registration for
Independent Labor Unions
The application for registration of an independent labor
union shall be accompanied by the following documents:
(i) The name of the applicant labor union, the
principal address, the name of its officers and
their respective addresses, approximate number of
employees in the bargaining unit where it seeks to
operate, with a statement that it is not reported as
a chartered local of any federation or national
union;
(ii) The minutes of the organizational meeting(s) and
the list of employees who participated in the said
meeting(s);
(iii) The name of all its members comprising at least
20% of the employees in the bargaining unit;
(iv) The annual financial reports if the applicant has
been in existence for one or more years, unless it
has not collected any amount from the members,
in which case a statement to this effect shall be
included in the application;
(v) The applicant’s constitution and by-laws, minutes
of its adoption or ratification, and the list of the
members who participated in it. The list of
ratifying members shall be dispensed with where
the constitution and by-laws was ratified or
adopted during the organizational meeting. In
such a case, the factual circumstances of the
ratification shall be recorded in the minutes of the
organizational meeting(s).
It does not appear in the Labor Code that the attendees in
the organizational meeting must comprise 20% of the employees in
the bargaining unit. In fact, even the Implementing Rules and
Regulations of the Labor Code does not so provide. It only requires
the names of all its members comprising at least twenty percent
(20%) of all the employees in the bargaining unit where it seeks to
operate. Clearly, the 20% minimum requirement pertains to the
employees’ membership in the union and not to the list of workers
who participated in the organizational meeting. In Takata v. BLR,
the total number of employees in the bargaining unit was 396, and
20% of which was about 79. Respondent submitted a document
entitled "Pangalan ng Mga Kasapi ng Unyon" showing the names
of 119 employees as union members, thus respondent sufficiently
complied even beyond the 20% minimum membership
requirement. Respondent also submitted the attendance sheet of the
organizational meeting which contained the names and signatures
of the 68 union members who attended the meeting. Considering
that there are 119 union members which are more than 20% of all
the employees of the bargaining unit, and since the law does not
provide for the required number of members to attend the
organizational meeting, the 68 attendees which comprised at least
Page 15 of 117
the majority of the 119 union members would already constitute a
quorum for the meeting to proceed and to validly ratify the
Constitution and By-laws of the union. There is, therefore, no basis
for petitioner to contend that grounds exist for the cancellation of
respondent's union registration. For fraud and misrepresentation to
be grounds for cancellation of union registration under Article 240
of the Labor Code, the nature of the fraud and misrepresentation
must be grave and compelling enough to vitiate the consent of a
majority of union members.
e. Requirements for Federations and National
Unions
The application or registration of federations and national
unions shall be accompanied by the following documents:
(i) A statement indicating the name of the applicant
labor union, its principal address, the name of its
officers and their respective addresses;
(ii) The minutes of the organizational meeting(s) and
the list of employees who participated in the said
meeting(s);
(iii) The annual financial reports if the applicant has
been in existence for one or more years, unless it has
not collected any amount from the members, in
which case a statement to this effect shall be
included in the application;
(iv) The applicant’s constitution and by-laws, minutes of
its adoption or ratification, and the list of the
members who participated in it. The list of ratifying
members shall be dispensed with where the
constitution and by-laws was ratified or adopted
during the organizational meeting. In such a case,
the factual circumstances of the ratification shall be
recorded in the minutes of the organizational
meeting(s);
(v) The resolution of affiliation at least ten (10)
legitimate labor organizations, whether independent
unions or chartered locals, each of which must be a
duly certified or recognized bargaining agent in the
establishment where it seeks to operate; and
(vi) The name and addresses of the companies where the
affiliates operate and the list of all the members in
each company involved.
f. Approval
It cannot be over-emphasized that the registration or the
recognition of a labor union after it has submitted the
corresponding papers is not ministerial on the part of the BLR. Far
from it. After a labor organization has filed the necessary
registration documents, it becomes mandatory for the BLR to
check if the requirements under Article 240 of the Labor Code
have been sedulously complied with. If the union's application is
infected by falsification and like serious irregularities, especial
those appearing on the face of the application and its attachments, a
union should be denied recognition as a legitimate labor
organization [S.S. Ventures International, Inc. v. S.S. Ventures
Labor Union].
g. Registration of Chartered Local
Article 241. [234-A] Chartering and Creation of a Local
Chapter. - A duly registered federation or national union may directly
create a local chapter by issuing a charter certificate indicating the
establishment of the local chapter. The chapter shall acquire legal
personality only for purposes of filing a petition for certification
election from the date it was issued a charter certificate.
The chapter shall be entitled to all other rights and
privileges of a legitimate labor organization only upon the submission
of the following documents in addition to its charter certificate:
 (a) The names of the chapter's officers, their addresses, and
the principal office of the chapter; and
(b) The chapter's constitution and by-laws: Provided, That
where the chapter's constitution and by-laws are the same as that of
the federation or the national union, this fact shall be indicated
accordingly.
The additional supporting requirements shall be certified
under oath by the secretary or treasurer of the chapter and attested by
its president.
Chartered locals have two types of personalities. First, it
has provisional personality if it only has a charter certificate. The
chartered local is considered an LLO only for the purpose of filing
a Petition for Certification Election. Second, it has full personality
if it submits all other documents for registration. It will be
considered as an LLO for all purposes (i.e., to file cases for its
members, to purchase property in its name, etc.) and possesses full
powers of a LLO.
A local or chapter need not be independently registered
to acquire legal personality [Laguna Autoparts v. Office of the
Secretary]. A chapter acquires legal personality on "the date it was
issued a charter certificate" by its mother federation or national
union. The acquisition of legal personality seems to happen
automatically, but "only for purposes of filing a petition for a
certification election."
Not required to acquire independent registration in
order to have legal personality
Ordinarily, a labor organization attains the status of
legitimacy only upon the issuance in its name of a Certificate of
Registration by the Bureau of Labor Relations pursuant to Articles
241 and 242 of the Labor Code. However, the procedure is not the
only way by which a labor union may become legitimate,
however.  When an unregistered union becomes a branch, local or
chapter of a federation, some of the aforementioned requirements
for registration are no longer require [San Miguel Foods v.
Laguesma].
Distinguished from other unions
Federation, national union, Chartered local
industry or trade union or
independent union
Acquisition of legal personality Acquisition of legal personality
under Article 240 in relation to under Article 241 in relation to
IRR IRR
Acquires legal personality upon Acquires legal personality in 2
the issuance of a certificate of stages (provisional/partial and
registration full)
More stringent because it requires Easier because it only requires
Certificate of Registration charter certificate
(notarized)
h. Action on and Denial of Application for
Registration
Article 242. [235] Action on Application. - The Bureau shall
act on all applications for registration within thirty (30) days from
filing.
All requisite documents and papers shall be certified under
oath by the secretary or the treasurer of the organization, as the case
may be, and attested to by its president.
Article 243. [236] Denial of Registration; Appeal. - The
decision of the Labor Relations Division in the regional office denying
registration may be appealed by the applicant union to the Bureau
within ten (10) days from receipt of notice thereof.
4. Affiliation
Page 16 of 117
An affiliate is (a) an independent union affiliated with a
federation or national union; or (b) a chartered local which was
subsequently granted independent registration but did not
disaffiliate from its federation.
In relation to an affiliate, the federation or national union
is commonly known as the mother union. The mother union, acting
for and in behalf of its affiliate, has the status of an agent while the
affiliate or local chapter or chartered local remains the principal –
the basic unit of the association free to serve the common interest
of all its members, subject only to the restraints imposed by the
constitution and by-laws of the association [Progressive
Development Corporation v. Secretary].
a. Requirements of Affiliation
The report of affiliation of an independently registered
labor union with a federation or national union shall be filed with
the Regional Office that issued the certificate of registration [IRR].
Moreover, the report of affiliation of independently
registered labor unions with a federation or national union shall be
accompanied by the following documents:
(i) Resolution of the labor union’s board of directors
approving the affiliation;
(ii) Minutes of the general membership meeting
approving the affiliation;
(iii) The total number of members comprising the labor
union and the names of members who approved the
affiliation;
(iv) The certificate of affiliation issued by the federation
in favor of the independently registered labor union;
and
(v) Written notice to the employer concerned if the
affiliating union is the incumbent bargaining agent.
b. Effects of Affiliation
The following are the effects of affiliation:
(i) The mother union becomes the agent, and the
affiliate union, the principal.
(ii) The affiliate union becomes subject to the
rules of the mother union
(iii) The appendage of the acronym of the mother
union after the name of the affiliate union does
not mean that the affiliate cannot
independently stand on its own [THFEU-
CGW vs. Tropical Hut].
(iv) Affiliation does not give the mother union the
license to act independently of the affiliate
union. However, if the mother union
negotiated the CBA, the affiliate union cannot
negotiate the renewal of the CBA without the
consent and participation of the mother union
[Abaria v. NLRC].
(v) The affiliate union and not the mother union
has the power to administer and enforce the
CBA with the employer [NAFLU v. Noriel].
(vi) In case of illegal strike, the affiliate union, not
the mother union, is liable for damages
[Filipino Pipe v. NLRC].
c. Significance of Affiliation
Legal significance of affiliation is that the mother union,
acting for and in behalf of its affiliate, has the status of an agent
while the local union remains the basic unit of association free to
serve the common interest of all its members subject only to the
restraints imposed by the constitution and by-laws of the
association [Pambansang Kapatiran v. Secretary].

5. Disaffiliation
The right to disaffiliate by the local union from its
mother federation or national union is a constitutionally-guaranteed
right which may be invoked by the former at any time. It is
axiomatic that an affiliate union is a separate and voluntary
association free to serve the interest of all its members – consistent
with the freedom of association guaranteed in the Constitution
[Volkschel Labor Union v. BLR].
It is not an act of disloyalty on the part of the local union
nor is it a violation of the union security clause in the CBA.
Disaffiliation should always carry the will of the
majority. It cannot be effected by a mere minority group of union
members [Villar v. Inciong].
The right of a local union to disaffiliate from its mother
federation is not a novel thesis unillumined by case law.  In the
landmark case of Liberty Cotton Mills Workers Union vs. Liberty
Cotton Mills, Inc. we upheld the right of local unions to separate
from their mother federation on the ground that as separate and
voluntary associations, local unions do not owe their creation and
existence to the national federation to which they are affiliated but,
instead, to the will of their members.  The sole essence of
affiliation is to increase, by collective action, the common
bargaining power of local unions for the effective enhancement and
protection of their interests.   Admittedly, there are times when
without succor and support local unions may find it hard, unaided
by other support groups, to secure justice for themselves. Yet the
local unions remain the basic units of association, free to serve
their own interests subject to the restraints imposed by the
constitution and by-laws of the national federation, and free also to
renounce the affiliation upon the terms laid down in the agreement
which brought such affiliation into existence [Philippine
Skylanders v. NLRC].
Liberty Cotton Mills Workers’ Union v. Liberty
Cotton Mills
Held: Likewise, the records show that the disaffiliation of the
local union members from the PAFLU was caused by the alleged
negligence of PAFLU and its lack of concern over the problems of the local
union and its members, particularly its neglect in not providing the local
union with a good lawyer who would attend to their ULP case against the
company.  This apparent laxity or negligence of PAFLU invites suspicion.
The records also show that the local union members were
dissatisfied with the way PAFLU negotiated the Collective Bargaining
Agreement with the company because it did not fight for their demands and
instead accepted the proposals of the company.  
And furthermore, PAFLU expelled only six (6) union members,
because PAFLU erroneously contends that their disaffiliation and their
refusal to retract amounted to disloyalty.  It was not disloyalty; it was their
dissatisfaction with PAFLU that compelled them to disaffiliate.  The
constitutional guarantee of security of tenure of the worker and his freedom
of association - to join or not to join a union - are paramount and should
prevail over a contractual condition for continued union membership and
over whimsical or arbitrary termination of his employment.
Respondent PAFLU also overlooked the fact that only sixteen
(16) out of the original thirty-two (32) signatories retracted their
disaffiliation.  PAFLU should have also expelled the remaining sixteen
members who did not retract, instead of only the six members, if indeed
their unretracted disaffiliation were an act of disloyalty instead of
dissatisfaction with the PAFLU's failure to promote and defend their
interests.
It is also worth considering here the fact that of the six members
expelled by PAFLU and subsequently dismissed by the company, four (4)
were officers of the local union and two were ordinary members.
The company also failed to notice this fact and proceeded
immediately to grant the request of PAFLU by dismissing the petitioner
workers without giving them the opportunity to be heard.
These facts and circumstances on record further underscore the
existence of conspiracy or connivance between the company and PAFLU in
the dismissal of the petitioner workers.  Respondent company is therefore a
Page 17 of 117
party to the illegal dismissal of the petitioner workers.  Under such a
situation, the respondent company should be jointly and severally liable
with the respondent PAFLU for the payment of backwages to the petitioner
workers.
Philippine Skylanders v. NLRC
Held: Upon an application of the aforecited principle to the issue
at hand, the impropriety of the questioned Decisions becomes clearly
apparent.  There is nothing shown in the records nor is it claimed by
PAFLU that the local union was expressly forbidden to disaffiliate from the
federation nor were there any conditions imposed for a valid breakaway. 
As such, the pendency of an election protest involving both the mother
federation and the local union did not constitute a bar to a valid
disaffiliation.  Neither was it disputed by PAFLU that 111 signatories out of
the 120 members of the local union, or an equivalent of 92.5% of the total
union membership supported the claim of disaffiliation and had in fact
disauthorized PAFLU from instituting any complaint in their behalf. 
Surely, this is not a case where one (1) or two (2) members of the local
union decided to disaffiliate from the mother federation, but it is a case
where almost all local union members decided to disaffiliate.
It was entirely reasonable then for PSI to enter into a collective
bargaining agreement with PSEA-NCW.  As PSEA had validly severed
itself from PAFLU, there would be no restrictions which could validly
hinder it from subsequently affiliating with NCW and entering into a
collective bargaining agreement in behalf of its members.
There is a further consideration that likewise argues for the
granting of the petitions.   It stands unchallenged that PAFLU instituted the
complaint for unfair labor practice against the wishes of workers whose
interests it was supposedly protecting.  The mere act of disaffiliation did not
divest PSEA of its own personality; neither did it give PAFLU the license
to act independently of the local union.  Recreant to its mission, PAFLU
cannot simply ignore the demands of the local chapter and decide for its
welfare.  PAFLU might have forgotten that as an agent it could only act in
representation of and in accordance with the interests of the local union. 
The complaint then for unfair labor practice lodged by PAFLU against PSI,
PSEA and their respective officers, having been filed by a party which has
no legal personality to institute the complaint, should have been dismissed
at the first instance for failure to state a cause of action.
Policy considerations dictate that in weighing the claims of a
local union as against those of a national federation, those of the former
must be preferred.  Parenthetically though, the desires of the mother
federation to protect its locals are not altogether to be shunned.  It will
however be to err greatly against the Constitution if the desires of the
federation would be favored over those of its members.  That, at any rate, is
the policy of the law.  For if it were otherwise, instead of protection, there
would be disregard and neglect of the lowly workingmen.
Tropical Hut Employees Union v. Tropical Hut
Held: This brings Us to the question of the legality of the
dismissal meted to petitioner employees. In the celebrated case of Liberty
Cotton Mills Workers Union v. Liberty Cotton Mills, L-33187, September
4, 1975, 66 SCRA 512, We held that the validity of the dismissals pursuant
to the union security clause in the collective bargaining agreement hinges
on the validity of the disaffiliation of the local union from the federation.
The right of a local union to disaffiliate from its mother
federation is well-settled. A local union, being a separate and voluntary
association, is free to serve the interest of all its members including the
freedom to disaffiliate when circumstances warrant. This right is consistent
with the constitutional guarantee of freedom of association (Volkschel
Labor Union v. Bureau of Labor Relations,  No. L-45824, June 19,1985,
137 SCRA 42).
All employees enjoy the right to self organization and to form
and join labor organizations of their own choosing for the purpose of
collective bargaining and to engage in concerted activities for their mutual
aid or protection. This is a fundamental right of labor that derives its
existence from the Constitution. In interpreting the protection to labor and
social justice provisions of the Constitution and the labor laws or rules or
regulations, We have always adopted the liberal approach which favors the
exercise of labor rights.
Relevant on this point is the basic principle We have repeatedly
affirmed in many rulings: 
"x x x The locals are separate and distinct units primarily
designed to secure and maintain an equality of bargaining power between
the employer and their employee-members in the economic struggle for the
fruits of the joint productive effort of labor and capital; and the association
of the locals into the national union (PAFLU) was in furtherance of the
same end. These associations are consensual entities capable of entering
into such legal relations with their members. The essential purpose was the
affiliation of the local unions into a common enterprise to increase by
collective action the common bargaining power in respect of the terms and
conditions of labor. Yet the locals remained the basic units of association,
free to serve their own and the common interest of all, subject to the
restraints imposed by the Constitution and By-Laws of the Association, and
free also to renounce the affiliation for mutual welfare upon the terms laid
down in the agreement which brought it into existence.'" (Adamson &
Adamson, Inc. v. CIR, No. L-35120, January 31, 1984, 127 SCRA
268; Elisco-Elirol Labor Union (NAFLU) v. Noriel, No. L-41955,
December 29, 1977, 80 SCRA 681; Liberty Cotton Mills Workers Union v.
Liberty Cotton Mills, Inc., supra).
The inclusion of the word NATU after the name of the local
union THEU in the registration with the Department of Labor is merely to
stress that the THEU is NATU's affiliate at the time of the registration. It
does not mean that the said local union cannot stand on its own. Neither can
it be interpreted to mean that it cannot pursue its own interests
independently of the federation. A local union owes its creation and
continued existence to the will of its members and not to the federation to
which it belongs.
When the local union withdrew from the old federation to join a
new federation, it was merely exercising its primary right to labor
organization for the effective enhancement and protection of common
interests. In the absence of enforceable provisions in the federation's
constitution preventing disaffiliation of a local union, a local may sever its
relationship with its parent (People's Industrial and Commercial Employees
and Workers Organization (FFW) v. People's Industrial and Commercial
Corporation, No-37687, March 15, 1982, 112 SCRA 440).
There is nothing in the constitution of the NATU or in the
constitution of the THEU-NATU that the THEU was expressly forbidden to
disaffiliate from the federation (pp. 62, 281, Rollo). The alleged non-
compliance of the local union with the provision in the NATU Constitution
requiring the service of three months notice of intention to withdraw did not
produce the effect of nullifying the disaffiliation for the following grounds:
firstly, NATU was not even a legitimate labor organization, it appearing
that it was not registered at that time with the Department of Labor, and
therefore did not possess and acquire, in the first place, the legal personality
to enforce its constitution and laws, much less the right and privilege under
the Labor Code to organize and affiliate chapters or locals within its group,
and secondly, the act of non-compliance with the procedure on withdrawal
is premised on purely technical grounds which cannot rise above the
fundamental right of self-organization.
Respondent Secretary of Labor, in affirming the decision of the
respondent Commission, concluded that the supposed decision to
disaffiliate was not the subject of a free and open discussion and decision
on the part f the THEU-NATU general membership (p. 305, Rollo). This,
however, is contradicted by the evidence on record. Moreover, We are
inclined to believe Arbitrator Villatuya's findings to the contrary, as
follows:  Public respondents further submit that several employees who
"x x x. However, the complainants refute this allegation by
submitting the following: a) Letter dated December 20, 1973 signed by 142
members (Exhs. 'B to B-5'); b) resolution dated January 12, 1974, signed by
140 members (Exhs. 'H to H-6'); c) letter dated February 26, 1974 to the
Department of Labor signed by 165 members (Exhs. 'I to 1-10'); d) letter
dated January 30, 1974 to the Secretary of the National Defense signed by
144 members (Exhs. '0 to 0-5') and; e) letter dated March 6,1974 signed by
146 members addressed to the President of the Philippines (Exhs. 'HH to
HH-5'), to show that in several instances, the members of the THEU-NATU
have acknowledged their disaffiliation from NATU. The letters of the
complainants also indicate that an overwhelming majority have freely and
voluntarily signed their union's disaffiliation from NATU, otherwise, if
there was really deception employed in securing their signatures as claimed
by NATU/Dilag, it could not be possible to get their signatures in five
different documents." (p. 144, Rollo)
We are aware of the time-honored doctrine that the findings of
the NLRC and the Secretary of Labor are binding on this Court if supported
by substantial evidence. However, in the same way that the findings of facts
unsupported by sustantial and credible evidence do not bind this Court,
neither will We uphold erroneous conclusions of the NLRC and the
Secretary of Labor when We find that the latter committed grave abuse of
Page 18 of 117
discretion in reversing the decision of the labor arbiter (San Miguel
Corporation v. NLRC, L-50321, March 13, 1984, 128 SCRA 180). In the
instant case, the factual findings of the arbitrator were correct against that
of public respondents.
Further, there is no merit in the contention of the respondents
that the act of disaffiliation violated the union security clause of the CBA
and that their dismissal as a consequence thereof is valid. A perusal of the
collective bargaining agreements shows that the THEU-NATU, and not the
NATU federation, was recognized as the sole and exclusive collective
bargaining agent for all its workers and employees in all matters concerning
wages, hours of work and other terms and conditions of employment (pp.
667-706, Rollo). Although NATU was designated as the sole bargaining
agent in the check-off authorization form attached to the CBA, this simply
means it was acting only for and in behalf of its affiliate. The NATU
possessed the status of an agent while the local union remained the basic
principal union which entered into contract with the respondent company.
When the THEU disaffiliated from its mother federation, the former did not
lose its legal personality as the bargaining union under the CBA. Moreover,
the union security clause embodied in the agreements cannot be used to
justify the dismissals meted to petitioners since it is not applicable to the
circumstances obtaining in this case. The CBA imposes dismissal only in
case an employee is expelled from the union for joining another federation
or for forming another union or who fails or refuses to maintain
membership therein. The case at bar does not involve the withdrawal of
merely some employees from the union but of the whole THEU itself from
its federation. Clearly, since there is no violation of the union security
provision in the CBA, there was no sufficient ground to terminate the
employment of petitioners.
Public respondents considered the existence of Arturo Dilag's
group as the remaining true and valid union. We, however, are inclined to
agree instead with the Arbitrator's findings when he declared: 
"x x x. Much more, the so called THEU-NATU under Dilag's
group which assumes to be the original THEU-NATU has a very doubtful
and questionable existence not to mention that the alleged president is
performing supervisory functions and not qualified to be a bona fide 
member of the rank and file union." (p. 146, Rollo)
Records show that Arturo Dilag had resigned in the past as
President of THEU-NATU because of his promotion to a managerial or
supervisory position as Assistant Unit Manager of respondent Company.
Petitioner Jose Encinas replaced Dilag as President and continued to hold
such position at the time of the disaffiliation of the union from the
federation. It is therefore improper and contrary to law for Dilag to
reassume the leadership of the remaining group which was alleged to be the
true union since he belonged to the managerial personnel who could not be
expected to work for the betterment of the rank and file employees.
Besides, managers and supervisors are prohibited from joining a rank and
file union (Binalbagan Isabela Sugar Co., Inc. (BISCOM) v. Philippine
Association of Free Labor Unions (PAFLU), et al., L-18782, August 29,
1963, 8 SCRA 700). Correspondingly, if a manager or supervisor organizes
or joins a rank and file union, he will be required to resign
therefrom (Magalit, et al. v. Court of Industrial Relations, et al., L-20448,
May 25, 1965, 14 SCRA 72).
disaffiliated their union from the NATU subsequently retracted and
reaffirmed their membership with the THEU-NATU. In the decision which
was affirmed by respondent Secretary of Labor, the respondent
Commission stated that: 
"x x x out of the alleged one hundred and seventy-one (171)
members of the THEU-CGW whose signatures appeared in the ‘Analysis of
Various Documents Signed by Majority Members of the THEU-CGW,
(Annex 'T', Complainants), which incidentally was relied upon by
Arbitrator Villatuya in holding that complainant THEU-CGW commanded
the majority of employees in respondent company, ninety?three (93) of the
alleged signatories reaffirmed their membership with the THEU-NATU and
reanounced whatever connection they may have had with other labor
unions, (meaning the complainant THEU-CGW) either through resolution
or membership application forms they have unwittingly signed.’ ” (p.
306, Rollo)
Granting arguendo, that the fact of retraction is true, the
evidence on record shows that the letters of retraction were executed on
various dates beginning January 11, 1974 to March 8, 1974 (pp. 278-
280, Rollo). This shows that the retractions were made more or less after
the suspension pending dismissal on January 11, 1974 of Jose Encinas,
formerly THEU-NATU President, who became THEU-CGW President,
and the suspension pending their dismissal of the other elected officers and
members of the THEU-CGW on January 15, 1974. It is also clear that some
of the retractions occurred after the suspension of the first set of workers
numbering about twenty-four (24) on March 5, 1974. There is no use in
saying that the retractions obliterated the act of disaffiliation as there are
doubts that they were freely and voluntarily done especially during such
time when their own union officers and co-workers were already suspended
pending their dismissal.
Disaffiliation of independently-registered union and
local chapter, distinguished
The disaffiliation of an independently-registered union
does nto affect its legitimate status as a labor organization.
However, the same thing may not be said of a union which is not
independently-registered (Local chapter). Once a local chapter
disaffiliates from the federation, it ceases to be entitled to the rights
and privileges granted to a legitimate labor organization. Thus, it
can no longer file a petition for certification election [Villar v.
Incion].
a. Effects of Disaffiliation
The following are the effects of disaffiliation:
(i) It terminates the right to check-off federation dues;
(ii) It does not affect the CBA, it does not amend or
change the administration of the contract;
(iii) Once the fact of disaffiliation has been manifested
beyond doubt, a certification election is the most
expeditious way of determining which labor
organization is to be treated as the exclusive
bargaining agent.
b. When Allowed to Disaffiliate
A member can only disaffiliate during the 60-day
freedom period.
However, the local can disaffiliate at any time even if the
constitution and by-laws of the CBA constitutes that the local can
disaffiliate during the 60-day freedom period because the
federation is merely an agent of the local.
6. Cancellation of Registration
a. Grounds for Cancellation
Article 247. [239] Grounds for Cancellation of Union
Registration. - The following may constitute grounds for cancellation of
union registration:
(a) Misrepresentation, false statement or fraud in connection
with the adoption or ratification of the constitution and by-laws or
amendments thereto, the minutes of ratification, and the list of
members who took part in the ratification;
(b) Misrepresentation, false statements or fraud in
connection with the election of officers, minutes of the election of
officers, and the list of voters;
(c) Voluntary dissolution by the members.
While a certificate of registration confers a union with
legitimacy with the concomitant right to participate in or ask for
certification election in a bargaining unit, the registration may be
canceled or the union may be decertified as the bargaining unit, in
which case the union is divested of the status of a legitimate labor
organization. Among the grounds for cancellation is the
commission of any of the acts enumerated in Art. 247(a) of the
Labor Code, such as fraud and misrepresentation in connection
with the adoption or ratification of the union's constitution and like
documents. The Court, has in previous cases, said that to decertify
a union, it is not enough to show that the union includes ineligible
employees in its membership. It must also be shown that there was
misrepresentation, false statement, or fraud in connection with the
Page 19 of 117
application for registration and the supporting documents, such as
the adoption or ratification of the constitution and by-laws or
amendments thereto and the minutes of ratification of the
constitution or by-laws, among other documents [SS Ventures v. SS
Ventures Labor Union]. 
In De Ocampo v. Bigkis, it was held that for fraud and
misrepresentation to constitute grounds for cancellation of union
registration under the Labor Code, the nature of the fraud and
misrepresentation must be grave and compelling enough to vitiate
the consent of a majority of union members. De Ocampo insists
that "by conveniently disregarding" BMDOMMC's existence
during the filing of its application, despite having the same set of
officers and members,37 BMDOMSI "had misrepresented facts,
made false statements and committed fraud in its application for
union registration for alleging facts therein which they [know] or
ought to have known to be false." BMDOMSI did not commit
fraud or misrepresentation in its application for registration. In the
form "Report of Creation of Local Chapter ” filed by BMDOMSI,
the applicant indicated in the portion "Description of the
Bargaining Unit" that it is composed of "Rank and File" and under
the "Occupational Classification," it marked "Technical" and
"Faculty." Further, the members appearing in the Minutes of the
General Membership and the List of Workers or Members who
attended the organizational meeting and adopted/ratified the
Constitution and By-Laws are, as represented, employees of the
school and the General Services Division, though some of the latter
employees service the hospital. Moreover, there is nothing in the
form "Report of Creation of Local Chapter" that requires the
applicant to disclose the existence of another union, much less the
names of the officers of such other union. Thus, we cannot see how
BMDOMSI made the alleged misrepresentation or false statements
in its application.
b. Where to File
Subject to the requirements of notice and due process, the
registration of any legitimate independent labor union, local
chapter and workers’ association may be cancelled by the Regional
Director upon the filing of a petition for cancellation for union
registration, or application by the organization itself for voluntary
dissolution.
The petition for cancellation or application for voluntary
dissolution shall be filed in the Regional Office which issued its
certificate of registration or creation.
In the case of federation, national or industry unions and
trade union centers, the Bureau Director may cancel the registration
upon the filing of a petition for cancellation or application for
voluntary dissolution in the Bureau of Labor Relations [IRR].
c. Who may File
Any party-in-interest may commence a petition for
cancellation of registration, except in actions involving violations
of Article 250 which can only be commenced by members in the
labor organization concerned [IRR].
d. Effect of a Petition for Cancellation
Article 246. [238-A] Effect of a Petition for Cancellation of
Registration. - A petition for cancellation of union registration shall not
suspend the proceedings for certification election nor shall it prevent
the filing of a petition for certification election.
In case of cancellation, nothing herein shall restrict the right
of the union to seek just and equitable remedies in the appropriate
courts.
Cancellation of registration does not affect the litigation.
The litigation continues because the union is a mere representative
party. The real parties in interest are the individual employees
concerned.
The labor organization may still be a party to the case but
the decision is binding only to those who did not withdraw from
the case before its trial and decision on the merits.
If some members in the meantime execute a quit-claim or
waiver because they have been paid in advance, such members are
no longer covered by the decision.
The non-renewal of registration permit does not dismiss
the cause because the court already acquired jurisdiction thereof.
e. Voluntary Cancellation
Article 248. [239-A] Voluntary Cancellation of Registration. -
The registration of a legitimate labor organization may be cancelled by
the organization itself: Provided, That at least two-thirds of its general
membership votes, in a meeting duly called for that purpose to dissolve
the organization: Provided, further, That an application to cancel
registration is thereafter submitted by the board of the organization,
attested to by the president thereof.
7. Rights of Legitimate Labor Organizations
Article 251. [242] Rights of Legitimate Labor Organizations. -
A legitimate labor organization shall have the right:
(a) To act as the representative of its members for the
purpose of collective bargaining;
(b) To be certified as the exclusive representative of all the
employees in an appropriate bargaining unit for purposes of collective
bargaining;
(c) To be furnished by the employer, upon written request,
with its annual audited financial statements, including the balance
sheet and the profit and loss statement, within thirty (30) calendar days
from the date of receipt of the request, after the union has been duly
recognized by the employer or certified as the sole and exclusive
bargaining representative of the employees in the bargaining unit, or
within sixty (60) calendar days before the expiration of the existing
collective bargaining agreement, or during the collective bargaining
negotiation;
(d) To own property, real or personal, for the use and
benefit of the labor organization and its members;
(e) To sue and be sued in its registered name; and
(f) To undertake all other activities designed to benefit the
organization and its members, including cooperative, housing, welfare
and other projects not contrary to law.
Notwithstanding any provision of a general or special law to
the contrary, the income and the properties of legitimate labor
organizations, including grants, endowments, gifts, donations and
contributions they may receive from fraternal and similar
organizations, local or foreign, which are actually, directly and
exclusively used for their lawful purposes, shall be free from taxes,
duties and other assessments. The exemptions provided herein may be
withdrawn only by a special law expressly repealing this provision.
The first three rights mentioned in this article do not
pertain to just about any union but only to the union that has been
selected as the bargaining representative of the employees in the
bargaining unit.
a. Right to Act as Representative
In order to act as a representative for purposes of
collective bargaining, the LLO must generally be the exclusive
bargaining agent.
The union whose demand for collective bargaining was
rebuffed by the employer, because the union was not the certified
bargaining agent, has no right to stage a strike. The strike is illegal.
Such illegality is reason enough for the NLRC to declare that the
union officers have lost their employment status [Philippine
Diamond Hotel v. Manila Diamond Hotel Employees Union].
Page 20 of 117
Although the union has every right to represent its
members in the negotiation regarding the terms and conditions of
their employment, it cannot negate their wishes on matters which
are purely personal and individual to them. In this case, the forty
employees freely opted to be covered by the Old Plan; their
decision should be respected. The company gave them every
opportunity to choose, and they voluntarily exercised their choice.
The union cannot pretend to know better; it cannot impose its will
on them [Caltex Refinery Employees Association v. Brillantes].
b. Right to be Certified as Exclusive
Bargaining Agent
In order to represent its members in collective
bargaining, it is an LLO’s inherent right that it be allowed to file a
Petition for Certification Election.
c. Right to Request for Audited Financial
Statement
In order to request for the Employer’s Audited Financial
Statement, the LLO must generally be an Exclusive Bargaining
Agent. This right includes the right to the notes and other
documents in support thereof.
To better equip the union in preparing for or in
negotiating with the employer, the law gives it the right to be
furnished with the employer's audited financial statements. There
are four points in time when the union may ask in writing for these
statements:
(i) after the union has been recognized by the
employer as sole bargaining representative of
the employees in the bargaining unit; or
(ii) after the union is certified by DOLE as such
sole bargaining representative; or
(iii) within the last 60 days of the life of a CBA; or
(iv) during the collective bargaining negotiation.
The audited financial statements, including the balance
sheet and the profit and loss statement, should be provided by the
employer within 30 calendar days after receipt of the union's
request.
Standard Chartered Bank Employees Union v. Confesor
Held: We, likewise, find that the Union failed to substantiate its
claim that the Bank refused to furnish the information it needed.
While the refusal to furnish requested information is in itself an
unfair labor practice, and also supports the inference of surface
bargaining, in the case at bar, Umali, in a meeting dated May 18, 1993,
requested the Bank to validate its guestimates on the data of the rank and
file. However, Umali failed to put his request in writing as provided for in
Article 242(c) of the Labor Code:
Article 242. Rights of Legitimate Labor Organization…
(c) To be furnished by the employer, upon written request, with
the annual audited financial statements, including the balance sheet and the
profit and loss statement, within thirty (30) calendar days from the date of
receipt of the request, after the union has been duly recognized by the
employer or certified as the sole and exclusive bargaining representatives of
the employees in the bargaining unit, or within sixty (60) calendar days
before the expiration of the existing collective bargaining agreement, or
during the collective negotiation;
The Union, did not, as the Labor Code requires, send a written
request for the issuance of a copy of the data about the Bank’s rank and file
employees. Moreover, as alleged by the Union, the fact that the Bank made
use of the aforesaid guestimates, amounts to a validation of the data it had
used in its presentation.
d. Right to Own Property
As a consequence of having a separate personality, LLOs
can acquire personal and real property under its name.

e. Right to Sue and be Sued in its Registered
Name
It is the function of a labor union to represent its
members against the employer's unfair labor practices. It can file an
action in their behalf without the cumbersome procedure of joining
each and every member as a separate party [Davao Free Workers
v. CIR].
The union and its attorney should be allowed to
participate in making compromise settlements with employees who
are union members. In one case, the company was adjudged to
have acted with evident bad faith and malice when it secured the 53
quitclaim agreements individually with the complainant workers
without the intervention of court and without involving the union.
This subterfuge is tantamount to a sabotage of the interest of the
association. Needless to say, the means employed by the employer
in dealing with the workers individually, instead of collectively
through the union and its counsel, violates good morals as they
undermine the unity of the union and fuels industrial disputes,
contrary to the declared policy in the Industrial Peace Act
[Pampanga Sugar v. CIR].
LAKAS v. Marcelo Enterprises
Held: In NARIC Workers' Union vs. CIR, 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.
Money Claims
The rule in this jurisdiction is that money claims due to
laborers cannot be the object of settlement or compromise effected
by the union, union officers or counsel without the specific
individual consent of each laborer concerned. This is so because
the aggrieved parties are the individual complainants themselves.
Their representative can only assist but not decide for them. In the
light of the categorical denial by the employees that Peran was
authorized to enter into an amicable settlement as regards their
claims, the Court holds that public respondent Secretary of
labor ruled correctly in upholding the Regional Director's rejection
of the agreement [Marquez v. Secretary of Labor].
For a waiver thereof to be legally effective, the individual
consent or ratification of the workers or employees involved must
be shown.  Neither the officers nor the majority of the union had
any authority to waive the accrued rights pertaining to the
dissenting minority members, even under a collective bargaining
agreement which provided for a "union shop." [General Rubber v.
Drilon]
The authority of a union under Article 251 to act as
representative of its members for the purposes of collective
bargaining includes the power to represent its members for the
purpose of enforcing the provisions of the CBA. When a union
files a case "for and in behalf of its members," a member or several
members of that union will not be permitted to file in the same case
a complaint-in-intervention even if it alleges that the union was not
pursuing the case diligently. Such complaint, together with the
Page 21 of 117
motion for intervention, will have to be denied upon a finding that
those members are already well represented by their union. The
intervention may be allowed, however, when there is a suggestion
of fraud or collusion or that the representative will not act in good
faith for the protection of all interests represented by [the union]. In
this case the members who desire to intervene have not shown
fraud, collusion, or lack of good faith on the part of their union
[Acedera v. International Container Terminal Services].
Negotiation Phase vs. Administration Phase
While in the negotiation phase, the union is the EBA for
the purpose of collective bargaining. Thus, the employee can
compel representation.
However, during the administration proceedings (i.e.,
filing complaints arising from the CBA), the union is no longer the
EBA because any group of employees or a single employee can
bring a grievance to management. Hence, the employee cannot
compel representation. He can do so by himself.
f. Right to Undertake all other Activities not
Contrary to Law
This is the right to undertake all other activities designed
to benefit the organization and its members, including cooperative,
housing, welfare and other projects not contrary to law.
g. Right to Tax Exemption
Notwithstanding any provision of a general or special
law to the contrary, the income and the properties of legitimate
labor organizations, including grants, endowments, gifts, donations
and contributions they may receive from fraternal and similar
organizations, local or foreign, which are actually, directly and
exclusively used for their lawful purposes, shall be free from
taxes, duties and other assessments. The exemptions provided
herein may be withdrawn only by a special law expressly repealing
this provision.
8. Rights and Conditions of Membership
Article 250. [241] Rights and Conditions of Membership in a
Labor Organization. - The following are the rights and conditions of
membership in a labor organization:
(a) No arbitrary or excessive initiation fees shall be required
of the members of a legitimate labor organization nor shall arbitrary,
excessive or oppressive fine and forfeiture be imposed;
(b) The members shall be entitled to full and detailed reports
from their officers and representatives of all financial transactions as
provided for in the constitution and by-laws of the organization;
(c) The members shall directly elect their officers in the local
union, as well as their national officers in the national union or
federation to which they or their local union is affiliated, by secret
ballot at intervals of five (5) years. No qualification requirement for
candidacy to any position shall be imposed other than membership in
good standing in subject labor organization. The secretary or any other
responsible union officer shall furnish the Secretary of Labor and
Employment with a list of the newly-elected officers, together with the
appointive officers or agents who are entrusted with the handling of
funds within thirty (30) calendar days after the election of officers or
from the occurrence of any change in the list of officers of the labor
organization;
(d) The members shall determine by secret ballot, after due
deliberation, any question of major policy affecting the entire
membership of the organization, unless the nature of the organization
or force majeure renders such secret ballot impractical, in which case,
the board of directors of the organization may make the decision in
behalf of the general membership;
(e) No labor organization shall knowingly admit as members
or continue in membership any individual who belongs to a subversive
organization or who is engaged directly or indirectly in any subversive
activity;
 (f) No person who has been convicted of a crime involving
moral turpitude shall be eligible for election as a union officer or for
appointment to any position in the union;
(g) No officer, agent or member of a labor organization shall
collect any fees, dues, or other contributions in its behalf or make any
disbursement of its money or funds unless he is duly authorized
pursuant to its constitution and by-laws;
(h) Every payment of fees, dues or other contributions by a
member shall be evidenced by a receipt signed by the officer or agent
making the collection and entered into the record of the organization to
be kept and maintained for the purpose;
(i) The funds of the organization shall not be applied for any
purpose or object other than those expressly provided by its
constitution and by-laws or those expressly authorized by written
resolution adopted by the majority of the members at a general
meeting duly called for the purpose;
(j) Every income or revenue of the organization shall be
evidenced by a record showing its source, and every expenditure of its
funds shall be evidenced by a receipt from the person to whom the
payment is made, which shall state the date, place and purpose of such
payment. Such record or receipt shall form part of the financial
records of the organization.
Any action involving the funds of the organization shall
prescribe after three (3) years from the date of submission of the
annual financial report to the Department of Labor and Employment
or from the date the same should have been submitted as required by
law, whichever comes earlier: Provided, That this provision shall apply
only to a legitimate labor organization which has submitted the
financial report requirements under this Code: Provided, further, That
failure of any labor organization to comply with the periodic financial
reports required by law and such rules and regulations promulgated
thereunder six (6) months after the effectivity of this Act shall
automatically result in the cancellation of union registration of such
labor organization;
(k) The officers of any labor organization shall not be paid
any compensation other than the salaries and expenses due to their
positions as specifically provided for in its constitution and by-laws, or
in a written resolution duly authorized by a majority of all the
members at a general membership meeting duly called for the purpose.
The minutes of the meeting and the list of participants and ballots cast
shall be subject to inspection by the Secretary of Labor or his duly
authorized representatives. Any irregularities in the approval of the
resolutions shall be a ground for impeachment or expulsion from the
organization;
(l) The treasurer of any labor organization and every officer
thereof who is responsible for the account of such organization or for
the collection, management, disbursement, custody or control of the
funds, moneys and other properties of the organization, shall render to
the organization and to its members a true and correct account of all
moneys received and paid by him since he assumed office or since the
last day on which he rendered such account, and of all bonds, securities
and other properties of the organization entrusted to his custody or
under his control. The rendering of such account shall be made:
(1) At least once a year within thirty (30) days after the close
of its fiscal year;
(2) At such other times as may be required by a resolution of
the majority of the members of the organization; and
(3) Upon vacating his office.
The account shall be duly audited and verified by affidavit
and a copy thereof shall be furnished the Secretary of Labor.
(m) The books of accounts and other records of the financial
activities of any labor organization shall be open to inspection by any
officer or member thereof during office hours;
(n) No special assessment or other extraordinary fees may be
levied upon the members of a labor organization unless authorized by a
written resolution of a majority of all the members in a general
membership meeting duly called for the purpose. The secretary of the
organization shall record the minutes of the meeting including the list
of all members present, the votes cast, the purpose of the special
assessment or fees and the recipient of such assessment or fees. The
record shall be attested to by the president.
(o) Other than for mandatory activities under the Code, no
special assessments, from any amount due to an employee without an
individual written authorization duly signed by the employee. The
Page 22 of 117
authorization should specifically state the amount, purpose and
beneficiary of the deduction; and
(p) It shall be the duty of any labor organization and its
officers to inform its members on the provisions of its constitution and
by-laws, collective bargaining agreement, the prevailing labor relations
system and all their rights and obligations under existing labor laws.
For this purpose, registered labor organizations may assess
reasonable dues to finance labor relations seminars and other labor
education activities.
Any violation of the above rights and conditions of
membership shall be a ground for cancellation of union registration or
expulsion of officers from office, whichever is appropriate. At least
thirty percent (30%) of the members of a union or any member or
members specially concerned may report such violation to the Bureau.
The Bureau shall have the power to hear and decide any reported
violation to mete the appropriate penalty.
Criminal and civil liabilities arising from violations of above
rights and conditions of membership shall continue to be under the
jurisdiction of ordinary courts.
a. Rights of Membership
(i) Right against arbitrary or excessive
initiation fees, fines, and forfeiture
No arbitrary or excessive initiation fees shall be required
of the members of a legitimate labor organization nor shall
arbitrary, excessive or oppressive fine and forfeiture be imposed.
Article 292 (a) provides:
(a) All unions are authorized to collect reasonable
membership fees, union dues, assessments and fines and other
contributions for labor education and research, mutual death and
hospitalization benefits, welfare fund, strike fund and credit and
cooperative undertakings
(ii) Right to full and detailed reports
The members shall be entitled to full and detailed reports
from their officers and representatives of all financial transactions
as provided for in the constitution and by-laws of the organization
such as financial statements, balanced sheet, and income
statements.
(iii) Right to election of officers by secret
ballot
The members shall directly elect their officers in the
local union, as well as their national officers in the national union
or federation to which they or their local union is affiliated at
intervals of five (5) years.
No qualification requirement for candidacy to any
position shall be imposed other than membership in good standing
in subject labor organization.
The secretary or any other responsible union officer shall
furnish the Secretary of Labor and Employment with a list of the
newly-elected officers, together with the appointive officers or
agents who are entrusted with the handling of funds within thirty
(30) calendar days after the election officers or form the occurrence
of any change in the list of officers of the labor organization.
Only members of the union can participate in the election
of union officers. The question of eligibility to vote may be
determined through the use of the applicable payroll period and
employee's status during the applicable payroll period. The payroll
of the month next preceding the labor dispute in case of regular
employees and the payroll period at or near the peak of operations
in case of employees in seasonal industries [Tancinco v. Ferrer-
Calleja].
(iv) Right to vote in determination of major
policies by secret ballot
 The members shall determine by secr3et ballot, after due
deliberation, any question of major policy affecting the entire
membership of the organization, unless the nature of the
organization or force majeure renders such secret ballot
impractical, in which case, the Board of Directors of the
organization may make the decision on behalf of the general
membership.
(v) Right to a receipt of any payment to the
union
Every payment of fees, dues, or other contributions by a
member shall be evidenced by a receipt signed by the officer or
agent making the collection and entered into the record of the
organization to be kept and maintained for that purpose.
(vi) Right against unauthorized
expenditures
The funds of the organization shall not be applied for any
purpose or object other than (a) those expressly provided by its
constitution and by-laws or (b) those expressly authorized by
written resolution adopted by the majority of the members at a
general meeting duly called for the purpose.
For this purpose, registered labor organizations may
assess reasonable dues to finance labor relations seminars and other
labor education activities.
(vii) Right to report from the treasurer or
other responsible officer to render an
account
The treasurer of any labor organization and every officer
thereof who is responsible for the account of such organization or
for the collection, management, disbursement, custody or control
of the funds, monies, and other properties of the organization, shall
render to the organization and to its members a true and correct
account of all moneys received and paid by him since he assumed
office or since the last day on which he rendered such account, and
of all bonds, securities and other properties of the organization
entrusted to his custody or under his control. The rendering of such
account shall be made:
(1) At least once a year within thirty (30) days after the
close of its fiscal year;
(2) At such other times as may be required by a
resolution of the majority of the members of the organization; and
(3) Upon vacating his office.
The account shall be duly audited and verified by
affidavit and a copy thereof shall be furnished the Secretary of
Labor.
(viii) Right to inspect financial records
during office hours
The books of accounts and other records of the financial
activities of any labor organization shall be open to inspection by
any officer or member thereof during office hours.
(ix) Right against unauthorized assessment
or fees
No special assessment or other extraordinary fees may be
levied upon the members of a labor organization unless authorized
by a written resolution of a majority of all the members in a general
membership meeting duly called for the purpose.
(x) Right against unauthorized deductions
from salary
Other than mandatory activities under the Code, no
special assessments, attorney’s fees, negotiation fees or any other
extraordinary fees may be checked off from any amount due to an
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employee without an individual written authorization duly signed
by the employee. The authorization should specifically state the
amount, purpose and beneficiary of the deduction.
It is very clear from the above-quoted provision that
attorney's fees may not be deducted or checked off from any
amount due to an employee without his written consent except for
mandatory activities under the Code.  A mandatory activity has
been defined as a judicial process of settling dispute laid down by
the law.  In the instant case, the amicable settlement entered into by
the management and the union cannot be considered as a
mandatory activity under the Code.  It is true that the union filed a
claim for emergency cost of living allowance and other benefits
before the Ministry of Labor.  But this case never reached its
conclusion in view of the parties’ agreement.  It is not also shown
from the records that Atty. Benjamin Sebastian was instrumental in
forging the said agreement on behalf of the union members
[Vengco v. Trajano].
For special assessment, attorney’s fees, negotiation fees,
and other extraordinary fees, automatic check-offs require (1)
written resolution of the majority of all the members at a general
membership meeting called for the purpose; and (2) individual
written authorization for check-off duly signed by the employee
concerned.
Article 228 provides:
Article 228. [222] Appearances and Fees. - (a) Non-
lawyers may appear before the Commission or any Labor
Arbiter only:
1. If they represent themselves; or
2. If they represent their organization or members
thereof.
(b) No attorney’s fees, negotiation fees or similar
charges of any kind arising from any collective bargaining
agreement shall be imposed on any individual charged against
union funds in an amount to be agreed upon by the parties. Any
contract, agreement or arrangement of any sort to the contrary
shall be null and void.
Article 222(b) of the Labor Code, as amended, prohibits
the payment of attorney's fees only when it is effected through
forced contributions from the employees from their own funds as
distinguished from union funds. Hence, the general rule is that
attorney's fees, negotiation fees, and other similar charges may
only be collected from union funds, not from the amounts that
pertain to individual union members. As an exception to the
general rule, special assessments or other extraordinary fees may
be levied upon or checked off from any amount due an employee
for as long as there is proper authorization by the employee
[Marino v. Gamilla].
When individual authorization not required
i. Assessment from non-members of the
bargaining agent of “Agency Fees;”
ii. Deductions for fees for mandatory activities;
iii. Check-off for union service fees authorized by
law;
iv. Deductions for withholding tax (NIRC);
v. Deductions for withholding of wages because
of employee’s deb to the employer which is
already due;
vi. Deductions made pursuant to a judgment
against the worker under circumstances where
the wages may be subject to attachment or
execution but only for debts incurred for food,
clothing, shelter, and medical attendance;
vii. Deductions from wages ordered by the court;
 viii. Deductions authorized by law such as
premiums for PhilHealth, SSS, Pag-IBIG, ECC
and the like.
Agency Fee
Article 259(e) provides:
(e) x x x. Employees of an appropriate bargaining
unit who are not members of the recognized collective
bargaining agent may be assessed a reasonable fee equivalent to
the dues and other fees paid by members of the recognized
collective bargaining agent, if such non-union members accept
the benefits under the collective bargaining agreement:
Provided, That the individual authorization required under
Article 250, paragraph (o) of this Code shall not apply to the
non-members of the recognized collective bargaining agent;
Agency Fee means a fee deducted by an employer from
the salary or wages of an employee who is not a member of an
employee organization, which is paid to the employee organization
that is the exclusive bargaining agent for the bargaining unit of the
employee [IRR].
This fee is collected when the bargaining agent
successfully negotiates a CBA with the employer. It is imposed on
non-members who are employees covered by the bargaining unit
being represented by the bargaining agent – in case they accept the
benefits under the CBA.
The fact that the non-member is also paying union dues
to their own unions does not free them from their obligations to pay
the agency fee, and vice versa. Thus they are required to pay (a)
union dues and special assessments of their own union; and (b)
agency fee to the bargaining agent.
It is neither contractual nor statutory but quasi-
contractual. Payment of agency fee to the bargaining union/agent
which negotiated the CBA is but a reasonable requirement
recognized by law, to prevent non-union members from enriching
themselves at the expense of union members [Holy Cross of Davao
v. Joaquin]. The non-member does not become a member when he
pays the agency fee.
Check-Off
Check-off is a method of deducting by the employer
from the employee’s pay at prescribed periods, any amount due for
fees, fines or assessments [AL Ammen Transportation v. Bicol
Transportation Employees]. Strictly speaking, it is a process or
device whereby the employer, on agreement with the union
certified as the SEBA, or on prior authorization from its
employees, deducts union dues or agency fees from the latter’s
wages and remits them directly to the union [Gabriel v. Secretary
of Labor].
This only applies to the SEBA and not to the minority
union.
Check-off may refer to two (2) things:
i. Collection of union dues, special assessments
and fees (such as attorney’s fees, negotiation
fees or any other extraordinary fees by the
SEBA from its members; and
ii. Collection of agency fees from non-members
of the SEBA but covered by and included in
the collective bargaining unit (CBU) who
accept the benefits provided in the Collective
Bargaining Agreement (CBA).
The first kind mentioned requires for its validity, the
execution by the employees of individual written authorization
which should specifically state the amount, purpose, beneficiary of
Page 24 of 117
the deduction; but the second kind does not require any such
authorization since the law itself recognizes and allows it upon the
non-SEBA member’s acceptance of benefits resulting from the
CBA [Holy Cross v. Joaquin].
To effect the check-off of agency fees, no individual
authorization is necessary unlike members under Article 250(o).
In ABS-CBN Supervisors-Employees Union Members v.
ABS-CBN Broadcasting Corporation, the Supreme Court declared
that Article 250 of the Labor Code, as amended, speaks of three (3)
requisites, to wit: (1) authorization by a written resolution of the
majority of all members at the general membership meeting called
for the purpose; (2) secretary's record of the minutes of the
meeting; and (3) individual written authorization for check-off duly
signed by the employee concerned.
(xi) Right to information
It shall be the duty of any labor organization and its
officers to inform its members on the provisions of its constitution
and by-laws, collective bargaining agreement, the prevailing labor
relations system and all their rights and obligations under existing
labor laws.
b. Conditions of Membership
(i) Individuals belonging to subversive
organization or engaged in subversive
activity
No labor organization shall knowingly admit as members
or continue in membership any individual who belongs to a
subversive organization or who is engaged directly or indirectly in
any subversive activity.
(ii) Persons convicted of a crime involving
moral turpitude
No person who has been convicted of a crime involving
moral turpitude shall be eligible for election as a union officer or
for appointment to any position in the union.
(iii) Collection or disbursement of funds
No officer, agent or member of a labor organization shall
collect any fees, dues, or other contributions in its behalf or make
any disbursement of its money or funds unless he is duly
authorized pursuant to its constitution and by-laws.
(iv) Action involving funds
Any action involving the funds of the organization shall
prescribe after three (3) years from the date of submission of the
annual financial report to the Department of Labor and
Employment or from the date the same should have been submitted
as required by law, whichever comes earlier: Provided, That this
provision shall apply only to a legitimate labor organization which
has submitted the financial report requirements under this Code:
Provided, further, That failure of any labor organization to comply
with the periodic financial reports required by law and such rules
and regulations promulgated thereunder six (6) months after the
effectivity of this Act shall automatically result in the cancellation
of union registration of such labor organization;
Who can file a complaint
If it is a general complaint, the complaint must be under
oath with written consent of at least 20% of the total membership
of the labor organization, or it may be exercised by the Secretary of
DOLE motu proprio.
The Regional or Bureau Director may inquire into the
financial activities of any legitimate labor organization and
examine their books of accounts and other records to determine
compliance with the law and the organization’s constitution and
by-laws. Such examination shall be made upon the filing of a
request or complaint for the conduct of an accounts examination by
any member of the labor organization, supported by the written
consent of at least 20% of its total membership [IRR].
If it is a specific complaint and it involves the member
only, there is no need for the written consent of 20% of the
members. If it involves the entire membership, it must be supported
by the written consent of 30% of the total membership.
Any complaint or petition with allegations of
mishandling, misappropriation, or non-accounting of funds in
violation of Article 250 shall be treated as an intra-union dispute. It
shall be heard and resolved by the Mediator-Arbiter pursuant to the
provisions or Rule XI [IRR].
Where the issue involves the entire membership of the
labor organization, the complaint or petition shall be supported by
at least 30% of its members [IRR].
(v) Compensation of officers
Any action involving the funds of the organization shall
prescribe after three (3) years from the date of submission of the
annual financial report to the Department of Labor and
Employment or from the date the same should have been submitted
as required by law, whichever comes earlier: Provided, That this
provision shall apply only to a legitimate labor organization which
has submitted the financial report requirements under this Code:
Provided, further, That failure of any labor organization to comply
with the periodic financial reports required by law and such rules
and regulations promulgated thereunder six (6) months after the
effectivity of this Act shall automatically result in the cancellation
of union registration of such labor organization;
c. Effect of Violation of Rights and Conditions
of Membership
Any violation of the above rights and conditions of
membership shall be a ground for cancellation of union registration
or expulsion of officers from office, whichever is appropriate. At
least thirty percent (30%) of the members of a union or any
member or members specially concerned may report such violation
to the Bureau. The Bureau shall have the power to hear and decide
any reported violation to mete the appropriate penalty. Criminal
and civil liabilities arising from violations of above rights and
conditions of membership shall continue to be under the
jurisdiction of ordinary courts.
D. DETERMINATION OF REPRESENTATION STATUS
The term sole and exclusive bargaining agent (SEBA)
refers to a legitimate labor union duly certified as the sole and
exclusive bargaining representative or agent of all the employees in
a collective bargaining unit (CBU). A labor union certified as a
SEBA means that it shall remain as such during the existence of the
CBA, to the exclusion of all other labor organizations existing and
operating in the same CBU, and no petition for certification
election (PCE) questioning its majority status shall be entertained
nor shall certification election be conducted outside the 60-day
freedom period immediately before the expiry date of the 5-year
term of the CBA.
Once certified, what is represented by the SEBA are not
only its members but also those who are members of other unions,
called “minority” unions, who are included in the CBU [National
Brewery & Allied Industries Labor Union v. San Miguel Brewery].
An unorganized establishment becomes an “Organized
Establishment” where there exists a recognized or certified sole
and exclusive bargaining agent.
The SEBA of the employees in a CBU may be
determined through any of the following modes:
Page 25 of 117
(a) Request for SEBA certification (which repealed and
replaced “Voluntary Recognition” as a mode of
securing SEBA status);
(b) Certification election;
(c) Consent election;
(d) Run-off election.
1. SEBA Certification
Before, it was voluntary recognition, which refers to the
free and voluntary act of the employer of extending and conferring
full recognition to a union as the sole and exclusive bargaining
representative of the employees in an appropriate bargaining unit,
for purposes of collective bargaining.
Department Order No. 40-I-15, Series of 2015 has
expressly repealed the entire set of Rules applicable to Voluntary
Recognition in the Labor Code’s Implementing Rules and replaced
it with the freshly-minted mode of securing the status of a SEBA
through a Request for SEBA Certification or simply “Request.”
Any legitimate labor organization may file a Request in
the DOLE Regional Office which issued to it its Certificate of
Registration or Certificate of Creation of Chartered Local, as the
case may be [IRR].
2. Consent Election
Consent election refers to the process, voluntarily and
mutually agreed upon by the contending unions, of determining
through secret ballot the SEBA of the employees in an appropriate
CBU for purposes of collective bargaining with the employer. It is
conducted with or without the intervention of the DOLE [IRR].
Consent Election vs. Certification Election
Consent election is but a form of certification election.
They may be distinguished from each other in the following
manner:
a. The former is held upon the mutual agreement of
the contending unions; while the latter does not
require the mutual consent of the parties as it is
conducted upon the order of the Med-Arbiter [IRR].
b. The former may be conducted with or without the
control and supervision of the DOLE; while the
latter is always conducted under the control and
supervision of the DOLE [IRR].
c. The former is being conducted as a voluntary mode
of resolving labor dispute; while the latter, although
non-adversarial, is a compulsory method of
adjudicating a labor dispute.
d. The former is given the highest priority; while the
latter is resorted only when the contending unions
fail or refuse to submit their representation dispute
through the former [IRR]. This is so because under
the Implementing Rules, as amended, even in cases
where a PCE is filed, the Med-Arbiter, during the
preliminary conference and hearing thereon, is
tasked to determine the possibility of a consent
election. It is only when the contending unions fail
to agree to the conduct of a consent election during
the preliminary conference that the Med-Arbiter will
proceed with the process of certification election by
conducting as many hearings as he may deem
necessary up to its actual holding. But in no case
shall the conduct of the certification election exceed
15 days from the date of the scheduled preliminary
conference/hearing after which time, the PCE is
considered submitted for decision.
 e. The former necessarily involves at least 2 or more
contending unions; while the latter may only
involve 1 petitioner union.
f. The former may be conducted in the course of the
proceeding in the latter or during its pendency.
g. The purpose of the former is only to determine (i)
who has the majority representation of all the
workers in the appropriate collective bargaining
unit; where as the purpose of the latter is to
determine (i) whether the bargaining unit wants
representation; and (ii) who will represent them if
they want representation.
Warren v. BLR
Held: The records show that petitioner admitted that what was
held on August 25, 1985 at the Company’s premises and which became the
root of this controversy, was a consent election and not a certification
election (underscoring supplied). The election held on August 25, 1985 was
not for the purpose of determining which labor union should be the
bargaining representative in the negotiation for a collective contract, there
being an existing collective bargaining agreement yet to expire on July 31,
1986; but only to determine which labor union shall administer the said
existing contract.
 As correctly distinguished by private respondent, a consent
election is an agreed one, its purpose being merely to determine the issue of
majority representation of all the workers in the appropriate collective
bargaining unit while a certification election is aimed at determining the
sole and exclusive bargaining agent of all the employees in an appropriate
bargaining unit for the purpose of collective bargaining. From the very
nature of consent election, it is a separate and distinct process and has
nothing to do with the import and effect of a certification election. Neither
does it shorten the terms of an existing CBA nor entitle the participants
thereof to immediately renegotiate an existing CBA although it does not
preclude the workers from exercising their right to choose their sole and
exclusive bargaining representative after the expiration of the sixty (60) day
freedom period.
3. Certification Election
Certification election refers to the process of determining
through secret ballot the SEBA of the employees in an appropriate
CBU for purposes of collective bargaining with the employer. A
certification election is conducted only upon the order of the Med-
Arbiter of the BLR [IRR].
Pendency of a petition for cancellation
The pendency of a petition for cancellation of union
registration does not preclude certification election or collective
bargaining.
a. Nature of Certification Election
Certification election is the most democratic method of
determining the choice of the employees of their bargaining
representative [PAL Employees’ Association v. Ferrer-Calleja]. It
is held to ensure that the employees are properly represented in the
exercise of their right to collective bargaining with their employer
[FOITAF v. Noriel]. No obstacle must be placed to the holding of a
certification election for it is the statutory policy that it should not
be circumvented [Trade Unions of the Philippines v. Laguesma]. It
is not a litigation proceeding in a sense in which this term is
commonly understood. It is a mere investigation of a non-adversary
fact-finding character in which the DOLE plays the part of a
disinterested investigator seeking merely to ascertain the desires of
the employees as to the matter of determining which labor
organization will represent the employees in their collective
bargaining with the employer [The Heritage Hotel v. Secretary of
Labor]. It is not therefore bound by the technical rules of evidence
[Associated Labor Unions v. Ferrer-Calleja]. In case of doubt, the
Page 26 of 117
PCE should be resolved in favor of the holding of a certification
election [National Federation of Labor v. Secretary of Labor].
The facts sought to be determined in a certification
election are: first, whether the Bargaining Unit wants
representation; and second, who will represent them if they want
representation.
A certification election proceeding directly involves two
(2) issues, namely: (a) the proper composition and constituency of
the bargaining unit; and (b) the validity of majority representation
claims. It is therefore incumbent upon the Med-Arbiter to rule on
the appropriateness of the bargaining unit once its composition and
constituency is questioned [Holy Child v. Sto. Tomas].
b. Where to File
A petition for certification election shall be filed with the
Regional Office which has jurisdiction over the principal office of
the petitioner. The petition shall be in writing and under oath
[IRR].
Under the omnibus rules implementing the Labor Code
as amended by D.O. No. 9, it is supposed to be filed in the
Regional Office which has jurisdiction over the principal office of
the employer or where the bargaining unit is principally
situated. The rules further provide that where two or more petitions
involving the same bargaining unit are filed in one Regional
Office, the same shall be automatically consolidated. Hence, the
filing of multiple suits and the possibility of conflicting decisions
will rarely happen in this proceeding and, if it does, will be easy to
discover. Notably, under the Labor Code and the rules pertaining to
the form of the petition for certification election, there is no
requirement for a certificate of non-forum shopping either in D.O.
No. 9, series of 1997 or in D.O. No. 40-03, series of 2003 which
replaced the former. Considering the nature of a petition for
certification election and the rules governing it, we therefore hold
that the requirement for a certificate of non-forum shopping is
inapplicable to such a petition [SAMMA-LIKHA v. SAMMA].
c. Who may File
(i) Organized Establishments
Article 268. [256] Representation Issue in Organized
Establishments. In organized establishments, when a verified petition
questioning the majority status of the incumbent bargaining agent is
filed by any legitimate labor organization including a national union or
federation which has already issued a charter certificate to its local
chapter participating in the certification election or a local chapter
which has been issued a charter certificate by the national union or
federation before the Department of Labor and Employment within
the sixty (60)-day period before the expiration of the collective
bargaining agreement, the Med-Arbiter shall automatically order an
election by secret ballot when the verified petition is supported by the
written consent of at least twenty-five percent (25%) of all the
employees in the bargaining unit to ascertain the will of the employees
in the appropriate bargaining unit. To have a valid election, at least a
majority of all eligible voters in the unit must have cast their votes. The
labor union receiving the majority of the valid votes cast shall be
certified as the exclusive bargaining agent of all the workers in the unit.
When an election which provides for three or more choices results in
no choice receiving a majority of the valid votes cast, a run-off election
shall be conducted between the labor unions receiving the two highest
number of votes: Provided, That the total number of votes for all
contending unions is at least fifty percent (50%) of the number of votes
cast. In cases where the petition was filed by a national union or
federation, it shall not be required to disclose the names of the local
chapter’s officers and members.
At the expiration of the freedom period, the employer shall
continue to recognize the majority status of the incumbent bargaining
agent where no petition for certification election is filed.
 (ii) Unorganized Establishments
Article 269. [257] Petitions in Unorganized Establishments. In
any establishment where there is no certified bargaining agent, a
certification election shall automatically be conducted by the Med-
Arbiter upon the filing of a petition by any legitimate labor
organization, including a national union or federation which has
already issued a charter certificate to its local/chapter participating in
the certification election or a local/chapter which has been issued a
charter certificate by the national union or federation. In cases where
the petition was filed by a national union or federation, it shall not be
required to disclose the names of the local chapter’s officers and
members.
 When a duly organized union files a petition for
certification election, the Med-Arbiter has the duty to automatically
conduct an election. He has no discretion on the matter [Philippine
Scout Veterans v. Secretary of Labor].
(iii) When an Employer May File
Article 270. [258] When an Employer May File Petition.
When requested to bargain collectively, an employer may petition the
Bureau for an election. If there is no existing certified collective
bargaining agreement in the unit, the Bureau shall, after hearing,
order a certification election.
All certification cases shall be decided within twenty (20)
working days.
The Bureau shall conduct a certification election within
twenty (20) days in accordance with the rules and regulations
prescribed by the Secretary of Labor .
A petition for certification election may be filed by:
a. A legitimate labor organization, including: (i) a
national union or federation that has issued a charter
certificate to its local chapter/chartered local. The
former is filing the PCE for and on behalf of the
latter; or (ii) the local chapter/chartered local itself
which has been issued a charter certificate by the
national union or federation; or (iii) an
independently registered union;
b. An employer, when requested to bargain
collectively in a bargaining unit where no registered
CBA exists and the status of the union is in doubt.
Role of Employer in Certification Election
Article 271. [258-A] Employer as Bystander. - In all cases,
whether the petition for certification election is filed by an employer or
a legitimate labor organization, the employer shall not be considered a
party thereto with a concomitant right to oppose a in such proceedings
shall be limited to: (1) being notified or informed of petitions of such
nature; and (2) submitting the list of employees during the pre-election
conference should the Med-Arbiter act favorably on the petition.
In issues as to the appropriateness of employees in a
bargaining unit, the employer has a proper role. He can object to
the appropriateness of the bargaining unit through a motion or a
manifestation. Once the bargaining unit is already established,
neither the employer nor the employees can change its
configuration.
d. When to File the Petition for Certification
Election
In the absence of a CBA duly registered in accordance
with Article 237, a petition for certification lection may be filed at
any time.
Page 27 of 117
However, no certification lection may be held under the
following rules:
(a) Certification year-bar rule;
(b) Negotiations-bar rule;
(c) Bargaining deadlock-bar rule; or
(d) Contract-bar rule.
(i) Certification Year Bar Rule
Although the Labor Code does not contain any provision
on when the CBA negotiation process should start after a union is
duly certified as the SEBA of the employees it seeks to represent in
a given bargaining unit, there is, however, this provision in the
Rules when the Med-Arbiter may dismiss the PCE if the same is
filed within one (1) year reckoned and counted:
(i) From the date the SEBA certification is issued
by the DOLE Regional Director in cases of
Request for SEBA Certification filed in an
unorganized establishment with only one (1)
legitimate labor organization; or
(ii) From the date of issuance of certification as
SEBA and not from the date of the conduct of
valid certification, consent, run-off or re-run
election [IRR].
In the first instance, the period is counted from the
issuance of the SEBA certification which shall have the effect of
barring the filing of a PCE by any labor organization. It is only
upon the expiration of this 1-year period that any legitimate labor
organization may file a PCE in the same collective bargaining unit
(CBU) represented by the certified SEBA, unless a CBA between
the employer and the certified SEBA was executed and registered
with the DOLE Regional Office [IRR].
In the second, there must be a distinction made between
the reckoning of the 1-year statutory bar and the 1-year
certification year bar. The 1-year period in the former should be
counted from the date of election; while the 1-year period in the
latter should be from the date of certification of the SEBA. The
union will be deprived of its entitlement to the critical one (1) year
as a certified SEBA if this period is reckoned from the actual date
when the certification, consent, run-off or re-run election was
conducted. The union is certainly entitled to a full 12 months as
SEBA. Until certification is made in its favor, its status as SEBA is
not definite.
Where an appeal has been filed from the order of the
Med-Arbiter certifying the results of the election, the running of
the one (1) year period is deemed suspended until the decision on
the appeal has become final and executory [IRR].
If the SEBA fails to commence the collective bargaining
process within said period, its being the SEBA may be questioned
by another union through the filing of a new PCE. This is best
illustrated by the case of KAMPIL-KATIPUNAN v. Trajano, where
the SEBA failed to initiate the collective bargaining process within
a period of more than 4 years thereby enabling another union to file
a new petition for certification election.
(ii) Negotiations Bar Rule
Under the negotiations bar rule, a certification election
petition may not be filed while the SEBA and employer have
commenced and sustained negotiations in good faith in accordance
with Article 261 within one (1) year from the date of entry of
SEBA certification, or from the date of a valid certification,
consent, or run-off election or from the date of issuance of the
SEBA certification by the DOLE Regional Director in cases of
Request for SEBA Certification.
 Once the CBA negotiations have commenced and while
the parties are engaged in this process, no challenging union is
allowed file a PCE that would disturb the negotiation process and
unduly delay, preempt or forestall the prompt and timely
conclusion thereof.
It must be noted that there is no law or rule that imposes
a time limitation or caps as to when the parties should negotiate
and conclude a CBA. The parties have all the freedom and leeway
to negotiate the CBA’s terms and conditions without being
constrained by any time restriction. In other words, the negotiation
process may last for days, weeks, months, even years, and during
the entire duration thereof, no PCE may be filed by any challenging
union.
(iii) Bargaining Deadlock Bar Rule
Collective bargaining deadlock refers to a situation
where there is failure in the collective bargaining negotiations
between the SEBA and the employer resulting in an impasse or
stalemate [San Miguel Corporation v. NLRC]. This happens when,
despite their efforts at bargaining in good faith, the parties have
failed to resolve the issues and it appears that there are no other
definite options or plans in sight to break the standoff. Simply
stated, there is a deadlock when there is a complete blocking or
stoppage in the negotiation resulting from the action of equal and
opposing forces [Capitol Medical Center Alliance of Concerned
Employees v. Laguesma].
Under this rule, a certification election petition may not
be filed when a bargaining deadlock to which an incumbent SEBA
is a party has been submitted to conciliation, compulsory or
voluntary arbitration or has become the subject of a valid notice of
strike or lockout [IRR].
The Deadlock Bar Rule simply provides that a petition
for certification election can only be entertained if there is no
pending bargaining deadlock submitted to conciliation or
arbitration or had become the subject of a valid notice of strike or
lockout. The principal purpose is to ensure stability in the
relationship of the workers and the management [NACUSIP v.
Trajano].
CMCEA-AFW v. Laguesma
Held: Was there a bargaining deadlock between CMC and
respondent union, before the filing of petitioner of a petition for
certification election, which had been submitted to conciliation or had
become the subject of a valid notice of strike or lockout?
In the case of Divine Word University of Tacloban v. Secretary
of Labor and Employment, we had the occasion to define what a deadlock
is, viz:
"A 'deadlock' is xxx the counteraction of things producing entire
stoppage; xxx There is a deadlock when there is a complete blocking or
stoppage resulting from the action of equal and opposed forces xxx. The
word is synonymous with the word impasse, which xxx 'presupposes
reasonable effort at good faith bargaining which, despite noble intentions,
does not conclude in agreement between the parties. ' "
Although there is no "deadlock" in its strict sense as there is no
"counteraction" of forces present in this case nor "reasonable effort at good
faith bargaining, "such can be attributed to CMC's fault as the bargaining
proposals of respondent union were never answered by CMC. In fact, what
happened in this case is worse than a bargaining deadlock for CMC
employed all legal means to block the certification of respondent union as
the bargaining agent of the rank-and-file; and use it as its leverage for its
failure to bargain with respondent union. Thus, we can only conclude that
CMC was unwilling to negotiate and reach an agreement with respondent
union. CMC has not at any instance shown willingness to discuss the
economic proposals given by respondent union.
As correctly ratiocinated by public respondent, to wit:
"For herein petitioner to capitalize on the ensuing delay which
was caused by the hospital and which resulted in the non-conclusion of a
CBA within the certification year, would be to negate and render a mockery
of the proceedings undertaken before this Department and to put an
Page 28 of 117
unjustified premium on the failure of the respondent hospital to perform its
duty to bargain collectively as mandated in Article 252 of the Labor Code,
as amended, which states."
"Article 252. Meaning of duty to bargain collectively - the duty
to bargain collectively means the performance of a mutual obligation to
meet and convene promptly and expeditiously in good faith for the purpose
of negotiating an agreement with respect to wages, hours of work and all
other terms and conditions of employment including proposals for adjusting
any grievance or questions arising under such agreement and executing a
contract incorporating such agreements if requested by either party but such
duty does not compel any party to agree to a proposal or to make any
concession."
The duly certified bargaining agent, CMCEA - AFW, should not
be made to further bear the brunt flowing from the respondent hospital's
reluctance and thinly disguised refusal to bargain."
If the law proscribes the conduct of a certification election when
there is a bargaining deadlock submitted to conciliation or arbitration, with
more reason should it not be conducted if, despite attempts to bring an
employer to the negotiation table by the certified bargaining agent, there
was "no reasonable effort in good faith" on the employer to bargain
collectively.
In the case of Kaisahan ng Manggagawang Pilipino vs. Trajano,
201 SCRA 453 (1991), penned by Chief Justice Andres R. Narvasa, the
factual milieu of which is similar to this case, this Court allowed the
holding of a certification election and ruled that the one year period known
as the "certification year" has long since expired. We also ruled, that:
  "xxx prior to the filing of the petition for election in this case,
there was no such 'bargaining deadlock xx (which) had been submitted to
conciliation or arbitration or had become the subject of a valid notice of
strike or lockout.' To be sure, there are in the record assertions by NAFLU
that its attempts to bring VIRON to the negotiation table had been
unsuccessful because of the latter's recalcitrance, and unfulfilled promises
to bargain collectively; but there is no proof that it had taken any action to
legally coerce VIRON to comply with its statutory duty to bargain
collectively. It could have charged VIRON with unfair labor practice; but it
did not. It could have gone on a legitimate strike in protest against VIRON's
refusal to bargain collectively and compel it to do so; but it did not. There
are assertions by NAFLU, too, that its attempts to bargain collectively had
been delayed by continuing challenges to the resolution pronouncing it the
sole bargaining representative in VIRON; but there is no adequate
substantiation thereof , or of how it did in fact prevent initiation of the
bargaining process between it and VIRON."
Although the statements pertinent to this case are merely obiter,
still the fact remains that in the Kaisahan case, NAFLU was counselled by
this Court on the steps that it should have undertaken to protect its interest,
but which it failed to do so.
This is what is strikingly different between the Kaisahan case
and the case at bench for in the latter case, there was proof that the certified
bargaining agent, respondent union, had taken an action to legally coerce
the employer to comply with its statutory duty to bargain collectively, i. e.,
charging the employer with unfair labor practice and conducting a strike in
protest against the employer's refusal to bargain. [25] It is only just and
equitable that the circumstances in this case should be considered as similar
in nature to a "bargaining deadlock" when no certification election could be
held. This is also to make sure that no floodgates will be opened for the
circumvention of the law by unscrupulous employers to prevent any
certified bargaining agent from negotiating a CBA. Thus, Section 3, Rule
V, Book V of the Implement Rules should be interpreted liberally so as to
include a circumstance, e. g. where a CBA could not be concluded due to
the failure of one party to willingly perform its duty to bargain collectively.
(iv) Contract Bar Rule
Under this rule, the existence of the CBA, the contract
referred to therein, bars the filing of a PCE. Once a CBA is duly
registered and validly subsisting, no PCE or any other action
should be entertained that may disturb the administration of the
duly registered existing CBA [IRR]. Neither party should terminate
nor modify such agreement during its lifetime. Inter-union electoral
contests are therefore not allowed [Foamtex Labor Union v.
Noriel].
For the entire 5-year lifetime of the CBA, no PCE
questioning the majority status of the incumbent SEBA shall be
entertained and no certification election shall be conducted by the
DOLE outside of the 60-day freedom period immediately before
the date of expiry of such five-year term of the CBA.
Exceptions
The contract bar rule admits of several exceptions where
a PCE may be validly filed:
(i) During the 60-day freedom period immediately
prior to the expiry date of a CBA.
(ii) When the CBA is not registered with the BLR
or any of the DOLE Regional Offices.
(iii) When the CBA, although registered, contains
provisions lower than the standards fixed by
law or illegal per se clauses.
(iv) When the documents supporting the CBA’s
registration are falsified, fraudulent or tainted
with misrepresentation.
(v) When the CBA is not complete as it does not
contain any of the mandatory provisions which
the law requires. Such kind of agreement
cannot promote industrial peace as it leaves out
matters which the parties should have
stipulated [Buklod ng Saulog Transit v.
Casalla].
(vi) When the CBA was extended during its term as
when it was negotiated and entered into prior to
the 60-day freedom period. The agreement in
this case is deemed hastily entered into in order
to frustrate the will of the employees in
choosing their bargaining representative
[Associated Trade Union v. Noriel].
(vii) When there is a schism in the union resulting in
an industrial dispute wherein the CBA can no
longer foster industrial peace. The conduct of a
certification election in such a situation
becomes imperative to clear any doubt as to the
real and legitimate representative of the
employees [Firestone Tire and Rubber
Company Employees Union v. Estrella].
(viii) When there is an automatic renewal provision
in the CBA but prior to the date when such
automatic renewal became effective, the
employer seasonably filed a manifestation with
the BLR of its intention to terminate the said
agreement if and when it is established that the
SEBA does not represent anymore the majority
of the workers in the bargaining unit [PLDT
Employees’ Union v. PLDT].
60-Day Freedom Period
The 60-day freedom period is superior to all other rules.
During this period, a petition for certification election and a motion
or intervention can be filed. Outside of this, the petition should be
dismissed outright.
During this period, the union security clause is not
effective and the employees are free to form or join another union
without fear of getting fired. However, they are not free from
paying union dues and agency fees because the EBA representation
status is still conclusive up to the expiration of the CBA term.
Upon the expiration of the period, the employer should
continue to recognize the majority status of the incumbent EBA
where no petition for certification election challenging such
majority status is filed by any other union.
In PMTI-ULGP v. Calleja, respondent union’s petition
for certification election was filed on November 25, 1987. At the
time of the filing of the said petition, a valid and existing CBA was
Page 29 of 117
present between petitioner and Triumph International. The CBA
was effective up to September 24, 1989. There is no doubt that the
respondent union’s CBA constituted a bar to the holding of the
certification election as petitioned by the respondent union with
public Respondent. The members of the respondent union should
wait for the proper time.
Oriental Tin v. Secretary of Labor
Held: It is uncontroverted that the petition for certification
election in this case was filed on March 18, 1994, twenty-eight days before
the expiration of the existing CBA on April 15, 1994, and well within the
60-day period provided for by the Code. The OTCLU, however, is
concerned with the effect of the employees' ratification of the new CBA on
the timely filing of the petition for certification election. Would such
ratification nullify the petition?
The law dictates a negative reply. The filing of a petition for
certification election during the 60-day freedom period gives rise to a
representation case that must be resolved even though a new CBA has been
entered into within that period. This is clearly provided for in the
aforequoted Section 4, Rule V, Book V of the Omnibus Rules
Implementing the Labor Code. The reason behind this rule is obvious. A
petition for certification election is not necessary where the employees are
one in their choice of a representative in the bargaining process. Moreover,
said provision of the Omnibus Rules manifests the intent of the legislative
authority to allow, if not encourage, the contending unions in a bargaining
unit to hold a certification election during the freedom period. Hence, the
Court held in the case of Warren Manufacturing Workers Union (WMWU)
v. Bureau of Labor Relations, that the agreement prematurely signed by the
union and the company during the freedom period does not affect the
petition for certification election filed by another union.
Schism
Excepted from the contract bar rule are certain types of
contracts which do not foster industrial stability, such as contracts
where the identity of the representative is in doubt. Any stability
derived from such contracts must be subordinated to the
employees’ freedom of choice because it does not establish the
type of industrial peace contemplated by law. Where, therefore, the
fact of disaffiliation has been demonstrated beyond doubt, a
certification election is the most expeditious way of determining
which labor organization is to be the exclusive bargaining
representative [Firestone Tire and Rubber Company Employees
Union v. Estrella].
Associated Workers Union-PTGWO v. NLRC
Held: While it is true that AWUM as a local union, being an
entity separate and distinct from AWU, is free to serve the interest of all its
members and enjoys the freedom to disaffiliate, such right to disaffiliate
may be exercised, and is thus considered a protected labor activity, only
when warranted by circumstances.  Generally, a labor union may
disaffiliate from the mother union to form a local or independent union only
during the 60-day freedom period immediately preceding the expiration of
the CBA. Even before the onset of the freedom period (and despite the
closed-shop provision in the CBA between the mother union and
management) disaffiliation may still be carried out, but such disaffiliation
must be effected by a majority of the members in the bargaining unit. This
happens when there is a substantial shift in allegiance on the part of the
majority of the members of the union.  In such a case, however, the CBA
continues to bind the members of the new or disaffiliated and independent
union up to the CBA's expiration date.
ALU v. Calleja
Held: The Court has long since declared that:
... Basic to the contract bar rule is the proposition that the delay
of the right to select represen tatives can be justified only where stability is
deemed paramount. Excepted from the contract which do not foster
industrial stability, such as contracts where the identity of the representative
is in doubt. Any stability derived from such contracts must be subordinated
to the employees' freedom of choice because it does nto establish the type
of industrial peace contemplated by the law. 11
 At this juncture, petitioner should be reminded that the technical
rules of rpocedure do not strictly apply in the adjudication of labor
disputes. 12 Consequently, its objection that the evidence with respect to the
aforesaid repudiiation of the supposed collective bargaining agreement
cannot be considered for the first time on appeal on the Bureau of Labor
Relations should be disregarded, especially considering the weighty
significance thereof.
Both petitioner and private respondent GAW Trading, Inc.
allege that the employees of the latter are now enjoying the benefits of the
collective bargaining agreement that both parties had forged. However, We
cannot find sufficient evidence of record to support this contention. The
only evidence cited by petitioner is supposed payment of union fees by said
employees, a premise too tenuous to sustain the desired conclusion. Even
the actual number of workers in the respondent company is not clear from
the records. Said private respondent claims that it is two hundred eighty-
one (281)13 but petitioner suggests that it is more than that number. The said
parties should be aware that this Court is not an adjudicator of facts. Worse,
to borrow a trite but apt phrase, they would heap the Ossa of confusion
upon the Pelion of uncertainty and still expect a definitive ruling on the
matter thus confounded.
Additionally, the inapplicability of the contract bar rule is
further underscored by the fact that when the disputed agreement was filed
before the Labor Regional Office on May 27, 1986, a petition for
certification election had already been filed on May 19, 1986. Although the
petition was not supported by the signatures of thirty percent (30%) of the
workers in the bargaining unit, the same was enough to initiate said
certification election.
Substitutionary Doctrine
Under this doctrine, employees are allowed to change
their SEBA, but the CBA continues to bind them up to its
expiration date. They may bargain however for the shortening of
said expriation date.
Thus, the new SEBA cannot negotiate a new CBA, it can
only administer the old CBA, but the new SEBA is not bound by
the personal obligations imposed by the old CBA such as the “no
strike, no lockout rule.”
Benguet Consolidated v. BCI Employees
Held: In support of an affirmative answer to the first question,
BENGUET first invokes the so-called “Doctrine of Substitution" referred to
in General Maritime Stevedore's Union v. South Sea Shipping Lines, L-
14689, July 26, 1960. There it was remarked:
“We also hold that where the bargaining contract is to run for
more than two years, the principle of substitution may well be adopted and
enforced by the CIR to the effect that after two years of the life of a
bargaining agreement, a certification election may be allowed by the
CIR; that if a bargaining agent other than the union or organization that
executed the contract, is elected, said new agent would have to respect said
contract, but that it may bargain with the management for the shortening of
the life of the contract if it considers it too long, or refuse to renew the
contract pursuant to an automatic renewal clause.” (Italics supplied)
The submission utterly fails to persuade Us. The above-quoted
pronouncement was obiter dictum. The only issue in the General Maritime
Stevedores’ Union case was whether a collective bargaining agreement
which had practically run for 5 years constituted a bar to certification
proceedings. We held it did not and accordingly directed the court a quo to
order certification elections. With that, nothing more was necessary for the
disposition of the case. Moreover, the pronouncement adverted to was
rather premature. The possible certification of a union different from that
which signed the bargaining contract was a mere contingency then since the
elections were still to be held. Clearly, the Court was not called upon to rule
on the possible effects of such proceedings on the bargaining agreement
But worse, BENGUET’s reliance upon the Principle of
Substitution is totally misplaced. This principle, formulated by the
NLRB[7] as its initial compromise solution to the problem facing it when
there occurs a shift in employees’ union allegiance after the execution of a
bargaining contract with their employer, merely states that even during the
effectivity of a collective bargaining agreement executed between employer
and employees thru their agent, the employees can change said agent but
the contract continues to bind them up to its expiration date. They may
bargain however for the shortening of said expiration date.
Page 30 of 117
In formulating the “substitutionary” doctrine, the only
consideration involved was the employees’ interest in the existing
bargaining agreement. The agent’s interest never entered the picture. In
fact, the justification for said doctrine was:
". . . that the majority of the employees, as an entity under the
statute, is the true party in interest to the contract, holding rights through the
agency of the union representative. Thus, any exclusive interest claimed by
the agent is defeasible at the will of the principal.. .” (Italics supplied)
Stated otherwise, the “substitutionary” doctrine only provides
that the employees cannot revoke the validly executed collective bargaining
contract with their employer by the simple expedient of changing their
bargaining agent. And it is in the light of this that the phrase “said new
agent would have to respect said contract” must be understood. It only
means that the employees, thru their new bargaining agent, cannot renege
on their collective bargaining contract, except of course to negotiate with
management for the shortening thereof.
The “substitutionary” doctrine, therefore, cannot be invoked to
support the contention that a newly certified collective bargaining agent
automatically assumes all the personal undertakings — like the no-strike
stipulation here — in the collective bargaining agreement made by the
deposed union. When BBWU bound itself and its officers not to strike, it
could not have validly bound also all the other rival unions existing in the
bargaining units in question. BBWU was the agent of the employees, not of
the other unions which possess distinct personalities. To consider UNION
contractually bound to the no-strike stipulation would therefore violate the
legal maxim that res inter alios acta alios nec prodest nec nocet.
Of course, UNION, as the newly certified bargaining agent,
could always voluntarily assume all the personal undertakings made by the
displaced agent. But as the lower court found, there was no showing at all
that, prior to the strike,[11] UNION formally adopted the existing
CONTRACT as its own and assumed all the liabilities imposed by the same
upon BBWU.
e. Appeal
Article 272. [259] Appeal from Certification Election Orders.
Any party to an election may appeal the order or results of the election
as determined by the Med-Arbiter directly to the Secretary of Labor
and Employment on the ground that the rules and regulations or parts
thereof established by the Secretary of Labor and Employment for the
conduct of the election have been violated. Such appeal shall be decided
within fifteen (15) calendar days.
f. Conduct of Certification Election
The process of certification election requires the
application of the double majority rule for the following twin
purposes:
(i) To have a valid certification election; and
(ii) To declare the winning union that will be certified
as a SEBA.
(i)First Majority: To be a valid
certification election, at least a majority
of all eligible voters in the bargaining
unit should have cast their votes
The first majority is essential to validate the certification
election process itself. According to Article 268, in order to have a
valid certification election, it is required that at least a majority of
all eligible voters in the bargaining unit must have cast their votes
[Samahan ng Manggagawa v. Laguesma]. If less than such
majority have cast their votes, the certification election process
itself is not valid and, therefore, not one of the contending unions
therein, even if chosen by the majority of the votes cast, can be
certified as the SEBA to represent the CBU.
(ii) Second Majority: Majority vote of the
valid votes cast in order to be chosen as
the SEBA
 After establishing the validity of the certification election
process itself, the next point to ascertain and establish is whether
the petitioning union, in a single-union contest, or any of the
unions, in a multi-union election, has garnered the majority of the
valid votes cast.
Under the same Article 268, it is required that only “the
labor union receiving the majority of the valid votes cast shall be
certified as the exclusive bargaining agent of all the workers in the
unit” and under Article 267, it is likewise provided that the labor
organization designated or selected by the majority of the
employees in an appropriate CBU is the exclusive representative of
the employees in such unit for purposes of collective bargaining
[Peral v. United Employees Welfare Association].
4. Run-Off Election
A run-off election refers to an election between the labor
unions receiving the two (2) highest number of votes when a
certification election which provides for three (3) or more choices
result in no choice receiving a majority of the valid votes cast;
provided, that the total number of votes for all contending unions is
at least fifty percent (50%) of the number of votes cast.
Thus, a run-off election may only be conducted under the
following elements:
a. There are three (3) or more unions competing in a
certification or consent election;
b. None of the contending unions garnered the
majority of the valid votes cast;
c. But the total number of votes for all contending
unions, if added, is at least fifty (50%) of the
number of valid votes cast;
d. If the above three (3) elements are present, a run-off
election will be conducted between the labor unions
receiving the two (2) highest number of votes in
such certification election or consent election. The
third union and the others, if any, will no longer be
allowed to participate in such election. And for
obvious reason, the choice of “No Union” should no
longer be included in the run-off election [IRR].
If the above conditions that justify the conduct of a run-
off election are present and there are no objections or challenges
which, if sustained, can materially alter the election results, the
Election Officer should motu proprio conduct a run-off election
within 10 days form the close of the election proceeding between
the labor unions receiving the two highest number of votes [IRR].
5. Re-Run Election
This mode of choosing the SEBA is not expressly
provided in the Labor Code nor in the rendering of its
implementing rules. It was only in 2015 that an issuance of the
DOLE Secretary has introduced this term for the first time as an
amendment to the Rules to Implement the Labor Code and defines
it as follows:
“‘Re-run election’ refers to an election doncuted to
break a tie between contending unions, including between ‘no
union’ and one of the unions. It shall likewise refer to an
election doncuted after a failure of election has been declared by
the Election Officer and/or affirmed by the Mediator-Arbiter.”
A re-run election is obviously in the nature of a
corrective action meant to cure a seriously defective and distorted
certification election. Consequently, a third ground that may be
cited as would justify the conduct of a fair re-run election is when
the certification, consent or run-off election has been invalidated or
nullified due to certain serious irregularities that have been
Page 31 of 117
committed during the conduct thereof, such as, inter alia,
disenfranchisement of the voters, lack of secrecy in the voting,
fraud or bribery or acts of terrorism, force, threat and intimidation
employed by any of the contending unions or the employer. Such
invalidation would necessitate the conduct of a re-run election
among the contending unions to determine the true will and desire
of the employees-electorate [Confederation of Citizens Labor
Unions v. Noriel].
Re-Run Election vs. Failure of Election
Re-Run Election Failure of Election
There is a valid certification There is no valid certification
election but because of certain election because the number of
circumstances, the election is votes cast is less than the majority
nullified and another one is of the number of eligible voters
ordered to truly reflect the will and there are no challenged votes
and sentiment of the electorate- that could materially change the
employees. results.
III
COLLECTIVE BARGAINING
A. DUTY TO BARGAIN COLLECTIVELY
Article 263. [252] Meaning of Duty to Bargain Collectively. -
The duty to bargain collectively means the performance of a mutual
obligation to meet and convene promptly and expeditiously in good
faith for the purpose of negotiating an agreement with respect to
wages, hours of work and all other terms and conditions of
employment including proposals for adjusting any grievances or
questions arising under such agreement and executing a contract
incorporating such agreements if requested by either party but such
duty does not compel any party to agree to a proposal or to make any
concession
Noteworthy in the above definition is the requirement on
both parties of the performance of the mutual obligation to meet
and convene promptly and expeditiously in good faith for the
purpose of negotiating an agreement [Colegio de San Juan de
Letran v. Association of Employees and Faculties of Letran].
The duty does not compel any party to agree blindly to a
proposal nor to make concession. While the law imposes on both
the employer and the bargaining union the mutual duty to bargain
collectively, the employer is not under any legal obligation to
initiate collective bargaining negotiations [Kiok Loy v. NLRC].
The duty to bargain collectively does not exist when the
majority status of the employees’ representative is not established.
The employer has no such duty to bargain with the individual
workers or with the minority union [Lakas ng Manggagawang
Makabayan v. Marcelo Enterprises]. In Philippine Diamond Hotel
v. Manila Diamond Hotel Employees Union, it was held that since
the respondent union is not the exclusive representative of the
majority of the employees of petitioner, it could not demand from
petitioner the right to bargain collectively in their behalf.
Petitioner’s refusal, therefore, to bargain collectively with
respondent union cannot be considered ULP.
Obviously, the ultimate purpose of collective bargaining
is to reach 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 [Union of Filipino
Employees v. Nestle Philippines].
1. Duty to Bargain Collectively in the Absence of a
CBA
 Article 262. [251] Duty to Bargain Collectively in the Absence
of Collective Bargaining Agreements. - In the absence of an agreement
or other voluntary arrangement providing for a more expeditious
manner of collective bargaining, it shall be the duty of employer and
the representatives of the employees to bargain collectively in
accordance with the provisions of this Code
Clearly, the law gives utmost premium and extends due
respect to the voluntary arrangement between the parties on how
they will discharge their respective duties to bargain collectively
before resort to the procedure laid down in the Labor Code may be
made. In other words, it is only when there is no such voluntary
arrangement that the procedure laid down in Article 261 of the
Labor Code should be followed.
2. Duty to Bargain Collectively When There Exists
a CBA
Article 264. [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.
This last 60-day period is the freedom period. It is
denominated as such because it is the only time when the law
allows the parties to freely serve a notice to terminate, alter or
modify the existing CBA. It is also the time when the majority
status of the SEBA may be challenged by another union by filing
the appropriate petition for certification election [MRR Yard Crew
v. PNR].
Another exception is the so-called Fractual Bargaining.
This is when the change that gradually occurs because of the actual
practice of the employer which in fact increases the benefits
provided in the CBA.
Automatic Renewal Clause
The last sentence of Article 253 refers to the so-called
"automatic renewal" of a CBA. The parties shall continue the CBA
in "full force and effect" until they reach a new agreement.
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 [New Pacific Timber v. NLRC].
Effect of CBA Renewal or Registration Before or
During the 60-Day Freedom Period
It is well settled that the 60-day freedom period based on
the original CBA shall not be affected by any amendment,
extension or renewal of the CBA for purposes of certification
election.
In the case of Warren Manufacturing Workers Union v.
Bureau of Labor Relations, it was held that an agreement
prematurely signed by the union and the company during the
freedom period does not affect the petition for certification election
filed by another union.
Page 32 of 117
B. COLLECTIVE BARGAINING AGREEMENT
A Collective Bargaining Agreement 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.” 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. 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 [Rivera v. Espiritu].
The CBA embodies all the agreements reached after
negotiations between the employer and the SEBA with respect to
the terms and conditions of their employment relationship
[Pantranco North Express v. NLRC]. Consequently, from the
moment it is perfected and during its lifetime, it is considered the
law between the parties [SMTFM-UWP v. NLRC] and as such, they
are bound not only to the fulfillment of what has been expressly
stipulated but also to all consequences which, according to their
nature, may be in keeping with good faith [Goya v. Goya
Employees Union] and the mandate of the law [Supreme Steel v.
NMS-IND-APL]. Being the law between the parties, any violation
thereof can be subject of redress in the court [Faculty Association
of Mapua v. Court of Appeals].
 In United Kimberly-Clark Employees Union Philippine
Transport General Workers Organization (UKCEU-PTGWO) v.
Kimberly-Clark Philippines, Inc., this Court emphasized that:
As a general proposition, an arbitrator is confined to
the interpretation and application of the collective bargaining
agreement. He does not sit to dispense his own brand of
industrial justice: his award is legitimate only in so far as it
draws its essence from the CBA, i.e., when there is a rational
nexus between the award and the CBA under consideration. It is
said that an arbitral award does not draw its essence from the
CBA; hence, there is an unauthorized amendment or alteration
thereof, if:
1. It is so unfounded in reason and fact;
2. It is so unconnected with the working and purpose
of the agreement;
3. It is without factual support in view of its
language, its context, and any other indicia of the parties'
intention;
4. It ignores or abandons the plain language of the
contract;
5. It is mistakenly based on a crucial assumption
which concededly is a nonfact;
6. It is unlawful, arbitrary or capricious; and
7. It is contrary to public policy.
xx xx
If the terms of a CBA are clear and [leave] no doubt
upon the intention of the contracting parties, the literal meaning
of its stipulation shall prevail. However, if, in a CBA, the parties
stipulate that the hirees must be presumed of employment
qualification standards but fail to state such qualification
standards in said CBA, the VA may resort to evidence extrinsic
of the CBA to determine the full agreement intended by the
parties. When a CBA may be expected to speak on a matter, but
does not, its sentence imports .ambiguity on that subject. The
VA is not merely to rely on the cold and cryptic words on the
face of the CBA but is mandated to discover the intention of the
parties. Recognizing the inability of the parties to anticipate or
address all future problems, gaps may be left to be filled in by
reference to the practices of the industry, and the step which is
equally a part of the CBA although not expressed in it. In order
to ascertain the intention of the contracting parties, their
contemporaneous and subsequent acts shall be principally
considered The VA may also consider and rely upon negotiating
 and contractual history of the parties, evidence of past practices
interpreting ambiguous provisions. The VA has to examine such
practices to determine the scope of their agreement, as where the
provision of the CBA has been loosely formulated. Moreover,
the CBA must be construed liberally rather than narrowly and
technically and the Court must place a practical and realistic
construction upon it
1. Law Deemed Written or Incorporated
As in all contracts, the parties in a CBA may establish
such stipulations, clauses, terms and conditions as they may deem
convenient provided these are not contrary to law, morals, good
customs, public order or public policy. Thus, where the CBA is
clear and unambiguous, it becomes the law between the parties and
compliance therewith is mandated by the express policy of the law
[Hongkong Union v. HSBC].
Parties may validly agree in the CBA to reduce wages
and benefits provided such reduction does not go below the
minimum standards [Manila Fashions v. NLRC].
If the CBA provides for just the minimum wage rates, the
CBA is void for being a Sweetheart contract.
2. Entitlement to Benefits
The following are entitled to the benefits stipulated in the
CBA:
a. Members of the Bargaining Union;
b. Non-members of the bargaining union but are
members of the bargaining unit;
c. Members of the minority union/s who paid agency
fees to the bargaining union; and
d. New employees hired after the conclusion of the
CBA and during its effectivity or even after its
expiration.
Employees excluded from the bargaining unit, like
confidential employees or managerial employees or supervisory
employees, in the case of rank-and-file CBU, or vice versa, are not
entitled to the benefits flowing from the CBA. But two exceptions
may be cited, to wit:
a. When the CBA benefits are granted to managerial
employees by reason of company policy or
company practice;
b. When adjustments are made to avoid distortion in
the levels of wages or benefits.
In the first, in order to make it an enforceable and
demandable right, there should be evidence of existence of such
policy or practice; otherwise, the absence thereof would not justify
any claim or demand therefor.
In the second, certain economic benefits may be
voluntarily extended to excluded employees such as increases in
wages and other monetary benefits because a CBA was concluded
with the rank-and-file employees. But if so given, the same cannot,
strictly speaking, be considered as having been based on the CBA
but simply as adjustments to prevent distortion in the levels of
wages and benefits among the employees included in the CBU, in
particular, and all the employees of the establishment, in general.
There is nothing to prevent the employer from granting
benefits to managerial employees equal to or higher than those
afforded to union members. There can be no conflict of interest
where the employer himself voluntarily agrees to grant such
benefits to managerial employees [Martinez v. NLRC].
3. In case of change of ownership of establishment
Page 33 of 117
The rule is that unless expressly assumed, labor contracts
such as employment contracts and collective bargaining
agreements are not enforceable against a transferee of an
enterprise, labor contracts being in personam, thus binding only
between the parties. A labor contract merely creates an action in
personally and does not create any real right which should be
respected by third parties. This conclusion draws its force from the
right of an employer to select his employees and to decide when to
engage them as protected under our Constitution, and the same can
only be restricted by law through the exercise of the police power.
As a general rule, there is no law requiring a bona fide purchaser of
assets of an on-going concern to absorb in its employ the
employees of the latter. However, although the purchaser of the
assets or enterprise is not legally bound to absorb in its employ the
employers of the seller of such assets or enterprise, the parties are
liable to the employees if the transaction between the parties is
colored or clothed with bad faith [Sundowner v. Drilon]. 
4. Effectivity in Case of Merger/Consolidation;
Wiley Doctrine
The lack of a provision in the plan of merger regarding
the transfer of employment contracts to the surviving corporation
could have very well been deliberate on the part of the parties to
the merger, in order to grant the surviving corporation the freedom
to choose who among the dissolved corporation's employees to
retain, in accordance with the surviving corporation's business
needs.  If terminations, for instance due to redundancy or labor-
saving devices or to prevent losses, are done in good faith, they
would be valid.  The surviving corporation too is duty-bound to
protect the rights of its own employees who may be affected by the
merger in terms of seniority and other conditions of their
employment due to the merger.  Thus, we are not convinced that in
the absence of a stipulation in the merger plan the surviving
corporation was compelled, or may be judicially compelled, to
absorb all employees under the same terms and conditions
obtaining in the dissolved corporation as the surviving corporation
should also take into consideration the state of its business and its
obligations to its own employees, and to their certified collective
bargaining agent or labor union [BPI v. BPI Employees].
5. Substitutionary Doctrine
Under this doctrine, employees are allowed to change
their SEBA, but the CBA continues to bind them up to its
expiration date. They may bargain however for the shortening of
said expriation date.
Thus, the new SEBA cannot negotiate a new CBA, it can
only administer the old CBA, but the new SEBA is not bound by
the personal obligations imposed by the old CBA such as the “no
strike, no lockout rule.”
Benguet Consolidated v. BCI Employees
Held: In support of an affirmative answer to the first question,
BENGUET first invokes the so-called “Doctrine of Substitution" referred to
in General Maritime Stevedore's Union v. South Sea Shipping Lines, L-
14689, July 26, 1960. There it was remarked:
“We also hold that where the bargaining contract is to run for
more than two years, the principle of substitution may well be adopted and
enforced by the CIR to the effect that after two years of the life of a
bargaining agreement, a certification election may be allowed by the
CIR; that if a bargaining agent other than the union or organization that
executed the contract, is elected, said new agent would have to respect said
contract, but that it may bargain with the management for the shortening of
the life of the contract if it considers it too long, or refuse to renew the
contract pursuant to an automatic renewal clause.” (Italics supplied)
The submission utterly fails to persuade Us. The above-quoted
pronouncement was obiter dictum. The only issue in the General Maritime
Stevedores’ Union case was whether a collective bargaining agreement
which had practically run for 5 years constituted a bar to certification
proceedings. We held it did not and accordingly directed the court a quo to
order certification elections. With that, nothing more was necessary for the
disposition of the case. Moreover, the pronouncement adverted to was
rather premature. The possible certification of a union different from that
which signed the bargaining contract was a mere contingency then since the
elections were still to be held. Clearly, the Court was not called upon to rule
on the possible effects of such proceedings on the bargaining agreement
But worse, BENGUET’s reliance upon the Principle of
Substitution is totally misplaced. This principle, formulated by the
NLRB[7] as its initial compromise solution to the problem facing it when
there occurs a shift in employees’ union allegiance after the execution of a
bargaining contract with their employer, merely states that even during the
effectivity of a collective bargaining agreement executed between employer
and employees thru their agent, the employees can change said agent but
the contract continues to bind them up to its expiration date. They may
bargain however for the shortening of said expiration date.
In formulating the “substitutionary” doctrine, the only
consideration involved was the employees’ interest in the existing
bargaining agreement. The agent’s interest never entered the picture. In
fact, the justification for said doctrine was:
". . . that the majority of the employees, as an entity under the
statute, is the true party in interest to the contract, holding rights through the
agency of the union representative. Thus, any exclusive interest claimed by
the agent is defeasible at the will of the principal.. .” (Italics supplied)
Stated otherwise, the “substitutionary” doctrine only provides
that the employees cannot revoke the validly executed collective bargaining
contract with their employer by the simple expedient of changing their
bargaining agent. And it is in the light of this that the phrase “said new
agent would have to respect said contract” must be understood. It only
means that the employees, thru their new bargaining agent, cannot renege
on their collective bargaining contract, except of course to negotiate with
management for the shortening thereof.
The “substitutionary” doctrine, therefore, cannot be invoked to
support the contention that a newly certified collective bargaining agent
automatically assumes all the personal undertakings — like the no-strike
stipulation here — in the collective bargaining agreement made by the
deposed union. When BBWU bound itself and its officers not to strike, it
could not have validly bound also all the other rival unions existing in the
bargaining units in question. BBWU was the agent of the employees, not of
the other unions which possess distinct personalities. To consider UNION
contractually bound to the no-strike stipulation would therefore violate the
legal maxim that res inter alios acta alios nec prodest nec nocet.
Of course, UNION, as the newly certified bargaining agent,
could always voluntarily assume all the personal undertakings made by the
displaced agent. But as the lower court found, there was no showing at all
that, prior to the strike,[11] UNION formally adopted the existing
CONTRACT as its own and assumed all the liabilities imposed by the same
upon BBWU.
6. Principles
 The CBA is executed not only upon the request of
the EBA but also upon request of the employer.
 Unilateral changes in the CBA are not allowed
 CBA should be construed liberally
 Workers are allowed to negotiate wage increases
separately and distinctly from legislated wage
increase.
 The literal meaning of the stipulations of the CBA,
as with every other contract, control if they are clear
and leave no doubt upon the intention of the
contracting parties. Thus, where the CBA is clear
and unambiguous, it, becomes the law between the
parties and compliance therewith is mandated by the
express policy of the law. Moreover, it is a familiar
rule in interpretation of contracts that the various
stipulations of a contract shall be interpreted
together, attributing to the doubtful ones that sense
which may result from all of them taken jointly
[Coca-Cola v. Ilo-Ilo Coca Cola Plant Employees].
Page 34 of 117
C. PROVISIONS SUBJECT TO COLLECTIVE
BARGAINING
Article 263. [252] Meaning of Duty to Bargain Collectively. -
The duty to bargain collectively means the performance of a mutual
obligation to meet and convene promptly and expeditiously in good
faith for the purpose of negotiating an agreement with respect to
wages, hours of work and all other terms and conditions of
employment including proposals for adjusting any grievances or
questions arising under such agreement and executing a contract
incorporating such agreements if requested by either party but such
duty does not compel any party to agree to a proposal or to make any
concession.
1. Non-Economic/Non-Monetary/Political
This covers the following provisions that the parties to a
CBA usually stipulate: (a) Coverage or Scope of the Agreement;
(b) Exclusions; (c) Rights and Responsibilities of Parties; (d)
Union Security Arrangement; (e) Job Security (Security of
Tenure); (f) Management Rights and Prerogatives; (g) Company
Rules and Regulations; (h) Discipline of Employees; (i) Union
Dues and Special Assessments; (j) Agency Fee; (k) Check-Off; (l)
Grievance Machinery; (m) Voluntary Arbitration; (n) Labor-
Management Council (LMC); (o) No-Strike, No-Lockout; (v)
Waiver and Completeness of Agreement; and (q) Duration and
Effectivity of Agreement.
2. Economic/Monetary/Non-Political
This includes: (a) Wage Increases; (b) Allowances; (c)
Premiums for Work on Rest Days, Holidays, etc.; (d) Meal, Rice
and other Subsidies; (e) Leave Benefits; (f) Union Leave; (g)
Uniforms; (h) Union Office; (i) Promotions; (j) Bonuses; (k)
Insurance; (l) Hospitalization; (m) Retirement; (n) Excursion; and
(o) Others which have monetary values.
3. Personal
These are provisions solely for the benefit of the union
and which the new EBA are not bound to.
D. PROCEDURE IN COLLECTIVE BARGAINING
Article 261. [250] Procedure in Collective Bargaining. - The
following procedures shall be observed in collective bargaining:
(a) When a party desires to negotiate an agreement, it shall
serve a written notice upon the other party with a statement of its
proposals. The other party shall make a reply thereto not later than ten
(10) calendar days from receipt of such notice;
(b) Should differences arise on the basis of such notice and
reply, either party may request for a conference which shall begin not
later than ten (10) calendar days from the date of request.
(c) If the dispute is not settled, the Board shall intervene
upon request of either or both parties or at its own initiative and
immediately call the parties to conciliation meetings. The Board shall
have the power to issue subpoenas requiring the attendance of the
parties to such meetings. It shall be the duty of the parties to
participate fully and promptly in the conciliation meetings the Board
may call;
(d) During the conciliation proceedings in the Board, the
parties are prohibited from doing any act which may disrupt or impede
the early settlement of the disputes; and
(e) The Board shall exert all efforts to settle disputes
amicably and encourage the parties to submit their case to a voluntary
arbitrator.
1. Phases of the Collective Bargaining Process
a. Negotiation Phase
Collective bargaining formally takes the fort of
negotiations when major conditions of employment to be written
into an agreement are under consideration and of grievance
committee meetings and arbitration when questions arising in the
administration of an agreement are at stake [Republic Savings
Bank v. Court of Industrial Relations].
Some Principles
i. A proposal not embodied in the CBA is not part
thereof.
ii. Minutes of CBA negotiation has no effect if its
contents are not incorporated in the CBA.
iii. Making a promise during the CBA negotiation is not
considered bad faith.
iv. Adamant stance resulting in impasse is not bad
faith.
v. The DOLE Secretary cannot order inclusion of
terms and conditions in CBA which the law and the
parties did not intend to reflect therein.
vi. Signing bonus is not demandable under the law.
vii. Allegations of bad faith are wiped out with the
signing of the CBA.
Effect of the Refusal of a Party to Sign the CBA
A party to a fully-concluded CBA may be compelled to
sign it, especially if said refusal to sign is the only remaining hitch
to its being implemented. Such refusal is considered unfair labor
practice [Roadway Express v. General Teamster].
CBA negotiated and concluded during suspension of
operations
In San Pedro Hospital of Digos v. Secretary of Labor, it
was held:
Temporary suspension of operations is reorganized
as a valid exercise of management prerogative provided it is not
carried  out in order to circumvent provisions of the Labor Code
or to defeat the rights of the employees under the Code. The
determination to cease or suspend operations is a prerogative of
management that the State usually does not interfere with, as no
business can be required to continue operating at a loss simply
to maintain the workers in employment.  Such an act would be
tantamount to a taking of property without due process of law,
which the employer has a right to resist.  But where it is shown
that the closure is motivated not by a desire to prevent further
losses, but to discourage the workers from organizing
themselves into a union for more effective negotiations with
management, the State is bound to intervene.
If a legitimate, valid and legal suspension of
operations does not terminate but merely suspends the
employee-employer relationship, with more reason will an
invalid and illegal suspension of operations, as in this case, not
affect the employment relationship.
The foregoing premises considered, it is clear that
there is no basis for petitioner to claim that a new CBA should
not be entered into or that collective bargaining should not be
conducted during the effectivity of a temporary suspension of
operations.  In this instance, petitioner expressly represented that
the suspension was to be for six months only.  In the absence of
any other information, the plain and natural presumption will be
that petitioner would resume operations after six months, and
therefore, it follows that a new CBA will be needed to govern
the employment relations of the parties, the old one having
already expired.  Clearly then, under the circumstances, the
respondent Secretary cannot be faulted nor considered to have
gravely abused his discretion for ordering the parties to enter
into a new CBA.
b. Administration Phase
The duty to bargain imposes on the parties during the
term of their agreement the mutual obligation "to meet and confer
promptly and expeditiously and to good faith for the purpose off
Page 35 of 117
adjusting any grievances or question arising under such
agreement and a violation of this obligation is an unfair labor
practice [Ibid].
c. Renegotiation Phase
This is the phase where the duties in phase 1 and 2 are
carried over.
2. Procedure is Mandatory
The procedure in collective bargaining prescribed by the
Labor Code is mandatory because of the basic interest of the State
in ensuring lasting industrial peace. As held in the case of Kiok Loy
vs. NLRC, the company's refusal to make counter-proposal to the
union's proposed CBA is an indication of its bad faith. Where the
employer did not even bother to submit an answer to the bargaining
proposals of the union, there is a clear evasion of the duty to
bargain collectively. In the case at bar, petitioner's actuation show a
lack of sincere desire to negotiate rendering it guilty of unfair labor
practice [Colegio de San Juan de Letran v. Association of
Employees and Faculty of Letran].
3. Kiok Loy Doctrine
The doctrine is based on the ruling in Kiok Loy v. NLRC,
where the petitioner, Sweden Ice Cream Plant, refused to submit
any counter-proposal to the CBA proposed by its employees’
certified SEBA. The Court rules that the employer had thereby lost
its right to bargain the terms and conditions of the CBA.
Consequently, all the terms and conditions of the CBA as proposed
by the SEBA are deemed approved and accepted lock, stock and
barrel (LSB) by the erring employer.
This case epitomizes the classic case of negotiating a
CBA in bad faith consisting of the employer’s refusal to bargain
with the SEBA by ignoring all notices for negotiations and requests
for counter-proposals made to the former by the latter. Such refusal
to send its counter-proposals to the SEBA’s proposals and to
bargain on the economic terms of the CBA constitutes an unfair
labor practice [General Milling Corporation v, Court of Appeals].
In Divine Word University of Tacloban v. Secretary of
Labor and Employment, the university refused to perform its duty
to bargain collectively. Hence, the Court upheld the unilateral
imposition on the university of the CBA proposed by the Divine
Word University Employees Union.
In General Milling Corporation v. Court of Appeals, the
Supreme Court imposed on the employer the draft CBA proposed
by the SEBA for the last 2 years commencing from the expiration
of the 3-year term of the original CBA. This was because of the
employer’s refusal to counter-propose to the SEBA’s proposals
which was declared as an ULP.
4. CBA Deadlock
In case of a deadlock in the initial negotiation or re-
negotiation or renewal of the CBA, the law provides that the parties
may exercise their respective rights under the Labor Code which
include the following:
a. Submission of the deadlocked issue to conciliation
and mediation by the NCMB. This means that the
deadlock may be taken cognizance of motu proprio
by the NCMB or through the filing of a notice of
strike by the union or notice of lockout by the
employer or notice of preventive mediation by any
of the parties,
b. Declaration and actual staging of a strike by the
union or lockout by the employer.
c. Referral of case to compulsory or voluntary
arbitration.
 d. In case of industries indispensable to the national
interest, filing of petition for assumption of
jurisdiction over the labor dispute or certification
thereof to the NLRC for compulsory arbitration.
E. PUBLICATION, RATIFICATION, AND
REGISTRATION OF THE CBA
Article 237, Paragraph 2 of the Labor Code provides;
Within thirty (30) days from the execution of a
Collective Bargaining Agreement, the parties shall submit
copies of the same directly to the Bureau or the Regional Offices
of the Department of Labor and Employment for registration
accompanied with verified proofs of its posting in two
conspicuous places in the place of work and ratification by the
majority of all the workers in the bargaining unit. The Bureau or
Regional Offices shall act upon the application for registration
of such Collective Bargaining Agreement within five (5)
calendar days from receipt thereof. The Regional Offices shall
furnish the Bureau with a copy of the Collective Bargaining
Agreement within five (5) days from its submission.
If the CBA is not registered, will it bar a petition for
certification election?
No. In Trade Unions of the Philippines v. Laguesma, it
was held:
It appears that the procedural requirement of filing
the CBA within 30 days from date of execution under Article
231 was not met. The subject CBA was executed on November
28, 1989. It was ratified on December 8, 1989, and then filed
with DOLE for registration purposes on March 14, 1990. Be that
as it may, the delay in the filing of the CBA was sufficiently
explained, i.e., there was an inter-union conflict on who would
succeed to the presidency of ILO?PHILS. The
CBA was registered by the DOLE only on May 4, 1990. It
would be injudicious for us to assume, as what petitioner did,
that the said CBA was filed only on April 30, 1990, or five (5)
days before its registration, on the unsupported surmise that it
was done to suit the law that enjoins Regional Offices of DOLE
to act upon an application for registration of a CBA within five
(5) days from its receipt thereof. In the absence of any
substantial evidence that DOLE officials or personnel, in
collusion with private respondent, had antedated the filing date
of the CBA, the presumption on regularity in the performance of
official functions holds.
More importantly, non-compliance with the cited
procedural requirement should not adversely affect the
substantive validity of the CBA between ILO-PHILS and the
Transunion Corporation-Glassware Division covering the
company's rank and file employees. A collective bargaining
agreement is more than a contract. It is highly impressed with
public interest for it is an essential instrument to promote
industrial peace. Hence, it bears the blessings not only of the
employer and employees concerned but even the Department of
Labor and Employment. To set it aside on technical grounds is
not conducive to the public good.
F. DURATION OF THE CBA; RETROACTIVITY
Article 265. [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
Page 36 of 117
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.
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 [Rivera v. Espiritu].
The duty to renegotiate not later than 3 years after its
execution is more serious than the duty to negotiate the CBA
during the 60-day freedom period. During the 3-year period, the
duty to bargain is mandatory. However, during the 60-day period,
the duty to bargain is permissive.
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 [San Miguel Employees v. Confesor].
1. Waiver of Right to Renegotiation
As a general rule, no. The basic rights of labor are not
waivable because it is contrary to public policy. However, if there
is already adequate consideration such as higher benefit of some
sort, the union can waive such right to renegotiate in certain
circumstances.
2. Suspension of a CBA
In Rivera v. Espiritu, it was held:
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 latter’s 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 PAL’s 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 union’s
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."
3. Extension of CBA
While the parties may agree to extend the CBA's original
five-year term together with all other CBA provisions, any such
amendment or term in excess of five years will not carry with it a
change in the union's exclusive collective bargaining status. By
express provision of the above-quoted Article 253-A, the exclusive
bargaining status cannot go beyond five years and the
representation status is a legal matter not for the workplace parties
to agree upon. In other words, despite an agreement for a CBA
with a life of more than five years, either as an original provision or
by amendment, the bargaining union's exclusive bargaining status
is effective only for five years and can be challenged within sixty
(60) days prior to the expiration of the CBA's first five years [FVC
Labor Union v. SANAMA-FVC-SIGLO].
4. Retroactivity
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
[MERALCO v. Quisimbing].
IV
DISPUTE RESOLUTION
A. GRIEVANCE PROCEDURE
Article 273. [260] Grievance Machinery and Voluntary
Arbitration. - The parties to a Collective Bargaining Agreement shall
include therein provisions that will ensure the mutual observance of its
terms and conditions. They shall establish a machinery for the
adjustment and resolution of grievances arising from the interpretation
or implementation of their Collective Bargaining Agreement and those
arising from the interpretation or enforcement of company personnel
policies.
All grievances submitted to the grievance machinery which
are not settled within seven (7) calendar days from the date of its
submission shall automatically be referred to voluntary arbitration
prescribed in the Collective Bargaining Agreement.
For this purpose, parties to a Collective Bargaining
Agreement shall name and designate in advance a Voluntary
Arbitrator or panel of Voluntary Arbitrators, or include in the
agreement a procedure for the selection of such Voluntary Arbitrator
or panel of Voluntary Arbitrators, preferably from the listing of
qualified Voluntary Arbitrators duly accredited by the Board. In case
the parties fail to select a Voluntary Arbitrator or panel of Voluntary
Arbitrators, the Board shall designate the Voluntary Arbitrator or
panel of Voluntary Arbitrators, as may be necessary, pursuant to the
selection procedure agreed upon in the Collective Bargaining
Agreement, which shall act with the same force and effect as if the
Arbitrator or panel of Arbitrators have been selected by the parties as
described above.
1. Grievance
A grievance or grievable issue is any question raised by
either the employer or the union regarding any of the following
issues or controversies:
a. The interpretation or application of the CBA;
b. The interpretation or enforcement of company
personnel policies;
c. Any claim by either party that the other party is
violating any provisions of the CBA or company
personnel policies [IRR]; or
d. Wage Distortion (Art. 124, RA 6727).
Personnel Policies
Page 37 of 117
Personnel policies are guiding principles stated in broad,
long-range terms that express the philosophy or beliefs of an
organization’s top authority regarding personnel matter. They deal
with matters affecting efficiency and well-being of employees and
include, among others, the procedures in the administration of
wages, benefits, promotions, transfers and other personnel
movements which are usually not spelled out in the collective
agreement. The usual sources of grievances, however, are the rules
and regulations governing disciplinary actions [Maneja v. NLRC].
Sanyo Philippines Workers’ Union v. Canizares
Held: In the instant case, however, We hold that the Labor
Arbiter and not the Grievance Machinery provided for in the CBA has the
jurisdiction to hear and decide the complaints of the private respondents.
While it appears that the dismissal of the private respondents was made
upon the recommendation of PSSLU pursuant to the union security clause
provided in the CBA, We are of the opinion that these facts do not come
within the phrase "grievances arising from the interpretation or
implementation of (their) Collective Bargaining Agreement and those
arising from the interpretation or enforcement of company personnel
policies," the jurisdiction of which pertains to the Grievance Machinery or
thereafter, to a voluntary arbitrator or panel of voluntary arbitrators. Article
260 of the Labor Code on grievance machinery and voluntary arbitrator
states that "(t)he parties to a Collective Bargaining Agreement shall include
therein provisions that will ensure the mutual observance of its terms and
conditions. They shall establish a machinery for the adjustment and
resolution of grievances arising from the interpretation or implementation
of their Collective Bargaining Agreement and those arising from the
interpretation or enforcement of company personnel policies". It is further
provided in said article that the parties to a CBA shall name or designate
their respective representatives to the grievance machinery and if the
grievance is not settled in that level, it shall automatically be referred to
voluntary arbitrators (or panel of voluntary arbitrators designated in
advance by the parties. It need not be mentioned that the parties to a CBA
are the union and the company. Hence, only disputes involving the union
and the company shall be referred to the grievance machinery or voluntary
arbitrators.
In the instant case, both the union and the company are united or
have come to an agreement regarding the dismissal of private respondents.
No grievance between them exists which could be brought to grievance
machinery. The problem or dispute in the present case is between the union
and the company on the one hand and some union and non-union members
who were dismissed, on the other hand. The dispute has to be settled before
an impartial body. The grievance machinery with members designated by
the union and the company cannot be expected to be impartial against the
dismissed employees. Due process demands that the dismissed workers
grievances be ventilated before an impartial body. Since there has already
been an actual termination, the matter falls within the jurisdiction of the
Labor Arbiter.
2. Grievance Machinery and Grievance Procedure
Grievance machinery refers to the mechanism for the
adjustment and resolution of grievances arising from the
interpretation or implementation of a CBA and those arising from
the interpretation or enforcement of company personnel policies.
Additionally, it is also mandated to process, adjust and resolve
violations of the CBA which are not gross in character. It is part of
the continuing process of collective bargaining [Republic Savings
Bank v. CIR].
Grievance procedure is the series of formal steps that
parties to a CBA agreed to take for the adjustment of grievances or
questions arising out of the interpretation or implementation of the
CBA or company personnel policies including voluntary arbitration
as the terminal step. The grievance procedure provides the parties a
first crack in addressing problems in the CBA administration and
its use is an essential requisite before a Voluntary Arbitrator can
take cognizance of the unresolved grievance. It usually consists of
a multi-step procedure starting from the discussion of the grievance
between the employee and/or the union steward, on the one hand,
and the foreman and supervisor, on the other hand, and ending with
the highest decision-making officials of the company, reflecting the
hierarchy of command or responsibility [NCMB Manual].
The reference to a Grievance Machinery and Voluntary
Arbitrators for the adjustment or resolution of grievances arising
from the interpretation or implementation of their CBA and those
arising from the interpretation or enforcement of company
personnel policies is mandatory. The law grants to voluntary
arbitrators original and exclusive jurisdiction to hear and decide all
unresolved grievances arising from the interpretation or
implementation of the Collective Bargaining Agreement and those
arising from the interpretation or enforcement of company
personnel policies [Sanyo Philippines Workers’ Union v.
Canizares].
3. Establishment of Grievance Machinery
Section 1, Rule XIX of the IRR provides:
Section 1. Establishment of grievance machinery. –
The parties to a collective bargaining agreement shall establish a
machinery for the expeditious resolution of grievances arising
from the interpretation or implementation of the collective
bargaining agreement and those arising from the interpretation
or enforcement of company personnel policies. Unresolved
grievances will be referred to voluntary arbitration and for this
purpose, parties to a collective bargaining agreement shall name
and designate in advance a voluntary arbitrator or panel of
voluntary arbitrators, or include in the agreement a procedure
for the selection of such voluntary arbitrator or panel of
voluntary arbitrators, preferably from the listing of qualified
voluntary arbitrators duly accredited by the Board.
In the absence of applicable provision in the
collective bargaining agreement, a grievance committee shall be
created within ten (10) days from signing of the collective
bargaining agreement. The committee shall be composed of at
least two (2) representatives each from the members of the
bargaining unit and the employer, unless otherwise agreed upon
by the parties. The representatives from among the members of
the bargaining unit shall be designated by the union.
4. Procedure in Handling Grievances
Section 2, Rule XIX of the IRR provides:
Section 2. Procedure in handling grievances. – In the
absence of a specific provision in the collective bargaining
agreement or existing company practice prescribing for the
procedures in handling grievance, the following shall apply:
(a) An employee shall present this grievance or
complaint orally or in writing to the shop steward. Upon receipt
thereof, the shop steward shall verify the facts and determine
whether or not the grievance is valid.
(b) If the grievance is valid, the shop steward shall
immediately bring the complaint to the employee’s immediate
supervisor. The shop steward, the employee and his immediate
supervisor shall exert efforts to settle the grievance at their level.
(c) If no settlement is reached, the grievance shall be
referred to the grievance committee which shall have ten (10)
days to decide the case.
Where the issue involves or arises from the
interpretation or implementation of a provision in the collective
bargaining agreement, or from any order, memorandum, circular
or assignment issued by the appropriate authority in the
establishment, and such issue cannot be resolved at the level of
the shop steward or the supervisor, the same may be referred
immediately to the grievance committee.
B. VOLUNTARY ARBITRATION
Voluntary arbitration refers to the mode of settling labor-
management disputes in which the parties select a competent,
trained and impartial third person who is tasked to decide on the
merits of the case and whose decision is final and executory. It is a
third-party settlement of a labor dispute involving the mutual
Page 38 of 117
consent of the representatives of the employer and the labor union
involved in a labor union dispute to submit their case for
arbitration.
1. Voluntary Arbitrator
A Voluntary Arbitrator refers to:
a. Any person who has been accredited by the National
Conciliation and Mediation Board as such; or
b. Any person named or designated in the CBA by the
parties as their Voluntary Arbitrator; or
c. One chosen by the parties with or without the
assistance of the NCMB, pursuant to a selection
procedure agreed upon in the CBA; or
d. One appointed by the NCMB in case either of the
parties to the CBA refuses to submit to voluntary
arbitration.
Based on the above definition, Voluntary Arbitrators may
be classified into two (2) kinds, namely:
a. Permanent Arbitrator referring to the VA
specifically named or designated in the CBA by the
parties as their Val and
b. Ad Hoc Arbitrator referring to the VA chosen by the
parties in accordance with the established procedure
in the CBA or the one appointed by the NCMB in
case there is failure in the selection or in case either
of the parties to the CBA refuses to submit to
voluntary arbitration.
A Voluntary Arbitrator need not be an employee of the
government. He may be a private individual but authorized to
render arbitration services provided under labor laws. He is not
required to be a lawyer. Though he is not a part of the government,
he is a quasi-judicial officer by nature of his functions, whether
acting solely or by a panel.
2. Submission for Voluntary Arbitration
Section 3, Rule XIX provides:
Section 3. Submission to voluntary
arbitration. – Where grievance remains unresolved,
either party may serve notice upon the other of its
decision to submit the issue to voluntary arbitration.
The notice shall state the issue or issues to be
arbitrated, copy thereof furnished the board or the
voluntary arbitrator or panel of voluntary arbitrators
named or designated in the collective bargaining
agreement.
If the party upon whom the notice is
served fails or refuses to respond favorably within
seven (7) days from receipt thereof, the voluntary
arbitrator or panel of voluntary arbitrators designated
in the collective bargaining agreement shall
commence voluntary arbitration proceedings. Where
the collective bargaining agreement does not so
designate, the board shall call the parties and appoint
a voluntary arbitrator or panel of voluntary
arbitrators, who shall thereafter commence
arbitration proceedings in accordance with the
proceeding paragraph.
In instances where parties fail to select a
voluntary arbitrator or panel of voluntary arbitrators,
the regional branch of the Board shall designate the
voluntary arbitrator or panel of voluntary arbitrators,
as may be necessary, which shall have the same force
and effect as if the parties have selected the
arbitrator.

3. Parties to a Proceeding with the Voluntary
Arbitrator
Well-entrenched is the rule that when a case does not
involve the parties to a CBA – the employer and the bargaining
union – it is not subject to voluntary arbitration.
While an individual employee or group of employees,
without participation of the union, are granted the right to bring a
grievance directly to the employer, they cannot submit the same
grievance, if unresolved by the employer, for voluntary arbitration
without the union’s approval and participation.
4. Jurisdiction of the Voluntary Arbitrator
Section 4, Rule XIX of the IRR provides:
Section 4. Jurisdiction of voluntary arbitrator or
panel of voluntary arbitrators. - The voluntary arbitrator or panel
of voluntary arbitrators shall have exclusive and original
jurisdiction to hear and decide all grievances arising from the
implementation or interpretation of the collective bargaining
agreements and those arising from the interpretation or
enforcement of company personnel policies which remain
unresolved after exhaustion of the grievance procedure.
They shall also have exclusive and original
jurisdiction, to hear and decide wage distortion issues arising
from the application of any wage orders in organized
establishments, as well as unresolved grievances arising from
the interpretation and implementation of the productivity
incentive programs under RA 6971.
The National Labor Relations Commission, its
regional branches and Regional Directors of the Department of
Labor and Employment shall not entertain disputes, grievances
or matters under the exclusive and original jurisdiction of the
voluntary arbitrator or panel of voluntary arbitrators and shall
immediately dispose and refer the same to the appropriate
grievance machinery or voluntary arbitration provided in the
collective bargaining agreement.
Upon agreement of the parties, any other labor
dispute may be submitted to a voluntary arbitrator or panel of
voluntary arbitrators. Before or at any stage of the compulsory
arbitration process, the parties may opt to submit their dispute to
voluntary arbitration.
The Voluntary Arbitrator or panel of Voluntary
Arbitrators shall have exclusive and original jurisdiction over the
following cases:
a. Unresolved grievances arising from the
interpretation or implementation of the CBA except
if grievance is a gross violation of the CBA (ULP)
or if the grievance results in termination.
b. Unresolved grievances arising from the
interpretation or enforcement of personnel policies.
c. Violations of the CBA which are not gross in
character.
d. Other labor disputes, including unfair labor
practices and bargaining deadlocks, upon agreement
of the parties.
e. National Interest cases.
f. Wage distortion issues arising from the application
of any wage orders in organized establishments.
g. Unresolved grievances arising from the
interpretation and implementation of the
Productivity Incentive Programs under RA 6971.
5. Powers of the Voluntary Arbitrator
Section 5, Rule XIX of the IRR provides:
Page 39 of 117
Section 5. Powers of voluntary arbitrator
or panel of voluntary arbitrators. – The voluntary
arbitrator or panel of voluntary arbitrators shall have
the power to hold hearings, receive evidence and take
whatever action is necessary to resolve the issue/s
subject of the dispute.
The voluntary arbitrator or panel of
voluntary arbitrators may conciliate or mediate to aid
the parties in reaching a voluntary settlement of the
dispute.
Moreover, the VA has the power to issue a writ of
execution to enforce final decisions and in connection therwith, it
shall be his duty too see that his decision is fully satisfied, inquire
into the correctness of the execution, consider supervening events
during execution, and determine every question of fact and law
which may be involved in the execution.
As a general proposition, an arbitrator is confined to the
interpretation and application of the collective bargaining
agreement. He does not sit to dispense his own brand of industrial
justice: his award is legitimate only in so far as it draws its essence
from the CBA,  i.e., when there is a rational nexus between the
award and the CBA under consideration. It is said that an arbitral
award does not draw its essence from the CBA; hence, there is an
unauthorized amendment or alteration thereof, if:
a. It is so unfounded in reason and fact;
b. It is so unconnected with the working and purpose
of the agreement;
c. It is without factual support in view of its
language, its context, and any other indicia of the
parties' intention;
d. It ignores or abandons the plain language of the
contract; 
e. It is mistakenly based on a crucial assumption
which concededly is a nonfact; 
f. It is unlawful, arbitrary or capricious; and
g. It is contrary to public policy. 
A CBA is more than a contract; it is a generalized code to
govern a myriad of cases which the draftsmen cannot wholly
anticipate. It covers the whole employment relationship and
prescribes the rights and duties of the parties. It is a system of
industrial self-government with the grievance machinery at the
very heart of the system. [41] The parties solve their problems by
molding a system of private law for all the problems which may
arise and to provide for their solution in a way which will generally
accord with the variant needs and desires of the parties [United
Kimberly Clark Employees Union v. Kimberly Clark].
If the terms of a CBA are clear and have no doubt upon
the intention of the contracting parties, the literal meaning of its
stipulation shall prevail.  However, if, in a CBA, the parties
stipulate that the hirees must be presumed of employment
qualification standards but fail to state such qualification standards
in said CBA, the VA may resort to evidence extrinsic of the CBA
to determine the full agreement intended by the parties. When a
CBA may be expected to speak on a matter, but does not, its
sentence imports ambiguity on that subject. The VA is not merely
to rely on the cold and cryptic words on the face of the CBA but is
mandated to discover the intention of the parties. Recognizing the
inability of the parties to anticipate or address all future problems,
gaps may be left to be filled in by reference to the practices of the
industry, and the step which is equally a part of the CBA although
not expressed in it. In order to ascertain the intention of the
contracting parties, their contemporaneous and subsequent acts
shall be principally considered. The VA may also consider and rely
upon negotiating and contractual history of the parties, evidence of
past practices interpreting ambiguous provisions. The VA has to
examine such practices to determine the scope of their
agreement, as where the provision of the CBA has been loosely
formulated. Moreover, the CBA must be construed liberally rather
than narrowly and technically and the Court must place a practical
and realistic construction upon it [Ibid].
Goya, Inc. v. Goya Inc. Employees Union
Held: Generally, the arbitrator is expected to decide only those
questions expressly delineated by the submission agreement. Nevertheless,
the arbitrator can assume that he has the necessary power to make a final
settlement since arbitration is the final resort for the adjudication of
disputes. The succinct reasoning enunciated by the CA in support of its
holding, that the Voluntary Arbitrator in a labor controversy has jurisdiction
to render the questioned arbitral awards, deserves our concurrence, thus:
In general, the arbitrator is expected to decide those questions
expressly stated and limited in the submission agreement. However, since
arbitration is the final resort for the adjudication of disputes, the arbitrator
can assume that he has the power to make a final settlement. Thus,
assuming that the submission empowers the arbitrator to decide whether an
employee was discharged for just cause, the arbitrator in this instance can
reasonably assume that his powers extended beyond giving a yes-or-no
answer and included the power to reinstate him with or without back pay.
In one case, the Supreme Court stressed that “xxx the Voluntary
Arbitrator had plenary jurisdiction and authority to interpret the agreement
to arbitrate and to determine the scope of his own authority subject only, in
a proper case, to the certiorari jurisdiction of this Court. The Arbitrator, as
already indicated, viewed his authority as embracing not merely the
determination of the abstract question of whether or not a performance
bonus was to be granted but also, in the affirmative case, the amount
thereof.
By the same token, the issue of regularization should be viewed
as two-tiered issue. While the submission agreement mentioned only the
determination of the date or regularization, law and jurisprudence give the
voluntary arbitrator enough leeway of authority as well as adequate
prerogative to accomplish the reason for which the law on voluntary
arbitration was created – speedy labor justice. It bears stressing that the
underlying reason why this case arose is to settle, once and for all, the
ultimate question of whether respondent employees are entitled to higher
benefits. To require them to file another action for payment of such benefits
would certainly undermine labor proceedings and contravene the
constitutional mandate providing full protection to labor.
Indubitably, Ludo fortifies, not diminishes, the soundness of the
questioned VA Decision. Said case reaffirms the plenary jurisdiction and
authority of the voluntary arbitrator to interpret the CBA and to determine
the scope of his/her own authority. Subject to judicial review, the leeway of
authority as well as adequate prerogative is aimed at accomplishing the
rationale of the law on voluntary arbitration – speedy labor justice. In this
case, a complete and final adjudication of the dispute between the parties
necessarily called for the resolution of the related and incidental issue of
whether the Company still violated the CBA but without being guilty of
ULP as, needless to state, ULP is committed only if there is gross violation
of the agreement.
6. Procedure in Voluntary Arbitration
Section 6, Rule XIX of the IRR provides:
Section 6. Procedure. – All parties to the dispute
shall be entitled to attend the arbitration proceedings. The
attendance of any third party or the exclusion of any witness
from the proceedings shall be determined by the voluntary
arbitrator or panel of voluntary arbitrators. Hearing may be
adjourned for cause or upon agreement by the parties.
Unless the parties agree otherwise, it shall be
mandatory for the voluntary arbitrator or panel of voluntary
arbitrators to render an award or decision within twenty (20)
calendar days from the date of submission for resolution.
Failure on the part of the voluntary arbitrator to
render a decision, resolution, order or award within the
prescribed period, shall upon complaint of a party, be sufficient
ground for the Board to discipline said voluntary arbitrator,
pursuant to the guidelines issued by the Secretary. In cases that
the recommended sanction is de-listing, it shall be unlawful for
Page 40 of 117
the voluntary arbitrator to refuse or fail to turn over to the board,
for its further disposition, the records of the case within ten (10)
calendar days from demand thereof.
7. Costs of Voluntary Arbitrator
Section 9, Rule XIX of the IRR provides:
Section 9. Cost of voluntary arbitration and voluntary
arbitrator’s fee. – The parties to a collective bargaining
agreement shall provide therein a proportionate sharing scheme
on the cost of voluntary arbitration including the voluntary
arbitrator’s fee. The fixing of fee of voluntary arbitrators or
panel of voluntary arbitrators, whether shouldered wholly by the
parties or subsidized by the Special Voluntary Arbitration Fund,
shall take into account the following factors:
(a) Nature of the case;
(b) Time consumed in hearing the case;
(c) Professional standing of the voluntary arbitrator;
(d) Capacity to pay of the parties; and
(e) Fees provided for in the Revised Rules of Court.
Unless the parties agree otherwise, the cost of
voluntary arbitration proceedings and voluntary arbitrator’s fee
shall be shared equally by the parties
Parties are encouraged to set aside funds to answer
for the cost of voluntary arbitration proceedings including
voluntary arbitrator’s fee. In the event the said funds are not
sufficient to cover such expenses, an amount by way of subsidy
taken out of the Special Voluntary Arbitration fund may be
availed of by either or both parties subject to the guidelines on
voluntary arbitration to be issued by the Secretary.
8. Finality of the Award or Decision
Section 7, Rule XIX of the IRR provides:
Section 7. Finality of Award/Decision. –
The decision, order, resolution or award of the
voluntary arbitrator or panel of voluntary arbitrators
shall be final and executory after ten (10) calendar
days from receipt of the copy of the award or
decision by the parties and it shall not be subject of a
motion for reconsideration.
The 10-day period stated in Article 276 should be
understood as the period within which the party adversely affected
by the ruling of the Voluntary Arbitrators or Panel of Arbitrators
may file a motion for reconsideration. Only after the resolution of
the motion for reconsideration may the aggrieved party appeal to
the CA by filing the petition for review under Rule 43 of the Rules
of Court within 15 days from notice pursuant to Section 4 of Rule
43 [Guagua National Colleges v. Court of Appeals].
Chin v. Maersk-Filipinas Crewing Inc.
Held: In the 2018 case of Guagua National Colleges vs.
CA (Guagua), the Court acknowledged the variance in its rulings and
categorically declared that the correct period to appeal the decision or
award of the Voluntary Arbitrator or Panel of Arbitrators to the CA via a
petition for review under Rule 43 of the Rules of Court is the fifteen (15)-
day period set forth in Section 4 thereof reckoned from notice or receipt of
the VA's resolution on the motion for reconsideration, and that the ten (10)-
day period provided in Article 276 of the Labor Code refers to the period
within which an aggrieved party may file said motion for reconsideration,
to wit:
Given the variable rulings of the Court, what should now be the
period to be followed in appealing the decisions or awards of the Voluntary
Arbitrators or Panel of Arbitrators?
In the 2010 ruling in Teng v. Pagahac, the Court clarified that
the 10-day period set in Article 276 of the Labor Code gave the aggrieved
parties the opportunity to file their motion for reconsideration, which was
more in keeping with the principle of exhaustion of administrative
remedies, holding thusly:
In the exercise of its power to promulgate implementing rules
and regulations, an implementing agency, such as the Department of Labor,
is restricted from going beyond the terms of the law it seeks to implement; UNFAIR LABOR PRACTICE
it should neither modify nor improve the law. The agency formulating the
rules and guidelines cannot exceed the statutory authority granted to it by
the legislature. V
By allowing a 10-day period, the obvious intent of Congress UNFAIR LABOR PRACTICE
in amending Article 263 to Article 262-A is to provide an opportunity
for the party adversely affected by the VA's decision to seek recourse A. CONCEPT OF UNFAIR LABOR PRACTICE
via a motion for reconsideration or a petition for review under Rule 43
of the Rules of Court filed with the CA. Indeed, a motion for
Article 258. [247] Concept of Unfair Labor Practice and
reconsideration is the more appropriate remedy in line with the
Procedure for Prosecution Thereof. - Unfair labor practices violate the
doctrine of exhaustion of administrative remedies. For this reason, an
constitutional right of workers and employees to self-organization, are
appeal from administrative agencies to the CA via Rule 43 of the Rules
inimical to the legitimate interests of both labor and management,
of Court requires exhaustion of available remedies as a condition
including their right to bargain collectively and otherwise deal with
precedent to a petition under that Rule.
each other in an atmosphere of freedom and mutual respect, disrupt
The requirement that administrative remedies be exhausted is
industrial peace and hinder the promotion of healthy and stable labor-
based on the doctrine that in providing for a remedy before an
management relations.
administrative agency, every opportunity must be given to the agency to
Consequently, unfair labor practices are not only violations
resolve the matter and to exhaust all opportunities for a resolution under the
of the civil rights of both labor and management but are also criminal
given remedy before bringing an action in, or resorting to, the courts of
offenses against the State which shall be subject to prosecution and
justice. Where Congress has not clearly required exhaustion, sound judicial
punishment as herein provided.
discretion governs, guided by congressional intent.
Subject to the exercise by the President or by the Secretary
By disallowing reconsideration of the VA's decision, Section
of Labor and Employment of the powers vested in them by Articles 263
7, Rule XIX of DO 40-03 and Section 7 of the 2005 Procedural
and 264 of this Code,201 the civil aspects of all cases involving unfair
Guidelines went directly against the legislative intent behind Article
labor practices, which may include claims affirmative relief, shall be
262-A of the Labor Code. These rules deny the VA the chance to
under the jurisdiction of the Labor Arbiters. The Labor Arbiters shall
correct himself and compel the courts of justice to prematurely
give utmost priority to the hearing and resolution of all cases involving
intervene with the action of an administrative agency entrusted with
unfair labor practices. They shall resolve such cases within thirty (30)
the adjudication of controversies coming under its special knowledge,
calendar days from the time they are submitted for decision.
training and specific field of expertise. In this era of clogged court
Recovery of civil liability in the administrative proceedings
dockets, the need for specialized administrative agencies with the special
shall bar recovery under the Civil Code.
knowledge, experience and capability to hear and determine promptly
No criminal prosecution under this Title may be instituted
disputes on technical matters or intricate questions of facts, subject to
without a final judgment finding that an unfair labor practice was
judicial review, is indispensable. In Industrial Enterprises, Inc. v. Court of
committed, having been first obtained in the preceding paragraph.
Appeals, we ruled that relief must first be obtained in an administrative
During the pendency of such administrative proceeding, the running of
proceeding before a remedy will be supplied by the courts even though the
the period of prescription of the criminal offense herein penalized shall
matter is within the proper jurisdiction of a court. (Emphasis supplied)
be considered interrupted: Provided, however, That the final judgment
Hence, the 10-day period stated in Article 276 should be
in the administrative proceedings shall not be binding in the criminal
understood as the period within which the party adversely affected by the
case nor be considered as evidence of guilt but merely as proof of
ruling of the Voluntary Arbitrators or Panel of Arbitrators may file a
compliance of the requirements therein set forth.
motion for reconsideration. Only after the resolution of the motion for
reconsideration may the aggrieved party appeal to the CA by filing the
petition for review under Rule 43 of the Rules of Court within 15 days  ULP relates to the commission of acts that transgress the
from notice pursuant to Section 4 of Rule 43. (Citations omitted; workers’ right to organize [T&H v. T&H Union]. 
emphasis and underscoring supplied) At the outset, it must be clarified that not all unfair acts
The Court further noted in Guagua that despite the clarification constitute ULPs. While an act or decision of an employer or a
made in Teng v. Pagahac in 2010, the Department of Labor and union may be unfair, certainly not every unfair act or decision
Employment (DOLE) and NCMB have yet to revise or amend Section
thereof may constitute ULP as defined and enumerated under
7, Rule VII of the Revised Procedural Guidelines in the Conduct of
Voluntary Arbitration Proceedings and that such inaction has caused Articles 259 and 260 of the Labor Code [Galaxie Steel Workers
confusion, particularly with respect to the filing of the motion for Union v. NLRC].
reconsideration as a condition precedent to the filing of the petition for The act complained of as ULP must have a proximate
review in the CA. Thus, the Court expressly directed the DOLE and the and casual connection with the following:
NCMB to cause the revision or amendment of the aforesaid section in order
to allow the filing of motions for reconsideration in line with Article 276 of a. Exercise of the right to self-organization;
the Labor Code. Unfortunately, no revision has yet been made in this b. Exercise of the right to collective bargaining; or
regard. Consequently, the DOLE and the NCMB are again reminded to
c. Compliance with the CBA.
cause the revision or amendment of Section 7, Rule VII of the Revised
Procedural Guidelines in the Conduct of Voluntary Arbitration Proceedings
insofar as it prohibits the filing of a motion for reconsideration, if they have Sans this connection, the unfair acts do not fall within the
not done so. technical signification of the term unfair labor practice [Allied
In view of the foregoing, petitioner in this case had fifteen (15) Banking v. Court of Appeals].
days from receipt of the Resolution denying his motion for reconsideration The only ULP which is the exception as it may or may
to file his petition for review with the CA. Having received a copy of the not relate to the exercise of the right to self-organization and
VA's October 29, 2018 Resolution on November 22, 2018, petitioner collective bargaining is the act described under paragraph (f) of
therefore had until December 7, 2018 to file his petition. As the records
Article 259, i.e., to dismiss, discharge or otherwise prejudice or
show that the petition was filed on December 4, 2018, albeit through a
private courier, it was therefore timely filed and the CA erred in dismissing discriminate against an employee for having given or being about
it outright. To rule otherwise would be clearly antithetical to the tenets of to give testimony under the Labor Code [Philcom Employees
fair play, not to mention the undue prejudice to petitioner's rights. [30] Thus, Union v. Philippine Global Communications].
in light of the fact that the CA dismissed the petition for review outright
based solely on procedural grounds, a remand of the case for a resolution 1. Aspects of ULP
on the merits is warranted. Under Article 258, an Unfair Labor Practice has two (2)
aspects, namely:
V
Page 41 of 117
 a. Civil aspect; and
b. Criminal aspect.
The civil aspect of ULP includes claims for actual, moral
and exemplary damages, attorney’s fees and other affirmative
reliefs. Generally, these civil claims should be asserted in the labor
case before the Labor Arbiters who have original and exclusive
jurisdiction over ULP cases. the criminal aspect, on the other hand,
can only be asserted before the regular courts.
2. Labor Code Provisions
There are only five (5) articles in the Labor Code related
to ULP, to wit:
a. Article 258 which describes the concept of ULPs
and prescribes the procedure for their prosecution;
b. Article 259 which enumerates the ULPs that may be
committed by employers;
c. Article 260 which enumerates the ULPs that may be
committed by labor organizations;
d. Article 274 which considers violations of the CBA
as no longer ULPs unless the same are gross in
character which means flagrant and/or malicious
refusal to comply with the economic provisions
thereof;
e. Article 278(c) which refers to union-busting, a form
of ULP, involving the dismissal from employment
of union officers duly elected in accordance with the
union constitution and by-laws, where the existence
of the union is threatened thereby.
3. Parties Who May Commit ULP
An Unfair Labor Practice may be committed by an
employer or by a labor organization. Article 259 describes the
ULPs that may be committed by the employer; while Article 260
enumerates those which may be committed by the Labor
Organization.
On the part of the employer, only the officers and agents
of corporations, associations or partnerships who have actually
participated in or authorized or ratified the ULPs are criminally
liable.
On the part of the union, only the officers, members of
governing boards, representatives or agents or members of the
labor associations or organizations who have actually participated
in or authorized or ratified the ULPs are criminally liable.
4. Elements of ULP
Before an employer or labor organization may be said to
have committed ULP, the following elements must concur:
a. There should exist an employer-employee
relationship between the offended party and the
offender; and
b. The act complained of must be expressly mentioned
and defined in the Labor Code as a ULP.
Absent one of the elements aforementioned will not
make the act an unfair labor practice.
The first requisite is necessary because ULP may only be
committed in connection with the right to self-organization and
collective bargaining by employees. Necessarily, there must be an
employment relationship in order for the organizational right to be
validly and lawfully invoked.
The second requisite should be present since the Labor
Code itself requires that the ULP be “expressly defined by this
Page 42 of 117
Code.” If an act is not covered by any of the ULPs expressly
mentioned in the law, it cannot be so deemed a ULP act.
5. Closure of Business
 In the case of Chronicle Securities Corp. v. NLRC, we
ruled that even an employer who is “found guilty of unfair labor
practice in dismissing his employee may not be ordered so to pay
backwages beyond the date of closure of business where such
closure was due to legitimate business reasons and not merely an
attempt to defeat the order of reinstatement.”
6. Prescription
Article 305. [290] Offenses. Offenses penalized under this
Code and the rules and regulations issued pursuant thereto shall
prescribe in three (3) years.
All unfair labor practice arising from Book V shall be filed
with the appropriate agency within one (1) year from accrual of such
unfair labor practice; otherwise, they shall be forever barred.
B. ULP IN COLLECTIVE BARGAINING
1. Bad Faith Bargaining
It is essential that the employer and employees should
both act in good faith when it comes to collective bargaining. Good
faith bargaining requires that claims made by either bargainer
should be honest.
In Union of Filipro Employees v. Nestle Philippines, it
was held:
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
have 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.
The crucial question, therefore, of whether or not a
party has met his statutory duty to bargain in good faith typically
turns on the facts of the individual case. As we have said, there
is no per se test of good faith in bargaining. Good faith or bad
faith is an inference to be drawn from the facts. To some degree,
the question of good faith may be a question of credibility.
The effect of an employer’s or a union’s individual actions is not
the test of good-faith bargaining, but the impact of all such
occasions or actions, considered as a whole, and the inferences
fairly drawn therefrom collectively may offer a basis for the
finding of the NLRC.
For a charge of unfair labor practice to prosper, it
must be shown that Nestlé was motivated by ill will, “bad faith,
or fraud, or was oppressive to labor, or done in a manner
contrary to morals, good customs, or public policy, and, of
course, that social humiliation, wounded feelings, or grave
anxiety resulted x x x” in disclaiming unilateral grants as proper
subjects in their collective bargaining negotiations. While the
law makes it an obligation for the employer and the employees
to bargain collectively with each other, such compulsion does
not include the commitment to precipitately accept or agree to
the proposals of the other. All it contemplates is that both parties
should approach the negotiation with an open mind and make
reasonable effort to reach a common ground of agreement.
Herein, the union merely bases its claim of refusal to
bargain on a letter dated 29 May 2001 written by Nestlé where
the latter laid down its position that “unilateral grants, one-time
company grants, company-initiated policies and programs,
which include, but are not limited to the Retirement Plan,
Incidental Straight Duty Pay and Calling Pay Premium, are by
their very nature not proper subjects of CBA negotiations and
therefore shall be excluded therefrom.” But as we have stated in
this Court’s Decision, said letter is not tantamount to refusal to
bargain. In thinking to exclude the issue of Retirement Plan
 from the CBA negotiations, Nestlé, cannot be faulted for
considering the same benefit as unilaterally granted, considering
that eight out of nine bargaining units have allegedly agreed to
treat the Retirement Plan as a unilaterally granted benefit. This
is not a case where the employer exhibited an indifferent attitude
towards collective bargaining, because the negotiations were not
the unilateral activity of the bargaining representative. Nestlé’s
desire to settle the dispute and proceed with the negotiation
being evident in its cry for compulsory arbitration is proof
enough of its exertion of reasonable effort at good-faith
bargaining.
In the case at bar, Nestle never refused to bargain
collectively with UFE-DFA-KMU. The corporation simply
wanted to exclude the Retirement Plan from the issues to be
taken up during CBA negotiations, on the postulation that such
was in the nature of a unilaterally granted benefit. An
employer’s steadfast insistence to exclude a particular
substantive provision is no different from a bargaining
representative’s perseverance to include one that they deem of
absolute necessity. Indeed, an adamant insistence on a
bargaining position to the point where the negotiations reach an
impasse does not establish bad faith.[fn24 p.10] It is but natural
that at negotiations, management and labor adopt positions or
make demands and offer proposals and counter-proposals. On
account of the importance of the economic issue proposed by
UFE-DFA-KMU, Nestle could have refused to bargain with the
former – but it did not. And the management’s firm stand
against the issue of the Retirement Plan did not mean that it was
bargaining in bad faith. It had a right to insist on its position to
the point of stalemate.
Boulwarism
Boulwarism is a negotiation tactic named after the former
vice president of General Electric, Lemuel Boulware, who
pioneered this strategy. It is a labor law principle in which
management opens the negotiation with a generous effort that is
not meant to be negotiated. In other words, it is an offer which is
ultimate and to which no further revisions will be made. This “take
it or leave it” offer or counter-offer does not constitute proper
collective bargaining not only within the contemplation of United
States laws but also under Philippine law [Philippine National
Railways v. Union de Maquinistas].
2. Refusal to Bargain
The failure of the employer to submit its counter-
proposals to the demands of the SEBA does not, by itself,
constitute refusal to bargain as would amount to ULP [Philippine
Marine Radio Officers Association v. CIR]. However, it is different
if the employer refuses to submit an answer or reply to the written
bargaining proposals of the SEBA. In this case, unfair labor
practice is committed. While the law does not compel the parties to
reach an agreement, it does not contemplate that both parties will
approach the negotiation with an open mind and make a reasonable
effort to reach a common ground of agreement [Kiok Loy v.
NLRC].
Other examples of ULP are: (a) stonewalling, or the
refusal to communicate or cooperate; and (b) giving flimsy excuses
for the delay in the negotiation.
3. Individual Bargaining
To negotiate or attempt to negotiate with individual
workers rather than with the SEBA is ULP. For instance, the act of
the employer in notifying absent employees individually during a
strike following unproductive efforts at collective bargaining that
the plant would be operated the next day and that their jobs were
open for them should they want to come in has been held to be a
ULP, an active inference with the right of collective bargaining
through dealing with the employees individually instead of through
their collective bargaining representative.
Page 43 of 117
4. Blue-Sky Bargaining
Blue-Sky Bargaining means making exaggerated or
unreasonable proposals. This is a kind of ULP which can only be
committed by a SEBA.
In Standard Chartered Bank Employees Union v.
Confesor, the minutes of the meeting show that the SEBA based its
economic proposals on data of rank-and-file employees and the
prevailing economic benefits received by bank employees from
other foreign banks doing business in the Philippines and other
branches of the bank in the Asian region, hence, it cannot be said
that the union was guilty of ULP for blue-sky bargaining.
5. Surface Bargaining
Surface bargaining is defined as going through the
motions of negotiating without any legal intent to reach an
agreement. It is a form of ULP that may only be committed by the
employer. In the same case of Standard Chartered Bank Employees
Union, it involves the question of whether an employer’s conduct
demonstrates an unwillingness to bargain in good faith or is merely
hard bargaining. There can be no surface bargaining, absent any
evidence that management had done acts, both at and away from
the bargaining table, which tend to show that it did not want to
reach an agreement with the union or to settle the differences
between it and the union. Here, admittedly, the parties were not
able to agree and thus reached a deadlock. However, it must be
emphasized that the duty to bargain does not compel either party to
agree to a proposal or require the making of a concession. Hence,
the parties’ failure to agree does not amount to ULP under Article
259(g) [Standard v. Confesor].
C. ULP OF EMPLOYERS
Article 259. [248] Unfair Labor Practices of Employers. - It
shall be unlawful for an employer to commit any of the following
unfair labor practices:
(a) To interfere with, restrain or coerce employees in the
exercise of their right to self-organization;
(b) To require as a condition of employment that a person or
an employee shall not join a labor organization or shall withdraw from
one to which he belongs;
(c) To contract out services or functions being performed by
union members when such will interfere with, restrain or coerce
employees in the exercise of their right to self-organization;
(d) To initiate, dominate, assist or otherwise interfere with
the formation or administration of any labor organization, including
the giving of financial or other support to it or its organizers or
supporters;
(e) To discriminate in regard to wages, hours of work and
other terms and conditions of employment in order to encourage or
discourage membership in any labor organization. Nothing in this
Code or in any other law shall stop the parties from requiring
membership in a recognized collective bargaining agent as a condition
for employment, except those employees who are already members of
another union at the time of the signing of the collective bargaining
agreement. Employees of an appropriate bargaining unit who are not
members of the recognized collective bargaining agent may be assessed
a reasonable fee equivalent to the dues and other fees paid by members
of the recognized collective bargaining agent, if such non-union
members accept the benefits under the collective bargaining
agreement: Provided, That the individual authorization required
under Article 250, paragraph (o) of this Code shall not apply to the
non-members of the recognized collective bargaining agent;
(f) To dismiss, discharge or otherwise prejudice or
discriminate against an employee for having given or being about to
give testimony under this Code;
(g) To violate the duty to bargain collectively as prescribed
by this Code;
(h) To pay negotiation or attorney’s fees to the union or its
officers or agents as part of the settlement of any issue in collective
bargaining or any other dispute; or
 (i) To violate a collective bargaining agreement.
The provisions of the preceding paragraph notwithstanding,
only the officers and agents of corporations, associations or
partnerships who have actually participated in, authorized or ratified
unfair labor practices shall be held criminally liable.
In summarized form, the nine U.L.P. acts of an employer
under Article 248 are: (1) interference, (2) fellow dog" condition,
(3) contracting out, (4) company unionism, (5) discrimination for
or against union membership, (6) discrimination because of
testimony, (7) violation of duty to bargain, (8) paid negotiation,
and (9) violation of CBA.
It is the union which has the burden of proof to present
substantial evidence to support its allegations of unfair labor
practices committed by the employer.
By the very nature of an unfair labor practice, it is not
only a violation of the civil rights of both labor and management
but is also a criminal offense against the State which is subject to
prosecution and punishment [Hongkong and Shang Hai Banking v.
NLRC].
1. Interference
The employer commits interference by way of speech
when it contains a promise of a reward or a threat of reprisal. This
kind of speech is no longer protected by the Constitutional right to
free speech except if done in the Conciliation Proceedings in the
NCMB under Article 239.
According to the case of Insular Life Co., Ltd.,
Employees Association v. Insular Life, the test of the employer’s
interference with, restraint or coercion of employees within the
meaning of the law is whether the employer has engaged in
conduct which may reasonably tend to interfere with the free
exercise of the employees’ twin rights to self-organization and
collective bargaining. It is not necessary that there be direct
evidence that any employee was in fact restrained, intimidated or
coerced by the statements or threats of the employer; what matters
is that there is a reasonable inference that the anti-union conduct of
the employer does have an adverse effect on the exercise of said
rights.
Totality of Conduct Doctrine
The totality of conduct doctrine means that expressions
of opinion by an employer, though innocent by themselves, may be
held to constitute ULP because of the circumstances under which
they were uttered, the history of the particular employer’s labor
relations or anti-union bias or because of their connection with an
established collateral plan of coercion or interference. An
expression which may be permissibly uttered by one employer
might, in the mouth of a more hostile employer, be deemed
improper and consequently actionable as ULP [Samahan ng
Manggagawa sa Bandolino v. NLRC]. The past conduct of the
employer and like considerations, coupled with an intimate
connection between the employer’s action and the union affiliation
or activities of the particular employee or employees taken as a
whole, may raise a suspicion as to the motivation for the
employer’s conduct. The failure of the employer to ascribe a valid
reason therefor may justify an inference that his unexplained
conduct in respect of the particular employee or employees was
inspired by the latter’s union membership and activities [Royal
Undergarment Corporation v. CIR].
Examples are:
a. Interference in the choice of union’s bargaining
panel [Standard Chartered Bank Employees Union
v. Confesor].
Page 44 of 117
b. The act of the employer in presenting the letters by
13 union members signifying resignation from the
union clearly indicative of the employer’s pressure
on its employees to prove that the union no longer
enjoyed the support of the workers [General Milling
v. Court of Appeals].
c. The employer’s refusal to bargain to its acts of
economic inducements resulting in the promotion of
those who withdrew from the union, the use of
armed guards to prevent the organizers to come in,
and the dismissal of union officials and members
[Hacienda Fatima v. National Federation of
Sugarcane Workers].
d. Termination of employee in order to strip the union
of a leader who would fight for the right of her co-
workers at the bargaining table [Colegio de San
Juan de Letran v. Association of Employees and
Faculty of Letran].
e. Dismissing a supervisory employee on account of
his union activities related to the formation of the
supervisory union [Cathay Pacific Steel Corp. v.
Court of Appeals].
f. Employer assigns active union members to do
overtime work on the day of the union meeting to
prevent them from attending.
g. The employer unilaterally closing its establishment
on the pretext that the demands of its employees are
excessive [St John’s Colleges v. St. Johns Academy
Faculty and Employees Union]. 
h. Offer of reinstatement and attempt to bribe the
strikers with comfortable cots, free coffee and
occasional movies, overtime pay for work
performed in excess of 8 hours and offer of
arrangements for their families so they would
abandon the strike and return to work, which
constitute strike-breaking which is a ULP [Insular
Life Assurance Co., Ltd., Employees Association v.
Insular Life Assurance].
i. Dismissal of employees after they have organized
their union and about to start with the effort at
having it certified as their SEBA [Samahan ng
Manggagawa sa Bandolino v. NLRC].
j. Transferring, laying off or assigning employees
more difficult work or tasks, or otherwise punishing
them because they engaged in organizing and
forming a union [T&H Shopfitters Corporation/Gin
Queen Corp. v. T&H Shopfitters/Gin Queen
Workers Union].
k. Establishing a savings account for the union where
all collected union dues and agency fees will be
deposited and held in trust and discontinuing normal
relations with any group within the union including
the incumbent sets of officers at the height of an
intra-union dispute involving the election of officers
of the union [De La Salle University v. De La Salle
University Employees Association].
l. In RMC Faculty Union v. NLRC, it was established
that said teachers were permanent employees who
had rendered six (6) to twenty (20) years of service.
Their permanent status notwithstanding, they were
dismissed because Abellera feared that if their
contracts were renewed, there would be a strike in
the school the following semester. This is
indisputably an unwarranted interference with the
right of workers to self-organization and to engage
in concerted activities. An apprehension that there
 might be a future strike in the school is not a ground
for dismissal of the workers. While a strike may
result in hardships or prejudice to the school and the
studentry, the employer is not without recourse. If
the employer feels that the action is tainted with
illegality, the law provides the employer with ample
remedies to protect his interests. Decidedly,
dismissal of employees in anticipation of an
exercise of a constitutionally protected right is not
one of them.
2. Yellow Dog Contract
Paragraph [b] of Article 259 describes what is commonly
known as yellow dog contract. It is one which exacts from workers
as a condition of employment that they shall not join or belong to a
labor organization, or attempt to organize one during their period
of employment or that they shall withdraw therefrom in case they
are already members of a labor organization.
A typical yellow dog contract embodies the following
stipulations:
(a) A representation by the employee that he is not a
member of a labor organization;
(b) A promise by the employee that he will not join a
union; and
(c) A promise by the employee that upon joining a
labor organization, he will quit his employment.
The act of the employer in imposing such a condition
constitutes ULP. Such stipulation in the contract is null and void.
3. Contracting Out of Services and Functions
This is also called “ULP Contracting.” Paragraph [c] of
Article 259 describes when the act of the employer of contracting
out of services or functions being performed by SEBA members is
considered ULP.
As a general rule, the act of an employer in having work
or certain services or functions being performed by SEBA
members contracted out is not per se ULP. This is so because
contracting-out of a job, work or service is clearly an exercise by
the employer of its business judgment and its inherent management
rights and prerogatives. Hiring of workers is within the employer’s
inherent freedom to regulate its business 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. The
employer 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 right to determine whether services
should be performed by its personnel or contracted to outside
agencies [Manila Electric Company v. Quisumbing].
It is only when the contracting out of a job, work or
service being performed by the SEBA members will interfere with,
restrain or coerce employees in the exercise of their right to self-
organization that it shall constitute ULP.
In Shell Oil Workers Union v. Shell Oil Company, the
Court ruled that the contracting out of security services to an
outside private security agency to undertake the work of the
company security guards who were re-assigned to other sections of
the company, is violative of the existing CBA. It could have been
purely an exercise of management prerogative on the part of the
company if it were not bound by what was stipulated in the CBA to
continue to maintain a security guard section at least during the
lifetime of the agreement.
BPI Employees Union v. BPI
Page 45 of 117
Held: It is to be emphasized that contracting out of services is
not illegal perse. It is an exercise of business judgment or management
prerogative. Absent proof that the management acted in a malicious or
arbitrary manner, the Court will not interfere with the exercise of judgment
by an employer. In this case, bad faith cannot be attributed to BPI because
its actions were authorized by CBP Circular No. 1388, Series of
1993 issued by the Monetary Board of the then Central Bank of the
Philippines (now Bangko Sentral ng Pilipinas). The circular covered
amendments in Book I of the Manual of Regulations for Banks and Other
Financial Intermediaries, particularly on the matter of bank service
contracts. A finding of ULP necessarily requires the alleging party to prove
it with substantial evidence. Unfortunately, the Union failed to discharge
this burden.
Much has been said about the applicability of D.O. No. 10. Both
the NLRC and the CA agreed with BPI that the said order does not apply.
With BPI, as a commercial bank, its transactions are subject to the rules and
regulations of the governing agency which is the Bangko Sentral ng
Pilipinas. The Union insists that D.O. No. 10 should prevail.
The Court is of the view, however, that there is no conflict
between D.O. No. 10 and CBP Circular No. 1388. In fact, they complement
each other.
Consistent with the maxim, interpretare et concordare leges
legibus est optimus interpretandi modus, a statute should be construed not
only to be consistent with itself but also to harmonize with other laws on
the same subject matter, as to form a complete, coherent and intelligible
system of jurisprudence. The seemingly conflicting provisions of a law or
of two laws must be harmonized to render each effective. It is only when
harmonization is impossible that resort must be made to choosing which
law to apply.
In the case at bench, the Union submits that while the Central
Bank regulates banking, the Labor Code and its implementing rules
regulate the employment relationship. To this, the Court agrees. The fact
that banks are of a specialized industry must, however, be taken into
account. The competence in determining which banking functions may or
may not be outsourced lies with the BSP. This does not mean that banks
can simply outsource banking functions allowed by the BSP through its
circulars, without giving regard to the guidelines set forth under D.O. No.
10 issued by the DOLE.
While D.O. No. 10, Series of 1997, enumerates the permissible
contracting or subcontracting activities, it is to be observed that,
particularly in Sec. 6(d) invoked by the Union, the provision is general in
character – "x x x Works or services not directly related or not integral to
the main business or operation of the principal… x x x." This does not limit
or prohibit the appropriate government agency, such as the BSP, to issue
rules, regulations or circulars to further and specifically determine the
permissible services to be contracted out. CBP Circular No.
1388 enumerated functions which are ancillary to the business of banks,
hence, allowed to be outsourced. Thus, sanctioned by said circular, BPI
outsourced the cashiering (i.e., cash-delivery and deposit pick-up) and
accounting requirements of its Davao City branches. The Union even
described the extent of BPI’s actual and intended contracting out to BOMC
as follows:
"As an initiatory move, the functions of the Cashiering Unit of
the Processing Center of BPI, handled by its regular rank and file
employees who are members of the Union, xxx [were] transferred to
BOMC with the Accounting Department as next in line. The Distributing,
Clearing and Bookkeeping functions of the Processing Center of the former
FEBTC were likewise contracted out to BOMC."
Thus, the subject functions appear to be not in any way directly
related to the core activities of banks. They are functions in a processing
center of BPI which does not handle or manage deposit transactions.
Clearly, the functions outsourced are not inherent banking functions, and,
thus, are well within the permissible services under the circular.
The Court agrees with BPI that D.O. No. 10 is but a guide to
determine what functions may be contracted out, subject to the rules and
established jurisprudence on legitimate job contracting and prohibited
labor-only contracting. Even if the Court considers D.O. No. 10 only, BPI
would still be within the bounds of D.O. No. 10 when it contracted out the
subject functions. This is because the subject functions were not related or
not integral to the main business or operation of the principal which is the
lending of funds obtained in the form of deposits. From the very definition
of "banks" as provided under the General Banking Law, it can easily be
discerned that banks perform only two (2) main or basic functions – deposit
and loan functions. Thus, cashiering, distribution and bookkeeping are but
ancillary functions whose outsourcing is sanctioned under CBP Circular work premises to perform the warehousing activities on its own account.
No. 1388 as well as D.O. No. 10. Even BPI itself recognizes that deposit Similarly, the job contracted out is directly related to CEPALCO's electric
and loan functions cannot be legally contracted out as they are directly distribution business, which involves logistics, inventories, accounting,
related or integral to the main business or operation of banks. The CBP's billing services, and other related operations. Lastly, same as above, no
Manual of Regulations has even categorically stated and emphasized on the evidence has been offered to establish that CESCO exercised control with
prohibition against outsourcing inherent banking functions, which refer to respect to the manner and methods of achieving the warehousing works, or
any contract between the bank and a service provider for the latter to that it supervised the workers assigned to perform the same.
supply, or any act whereby the latter supplies, the manpower to service the At this juncture, it should be made clear that the disposition of
deposit transactions of the former. these cases should be limited only to the foregoing declaration. Again, the
complaints filed by respondent were only for ULP. While there is nothing
infirm in passing upon the matter of labor-only contracting since it was
CEPALCO v. CEPALCO Union
vigorously litigated in these proceedings, the resolution of the same must
Held: The need to determine whether or not the contracting out
only be read in relation to the charges of ULP. As earlier stated, labor-only
of services (or any particular activity or scheme devised by the employer
contracting was invoked by respondent as a prohibited act under Article
for that matter) was intended to defeat the workers' right to self-
259 (c) of the Labor Code, as amended. As it turned out, however,
organization is impelled by the underlying concept of ULP. This is stated in
respondent failed to relate the arrangement to the defining element of
Article 258 of the Labor Code, as amended, to wit:
ULP, i.e., that it violated the workers' right to self-organization. Hence,
Article 258. Concept of Unfair Labor Practice and Procedure
being a preliminary matter actively argued by respondent to prove the
for Prosecution Thereof. - Unfair labor practices violate the
charges of ULP, the same was not rendered moot and academic by the
constitutional right of workers and employees to self-organization, are
eventual dismissal of the complaints as an issue only becomes moot and
inimical to the legitimate interests of both labor and
academic if it becomes a "dead" issue, devoid of any practical value or use
management, including their right to bargain collectively and otherwise
to be passed upon. In Pormento v. Estrada:
deal with each other in an atmosphere of freedom and mutual respect,
An action is considered "moot" when it no longer presents a
disrupt industrial peace and hinder the promotion of healthy and stable
justiciable controversy because the issues involved have become academic
labor-management relations.
or dead or when the matter in dispute has already been resolved and hence,
Thus, in Great Pacific Employees Union v. Great Pacific Life
one is not entitled to judicial intervention unless the issue is likely to be
Assurance Corporation,69 the Court observed:
raised again between the parties. There is nothing for the court to resolve as
There should be no dispute that all the prohibited acts
the determination thereof has been overtaken by subsequent
constituting unfair labor practice in essence relate to the workers' right to
events.83chanroblesvirtuallawlibrary
self-organization. Thus, an employer may be held liable under this
For another, the Court also observes that while respondent did
provision if his conduct affects in whatever manner the right of an
ask for the nullification of the subject contracts between petitioners, and
employee to self-organize.
even sought that the employees provided by CESCO to CEPALCO be
Similarly, in Bankard, Inc. v. NLRC:
declared as the latter's own employees, petitioners correctly argue that
The Court has ruled that the prohibited acts considered as ULP
respondent is not a real party-in-interest and hence, had no legal standing
relate to the workers' right to self-organization and to the observance of a
insofar as these matters are concerned. This is because respondent failed to
CBA. It refers to "acts that violate the workers' right to organize."
demonstrate how it stands to be benefited or injured by a judgment on the
Without that element, the acts, even if unfair, are not ULP. Thus, an
same, or that any personal or direct injury would be sustained by it if these
employer may only be held liable for unfair labor practice if it can be
reliefs were not granted. In Joya v. Presidential Commission on Good
shown that his acts affect in whatever manner the right of his employees to
Government,84 the Court explained:
self-organize.
"Legal standing" means a personal and substantial interest in the
In these cases, the Court agrees with the CA that CEPALCO
case such that the party has sustained or will sustain direct injury as a result
was engaged in labor-only contracting as its Contract for Meter-Reading
of the x x x act being challenged. The term "interest" is material interest, an
Work dated February 19, 2007 and Contract of Service To Perform
interest in issue and to be affected by the decree, as distinguished from
Warehousing Works dated January 5, 2010 (subject contracts) with CESCO
mere interest in the question involved, or a mere incidental interest.
fit the criteria provided for in Section 5 of DO 18-02, as above-highlighted.
Moreover, the interest of the party plaintiff must be personal and not one
To be specific, petitioners failed to show that CESCO has
based on a desire to vindicate the constitutional right of some third and
substantial capital or investment which relates to the job, work or service to
unrelated party.85chanroblesvirtuallawlibrary
be performed. While it is true that: (a) CESCO's Amended Articles of
If at all, it would be the employees of CESCO who are entitled
Incorporation73 as of November 26, 2008 shows that CESCO's authorized
to seek the foregoing reliefs since in cases of labor-only contracting, "the
capital stock is P200,000,000.00 as of September 26, 2008, 74 which was
person or intermediary shall be considered merely as an agent of the
increased from P100,000,000.0075 on May 30, 2007; and (b) its financial
employer who shall be responsible to the workers in the same manner and
statement76 as of 2010 and 2011 shows that its paid-up capital stock is in the
extent as if the latter were directly employed by him."86 However, they have
sum of P81,063,000.00,77 there is no available document to show CESCO's
not been impleaded in these cases. Thus, as prayed for by petitioners, the
authorized capital stock at the time of the contracting out of
Court must set aside the portions of the assailed CA Decisions declaring:
CEPALCO's meter-reading activities to CESCO on February 19, 2007.
(a) the workers hired by CESCO, pursuant to the contracts subject of these
As it is, the increases in its authorized capital stock and paid-up capital
cases, as regular employees of CEPALCO; and (b) the latter responsible to
were only made after November 26, 2008, hence, are only relevant with
said workers in the same manner and extent as if they were directly
regard to the time CEPALCO contracted out its warehousing works to
employed by it. This pronouncement not only squares with the rules on real
CESCO on January 5, 2010. Since the amount of CESCO's authorized
party-in-interest and legal standing, but also with the precept that no one
capital stock at the time CEPALCO contracted out its meter-reading
shall be affected by any proceeding to which he is a stranger, and that
activities was not shown, the Court has no means of determining whether it
strangers to a case are not bound by any judgment rendered by the court.
had substantial capital at the time the contract therefor was entered into.
Furthermore, the list78 of CESCO's office equipment, furniture and fixtures,
and vehicles offered in evidence by petitioners does not satisfy the 4. Company Union
requirement that they could have been used in the performance of the "Company union" means any labor organization whose
specific work contracted out, i.e., meter-reading service. As the CA aptly formation, function or administration has been assisted by any act
pointed out,79 the tools and equipment utilized by CESCO in the meter- defined as unfair labor practice by this Code.
reading activities are owned by CEPALCO, emphasizing the fact that Paragraph [d] of Article 259 considers it a ULP to
CESCO has no basic equipment to carry out the service contracted out by
initiate, dominate, assist or otherwise interfere with the formation
CEPALCO.
On the other hand, although it may be said that CESCO had
or administration of any labor organization, including the giving of
substantial capital when CEPALCO contracted out financial or other support to it or its organizers or supports. Such
its warehousing works on January 5, 2010, there is, however, lack of union is called “company union” as its formation, function or
credible evidence to show that CESCO had the aforesaid substantial administration has been assisted by any act of the employer defined
investment in the form of equipment, tools, implements, machineries, and as ULP under the Labor Code [IRR].
Page 46 of 117
 While generally, the pendency of a ULP case filed
against a labor organization participating in the certification
election does not stay the holding thereof [Barrera v. CIR],
however, the pendency of a formal charge of company domination
against one of the unions which is participating in the certification
election is a prejudicial question that bars the holding thereof until
its final resolution [United CMC Workers Union v. BLR].
Examples:
a. Management files a joint motion with the defeated
union to nullify the result of the certification
election.
b. No member of the union is dismissed despite a
retrenchment policy which resulted in the dismissal
of other employees who are officers and members of
another union [Oceanic Arc Products v. CIR].
c. Dismissing employees for not joining the union
being supported by the company [Progressive
Development Corporation v. CIR].
5. Discrimination
It is ULP to discriminate in regard to wages, hours of
work and other terms and conditions of employment in order to
encourage or discourage membership in any labor organization.
Discrimination has been defined as the failure to treat all
persons equally when no reasonable distinction can be found
between those favored and those not favored [Sugue v. Triumph
International]. There is discrimination only when one is denied
privileges which are granted to others under similar conditions and
circumstances [Caltex v. Philippine Labor Organization]. Thus,
before a claim for discrimination can prosper, it must be
established that first, there is no reasonable distinction or
classification that can be obtained between persons belonging to
the same class; and, second, persons belonging to the same class
have not been treated alike. It must be stressed, however, that
discrimination per se is not unlawful. Further, there can be no
discrimination where the employees concerned are not similarly
situated [Wise and Co. v. Wise and Co., Inc. Employees Union].
In Manila Railroad v. Kapisanan ng Manggagawa sa
Manila Railroad, the non-regularization of long-time employees
because of their affiliation with the union while new employees
were immediately regularized was declared an act of
discrimination.
In Philippine Blooming Mills Employees Organization v.
Philippine Blooming Mills, the employer reserved its right under
the CBA to grant better bonus to those who are exceptionally good
or efficient, it was held that it is not discriminatory or ULP for said
employer to give such bonus to non-union members, it being clear
that many union members were also given the bonus and it was
purely a valid exercise of management prerogative.
But in Manila Hotel v. Pines Hotel Employees
Association, it was enunciated that there was unjust discrimination
when management departed from its previous practice of dividing
equally to all employees certain percentage of its net profits as
Christmas bonus – giving only to its employees in the operation
where there was no union and not giving any to its unionized
departments.
In Davao Free Workers Front v. CIR, it was held that
requiring medical examination as a pre-condition to re-admission
to work after a strike is improper. They may be subjected to
periodic physical exam as old reinstated workers but not as a
precondition to their reinstatement. And if they are ill or suffering
from disability, they are entitled to all the benefits that the laws and
company practices provide.
Page 47 of 117
In Manila Pencil Co. v. CIR, this Court had occasion to
observe that even where business conditions justified a lay-off of
employees, unfair labor practices were committed in the form of
discriminatory dismissal where only unionists were permanently
dismissed. This was despite the valid excuse given by the Manila
Pencil Company that the dismissal of the employees was due to the
reduction of the company's dollar allocations for importation and
that both union members and non-union members were laid-off.
The Court, thru Justice Makalintal, rebuffed the petitioner
Company and said:
. . . The explanation, however, does not by any
means account for the permanent dismissal of five of the
unionists, where it does not appear that non-unionists were
similarly dismissed.
xxx xxx xxx
And the discrimination shown by the Company
strongly is confirmed by the fact that during the period from
October 1958 to August 17, 1959 it hired from fifteen to twenty
new employees and ten apprentices. It says these employees
were for its new lead factory, but is (sic) not shown that the five
who had been permanently dismissed were not suitable for work
in that new factory.
In Bataan Shipyard and Engineering Co., Inc. v. NLRC,
under the circumstances obtaining in this case, We are inclined to
believe that the company had indeed been discriminatory in
selecting the employees who were to be retrenched. All of the
retrenched employees are officers and members of the NAFLU.
The record of the case is bereft of any satisfactory explanation
from the Company regarding this situation. As such, the action
taken by the firm becomes highly suspect. It leads Us to conclude
that the firm had been discriminating against membership in the
NAFLU, an act which amounts to interference in the employees'
exercise of their right of self-organization. Under Art. 249 (now
Art. 248) of the Labor Code of the Philippines, such interference is
considered an act of unfair labor practice on the part of the
Company
a. Closed-Shop Agreement
A closed-shop arrangement may be defined as a scheme
in which, by agreement between the employer and its employees or
their representatives, no person is allowed to be employed in any
departments of the enterprise unless he/she is, becomes and, for the
duration of the agreement, remains a member in good standing of a
SEBA entirely comprised of or of which the employees in interest
are a part [Del Monte Philippines v. Saldivar].
Basically, this kind of agreement stipulates the
undertaking by the employer not to hire or employ any person who
is not a member of the SEBA. Once employed, it is required that
the said person should remain a member of the SEBA in good
standing as a condition for his/her continued employment, at least
during the whole duration of the CBA. This requirement for
employees to become members of the SEBA as a condition for
their continued employment redounds to their benefit and
advantage because by holding out to loyal members a promise of
employment in the closed shop, the union wields group solidarity.
In fact, it is said that “the closed shop contract is the most prized
achievement of unionism.” It adds membership and compulsory
dues [Manila Mandarin Employees Union v. NLRC].
b. Maintenance of Membership Agreement
There is a maintenance of membership arrangement
when employees who are SEBA members as of the effective date
of the agreement, or who thereafter become its members, must
maintain their union membership as a condition for their continued
employment until they are promoted or transferred out of the
bargaining unit, or the agreement is terminated [Pico Resources v.
Dequilla]. Its role is to protect the SEBA’s current membership. By
its express terms, it covers and renders continued membership
compulsory for: (1) those who were already SEBA members at the
time the CBA was signed; and (2) the newly-hired employees who
will become regular during the lifetime of the CBA.
This form of union security clause is considered the
mildest because it does not require non-members of the SEBA to
moin the latter but simply stipulates that those who are its members
at the time of the execution of the CBA and those who may, after
its execution, on their own, voluntarily join it, should maintain
their membership in good standing therein for the whole duration
of the CBA as a condition for their continued employment until
they are promoted or transferred out of the bargaining unit or the
agreement is terminated. Simply put, employees who are not
members of the SEBA at the time of the execution of the CBA are
not, in any manner, required to become its members. Employees
hired after the execution of the CBA are likewise not duty-bound to
join it. They may or may not join it.
c. Union Shop Agreement
There is union shop arrangement when all new regular
employees are required to join the SEBA within a certain period as
a condition for their continued employment [Picop Resources v.
Taneca]. Its role is to compel membership of those who are not yet
SEBA members. Under this scheme, the employer is given the
freedom to hire and employ any person who is not a member of the
SEBA. Once such person becomes an employee, he is required to
become a member of the SEBA and to remain as such member in
good standing for the whole duration of the effectivity of the CBA
as a condition for his continued employment.
d. Modified Union Shop Agreement
Employees under this arrangement who are not SEBA
members at the time of the signing or execution of the CBA are not
required to join it. However, any and all workers hired or employed
after the signing or the execution of the CBA are required to join
the SEBA.
e. Agency Shop Agreement
Under this scheme, there is no requirement for non-
members of the SEBA to become its members. However, it is
required that such non-SEBA members should pay the SEBA an
agency fee as a condition or their continued employment. The third
sentence of Article 259[e] of the Labor Code validates this
arrangement.
f. Termination for Violation of Union
Security Clause
It cannot be said that the stipulation providing that the
employer may dismiss an employee whenever the union
recommends his expulsion either for disloyalty or for any violation
of its by-laws and constitution is illegal or constitute of unfair labor
practice, for such is one of the matters on which management and
labor can agree in order to bring about harmonious relations
between them and the union, and cohesion and integrity of their
organization. And as an act of loyalty a union may certainly require
its members not to affiliate with any other labor union and to
consider its infringement as a reasonable cause for separation
[Tanduay v. NLRC].  by enforcing the union security clause, the employer needs to determine
Alabang Country Club v. NLRC has enunciated the
following requisites that the employer should determine, prove and
comply with prior to terminating the employment of an employee
by virtue of the enforcement of the union security clause:
a. The union security clause is applicable;
Page 48 of 117
b. The SEBA is requesting for the enforcement of such
clause;
c. There is sufficient evidence to support the SEBA’s
decision to expel the employee from membership.
In the case of Cariño vs. National Labor Relations
Commission, the Court pronounced that while the company, under
a maintenance of membership provision of the collective
bargaining agreement, is bound to dismiss any employee expelled
by the union for disloyalty upon its written request, this
undertaking should not be done hastily and summarily. The
company acts in bad faith in dismissing a worker without giving
him the benefit of a hearing.
"The power to dismiss is a normal prerogative of the
employer. However, this is not without limitation. The employer
is bound to exercise caution in terminating the services of his
employees especially so when it is made upon the request of a
labor union pursuant to the Collective Bargaining Agreement,
xxx. Dismissals must not be arbitrary and capricious. Due
process must be observed in dismissing an employee because it
affects not only his position but also his means of livelihood.
Employers should respect and protect the rights of their
employees, which include the right to labor."
MSMG-UWP v. Ramos
Held: In the case under scrutiny, petitioner union officers were
expelled by the federation for allegedly commiting acts of disloyalty and/or
inimical to the interest of ULGWP and in violation of its Constitution and
By-laws. Upon demand of the federation, the company terminated the
petitioners without conducting a separate and independent investigation.
Respondent company did not inquire into the cause of the expulsion and
whether or not the federation had sufficient grounds to effect the same.
Relying merely upon the federation’s allegations, respondent company
terminated petitioners from employment when a separate inquiry could
have revealed if the federation had acted arbitrarily and capriciously in
expelling the union officers. Respondent company’s allegation that
petitioners were accorded due process is belied by the termination letters
received by the petitioners which state that the dismissal shall
be immediately effective.
As held in the aforecited case of Cariño, "the right of an
employee to be informed of the charges against him and to reasonable
opportunity to present his side in a controversy with either the company or
his own union is not wiped away by a union security clause or a union shop
clause in a collective bargaining agreement. An employee is entitled to be
protected not only from a company which disregards his rights but also
from his own union the leadership of which could yield to the temptation of
swift and arbitrary expulsion from membership and mere dismissal from his
job.
While respondent company may validly dismiss the employees
expelled by the union for disloyalty under the union security clause of the
collective bargaining agreement upon the recommendation by the union,
this dismissal should not be done hastily and summarily thereby eroding the
employees’ right to due process, self-organization and security of tenure.
The enforcement of union security clauses is authorized by law provided
such enforcement is not characterized by arbitrariness, and always with due
process. Even on the assumption that the federation had valid grounds to
expell the union officers, due process requires that these union officers be
accorded a separate hearing by respondent company.
Picop Resources v. Taneca
Held: However, in terminating the employment of an employee
and prove that: (1) the union security clause is applicable; (2) the union is
requesting for the enforcement of the union security provision in the CBA;
and (3) there is sufficient evidence to support the decision of the union to
expel the employee from the union. These requisites constitute just cause
for terminating an employee based on the union security provision of the
CBA.
As to the first requisite, there is no question that the CBA
between PRI and respondents included a union security clause, specifically,
a maintenance of membership as stipulated in Sections 6 of Article II,
Union Security and Check-Off.  Following the same provision, PRI, upon
written request from the Union, can indeed terminate the employment of
the employee who failed to maintain its good standing as a union member.
Secondly, it is likewise undisputed that NAMAPRI-SPFL, in
two (2) occasions demanded from PRI, in their letters dated May 16 and 23,
2000, to terminate the employment of respondents due to their acts of
disloyalty to the Union.
However, as to the third requisite, we find that there is no
sufficient evidence to support the decision of PRI to terminate the
employment of the respondents.
PRI alleged that respondents were terminated from employment
based on the alleged acts of disloyalty they committed when they signed an
authorization for the Federation of Free Workers (FFW) to file a Petition
for Certification Election among all rank-and-file employees of PRI.  It
contends that the acts of respondents are a violation of the Union Security
Clause, as provided in their Collective Bargaining Agreement.
We are unconvinced.
We are in consonance with the Court of Appeals when it held
that the mere signing of the authorization in support of the Petition for
Certification Election of FFW on March 19, 20 and 21, or before the
"freedom period," is not sufficient ground to terminate the employment of
respondents inasmuch as the petition itself was actually filed during the
freedom period.  Nothing in the records would show that respondents failed
to maintain their membership in good standing in the Union. Respondents
did not resign or withdraw their membership from the Union to which they
belong. Respondents continued to pay their union dues and never joined the
FFW.
Significantly, petitioner's act of dismissing respondents stemmed
from the latter's act of signing an authorization letter to file a petition for
certification election as they signed it outside the freedom period. However,
we are constrained to believe that an "authorization letter to file a petition
for certification election" is different from an actual "Petition for
Certification Election."  Likewise, as per records, it was clear that the actual
Petition for Certification Election of FFW was filed only on May 18,
2000. Thus, it was within the ambit of the freedom period which
commenced from March 21, 2000 until May 21, 2000. Strictly speaking,
what is prohibited is the filing of a petition for certification election outside
the 60-day freedom period. This is not the situation in this case. If at all, the
signing of the authorization to file a certification election was merely
preparatory to the filing of the petition for certification election, or an
exercise of respondents' right to self-organization.
6. Retaliatory Measures
Under paragraph [f] of Article 259, it is an unfair labor
practice for an employer to dismiss, discharge or otherwise
prejudice or discriminate against an employee for having given or
being about to give testimony under the Labor Code pertaining to
labor relations.
In Mabesa v. NLRC, the acts of the employer in forcing
the employees to sign an instrument indicating that the employer
observed labor standards provisions when he might not have not,
together with terminating or coercing those who refuse to
cooperate with the employer’s schemes constitute ULP. The act
clearly preempts the right of the hotel workers to seek better terms
and conditions of employment through concerted action.
Ordinary Illegal Dismissal vs. ULP Dismissal
ULP Dismissal (259) Ordinary Illegal Dismissal
(118/294)
Ground for strike Not a ground for strike
Motivated to prevent an employee Arises if the dismissal is without
from exercising his right to self- just cause
organization
In labor relations, the action for In labor standards, the action for
ULP dismissal prescribes within 1 illegal dismissal prescribes within
year 4 years
A ULP dismissal can be An ordinary dismissal cannot be
transformed into an ordinary transformed into a ULP dismissal
illegal dismissal case case
Only Article 259 ripens into a The dismissal does not ripen into
criminal action a criminal action
Page 49 of 117
7. Payment of Negotiation Fees or Attorney’s Fees
Article 259[h] considers as ULP the act of the employer
in paying negotiation fees or attorney’s fees to the SEBA or its
officers or agents as part of the settlement of any issue in collective
bargaining or any other dispute.
Article 228[b] requires that such attorney’s fees,
negotiations fees, or similar charges should be paid from the union
funds. These fees cannot be collected from the employees
individually [Pacific Banking Corporation v. Clave].
8. Violation of the Collective Bargaining Agreement
Article 259[i] should be read in relation to Article 274.
Under the latter article, as amended, violations of the CBA, except
those which are gross in character, are no longer considered as
ULPs but merely as grievances that must be resolved through the
grievance machinery provided in the CBA. Gross violation of CBA
means flagrant and/or malicious refusal to comply with its
economic provisions [Flight Attendant and Stewards Association
of the Philippines v. Philippine Airlines].
In other words, (a) ordinary violations of a CBA which
involves non-economic provisions thereof; (b) violations of its non-
economic provisions, even if gross in nature; or (c) violations of its
economic provisions which are not gross in character, are no longer
treated as ULP. Consequently, they should be resolved as ordinary
grievances properly cognizable under the grievance machinery and
voluntary arbitration clause of a CBA.
The act of the employer in refusing to implement the
negotiated wage increase stipulated in the CBA is ULP [Philippine
Apparel Workers Union v. NLRC].
Refusal for a considerable number of years to give salary
adjustments according to the improved salary scaled in the CBAs is
unfair labor practice [Benguet Consolidated v. BCI Employees and
Workers Union].
Runaway Shop
A "runaway shop" is defined as an industrial plant moved
by its owners from one location to another to escape union labor
regulations or state laws, but the term is also used to describe a
plant removed to a new location in order to discriminate against
employees at the old plant because of their union activities. It is
one wherein the employer moves its business to another location or
it temporarily closes its business for anti-union purposes. A
"runaway shop" in this sense, is a relocation motivated by anti-
union animus rather than for business reasons. [Complex
Electronics Employees v. Complex]. 
AC Ransom Labor Union v. NLRC
Held: Aggravating RANSOM's clear evasion of payment of its
financial obligations is the organization of a "run-away corporation",
ROSARIO, in 1969 at the time the unfair labor practice case was pending
before the CIR by the same persons who were the officers and stockholders
of RANSOM, engaged in the same line of business as RANSOM,
producing the same line of products, occupying the same compound, using
the same machineries, buildings, laboratory, bodega and sales and accounts
departments used by RANSOM, and which is still in existence.  Both
corporations were closed corporations owned and managed by members of
the same family.  Its organization proved to be a convenience instrument to
avoid payment of backwages and the reinstatement of the 22 workers.  This
is another instance where the fiction of separate and distinct corporate
entities should be disregarded.
“It is very obvious that the second corporation seeks the
protective shield of a corporate fiction whose veil in the present case could,
and should, be pierced as it was deliberately and maliciously designed to
evade its financial obligation to its employees.
"x x x x When a notion of legal entity is used to defeat public
convenience, justify wrong, protect fraud, or defend crime, the law will
regard the corporation as an association or persons, or, in the case of two
corporations, will merge them into one."
"The corporation will be treated merely as an aggregation of
individuals or, where there are two corporations, they will be merged as
one, the one being merely regarded as part of the instrumentality of the
other."
Complex Electronics Employees v. Complex
The mere fact that one or more corporations are owned or
controlled by the same or single stockholder is not a sufficient ground for
disregarding separate corporate personalities. Thus, in Indophil Textile Mill
Workers Union v. Calica, we ruled that:chanrob1es virtual 1aw library
[I]n the case at bar, petitioner seeks to pierce the veil of
corporate entity of Acrylic, alleging that the creation of the corporation is a
devise to evade the application of the CBA between petitioner Union and
private respondent company. While we do not discount the possibility of
the similarities of the businesses of private respondent and Acrylic, neither
are we inclined to apply the doctrine invoked by petitioner in granting the
relief sought. The fact that the businesses of private respondent and Acrylic
are related, that some of the employees of the private respondent are the
same persons manning and providing for auxiliary services to the units of
Acrylic, and that the physical plants, offices and facilities are situated in the
same compound, it is our considered opinion that these facts are not
sufficient to justify the piercing of the corporate veil of Acrylic.
Likewise, in Del Rosario v. National Labor Relations
Commission, the Court stated that substantial identity of the incorporators
of two corporations does not necessarily imply that there was fraud
committed to justify piercing the veil of corporate fiction.
D. ULP OF LABOR ORGANIZATIONS
Article 260. [249] Unfair Labor Practices of Labor
Organizations. - It shall be unfair labor practice for a labor
organization, its officers, agents or representatives:
(a) To restrain or coerce employees in the exercise of their
right to self-organization. However, a labor organization shall have the
right to prescribe its own rules with respect to the acquisition or
retention of membership;
(b) To cause or attempt to cause an employer to discriminate
against an employee, including discrimination against an employee
with respect to whom membership in such organization has been
denied or to terminate an employee on any ground other than the usual
terms and conditions under which membership or continuation of
membership is made available to other members;
(c) To violate the duty, or refuse to bargain collectively with
the employer, provided it is the representative of the employees;
(d) To cause or attempt to cause an employer to pay or
deliver or agree to pay or deliver any money or other things of value, in
the nature of an exaction, for services which are not performed or not
to be performed, including the demand for fee for union negotiations;
(e) To ask for or accept negotiation or attorney’s fees from
employers as part of the settlement of any issue in collective bargaining
or any other dispute; or
(f) To violate a collective bargaining agreement. The
provisions of the preceding paragraph notwithstanding, only the
officers, members of governing boards, representatives or agents or
members of labor associations or organizations who have actually
participated in, authorized or ratified unfair labor practices shall be
held criminally liable
1. Restraint and Coercion
Under paragraph [a], it is ULP for a labor organization,
its officers, agents, or representatives, to restrain or coerce
employees in the exercise of their right to self-organization.
Compared to similar provision of paragraph [a] of Article 259,
notably lacking is the use of the word “interfere” in the exercise of
the employees’ right to self-organize. The significance in the
omission of this term lies in the grant of unrestricted license to the
labor organization, its officers, agents or representatives to interfere
with the exercise by the employees of their right to self-
organization. Such interference is not lawful since without it, no
Page 50 of 117
labor organization can be formed ads the act of recruiting and
convincing the employees to join it is definitely an act of
interference. It becomes unlawful within the context of paragraph
[a] only when it amounts to restrain or coercion which is expressly
prohibited thereunder.
Mendoza v. Officers
Held: The right of self-organization includes the right to
organize or affiliate with a labor union or determine which of two or more
unions in an establishment to join, and to engage in concerted activities
with co-workers for purposes of collective bargaining through
representatives of their own choosing, or for their mutual aid and
protection, i.e., the protection, promotion, or enhancement of their rights
and interests.
As members of the governing board of MWEU, respondents are
presumed to know, observe, and apply the union’s constitution and by-laws.
Thus, their repeated violations thereof and their disregard of petitioner’s
rights as a union member – their inaction on his two appeals which resulted
in his suspension, disqualification from running as MWEU officer, and
subsequent expulsion without being accorded the full benefits of due
process – connote willfulness and bad faith, a gross disregard of his rights
thus causing untold suffering, oppression and, ultimately, ostracism from
MWEU. "Bad faith implies breach of faith and willful failure to respond to
plain and well understood obligation."
2. Discrimination
There are three (3) kinds of discrimination that a union
may commit under this article, thus:
a. The act of the union to cause or attempt to cause an
employer to discriminate against an employee, in
general, irrespective of whether he or she is a
member or non-member of the union.
b. The discriminatory act of the union against an
employee “with respect to whom membership in
such organization has been denied.”
c. The discriminatory act of the union against an
employee whose membership therein has been
terminated based “on any ground other than the
usual terms and conditions under which membership
or continuation of membership is made available to
other members.”
It is the basic characteristic of the first kind of union
discrimination mentioned above that the union’s act which
constitutes ULP consists in inducing or instigating the employer to
commit discrimination against an employee who may or may not
be its member. The purpose is to encourage or discourage union
membership. An example is the act of the union in convincing an
employer to penalize employees who engage in anti-union
activities.
The discriminatory ULP act under the second and third
kinds of discrimination mentioned above is perpetrated by the
union itself against an employee whose membership therewith has
been either: (1) denied by the union; or (2) terminated by the union.
The first involves an employee who has not become a
member of the union because his membership therein has been
discriminatorily denied by the union; while the second refers to the
case of an employee who is already a member of the union but
whose membership therein is discriminatorily terminated based on
any ground other than the usual terms and conditions under which
membership or continuation of membership is made available to
other members.
Excepted from this coverage is the union security
provision of the CBA. The law allows a union which has been
designated as SEBA, to bargain collectively for a contract that
permits it to cause an employer to discharge employees who fail to
join or maintain membership in good standing therein as a
condition for continued employment. This certainly is an exception
to the general rule that unions may not cause or attempt to cause an
employer to discriminate against (or in favor of) employees on
union-related grounds. However, if the employee discharged on the
basis of the recommendation of a union is a religious objector,
hence exempted from the coverage of any form of union security
clause, the same may be considered ULP of the labor organization
so recommending [Lakas ng Manggagawang Makabayan v.
Abiera].
The broad rule is that the union has the right to determine
its membership and to prescribe the conditions for the acquisition
and retention thereof. Consequently, admission to membership may
not be compelled. This rule, however, is qualified in the case of
labor unions holding a monopoly in the supply of labor, either in a
given locality, or as regards a particular employer by reason of a
closed-shop or similar agreements. In such case, qualified
applicants may not be arbitrarily excluded from membership and
their admission may not be barred by unreasonable rules [Salunga
v. CIR].
Just as the Court has stricken down unjust exploitation of
laborers by oppressive employers, so will it strike down their unfair
treatment by their own unworthy leaders. The Constitution enjoins
the State to afford protection to labor. Fair dealing is equally
demanded of unions as well as of employers in their dealings with
employees [Heirs of Cruz v. CIR].
3. Violation of Union to Bargain Collectively
The purpose of the law in imposing it as a duty on the
part of the SEBA to bargain collectively is to ensure that it will
negotiate with management in good faith in order for them to
conclude a mutually beneficial agreement on the terms and
conditions of their employment relationship.
The requisites before a union may be held liable for ULP
are as follows:
a. The union is a duly certified SEBA; and
b. It commits any of the following:
i. it violates the duty to bargain collectively;
or
ii. it refuses to bargain collectively with the
employer.
4. Featherbedding Law
Paragraph [d] is the featherbedding provision.
Featherbedding or “make-work” refers to the practice, cause and
induced by a union, of hiring more workers than are needed to
perform a given work, job or task or to adopt work procedures
which is evidently senseless, wasteful, inefficient and without
legitimate justifications since it is meant purely for the purpose of
employing additional workers than necessary. This is resorted to by
the union as a response to laying-off workers occasioned by their
obsolescence because of the introduction of machines, robots or
new innovative technological changes and improvements in the
workplace or as required by minimum health and safety standards,
among other reasons. Its purpose is to unduly secure the jobs of the
workers. Because of these lay-offs, the unions are constrained to
resort to some featherbedding practices. Accordingly, they usually
request that the technological changes be introduced gradually, or
not at all, or that a minimum number of retaining workers even
though there may be little work left for them to do and perform. It
therefore unnecessarily maintains or increases the number of
employees used or the amount of time consumed to work on a
specific job, work, or undertaking. By so increasing the demand for
workers, featherbedding obviously keeps the wages higher.
5. Kickbacks
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Paragraph [e] is the counterpart provision of Article
259(h) regarding the payment, on the part of the employer, of
negotiation fees or attorney’s fees to the union or its officers or
agents as part of the settlement of any issue in collective bargaining
or any other dispute.
The reason for this policy of the law is to prevent undue
influence by the employer on the independence of the union in its
decision-making over any issues it may have with the former.
Moreover, it is possible that the matter of fixing the amount of
negotiation fees or attorney’s fees alone would present a problem
much complicated than the more substantive issues involving the
terms and conditions of employment and the rights, benefits or
welfare of the workers.
6. Gross Violation of Economic Provisions of the
CBA
Paragraph [f] is the counterpart provision of Article
259(i) regarding the employer’s act of violating a CBA. But it must
be noted that under Article 274 of the Labor Code, simple violating
of the CBA is generally considered no longer a ULP but merely a
grievable issue. It becomes ULP only if the violation is gross in
character which means that there is flagrant and/or malicious
refusal to comply with the economic stipulations in the CBA. This
principle applies not only to the employer but with equal force to
the labor organization as well.
VI
PEACEFUL AND CONCERTED ACTIVITIES
Article 278. [263] Strikes, Picketing, and Lockouts. (a) It is
the policy of the State to encourage free trade unionism and free
collective bargaining. (b) Workers shall have the right to engage in
concerted activities for purposes of collective bargaining or for their
mutual benefit and protection. The right of legitimate labor
organizations to strike and picket and of employers to lockout,
consistent with the national interest, shall continue to be recognized
and respected. However, no labor union may strike and no employer
may declare a lockout on grounds involving inter-union and intra-
union disputes. (c) In cases of bargaining deadlocks, the duly certified
or recognized bargaining agent may file a notice of strike or the
employer may file a notice of lockout with the Ministry at least 30 days
before the intended date thereof. In cases of unfair labor practice, the
period of notice shall be 15 days and in the absence of a duly certified
or recognized bargaining agent, the notice of strike may be filed by any
legitimate labor organization in behalf of its members. However, in
case of dismissal from employment of union officers duly elected in
accordance with the union constitution and by-laws, which may
constitute union busting where the existence of the union is threatened,
the 15-day cooling-off period shall not apply and the union may take
action immediately.
(d) The notice must be in accordance with such
implementing rules and regulations as the Minister of Labor and
Employment may promulgate.
(e) During the cooling-off period, it shall be the duty of the
Ministry to exert all efforts at mediation and conciliation to effect a
voluntary settlement. Should the dispute remain unsettled until the
lapse of the requisite number of days from the mandatory filing of the
notice, the labor union may strike or the employer may declare a
lockout.
(f) A decision to declare a strike must be approved by a
majority of the total union membership in the bargaining unit
concerned, obtained by secret ballot in meetings or referenda called for
that purpose. A decision to declare a lockout must be approved by a
majority of the board of directors of the corporation or association or
of the partners in a partnership, obtained by secret ballot in a meeting
called for that purpose. The decision shall be valid for the duration of
the dispute based on substantially the same grounds considered when
the strike or lockout vote was taken. The Ministry may, at its own
initiative or upon the request of any affected party, supervise the
conduct of the secret balloting. In every case, the union or the employer
shall furnish the Ministry the results of the voting at least seven days
before the intended strike or lockout, subject to the cooling-off period
herein provided.
(g) When, in his opinion, there exists a labor dispute causing
or likely to cause a strike or lockout in an industry indispensable to the
national interest, the Secretary of Labor and Employment may assume
jurisdiction over the dispute and decide it or certify the same to the
Commission for compulsory arbitration. Such assumption or
certification shall have the effect of automatically enjoining the
intended or impending strike or lockout as specified in the assumption
or certification order. If one has already taken place at the time of
assumption or certification, all striking or locked out employees shall
immediately return to work and the employer shall immediately
resume operations and readmit all workers under the same terms and
conditions prevailing before the strike or lockout. The Secretary of
Labor and Employment or the Commission may seek the assistance of
law enforcement agencies to ensure compliance with this provision as
well as with such orders as he may issue to enforce the same.
In line with the national concern for and the highest respect
accorded to the right of patients to life and health, strikes and lockouts
in hospitals, clinics and similar medical institutions shall, to every
extent possible, be avoided, and all serious efforts, not only by labor
and management but government as well, be exhausted to substantially
minimize, if not prevent, their adverse effects on such life and health,
through the exercise, however legitimate, by labor of its right to strike
and by management to lockout. In labor disputes adversely affecting
the continued operation of such hospitals, clinics or medical
institutions, it shall be the duty of the striking union or locking-out
employer to provide and maintain an effective skeletal workforce of
medical and other health personnel, whose movement and services
shall be unhampered and unrestricted, as are necessary to insure the
proper and adequate protection of the life and health of its patients,
most especially emergency cases, for the duration of the strike or
lockout. In such cases, therefore, the Secretary of Labor and
Employment may immediately assume, within twenty four (24) hours
from knowledge of the occurrence of such a strike or lockout,
jurisdiction over the same or certify it to the Commission for
compulsory arbitration. For this purpose, the contending parties are
strictly enjoined to comply with such orders, prohibitions and/or
injunctions as are issued by the Secretary of Labor and Employment or
the Commission, under pain of immediate disciplinary action,
including dismissal or loss of employment status or payment by the
locking-out employer of backwages, damages and other affirmative
relief, even criminal prosecution against either or both of them.
The foregoing notwithstanding, the President of the
Philippines shall not be precluded from determining the industries
that, in his opinion, are indispensable to the national interest, and from
intervening at any time and assuming jurisdiction over any such labor
dispute in order to settle or terminate the same.
(h) Before or at any stage of the compulsory arbitration
process, the parties may opt to submit their dispute to voluntary
arbitration.
(i) The Secretary of Labor and Employment, the
Commission or the voluntary arbitrator or panel of voluntary
arbitrators shall decide or resolve the dispute within thirty (30)
calendar days from the date of the assumption of jurisdiction or the
certification or submission of the dispute, as the case may be. The
decision of the President, the Secretary of Labor and Employment, the
Commission or the voluntary arbitrator shall be final and executory
ten (10) calendar days after receipt thereof by the parties.
One of the most fundamental elements of a strike or
picketing is its being a “concerted activity” of the employees. If not
concerted, an activity cannot be characterized as a strike or picket.
First and foremost, among the most significant guarantees in the
Constitution is the assurance that is given by the State to workers
that, under Section 18, Article II, “the State shall affirm labor as a
primary social economic force and protect the rights of works and
promote their welfare.” The twin rights to strike and to picket
certainly fall under the ambit of protection of this provision.
Page 52 of 117
The second applies solely to picketing which, under
Section 4, Article III of the Constitution, is considered part of the
twin freedoms of speech and of expression.
The third is the State’s guarantee under Section 8, Article
III of the Constitution to employees in both the public and private
sectors that their right to form unions shall not be abridged.
Towards this end, Section 3, Article XIII guarantees the rights of
all workers to self-organization, then to engage in collective
bargaining and negotiations and should there be conflict, to
conduct peaceful concerted activities, including the right to strike
in accordance with law.
A. PICKETING
Picketing is a concerted activity of workers consisting in
peacefully marching to and fro before an establishment involved in
a labor dispute generally accompanied by the carrying and display
of signs, placards and banners intended to inform the public about
the dispute [Ilaw at Buklod ng Manggagawa v. NLRC].
Unlike the Right to Strike which is guaranteed under the
Constitutional provision on the right of workers to conduct
peaceful concerted activities under Section 3, Article XIII, the
Right to Picket is guaranteed under the Freedom of Speech Clause
under the Bill of Rights.
Picketing, if peacefully carried out, cannot be prohibited
even in the absence of employer-employee relationship between
the picketers and the employer being picketed [Philippine
Association of Free Labor Unions v. CFI].
1. Limitation on the Right to Picket
As a general rule, injunction cannot be issued against the
conduct of picketing by the workers., under our constitutional set
up, picketing is considered part of the freedom of speech duly
guaranteed by the Constitution.
However, excepted from this legal proscription are the
following situations:
a. Where picketing is carried out through the use of
illegal means;
b. Where picketing involves the use of violence and
other illegal acts; or
c. Where injunction becomes necessary to protect the
rights of third parties
It is important to stress that the right to peaceful
picketing should be exercised by the workers with due respect for
the rights of others. Hence, commission by any picketing employee
of any act of violence, coercion or intimidation is prohibited.
Similarly, stationary picket and the use of means like placing of
objects to constitute permanent blockade or to effectively close
points of entry or exit in company premises are likewise not
allowed by law [IRR]. The strikers staging the picket cannot also
rightfully prevent employees of another company which is not their
employer, from getting in and out of its rented premises since this
will violate the right of innocent bystanders [Liwayway
Publications v. Permanent Concrete Workers Union]. In fact,
under the so-called “Innocent Bystander Rule,” such employer is
considered an innocent bystander who has no employer-employee
relationship with the picketing strikers and thus may file for an
injunctive relief with the regular courts to enjoin the conduct of the
picket. The NLRC has no jurisdiction to issue an injunction in
favor of the innocent bystander because of the absence of such
relationship.
According to Phimco Industries v. Phimco Industries
Labor Association, while the right of employees to publicize their
dispute falls within the protection of freedom of expression and the
right to peacably assemble to air grievances, these rights are by no
means absolute. Protected picketing does not extend to blocking
ingress to and egress from the company premises. That the picket
was moving, was peaceful and was not attended by actual violence
may not free it from taints of illegality if the picket effectively
blocked entry to and exit from the company premises.
2. Use of Foul Language
In the event the picketers employ discourteous and
impolite language in their picket, such may not result in, or give
rise to, libel or action for damages [Philippine Commercial and
Industrial Bank v. Philnabank Employees Association].
B. BOYCOTT
A boycott is an act of voluntary and intentional
abstention from using, buying, or dealing with a person,
organization, or country as an expression of protest, usually for
moral, social, political or environmental reasons.
As applied to labor unions, a "boycott" has been defined
as an attempt, by arousing a fear of loss, to coerce others, against
their will to withhold from one denominated "unfriendly to labor"
their beneficial business intercourse.
1. Primary Boycott
A primary boycott is an organized effort of a labor union
and its members to discourage consumers from buying the products
of a particular employer. It is applied directly and alone to the
offending person by withdrawing from him all business relations
on the part of the organization that initiated the boycott. This is
legal.
2. Secondary Boycott
A Secondary Boycott is a boycott of a secondary
employer with which a union does not have a dispute that is
intended to induce the secondary employer to cease doing business
with the primary employer with which the union does have a
dispute. A secondary boycott is an attempt to influence the actions
of one business by exerting pressure on another business. This is
illegal.
Distinction Between Strike and Picketing
In distinguishing between a picket and a strike, the
totality of the circumstances obtaining in a case should be taken
into account. For instance, the petitioners in Santa Rosa Coca-Cola
Plant Employees Union v. Coca-Cola bottlers, contend that what
they conducted was a mere picketing and not a strike. In
disagreeing to this contention, the Court emphasized that it is not
an issue in this case that there was a labor dispute between the
parties as petitioners had notified the respondent of their intention
to stage a strike, and not merely to picket. Petitioner’s insistence to
stage a strike is evident in the fact that an amended notice of strike
was filed even as respondent moved to dismiss the first notice. The
basic elements of a strike are present in this case: 106 members of
petitioner Union, whose respective applications for leave of
absence on September 21, 1999 were disapproved, opted not to
report for work on said date, and gathered in front of the company
premises to hold a mass protest action. Petitioners deliberately
absented themselves and instead wore ribbons and carried placards
with slogans such as: “YES KAMI SA STRIKE,” “PROTESTA
KAMI,” “SAHOD KARAPATAN NG MANGGAGAWA
IPAGLABAN,” “CBA-WAG BABOYIN,” “STOP UNION
BUSTING.” They marched to and fro in front of the company’s
premises during working hours. Thus, petitioners engaged in a
concerted activity which already affected the company’s
operations. The mass concerted activity obviously constitutes a
strike. The Mayor’s description of what activities petitioners were
allowed to conduct is inconsequential. To repeat, what is definitive
Page 53 of 117
of whether the action staged by petitioners is a strike and not
merely a picket is the totality of circumstances surrounding the
situation.
Picketing Strike
Marching to and for before the Temporary stoppage of work by
premises of an establishment the concerted action of the
involved in a labor dispute employees as a result of an
industrial or labor dispute
Purpose is to publicize a labor Purpose is stoppage of work
dispute
Emanates from freedom of Emanates from the right to self-
Speech organization
Privilege right, thus cannot be Protected right, can be enjoined
enjoined
Government employees can picket Government employees can’t
strike
Can be done by 1 person Can’t be done by only 1 person,
must be a concerted action
Does not require formalities Requires notice of strike, cooling
off period, strike vote, waiting
period
No need ER-EE relationship Needs ER-EE relationship.
C. SLOWDOWN
Slowdown is a "strike on the installment plan;" as a
willful reduction in the rate of work by concerted action of workers
for the purpose of restricting the output of the employer, in relation
to a labor dispute; as an activity by which workers, without a
complete stoppage of work, retard production or their performance
of duties and functions to compel management to grant their
demands. The Court also agrees that such a slowdown is generally
condemned as inherently illicit and unjustifiable, because while
the employees "continue to work and remain at their positions and
accept the wages paid to them," they at the same time "select what
part of their allotted tasks they care to perform of their own volition
or refuse openly or secretly, to the employer's damage, to do other
work;" in other words, they "work on their own terms [Ramirez v.
Polyson].
A slowdown is an inherently illegal activity essentially
illegal even in the absence of a no-strike clause in a collective
bargaining contract, or statute or rule [IBM v. NLRC].
 A slowdown is generally condemned as inherently illicit
and unjustifiable, because while the employees "continue to work
and remain at their positions and accept the wages paid to them,"
they at the same time "select what part of their allotted tasks they
care to perform of their own volition or refuse openly or secretly,
to the employer’s damage, to do other work;" in other words, they
"work on their own terms [Interphil Union v. Interphil].
D. STRIKES
Strike means any temporary stoppage of work by the
concerted action of the employees as a result of an industrial or
labor dispute [Article 219(o)].
The term “strike” is a very broad and comprehensive
term. It encompasses not only concerted work stoppages but also
slowdowns, mass leaves, overtime boycott, sitdowns, attempts to
damage, destroy or sabotage plant equipment and facilities, and
similar activities [Solidbank Corporation v. Garrier]. It is
axiomatic, therefore, that the fact that the conventional term
“strike” was not used by the striking employees to describe their
common course of action is inconsequential since the substance of
the situation and not its appearance, is deemed controlling [Gesite
v. Court of Appeals].
Strike is the most preeminent of the economic weapons
of workers which they unsheathe to force management to agree to
an equitable sharing of the joint product of labor and capital.
Undeniably, strikes exert some disquieting effects not only on the
relationship between labor and management but also on the general
peace and progress of society. Our laws thus regulate their exercise Marsman]. It is a strike which arose out
within reason by balancing the interests of labor and management of a bargaining deadlock in the CBA
together with the overarching public interest [Lapanday Workers negotiations [NUHWHRAIN-APL-IUF
Union v. NLRC]. v. Court of Appeals].
Strikes are construed strictly against labor because strikes (ii) Unfair Labor Practice or Political
are inimical to the General Welfare Clause of the Constitution. Strike – one called to protest against
the employer’s ULPs enumerated in
Entitlement to Pay Article 259 of the Labor Code,
Strikers are not entitled to pay during strikes. Even if the including gross violation of the CBA
strike is legal, strikers may not collect their wages during the days under Article 274 and union-busting
they did not go to work, for the same reasons that laborers who under Article 278(c).
voluntarily absent themselves from work are not entitled to pay
during the period of such absence.  The age-old rule governing the c. As to Nature of the Strikers’ Action
relation between labor and capital or management and employee is
that of a "fair day's wage for a fair day labor."  If there is no work (i) Slowdown Strike – one staged where
performed by the employee there can be no wage or pay, unless of the workers do not quit their work but
course, the laborer was able, willing and ready to work but was merely slacked or reduced their normal
illegally locked out, dismissed or suspended.  It is hardly fair or work output [Fadriquelan v. Monterey
just for an employee or laborer to fight or litigate against his Foods].
employer on the employer's time [JP Helibronn Co. v. National (ii) Sit-Down Strike- one where the
Labor Union]. workers stop working but do not leave
In a case where a laborer absents himself from work their place of work [G&S Transport v.
because of a strike or to attend a conference or hearing in a case or Infante].
incident between him and his employer, he might seek
reimbursement of his wages from his union which had declared the d. As to Coverage
strike or filed the case in the industrial court.  Or, in the present
case, he might have his absence from his work charged against his (i) General Strike – one which covers and
vacation leave [Ibid]. extends over a whole province or
However, if both parties have acted in pari delicto in that country. In this kind of strike, the
the employer is guilty of illegal lockout and the union is culpable employees of various companies and
for illegal strike, the dismissal of the striking employees is industries cease to work in sympathy
unwarranted and their reinstatement should be ordered as a matter with striking workers of another
of courses. They should be restored to their respective positions company. It is also resorted to for the
prior to the illegal strike and illegal lockout. Nonetheless, if purpose of putting pressure on the
reinstatement is no longer feasible, the concerned employees government to enact certain labor-
should be given separation pay up to the date set for the return of related measures such as mandated
the complaining employees in lieu of reinstatement [AER v. wage increases or to cease from
Progresibong Unyon]. implementing a law which workers
If the strikers are not guilty of illegal strike, the general consider inimical to their interest. It is
rule that strikers are not entitled to backwages is not applicable also mounted for purposes of
where the employer is guilty of oppression and union-busting paralyzing or crippling the entire
activities and strikers ordered reinstated are denied such economic dispensation.
reinstatement and therefore are declared entitled to backwages (ii) Particular Strike – one which covers a
from the date of such denial [Philippines Inter-Fashion v. NLRC]. particular establishment or employer or
one industry involving one union or
1. Forms of Strike federation.

a. As to Nature e. As to the Extent of the Interest of the

(i) Legal Strike – one called for a valid
purpose and conducted through means
allowed by law.
(ii) Illegal Strike – one staged for a
purpose not recognized by law or, if for
a valid purpose, it is conducted through
means not sanctioned by law.
b. As to Purpose
(i) Economic Strike – one declared to
demand higher wages, overtime pay,
holiday pay, vacation pay, etc. it is
declared for the purpose of forcing
wage or other concessions from the
employer which he is not required by
law to grant [Consolidated Labor v.
Employees
(i) Primary strike – refers to a strike
conducted by the workers against their
employer, involving a labor dispute
directly affecting them.
(ii) Secondary Strike – refers to a strike
staged by the workers of an employer
involving an issue which does not
directly concern or affect their
relationship but rather, by some other
circumstances, affect the workers, such
as when the employer persists to deal
with a third person against whom the
workers have an existing grievance.
Workers stage this kind of strike to
secure the economic assistance of their
employer to force the third person to

Page 54 of 117
 yield to the union on the issues
involving it and said third person.
(iii) Sympathy Strike – refers to a strike
where the strikers have no demands or
grievances or labor dispute of their own
against their employer but nonetheless
stage the strike for the purpose of
aiding, directly or indirectly, other
strikers in other establishments or
companies, without necessarily having
any direct relation to the advancement
of the strikers’ interest. This is patently
an illegal strike [Dee C. Chuan & Sons
v. Kaisahan ng Manggagawa]. An
example is the “welga ng bayan” where
workers refuse to render work to join a
general strike which does not involve a
labor or industrial dispute between the
strikers and the employer struck against
but it is staged in pursuit of certain
ends, such as reduction in the electric
power rates, increase in the legislated
wages, etc.
f. As to Approval of Union
(i) Wildcat Strike – one declared and
staged without the majority approval of
the certified bargaining agent. Is it a
spontaneous or unannounced illegal
concerted action by a section or group
of employees without the sanction or
authorization of the union or in
violation of the union’s constitution
and by-laws, or without following the
proper procedure for striking such as
majority approval of the union
members through appropriate union
balloting. It is also called an “outlaw
strike” or “quickie strike.”
2. Elements of a Strike
The following are the elements of strike:
a. Temporary stoppage of work by the employees;
b. Through their concerted action;
c. Occasioned by an industrial or labor dispute; and
d. Work stoppage must be directly intended.
A labor dispute, in turn, includes any controversy or
matter concerning terms or conditions of employment or the
association or representation of persons in negotiating, fixing,
maintaining, changing, or arranging the terms and conditions of
employment, regardless of whether the disputants stand in the
proximate relation of the employer and the employee [TMPCWA v.
NLRC].
TMPCWA v. NLRC
Held: Petitioner Union contends that the protests or rallies
conducted on February 21 and 23, 2001 are not within the ambit of strikes
as defined in the Labor Code, since they were legitimate exercises of their
right to peaceably assemble and petition the government for redress of
grievances. Mainly relying on the doctrine laid down in the case
of Philippine Blooming Mills Employees Organization v. Philippine
Blooming Mills Co., Inc.,[34] it argues that the protest was not directed at
Toyota but towards the Government (DOLE and BLR). It explains that the
protest is not a strike as contemplated in the Labor Code. The Union points
Page 55 of 117
out that in Philippine Blooming Mills Employees Organization, the mass
action staged in Malacañang to petition the Chief Executive against the
abusive behavior of some police officers was a proper exercise of the
employees’ right to speak out and to peaceably gather and ask government
for redress of their grievances.
The Union’s position fails to convince us.
While the facts in Philippine Blooming Mills Employees
Organization are similar in some respects to that of the present case, the
Union fails to realize one major difference: there was no labor dispute
in Philippine Blooming Mills Employees Organization. In the present case,
there was an on-going labor dispute arising from Toyota’s refusal to
recognize and negotiate with the Union, which was the subject of the notice
of strike filed by the Union on January 16, 2001. Thus, the Union’s reliance
on Phililippine Blooming Mills Employees Organization is misplaced, as it
cannot be considered a precedent to the case at bar.
A strike means any temporary stoppage of work by the
concerted action of employees as a result of an industrial or labor dispute.
A labor dispute, in turn, includes any controversy or matter concerning
terms or conditions of employment or the association or representation of
persons in negotiating, fixing, maintaining, changing, or arranging the
terms and conditions of employment, regardless of whether the disputants
stand in the proximate relation of the employer and the employee.
In Bangalisan v. Court of Appeals, it was explained that “[t]he
fact that the conventional term ‘strike’ was not used by the striking
employees to describe their common course of action is inconsequential,
since the substance of the situation and not its appearance, will be deemed
controlling.” The term “strike” has been elucidated to encompass not only
concerted work stoppages, but also slowdowns, mass leaves, sit-downs,
attempts to damage, destroy, or sabotage plant equipment and facilities, and
similar activities.
Applying pertinent legal provisions and jurisprudence, we rule
that the protest actions undertaken by the Union officials and members on
February 21 to 23, 2001 are not valid and proper exercises of their right to
assemble and ask government for redress of their complaints, but are illegal
strikes in breach of the Labor Code. The Union’s position is weakened by
the lack of permit from the City of Manila to hold “rallies.” Shrouded as
demonstrations, they were in reality temporary stoppages of work
perpetrated through the concerted action of the employees who deliberately
failed to report for work on the convenient excuse that they will hold a rally
at the BLR and DOLE offices in Intramuros, Manila, on February 21 to 23,
2001. The purported reason for these protest actions was to safeguard their
rights against any abuse which the med-arbiter may commit against their
cause. However, the Union failed to advance convincing proof that the
med-arbiter was biased against them. The acts of the med-arbiter in the
performance of his duties are presumed regular. Sans ample evidence to the
contrary, the Union was unable to justify the February 2001 mass actions.
What comes to the fore is that the decision not to work for two days was
designed and calculated to cripple the manufacturing arm of Toyota. It
becomes obvious that the real and ultimate goal of the Union is to coerce
Toyota to finally acknowledge the Union as the sole bargaining agent of the
company. This is not a legal and valid exercise of the right of assembly and
to demand redress of grievance.
We sustain the CA’s affirmance of the NLRC’s finding that the
protest rallies staged on February 21 to 23, 2001 were actually illegal
strikes. The illegality of the Union’s mass actions was succinctly elaborated
by the labor tribunal, thus:
We have stated in our questioned decision that such mass
actions staged before the Bureau of Labor Relations on February 21-23,
2001 by the union officers and members fall squarely within the definition
of a strike (Article 212 (o), Labor Code). These concerted actions resulted
in the temporary stoppage of work causing the latter substantial losses.
Thus, without the requirements for a valid strike having been complied
with, we were constrained to consider the strike staged on such dates as
illegal and all employees who participated in the concerted actions to have
consequently lost their employment status.
If we are going to stamp a color of legality on the two (2)
[day-] walk out/strike of respondents without filing a notice of strike, in
effect we are giving license to all the unions in the country to paralyze
the operations of their companies/employers every time they wish to
hold a demonstration in front of any government agency. While we
recognize the right of every person or a group to peaceably assemble and
petition the government for redress of grievances, the exercise of such right
is governed by existing laws, rules and regulations.
 Although the respondent union admittedly made earnest
representations with the company to hold a mass protest before the BLR,
together with their officers and members, the denial of the request by the
management should have been heeded and ended their insistence to hold
the planned mass demonstration. Verily, the violation of the company rule
cannot be dismissed as mere absences of two days as being suggested by
the union [are but] concerted actions detrimental to Petitioner Toyota’s
interest. (Emphasis supplied.)
3. Lawful Purpose
The right to strike is not absolute. It comes into being and
is safeguarded by law only if the acts intended to render material
aid or protection to a labor union arise from a lawful ground,
reason or motive. But if the motive which had impelled, prompted,
moved or led members of a labor union or organization to stage a
strike, even if they had acted in good faith in staging it, be
unlawful, illegitimate, unjust, unreasonable or trivial, the strike
may be declared illegal [Filcon Manufacturing v. Lakas
Manggagawa]. One example of a strike conducted for unlawful
purposes is a strike to compel the dismissal of an employee
[Insurefco Paper Pulp v. Sugar Refining] or a union-recognition
strike, which is calculated to compel the employer to recognize a
union as the employees’ bargaining representative to work out a
CBA despite the union’s doubtful majority status.
Filcon Manufacturing v. Lakas Manggagawa
Held; As borne out by the record, respondent SWAT was
certified as the sole and (sic) bargaining agent of all the rank-and-file
employees of complainant Filcon Manufacturing Corporation whose
Collective Bargaining Agreement expired last 15 January 1990 and was not
renewed due to the filing of Petition for Certification Election by three (3)
unions, namely: 1) Lakas Manggagawa sa Filcon-Lakas Manggagawa
Labor Center; 2) Bisig ng Manggagawa; and 3) Kampli-Katipunan, which
up to present is still pending before the Bureau of Labor Relations. In its
Collective Bargaining Agreement, it provides that the provisions contained
therein shall be in full force and effect until a new one has been entered into
and one of the provisions therein reads that there shall be no strike nor lock-
out. This provision must be given due respect by all the parties concerned.
Thus, it is evident, therefore, that the contract bar rule applies, thereby,
rendering the strike staged by respondent LMF-LMLC illegal.  (NLRC/LA);
4. Procedural Requisites for a Valid Strike
Because of its potential adverse consequences to the
striking workers, the employer and the community, a strike enjoys
recognition and respect only when it complies with the conditions
laid down by law [Libongcogon v. Phimco Industries] and
pertinent prevailing jurisprudence. Following are the procedural
but mandatory requisites for a valid and legal strike:
a. It must be based on a valid and factual ground;
b. A notice of strike must be filed with the NCMB-
DOLE;
c. A notice must be served to the NCMB-DOLE at
least twenty-four (24) hours prior to the taking of
the strike vote by secret balloting, informing said
office of the decision to conduct a strike vote, and
the date, place, and time thereof and asking it to
supervise the taking of the strike vote;
d. A strike vote must be taken where a majority of the
members of the union obtained by secret ballot in a
meeting called for the purpose must approve it;
e. A strike vote report must be submitted to the
NCMB-DOLE at least seven (7) days before the
intended date of the strike;
f. Except in cases of union busting, observance of the
cooling-off period of 15 days from the filing of the
notice of strike, in case of ULP of the employer, or
Page 56 of 117
30 days, in case of collective bargaining deadlock,
should be fully observed; and
g. The 7-day waiting period or strike ban reckoned
after the submission of the strike vote report to the
NCMB-DOLE should be fully observed in all cases.
a. Valid and Factual Grounds
The law recognizes only two (2) grounds in support of a
valid strike, viz:
(i) Unfair Labor Practice (ULP or Political
Strike); or
(ii) Collective bargaining deadlock (economic
strike),
Collective bargaining deadlock refers to a situation
where there is failure in the collective bargaining negotiations
between the SEBA and the employer resulting in an impasse or
stalemate [San Miguel Corporation v. NLRC]. This happens when,
despite their efforts at bargaining in good faith, the parties have
failed to resolve the issues and it appears that there are no other
definite options or plans in sight to break the standoff. Simply
stated, there is a deadlock when there is a complete blocking or
stoppage in the negotiation resulting from the action of equal and
opposing forces [Capitol Medical Center Alliance of Concerned
Employees v. Laguesma].
No other grounds may be invoked in a notice of strike. A
strike not based on any of the two (2) grounds discussed above is
illegal [San Miguel Corporation v. NLRC]. Therefore, the
following are not valid grounds:
(i) Violation of CBAs (GM>VA);
(ii) Inter-union and internal union disputes
(BLR/MedArb);
(iii) Issues already brought before grievance
machinery or voluntary arbitration (GM>VA)
(iv) Issues brought to compulsory arbitration
(v) Issues already assumed by the DOLE Secretary
or certified by him to the NLRC for
compulsory arbitration (DOLE
Sec./NLRC/LA)
(vi) Legislated wage orders (GM>VA); and
(vii) Labor standard cases (LA).
In G&T Transport v. Infante, it was held that a valid
strike therefore presupposes the existence of a labor dispute. The
strike undertaken by respondents took the form of a sit-down
strike, or more aptly termed as a sympathetic strike, where the
striking employees have no demands or grievances of their own,
but they strike for the purpose of directly or indirectly aiding
others, without direct relation to the advancement of the interest of
the strikers.31 It is indubitable that an illegal strike in the form of a
sit-down strike occurred in petitioner's premises, as a show of
sympathy to the two employees who were dismissed by petitioner.
Apart from the allegations in its complaint for illegal strike filed
before the Labor Arbiter, petitioner presented the affidavits and
testimonies of their other employees which confirm the
participation of respondents in the illegal strike. Petitioner has
sufficiently established that respondents remained in the work
premises in the guise of waiting for orders from management to
resume operations when, in fact, they were actively participating in
the illegal strike.
Doctrine of Privilege of Good Faith Error
 In a situation where ULP is alleged, it is not essential that
the unfair labor practice act has, in fact, been committed; it suffices
that the striking workers are shown to have acted honestly on an
impression that the company has committed such unfair labor
practice and the surrounding circumstances could warrant such a
belief in good faith.
b. Notice of Strike
Article 278(c) of the Labor Code provides:
Article 278. xxx
(c) In cases of bargaining deadlocks, the duly
certified or recognized bargaining agent may file a notice of
strike or the employer may file a notice of lockout with the
Ministry at least 30 days before the intended date thereof. In
cases of unfair labor practice, the period of notice shall be 15
days and in the absence of a duly certified or recognized
bargaining agent, the notice of strike may be filed by any
legitimate labor organization in behalf of its members. However,
in case of dismissal from employment of union officers duly
elected in accordance with the union constitution and by-laws,
which may constitute union busting where the existence of the
union is threatened, the 15-day cooling-off period shall not
apply and the union may take action immediately.
xxx
A notice of strike refers to the notification filed by a duly
registered union, after service of notice to the other party
concerned, with the NCMB-DOLE, informing the latter of its
intention to go on strike because of the alleged commission by the
employer of ULP or because of a deadlock in the collective
bargaining negotiations.
The notice should state, among others, the names and
addresses of the employer and the union involved, the nature of the
industry to which the employer belongs, the number of union
members and workers in the bargaining unit, and such other
relevant data as may facilitate the settlement of the dispute, such as
a brief statement or enumeration of all pending labor disputes
involving the same parties.
c. Service of 24-Hour Prior Notice to NCMB-
DOLE
The third requisite requires that a 24-hour notice be
served to the NCMB-DOLE prior to the taking of the strike vote by
secret balloting, informing it of the union’s decision to conduct a
strike vote, as well as the date, place, and time thereof. This
requisite was enunciated in Capitol Medical Center, Inc. v. NLRC.
The requirement of giving notice of the conduct of a strike vote to
the NCMB at least 24 hours before the meeting for the said purpose
is designed to (a) inform the NCMB of the intent of the union to
conduct a strike vote; (b) give the NCMB ample time to decide on
whether or not there is a need to supervise the conduct of the strike
vote to prevent any acts of violence and/or irregularities attendant
thereto; and (c) should the NCMB decide on its own initiative or
upon the request of an interested party including the employer, to
supervise the strike vote, to give it ample time to prepare for the
deployment of the requisite personnel, including peace officers if
need be.  Unless and until the NCMB is notified at least 24 hours
of the union’s decision to conduct a strike vote, and the date, place,
and time thereof, the NCMB cannot determine for itself whether to
supervise a strike vote meeting or not and insure its peaceful and
regular conduct.  The failure of a union to comply with the
requirement of the giving of notice to the NCMB at least 24 hours
prior to the holding of a strike vote meeting will render the
subsequent strike staged by the union illegal.
Preventive Mediation
Page 57 of 117
The NCMB has the authority to convert a notice of strike
filed by the union into a preventive mediation case if it finds that
the real issues raised therein are non-strikeable in character.
Once a notice of strike/lockout is converted into a
preventive mediation case, it will be dropped from the docket of
notices of strikes/lockouts. Once dropped therefrom, a
strike/lockout can no longer be legally staged based on the same
notice. The conversion has the effect of dismissing the notice.
Philippine Airlines v. Secretary of Labor
Held: The NCMB had declared the notice of strike as
“appropriate for preventive mediation.”  The effect of that declaration
(which PALEA did not ask to be reconsidered or set aside) was to drop the
case from the docket of notice of strikes, as provided in Rule 41 of the
NCMB Rules, as if there was no notice of strike.  During the pendency of
preventive mediation proceedings no strike could be legally declared.  The
Secretary must have thought so too, that is why he failed to act, for a period
of seven (7) days, on PAL'S petition for him to assume jurisdiction over the
labor dispute.  The strike which the union mounted, while preventive
mediation proceedings were ongoing, was aptly described by the petitioner
as "an ambush" (p. 21. Rollo).
Since the strike was illegal, the company has a right to take
disciplinary action against the union officers who participated in it, and
against any union members who committed illegal acts during the strike.
Withdrawal of Notice
If the union or the employer withdraws the Notice of
Strike or Lockout, the process goes back to square one. But it
would not amount to a waiver of their right to strike based on that
ground.
d. Strike Vote
It is a requirement that no labor organization shall
declare a strike without the necessary strike vote first having been
obtained and reported to the NCMB-DOLE. A decision to declare a
strike must be approved by a majority of the total union
membership in the bargaining unit concerned, obtained by secret
ballot in meetings or referenda called for that purpose. This process
is called “strike vote balloting.”
The duration of the validity of the majority approval of a
strike is for the whole duration of the dispute based on substantially
the same grounds considered when the strike vote was taken.
e. Strike Vote Report
In every case of strike vote, the union is required to
furnish a report on the results of the voting to the NCMB-DOLE.
Its submission is meant to ensure that a strike vote was indeed
taken and in the event that the report is false, to afford the members
an opportunity to take the appropriate remedy before it is too late.
It is a fact, for instance, that many disastrous strikes have been
staged based merely on the insistence of minority groups within the
union. The submission of the report gives assurance that a strike
vote has been taken and that, if the report concerning it is false, the
majority of the members can take appropriate remedy before it is
too late [NFW v. Ovejara].
A strike vote should be reported at least seven (7) days
before the actual staging of the intended strike/lockout, subject to
the observance of the cooling-off periods provided under the law.
The failure of the union to prove that it obtained the required strike
vote among its members and that the results thereof were submitted
to the NCMB would render the strike illegal [Pinero v. NLRC].
In the event the result of the strike vote report is filed
within the cooling-off period, the 7-day waiting period shall be
counted from the day following the expiration of the cooling-off
period. It must be stressed that the requirements of cooling-off
period and 7-day strike ban must both be complied with, although
the labor union may take a strike vote and report the same within
the statutory cooling-off period. If only the filing of the strike
notice and the strike-vote report would be deemed mandatory, but
not the waiting periods so specifically and emphatically prescribed
by law, the purposes (hereafter discussed) for which the filing of
the strike notice and strike-vote report is required would not be
achieved, as when a strike is declared immediately after a strike
notice is served, or when - as in the instant case - the strike-vote
report is filed with MOLE after the strike had actually commenced.
Such interpretation of the law ought not and cannot be
countenanced. It would indeed be self-defeating for the law to
imperatively require the filing on a strike notice and strike-vote
report without at the same time making the prescribed waiting
periods mandatory [NSFW v. Ovejera].
f. Cooling-Off Period
The cooling off periods before a strike may be conducted
are as follows:
(i) In case of bargaining deadlock, the cooling-off
period is 30 days;
(ii) In case of unfair labor practice, the cooling-off
period is 15 days.
In requiring the cooling-off period, the avowed intent of
the law is to provide an opportunity for mediation and conciliation
by the NCMB-DOLE. It is designed to afford the parties the
opportunity to amicably resolve the dispute with the assistance of
the Conciliators-Mediators of the NCMB-DOLE [NSFW v.
Ovejara].
These requirements are mandatory, and the union's
failure to comply renders the strike illegal.  The 15 to 30-day
cooling-off period is designed to afford the parties the opportunity
to amicably resolve the dispute with the assistance of the NCMB
conciliator/mediator, while the seven-day strike ban is intended to
give the DOLE an opportunity to verify whether the projected
strike really carries the imprimatur of the majority of the union
members.
In Phimco Industries v. Phimco Industries Labor Association , the
respondents fully satisfied the legal procedural requirements; a
strike notice was filed on March 9, 1995; a strike vote was reached
on March 16, 1995; notification of the strike vote was filed with
the DOLE on March 17, 1995; and the actual strike was launched
only on April 25, 1995.
Union-Busting
The exception to the rule on the observance of the
cooling-off period is in cases of union-busting which is considered
an unfair labor practice where the said 15-day cooling-off period
may be disregarded completely.
To constitute union-busting under Article 278(c), there
must be:
(i) A dismissal from employment of union officers
duly elected in accordance with the union’s
constitution and by-laws; and
(ii) The existence of the union is threatened by
such dismissal.
The act of union-busting by an employer is an unfair
labor practice which may be invoked as a valid ground for a strike
[Zamboanga Wood Products v. NLRC].
g. 7- Day Waiting Period or Strike Ban
After the taking of the strike vote, the union, in every
case, should furnish the NCMB-DOLE, the results of the voting at
Page 58 of 117
least 7 days before the actual staging of the intended strike or
lockout, subject to the cooling-off period provided therein.
The cooling-off period and the 7-day waiting period or
strike ban after the submission of the strike vote report, are meant
to be, and should be deemed, both mandatory [CCBPI Postmix
Workers Union v. NLRC]. It would indeed be self-defeating for the
law to imperatively require the filing of a strike notice and strike
vote report without at the same time making the prescribed waiting
periods mandatory [Coca Cola Bottlers v. NLRC].
Waiting Period vs. Cooling-Off Period
The 7-day waiting period or strike ban is a distinct and
separate requirement from the 15-day or 30-day-cooling-off period
prescribed by law. The latter cannot be substituted for the former.
This is clear from the provision of Article 278(f) which states that
the 7-day requirement is subject to the cooling-off period herein
provided [Samahang Manggagawa v. Sulpicio Lines].
The cooling-off period, on the other hand, is counted
from the time of the filing of the notice of strike up to the intended
or actual staging thereof, in case of deadlock, such period is 30
days. The 7-day waiting period strike ban, on the other hand, is
reckoned from the time the strike vote report is submitted to the
NCMB-DOLE. Consequently, a strike is illegal for failure to
comply with the prescribed mandatory cooling-off period and the
7-day waiting period or strike ban after the submission of the report
on the strike/lockout vote [Union of Filipro employees v. Nestle
Philippines].
5. Violence
If the union intended to use violence as a method of
strike from the very beginning of the strike, the union is liable.
If the union intended it to be a peaceful strike, but it
eventually became violent, the individual employees are liable.
Malayang Samahan v. Ramos
Held: On the allegation of violence committed in the course of
the strike, it must be remembered that the Labor Arbiter and the
Commission found that "the parties are agreed that there were violent
incidents x x x resulting to injuries to both sides, the union and
management." The evidence on record show that the violence cannot be
attributed to the striking employees alone for the company itself employed
hired men to pacify the strikers. With violence committed on both sides, the
management and the employees, such violence cannot be a ground for
declaring the strike as illegal.
6. Some Principles on Strike
 A strike or lockout is illegal if the issues involved
are already subject of compulsory or voluntary
arbitration or conciliation or the steps in grievance
machinery are not exhausted.
 A strike or lockout is illegal if unlawful means were
employed or prohibited acts or practices were
committed
 A strike or lockout is illegal if staged in violation of
the “No-Strike, No-Lockout” clause in the CBA.
This clause may be invoked by the employer only
when the strike is economic in nature or one which
is conducted to force wage or other concessions
from the employer that are not mandated to be
granted by the law itself. It does not bar strikes
grounded on ULP [Malayang Samahan v. Ramos].
 A strike or lockout is illegal if staged in violation of
a TRO or an injunction order issued for the purpose
of enjoining the union and/or its members from
committing illegal and prohibited acts in the course
of a strike, such as, among others, the act of
 obstructing the free ingress to or egress from the
company premises [Association of Independent
Unions v. NRLC].
 A strike or lockout is illegal if conducted for
unlawful purposes. This principle applies even if the
strikers had acted in good faith in staging it [Filcon
Manufacturing v. Lakas Manggagawa]. A strike
staged for the purpose of unreasonably demanding
the dismissal of an employee like a factory foreman
is illegal [Toyota Motor Phils. Corp Woprkers
Association v. NLRC].
 A one-day strike without complying with the 7-day
strike ban is illegal.
7. Illegal Strikes
 Without complying with the procedural but
mandatory requisites
 For unlawful purpose
 Based on non-strikeable or invalid grounds
 In violation of no-strike, no-lockout clause in the
CBA.
 Without submitting the issues to the Grievance
Machinery or Voluntary Arbitrator or failing to
exhaust the steps provided therein
 Without first having bargained collectively
 While the conciliation and mediation proceeding is
on-going at the NCMB. The disregard of such
proceedings is a blatant violation of the IRR, which
explicitly obliges the parties to bargain collectively
in good faith and prohibits them from impeding or
disrupting the proceedings [Filipino Pipe v. NLRC].
 Based on issues already brought to the VA or CA.
The rationale behind this prohibition is that once
jurisdiction over the labor dispute has been properly
acquired by competent authority, that jurisdiction
should not be interfered with by the application of
coercive process of a strike or lockout [Telefunken
Semiconductors v. Court of Appeals]. Thus, a strike
conducted during the pendency of the compulsory
arbitration proceedings on a labor dispute certified
to the NLRC by the DOLE Secretary for
compulsory arbitration is illegal [Philippine
Diamond Hotel v. Manila Diamond Hotel
Employees Union].
 During the pendency of a case involving the same
grounds cited in the notice of strike
 In defiance of an assumption or certification or
return-to-work order
 After the conversion of the notice of strike into a
preventive mediation case
 Against the prohibition of law
 By a minority union. This is so because no labor
dispute which will justify the conduct of a strike can
exist between the employer and a minority union.
To permit the union’s picketing activities would be
to flaunt at the will of the majority [United
Restauror’s Employees v. Torres].
 By an illegitimate union. Under Article 278(c), only
a LLO is entitled to file a notice of strike on behalf
of its members. Absent sowing as to the legitimate
status of the labor organization, the strike it
conducted would have to be considered as illegal
[Stamford Marketing v. Julian].
 By dismissed employees [Toyota Motor v. NLRC].
Page 59 of 117
 In violation of company code of conduct [Toyota
Motor v. NLRC].
 As a protest in front of government offices
 As welga ng bayan. Stoppage of work due to welga
ng bayan is in the nature of a general strike and an
extended sympathy strike which are illegal since the
striking employees have no labor dispute with their
employer but who, on a day they are scheduled to
work, refuse to work and instead join a welga ng
bayan [Biflex Labor Union v. Filiflex Industrial].
 In violation of the rules on picketing, such as
commission of prohibited acts like: obstructing,
impeding or interfering with, by force, violence,
coercion, threats or intimidation, any peaceful
picketing; conducting a stationary picket;
committing any act of violence, coercion or
intimidation by any picketer; obstructing the free
ingress to or egress from the employer’s premises
from lawful purposes; obstructing public
thoroughfares.
8. Improved Offer Balloting
In case of a strike, the Regional Branch of the NCMB
shall conduct a REFERENDUM by secret balloting on the
improved offer of the employer on or before the 30 th day of the
strike.
When at least a majority of the union members vote to
accept the improved offer, the striking workers shall immediately
return to work and the employer shall thereupon readmit them upon
the signing of the agreement.
E. LOCKOUTS
Lockout means the temporary refusal of an employer to
furnish work to its employees as a result of an industrial or labor
dispute [Article 219(p)].
Lockout consists of shutdowns, mass retrenchment and
dismissals initiated by the employer [PD 823]. It, however, may
take other forms such as the employer’s act of excluding
employees who are union members [Complex Electronics
Employees v. NLRC].
Shutdown vs. Lockout
In a shutdown, the plant ceases to operate. It is a willful
act of the employer himself. While a lockout is a compulsory
stoppage of operations as a result of a strike and walkout. In a
lockout the plant continues to operate. The employee-union
members who are locked out are replaced by non-union substitutes,
but the plant continues to function.
1. Requisites of a Valid Lockout
To be valid, a lockout should comply with the following
requisites:
a. It must be based on any or both of the following
grounds:
(i) Unfair Labor Practice of Labor
Organization
(ii) Collective Bargaining Deadlock
b. A notice of lockout should be filed with the NCMB-
DOLE;
c. A notice must be served to the NCMB-DOLE at
least twenty-four (24) hours prior to the taking of
the lockout vote by secret balloting, informing said
office of the decision to conduct a lockout vote, and
 the date, place, and time thereof and asking it to
supervise the taking of the lockout vote;
d. A lockout vote must be taken where a majority of
the members of the Board of Directors of the
corporation or association or of the partners in a
partnership, obtained by secret ballot in a meeting
called for the purpose, must approve it;
e. A lockout vote report should be submitted to the
NCMB-DOLE at least (7) days before the intended
date of the lockout;
f. Observance of the cooling-off period of 15 days, in
case of ULP of the labor organization, or 30 days, in
case of CBD, reckoned from the date of filing of the
notice of lockout; and
g. The 7-day waiting period reckoned after the
submission of the lockout vote report to the NCMB-
DOLE should be fully complied with in all cases.
2. Reduced Offer Balloting
In case of a lockout, the Regional Branch of the NCMB
shall conduct a REFERENDUM by secret balloting on the reduced
offer of the union or or before the 30th day of the lockout.
When at least a majority of the board of directors or
trustees or the partners holding the controlling interest in the case
of partnership, vote to accept the reduced offer, the workers shall
immediately return to work and the employer shall thereupon
readmit them upon the signing of the agreement.
F. INJUNCTIONS
As a general rule, strikes or lockouts that are validly
declared enjoy the protection of the law and cannot be enjoined
unless illegal acts are committed or threatened to be committed in
the course thereof. This policy applies even if the strike appears to
be illegal in nature. The rationale for this policy is the protection
extended to the right to strike under the Constitution and the law. It
is basically treated as a weapon that the law guarantees to
employees for the advancement of their interest and for their
protection [Caltex Refinery Employees Association v. Lucero].
However, in some cases, injunctions issued to enjoin the
conduct of the strike itself and not only the commission of illegal
or prohibited acts in the course thereof, were held to be valid. In
IBM v. NLRC, it was held that it is the legal duty and obligation of
the NLRC to enjoin a partial strike staged in violation of the law.
Failure to promptly issue an injunction by the NLRC was held
therein to be an abuse of discretion.
1. When Equity and Justice Requires
In Bulletin Publishing v. Sanchez, an injunction was
allowed against the strike which was staged to compel the
employer to ignore the law. The reason is that when trade unionism
and strikes are used in violation of the law, misuse thereof can be
subject of judicial intervention.
2. Innocent Bystander Rule
In situations where the picket affects not only the
employer but also the business operations of other establishments
owned by third parties, an injunction may be secured by the latter
from the regular courts to enjoin the picket. Picketing strikers
cannot prevent employees of other companies from using the same
premises being picketed. A picketing labor union has no right to
prevent employees of another company which is not their
employer, from getting in and out of its rented premises; otherwise,
it will be held liable for damages for its acts against an innocent
bystander [Liwayway Publications v. Permanent Concrete Workers
Union].
Page 60 of 117
MSF Tire & Rubber v. Court of Appeals
Held: In Philippine Association of Free Labor Unions (PAFLU)
v. Cloribel, this Court, through Justice J.B.L. Reyes, stated the "innocent
bystander" rule as follows:
The right to picket as a means of communicating the facts of a
labor dispute is a phase of the freedom of speech guaranteed by the
constitution. If peacefully carried out, it can not be curtailed even in the
absence of employer-employee relationship.
The right is, however, not an absolute one. While peaceful
picketing is entitled to protection as an exercise of free speech, we
believe the courts are not without power to confine or localize the
sphere of communication or the demonstration to the parties to the
labor dispute, including those with related interest, and to insulate
establishments or persons with no industrial connection or having
interest totally foreign to the context of the dispute. Thus the right may
be regulated at the instance of third parties or "innocent bystanders" if
it appears that the inevitable result of its exercise is to create an
impression that a labor dispute with which they have no connection or
interest exists between them and the picketing union or constitute an
invasion of their rights. In one case decided by this Court, we upheld a
trial court's injunction prohibiting the union from blocking the entrance to a
feed mill located within the compound of a flour mill with which the union
had a dispute. Although sustained on a different ground, no connection was
found between the two mills owned by two different corporations other
than their being situated in the same premises. It is to be noted that in the
instances cited, peaceful picketing has not been totally banned but merely
regulated. And in one American case, a picket by a labor union in front of a
motion picture theater with which the union had a labor dispute was
enjoined by the court from being extended in front of the main entrance of
the building housing the theater wherein other stores operated by third
persons were located. (Emphasis added)
Thus, an "innocent bystander," who seeks to enjoin a labor
strike, must satisfy the court that aside from the grounds specified in Rule
58 of the Rules of Court, it is entirely different from, without any
connection whatsoever to, either party to the dispute and, therefore, its
interests are totally foreign to the context thereof. For instance, in PAFLU
v. Cloribel, supra, this Court held that Wellington and Galang were entirely
separate entities, different  from, and without any connection whatsoever to,
the Metropolitan Bank and Trust Company, against whom the strike was
directed, other than the incidental fact that they are the bank's landlord and
co-lessee housed in the same building, respectively. Similarly, in Liwayway
Publications, Inc. v. Permanent Concrete Workers Union, this Court ruled
that Liwayway was an "innocent bystander" and thus entitled to enjoin the
union's strike because Liwayway's only connection with the employer
company was the fact that both were situated in the same premises.
In the case at bar, petitioner cannot be said not to have such
connection to the dispute. As correctly observed by the appellate court:
Coming now to the case before us, we find that the "negotiation,
contract of sale, and the post transaction" between Philtread, as vendor, and
Siam Tyre, as vendee, reveals a legal relation between them which, in the
interest of petitioner, we cannot ignore. To be sure, the transaction between
Philtread and Siam Tyre, was not a simple sale whereby Philtread ceased to
have any proprietary rights over its sold assets. On the contrary, Philtread
remains as 20% owner of private respondent and 60% owner of Sucat Land
Corporation which was likewise incorporated in accordance with the terms
of the Memorandum of Agreement with Siam Tyre, and which now owns
the land were subject plant is located. This, together with the fact that
private respondent uses the same plant or factory; similar or substantially
the same working conditions; same machinery, tools, and equipment; and
manufacture the same products as Philtread, lead us to safely conclude that
private respondent's personality is so closely linked to Philtread as to bar its
entitlement to an injunctive writ. Stated differently, given its close links
with Philtread as to bar its entitlement to an injunctive writ. Stated
differently, given its close links with Philtread, we find no clear and
unmistakable right on the part of private respondent to entitle it to the writ
of preliminary injunction it prayed for below.
....
We stress that that in so ruling, we have not touched on the issue
of . . . whether or not private respondent is a mere dummy or continuation
of Philtread. . . .
Although, as petitioner contends, the corporate fiction may be
disregarded where it is used to defeat public convenience, justify wrong,
protect fraud, defend crime, or where the corporation is used as a mere
alter-ego or business conduit, it is not these standards but those of the
"innocent bystander" rule which govern whether or not petitioner is entitled
to an injunctive writ. Since petitioner is not an "innocent bystander", the
trial court's order, dated July 2, 1996, is a patent nullity, the trial court
having no jurisdiction to issue the writ of injunction. No motion for
reconsideration need be filed where the order is null and void.
3. Industry Indispensable to the National Interest
a. Hospitals, Clinics, or Medical Institutions
The second paragraph of Article 278(g) provides:
(g) xxx
In line with the national concern for and the highest
respect accorded to the right of patients to life and health, strikes
and lockouts in hospitals, clinics and similar medical institutions
shall, to every extent possible, be avoided, and all serious
efforts, not only by labor and management but government as
well, be exhausted to substantially minimize, if not prevent,
their adverse effects on such life and health, through the
exercise, however legitimate, by labor of its right to strike and
by management to lockout. In labor disputes adversely affecting
the continued operation of such hospitals, clinics or medical
institutions, it shall be the duty of the striking union or locking-
out employer to provide and maintain an effective skeletal
workforce of medical and other health personnel, whose
movement and services shall be unhampered and unrestricted, as
are necessary to insure the proper and adequate protection of the
life and health of its patients, most especially emergency cases,
for the duration of the strike or lockout. In such cases, therefore,
the Secretary of Labor and Employment may immediately
assume, within twenty four (24) hours from knowledge of the
occurrence of such a strike or lockout, jurisdiction over the same
or certify it to the Commission for compulsory arbitration. For
this purpose, the contending parties are strictly enjoined to
comply with such orders, prohibitions.
xxx
b. Banking Institutions
Section 22 of Republic Act No. 8791 provides:
Section 22. Strikes and Lockouts. - The banking
industry is hereby declared as indispensable to the national
interest and, notwithstanding the provisions of any law to the
contrary, any strike or lockout involving banks, if unsettled after
seven (7) calendar days shall be reported by the Bangko Sentral
to the secretary of Labor who may assume jurisdiction over the
dispute or decide it or certify the same to the National Labor
Relations Commission for compulsory arbitration. However, the
President of the Philippines may at any time intervene and
assume jurisdiction over such labor dispute in order to settle or
terminate the same. (6-E)
G. ASSUMPTION OF JURISDICTION BY THE DOLE
SECRETARY
Article 278(g) provides that when in the opinion of the
DOLE Secretary, the labor dispute causes or will likely to cause a
strike or lockout in an industry indispensable to the national
interest, he is empowered to do either of the 2 things:
a. He may assume jurisdiction over the labor dispute
and decide it for himself; or
b. He may certify it to the NLRC for compulsory
arbitration, in which case, it will be the NLRC
which shall hear and decide.
The foregoing article clearly does not interfere with the
workers' right to strike but merely regulates it, when in the exercise
of such right, national interests will be affected. The rights granted
by the Constitution are not absolute. They are still subject to
control and limitation to ensure that they are not exercised
Page 61 of 117
arbitrarily. The interests of both the employers and employees are
intended to be protected and not one of them is given undue
preference [Philtread v. Confesor].
Both parties may request the Secretary of DOLE to
assume jurisdiction over the labor dispute or after a conference is
called by the DOLE Secretary on the propriety of the issuance, the
Secretary may motu proprio or upon a request or petition by either
of the parties to the labor dispute assume jurisdiction.
Having the two (2) options above, the DOLE Secretary
may do the following variations thereof:
a. Assume jurisdiction over a labor dispute and at the
same time certify it to the NLRC for compulsory
arbitration [NAFLU v. NLRC].
b. Initially assume jurisdiction over a labor dispute and
later, on a different date, certify the same labor
dispute to the NLRC for compulsory arbitration
[NAFLU v. Sulpicio Lines].
Notwithstanding the power granted to the DOLE
Secretary to assume jurisdiction over national interest labor
disputes or to certify them to the NLRC for compulsory arbitration,
the President of the Philippines shall not be precluded from doing
any of the following:
a. To determine the industries that, in his opinion, are
indispensable to the national interest;
b. To intervene at any time and assume jurisdiction
over any such labor dispute in order to settle or
terminate it [Article 278(g)].
Unlike his alter ego, the DOLE Secretary, the President,
while possessed of the power of assumption, has no similar power
to “certify the labor dispute to the Commission for Compulsory
arbitration,” this power being granted solely to the DOLE
Secretary. His role is confined to assuming jurisdiction thereover,
thus: “The President of the Philippines shall not be precluded from
determining the industries that, in his opinion, are indispensable to
the national interest, and from intervening at any time and
assuming jurisdiction over any such labor dispute in order to settle
or terminate the same.
The DOLE Secretary or the NLRC, as the case may be,
may seek assistance of law enforcement agencies to seek assistance
of law enforcement agencies to ensure compliance with the
assumption or certification orders as well as with such orders
which may forthwith be issued to enforce them.
1. Industries Indispensable to National Interest
The determination of specific industries indispensable to
the national interest is left to the discretion of the DOLE Secretary.
Section 16 to Rule XXII, Book V of the Omnibus Rules provides:
Section 16. Industries Indispensable to the National
Interest. - For the guidance of the workers and employers in the
filing of petition for assumption of jurisdiction, the following
industries/services are hereby recognized as deemed
indispensable to the national interest:
a. Hospital Sector;
b. Electric Power Industry;
c. Water Supply Services, to exclude small water
supply services such as Bottling and Refilling Refilling Stations;
d. Air Traffic Control; and
e. Such other industries as maybe recommended by
the National Tripartite Industrial Peace Council (NTIPC).
The above enumeration is not exclusive as other
companies or firms or industries may be considered indispensable
to the national interest based on the appreciated and discretion of
the DOLE Secretary, or as may be recommended by the TIPC, or
because they have already been judicially adjudged as being
indispensable to the national interest.
Philtread v. Confesor
Held: The Labor Code vests upon the Secretary of Labor the
discretion to determine what industries are indispensable to national
interest. Thus, upon the determination of the Secretary of Labor that such
industry is indispensable to the national interest, it will assume jurisdiction
over the labor dispute of said industry. The assumption of jurisdiction is in
the nature of police power measure. This is done for the promotion of the
common good considering that a prolonged strike or lockout can be
inimical to the national economy. The Secretary of Labor acts to maintain
industrial peace. Thus, his certification for compulsory arbitration is not
intended to impede the workers' right to strike but to obtain a speedy
settlement of the dispute. This is well-articulated in International
Pharmaceuticals, Inc. vs. Secretary of Labor, in this wise:
Plainly, Article 263 (g) of the Labor Code was meant to make
both the Secretary (or the various regional directors) and the labor arbiters
share jurisdiction, subject to certain conditions. Otherwise, the Secretary
would not be able to effectively and efficiently dispose of the primary
dispute. To hold the contrary may even lead to the absurd and undesirable
result wherein the Secretary and the labor arbiter concerned may have
diametrically opposed rulings. As we have said, "(i)t is fundamental that a
statute is to be read in a manner that would breathe life into it, rather than
defeat it.8
On the second issue raised by the petitioners, We find that the
Secretary of Labor did not act with grave abuse of discretion in issuing the
certification for compulsory arbitration. It had been determined by the
Labor Arbiter in NLRC-NCR Case No. 00-05-04156-94 that the work
slowdowns conducted by the petitioner amounted to illegal strikes. It was
shown that every time the respondent company failed to accede to the
petitioner's demands, production always declined. This resulted to the
significant drops in the figures of tires made, cured, and warehoused.
However, when the demand of the petitioner union for the restoration of
overtime work was allowed, production improved. The work slowdowns,
which were in effect, strikes on installment basis, were apparently a pattern
of manipulating production depending on whether the petitioner union's
demands were met. These strikes, however, had greatly affected the
respondent company that on November 11, 1994, it had indefinitely ceased
operations because of tremendous financial losses.
We do not agree with the petitioners that the respondent
company is not indispensable to national interest considering that the tire
industry has already been liberalized. Philtread supplies 22% of the tire
products in the country. Moreover, it employs about 700 people. As
observed by the Secretary of Labor, viz.:
The Company is one of the tire manufacturers in the country
employing more or less 700 workers. Any work disruption thereat, as a
result of a labor dispute will certainly prejudice the employment and
livelihood of its workers and their dependents. Furthermore, the labor
dispute may lead to the possible closure of the Company and loss of
employment to hundreds of its workers. This will definitely aggravate the
already worsening unemployment situation in the country and discourage
foreign and domestic investors from further investing in the country. There
is no doubt, therefore, that the labor dispute in the Country is imbued with
national interest.
At this point in time when all government efforts are geared
towards economic recovery and development by encouraging both foreign
and domestic investments to generate employment, we cannot afford to
derail the same as a result of a labor dispute considering that there are
alternative dispute resolution machineries available to address labor
problems of this nature.9
The intervention of the Secretary of Labor was therefore
necessary to settle the labor dispute which had lingered and which had
affected both respondent company and petitioner union. Had it not been so,
the deadlock will remain and the situation will remain uncertain. Thus, it
cannot be deemed that the Secretary of Labor had acted with grave abuse of
discretion in issuing the assailed order as she had a well-founded basis in
issuing the assailed order. It is significant at this point to point out that
grave abuse of discretion implies capricious and whimsical exercise of
judgment. Thus, an act may be considered as committed in grave abuse of
discretion when the same was performed in a capricious or whimsical
exercise of judgment which is equivalent to lack of jurisdiction. The abuse
Page 62 of 117
of discretion must be so patent and gross as to amount to an evasion of
positive duty or to a virtual refusal to perform a duty enjoined by law, or to
act at all in contemplation of law, as where the power is exercised in an
arbitrary and despotic manner by reason of passion or personal hostility.
2. Strikes in Hospitals, Clinics and Medical
Institutions
The second paragraph of Article 278(g) provides:
In line with the national concern for and the highest
respect accorded to the right of patients to life and health, strikes
and lockouts in hospitals, clinics and similar medical institutions
shall, to every extent possible, be avoided, and all serious
efforts, not only by labor and management but government as
well, be exhausted to substantially minimize, if not prevent,
their adverse effects on such life and health, through the
exercise, however legitimate, by labor of its right to strike and
by management to lockout. In labor disputes adversely affecting
the continued operation of such hospitals, clinics or medical
institutions, it shall be the duty of the striking union or locking-
out employer to provide and maintain an effective skeletal
workforce of medical and other health personnel, whose
movement and services shall be unhampered and unrestricted, as
are necessary to insure the proper and adequate protection of the
life and health of its patients, most especially emergency cases,
for the duration of the strike or lockout. In such cases, therefore,
the Secretary of Labor and Employment may immediately
assume, within twenty four (24) hours from knowledge of the
occurrence of such a strike or lockout, jurisdiction over the same
or certify it to the Commission for compulsory arbitration. For
this purpose, the contending parties are strictly enjoined to
comply with such orders, prohibitions and/or injunctions as are
issued by the Secretary of Labor and Employment or the
Commission, under pain of immediate disciplinary action,
including dismissal or loss of employment status or payment by
the locking-out employer of backwages, damages and other
affirmative relief, even criminal prosecution against either or
both of them.
3. Effect on Strike or Lockout
The assumption of jurisdiction or certification to the
NLRC of a labor dispute has the following effects:
a. On the intended or impending strike or
lockout
Upon assumption/certification, the intended or
impending strike or lockout is automatically enjoined,
notwithstanding the filing of any motion for reconsideration of the
assumption/certification order or the non-resolution of any such
motion which may have been duly submitted to the Office of the
DOLE Secretary [NLRC Rules of Procedure].
b. On the actual strike or lockout
If a work stoppage has already been taken place at the
time of the assumption/certification, all striking or locked-out
employees shall immediately return to work and the employer shall
immediately resume operations and readmit all workers under the
same terms and conditions prevailing before the strike or lockout
[NLRC Rules of Procedure].
c. On cases already filed or may be filed
All cases between the same parties, except where the
assumption/certification order specifies otherwise, including the
issues submitted for arbitration which already filed or may be filed
and are relevant to or are proper incidents of the certified case, are
considered subsumed or absorbed by the assumed/certified case
[NLRC Rules of Procedure].
d. On other pending cases
 The parties to an assumed/certified case, under pain of
contempt, are required to inform their counsels and the DOLE
Secretary/NLRC Division concerned, as the case may be, of all
pending cases that are related or incident to the assumed/certified
case before it [NLRC Rules of Procedure].
Submission of National Interest Dispute to Voluntary
Arbitration
Before or at any stage of the compulsory arbitration
process, the parties may, by mutual agreement, decide to bring the
matter for resolution before an accredited Voluntary Arbitrator or
Panel of Voluntary Arbitrators of their own choice, in which case,
the notice is deemed automatically withdrawn and dropped from
the docket [NLRC Rules of Procedure].
4. Return-To-Work Order
It is clear that under Article 278(g), that the moment the
DOLE Secretary assumes jurisdiction over a labor dispute
involving national interest or certifies it to the NLRC for
compulsory arbitration, such assumption or certification has the
effect of automatically enjoining the intended or impending strike.
Simple stated, assumption of jurisdiction over a labor dispute, or
the certification of the same to the NLRC for compulsory
arbitration, always co-exists with an order for workers to return to
work immediately and for employers to readmit all of them under
the same terms and conditions prevailing before the strike or
lockout [University of San Agustin Employees Union v. Court of
Appeals].
a. Nature of Return-to-Work Order
It is also important to emphasize that the return-to-work
order not so much confers a right as it imposes a duty; and while as
a right it may be waived, it must be discharged as a duty even
against the worker's will.  Returning to work in this situation is not
a matter of option or voluntariness but of obligation.  The worker
must return to his job together with his co-workers so the
operations of the company can be resumed and it can continue
serving the public and promoting its interest.  That is the real
reason such return can be compelled.  So imperative is the order in
fact that it is not even considered violative of the right against
involuntary servitude. The worker can of course give up his work,
thus severing his ties with the company, if he does not want to obey
the order; but the order must be obeyed if he wants to retain his
work even if his inclination is to strike [Asian Transmission v.
NLRC].
The assumption/certification order may be served at any
time of the day or night [Telefunken Semiconductors Employees’
union v. Secretary of Labor].
b. All Striking or Locked out Employees
The phrase "all striking or locked out employees" and
"readmit all workers" does not distinguish or qualify and
emphatically is a catch all-embracing enumeration of who should
be returned to work. Where the law does not distinguish, courts
should not distinguish [PLDT v. Manggagawa ng Komunikasyon].
c. Under the Same Terms and Conditions
Prevailing Before the Strike
As a general rule, the concept of return-to-work under
Article 278(g) contemplates actual reinstatement and not payroll
reinstatement. This is in accordance with the intent and spirit of
this Article [NUWHRAIN-APL-IUF v. Court of Appeals].
As with most rules, however, the actual reinstatement
rule in Article 278(g) is subject to exceptions [Ibid]. Consequently,
there are a number of cases where, instead of actual reinstatement,
payroll reinstatement was ordered by the Court to implement the
Page 63 of 117
return-to-work order in national interest cases. but such departure
from the norm may only be justified in case of existence of certain
special circumstances that render actual reinstatement
impracticable or otherwise not conducive to attaining the purposes
of the law [Manila Diamond Hotel Employees’ Union v. Court of
Appeals]. This is best exemplified in the case of University of Sto.
Tomas v. NLRC, where, by reason of the special circumstance at
the time the teachers were ordered to return to work by reason of
the DOLE Secretary’s certification of the labor dispute to the
NLRC for compulsory arbitration, they could not be given back
their academic assignments since the return-to-work order of the
DOLE Secretary was issued in the middle of the first semester of
the academic year. The NLRC, to which the labor dispute was
certified, was therefore faced with a situation where the striking
teachers were entitled to a return-to-work order, but the university
could not immediately reinstate them since it would be
impracticable and detrimental to the students to change teachers at
the point. Thus:
It was error for the NLRC to order the alternative
remedies of payroll reinstatement or actual
reinstatement.  However, the order did not amount to grave
abuse of discretion.  Such error is merely an error of judgment
which is not correctible by a special civil action
for certiorari.  The NLRC was only trying its best to work out a
satisfactory ad hoc solution to a festering and serious
problem.  In the light of our rulings on the impropriety of the
substantially equivalent academic assignments and the need to
defer the changes of teachers until the end of the first semester,
the payroll reinstatements will actually minimize the petitioner's
problems in the payment of full backwages.
xxx
Although we pronounce that the dismissed faculty
members must be actually reinstated while the labor dispute is
being resolved, we have to take into account the fact that at this
time, the first semester for schoolyear 1990-1991 is about to
end.  To change the faculty members around the time of final
examinations would adversely affect and prejudice the students
whose welfare and interest we consider to be of primordial
importance and for whom both the University and the faculty
union must subordinate their claims and desires.  This Court
therefore resolves that the actual reinstatement of the non-
reinstated faculty members, pending resolution of the labor
controversy before the NLRC, may take effect at the start of the
second semester of the schoolyear 1990-1991 but not
later.  With this arrangement, the petitioner's reasoning that it
will be violating contracts with the faculty members who took
over the dismissed professors’ teaching loads becomes moot
considering that, as it alleges in its petition, it operates on
a semestral basis.
University of Immaculate Concepcion v. Secretary of Labor
Held: With respect to the Secretary’s Order allowing payroll
reinstatement instead of actual reinstatement for the individual respondents
herein, an amendment to the previous Orders issued by her office, the same
is usually not allowed.  Article 263(g) of the Labor Code aforementioned
states that all workers must immediately return to work and all employers
must readmit all of them under the same terms and conditions prevailing
before the strike or lockout.  The phrase “under the same terms and
conditions” makes it clear that the norm is actual reinstatement.  This is
consistent with the idea that any work stoppage or slowdown in that
particular industry can be detrimental to the national interest.
In ordering payroll reinstatement in lieu of actual reinstatement,
then Acting Secretary of Labor Jose S. Brillantes said:
Anent the Union’s Motion, we find that superseding
circumstances would not warrant the physical reinstatement of the twelve
(12) terminated employees.  Hence, they are hereby ordered placed under
payroll reinstatement until the validity of their termination is finally
resolved.
As an exception to the rule, payroll reinstatement must rest on
special circumstances that render actual reinstatement impracticable or
otherwise not conducive to attaining the purposes of the law.
 The “superseding circumstances” mentioned by the Acting
Secretary of Labor no doubt refer to the final decision of the panel of
arbitrators as to the confidential nature of the positions of the twelve private
respondents, thereby rendering their actual and physical reinstatement
impracticable and more likely to exacerbate the situation.  The payroll
reinstatement in lieu of actual reinstatement ordered in these cases,
therefore, appears justified as an exception to the rule until the validity of
their termination is finally resolved.  This Court sees no grave abuse of
discretion on the part of the Acting Secretary of Labor in ordering the
same.  Furthermore, the issue has not been raised by any party in this case.
d. Issue Legality of Strike, Immaterial
The brazen disregard of the return-to-work order would
render the strike illegal [Union of Filipro Employees v. Nestle].
Where the return-to-work order is issued pending the determination
of the legality of the strike, it is not correct to say that it may be
enforced only if the strike is legal and may be disregarded if the
strike is illegal. Precisely, the Supreme Court in Asian
Transmission Corporation v. NLRC, the purpose of the return-to-
work order is to maintain the status quo while the determination is
being made. Otherwise, workers who contend that the strike is
legal can refuse to return to their work and use a standstill in the
company operations while retaining the positions they refuse to
discharge or allow management to fill. Worse, they will also claim
payment for work not done on the ground that they are still legally
employed although actually engaged in activities inimical to their
employer’s interest.
e. Effect of Compliance of RTWO
The act of the strikers in voluntarily returning to work
does not result in the waiver of their original demands. Such act of
returning to work only means that they desisted from the strike
which desistance is a personal act of the strikers and cannot be used
against the union and interpreted as a waiver by it of its original
demands for which the strike was adopted as a weapon [Bisaya
Land Transportation v. CIR].
In the same breadth, a return-to-work order does not
generally have the effect of rendering as moot and academic the
issue of the illegality of the strike [Insurefco Paper v. Insular
Sugar]. However, according to Trans-Asia Shipping Lines v. Court
of Appeals, an employer may be considered to have waived its right
to proceed against the striking employees for alleged commission
of illegal acts during the strike when, during a conference before
the Chairman of the NLRC, it agreed to reinstate them and comply
fully with the RTWO issued by the DOLE Secretary.
f. Entitlement to Pay
The return-to-work order should benefit only those
workers who complied therewith and, regardless of the outcome of
the compulsory arbitration proceedings, are entitled to be paid for
work they have actually performed.  Conversely, those workers
who refused to obey the said order and instead waged the
restrained strike are not entitled to be paid for work not done or to
reinstatement to the positions they have abandoned by their refusal
to return thereto as ordered [Asian Transmission v. NLRC].
5. Effect of Defiance of Return-To-Work Order
a. As to the Employees
Any worker or union officer who defies a return-to-work
order may be subject to immediate disciplinary action, including
dismissal or loss of employment status and even to criminal
prosecution.
From the moment a worker defies a return-to-work order,
he is deemed to have abandoned his job [Philippine Airlines v.
Brillantes]. By so defying, the workers have forfeited their right to
be readmitted to work [Steel Corporation v. SCP Employees
Page 64 of 117
Union]. The defiant strikers could then be validly replaced
[Marcopper Mining v. Brillantes].
The refusal to acknowledge receipt of the
assumption/certification orders and other processes is an apparent
attempt to frustrate the ends of justice, hence, invalid. The union
cannot be allowed to thwart the efficacy of the said orders issued in
the national interest through the simple expediency of refusing to
acknowledge the receipt thereof [Navale v. Court of Appeals].
Period of Defiance, Not Material
The length of time within which the assumption or
certification order or return-to-work order was defied by the
strikers is not significant in determining their liability therefor. In
University of San Agustin Employees’ Union v. Court of Appeals,
the period of defiance was less than 9 hours.
There is no practice of giving 2 hours to strikers within
which to return to work, there is no law or jurisprudence
recognizing this practice [University of San Agustin Employees’
Union v. Court of Appeals].
b. As to Employer
In case of non-compliance by the employer with the
RWTO issued, he may be held liable to pay backwages, damages
and other positive or affirmative reliefs, even criminal prosecution
against him.
H. PROHIBITED ACTIVITIES
Article 279. [264] Prohibited activities. - (a) No labor
organization or employer shall declare a strike or lockout without first
having bargained collectively in accordance with Title VII of this Book
or without first having filed the notice required in the preceding Article
or without the necessary strike or lockout vote first having been
obtained and reported to the Ministry.
No strike or lockout shall be declared after assumption of
jurisdiction by the President or the Minister or after certification or
submission of the dispute to compulsory or voluntary arbitration or
during the pendency of cases involving the same grounds for the strike
or lockout.
Any worker whose employment has been terminated as a
consequence of any unlawful lockout shall be entitled to reinstatement
with full backwages. Any union officer who knowingly participates in
an illegal strike and any worker or union officer who knowingly
participates in the commission of illegal acts during a strike may be
declared to have lost his employment status: Provided, That mere
participation of a worker in a lawful strike shall not constitute
sufficient ground for termination of his employment, even if a
replacement had been hired by the employer during such lawful strike.
(b) No person shall obstruct, impede, or interfere with by
force, violence, coercion, threats or intimidation, any peaceful
picketing by employees during any labor controversy or in the exercise
of the right to self-organization or collective bargaining, or shall aid or
abet such obstruction or interference.
(c) No employer shall use or employ any strike-breaker, nor
shall any person be employed as a strike-breaker.
(d) No public official or employee, including officers and
personnel of the New Armed Forces of the Philippines or the
Integrated National Police, or armed person, shall bring in, introduce
or escort in any manner, any individual who seeks to replace strikers in
entering or leaving the premises of a strike area, or work in place of the
strikers. The police force shall keep out of the picket lines unless actual
violence or other criminal acts occur therein: Provided, That nothing
herein shall be interpreted to prevent any public officer from taking
any measure necessary to maintain peace and order, protect life and
property, and/or enforce the law and legal orders.
(e) No person engaged in picketing shall commit any act of
violence, coercion or intimidation or obstruct the ingress to or egress
from the employer’s premises for lawful purposes, or obstruct public
thoroughfares.
 1. Test of Legality of Strike
In Toyota v. NLRC, the Court noted authority on labor
law, Ludwig Teller, lists six (6) categories of an illegal strike, viz:
(i) [when it] is contrary to a specific prohibition of
law, such as strike by employees performing
governmental functions; or
(ii) [when it] violates a specific requirement of
law[, such as Article 263 of the Labor Code on
the requisites of a valid strike]; or
(iii) [when it] is declared for an unlawful purpose,
such as inducing the employer to commit an
unfair labor practice against non-union
employees; or
(iv) [when it] employs unlawful means in the
pursuit of its objective, such as a widespread
terrorism of non-strikers [for example,
prohibited acts under Art. 279(e) of the Labor
Code]; or
(v) [when it] is declared in violation of an existing
injunction[, such as injunction, prohibition, or
order issued by the DOLE Secretary and the
NLRC under Art. 263 of the Labor Code]; or
(vi) [when it] is contrary to an existing agreement,
such as a no-strike clause or conclusive
arbitration clause.
NUWHRAIN-APL-IUF Dusit v. Court of Appeals
Held: With the foregoing parameters as guide and the following
grounds as basis, we hold that the Union is liable for conducting an illegal
strike for the following reasons:
First, the Union's violation of the Hotel's Grooming Standards
was clearly a deliberate and concerted action to undermine the authority of
and to embarrass the Hotel and was, therefore, not a protected action. The
appearances of the Hotel employees directly reflect the character and well-
being of the Hotel, being a five-star hotel that provides service to top-notch
clients. Being bald or having cropped hair per se does not evoke negative or
unpleasant feelings. The reality that a substantial number of employees
assigned to the food and beverage outlets of the Hotel with full heads of
hair suddenly decided to come to work bald-headed or with cropped hair,
however, suggests that something is amiss and insinuates a sense that
something out of the ordinary is afoot. Obviously, the Hotel does not need
to advertise its labor problems with its clients. It can be gleaned from the
records before us that the Union officers and members deliberately and in
apparent concert shaved their heads or cropped their hair. This was shown
by the fact that after coming to work on January 18, 2002, some Union
members even had their heads shaved or their hair cropped at the Union
office in the Hotel's basement. Clearly, the decision to violate the company
rule on grooming was designed and calculated to place the Hotel
management on its heels and to force it to agree to the Union's proposals.
In view of the Union's collaborative effort to violate the Hotel's
Grooming Standards, it succeeded in forcing the Hotel to choose between
allowing its inappropriately hair styled employees to continue working, to
the detriment of its reputation, or to refuse them work, even if it had to
cease operations in affected departments or service units, which in either
way would disrupt the operations of the Hotel. This Court is of the opinion,
therefore, that the act of the Union was not merely an expression of their
grievance or displeasure but, indeed, a calibrated and calculated act
designed to inflict serious damage to the Hotel's finances or its reputation.
Thus, we hold that the Union's concerted violation of the Hotel's Grooming
Standards which resulted in the temporary cessation and disruption of the
Hotel's operations is an unprotected act and should be considered as an
illegal strike.
Second, the Union's concerted action which disrupted the Hotel's
operations clearly violated the CBA's "No Strike, No Lockout" provision,
which reads:
ARTICLE XXII - NO STRIKE/WORK STOPPAGE AND
LOCKOUT
SECTION 1. No Strikes
The Union agrees that there shall be no strikes, walkouts,
stoppage or slow-down of work, boycott, refusal to handle accounts,
Page 65 of 117
picketing, sit-down strikes, sympathy strikes or any other form of
interference and/or interruptions with any of the normal operations of the
HOTEL during the life of this Agreement.
The facts are clear that the strike arose out of a bargaining
deadlock in the CBA negotiations with the Hotel. The concerted action is
an economic strike upon which the afore-quoted "no strike/work stoppage
and lockout" prohibition is squarely applicable and legally binding.19
Third, the Union officers and members' concerted action to
shave their heads and crop their hair not only violated the Hotel's Grooming
Standards but also violated the Union's duty and responsibility to bargain in
good faith. By shaving their heads and cropping their hair, the Union
officers and members violated then Section 6, Rule XIII of the
Implementing Rules of Book V of the Labor Code. 20 This rule prohibits the
commission of any act which will disrupt or impede the early settlement of
the labor disputes that are under conciliation. Since the bargaining deadlock
is being conciliated by the NCMB, the Union's action to have their officers
and members' heads shaved was manifestly calculated to antagonize and
embarrass the Hotel management and in doing so effectively disrupted the
operations of the Hotel and violated their duty to bargain collectively in
good faith.
Fourth, the Union failed to observe the mandatory 30-day
cooling-off period and the seven-day strike ban before it conducted the
strike on January 18, 2002. The NLRC correctly held that the Union failed
to observe the mandatory periods before conducting or holding a strike.
Records reveal that the Union filed its Notice of Strike on the ground of
bargaining deadlock on December 20, 2001. The 30-day cooling-off period
should have been until January 19, 2002. On top of that, the strike vote was
held on January 14, 2002 and was submitted to the NCMB only on January
18, 2002; therefore, the 7-day strike ban should have prevented them from
holding a strike until January 25, 2002. The concerted action committed by
the Union on January 18, 2002 which resulted in the disruption of the
Hotel's operations clearly violated the above-stated mandatory periods.
Last, the Union committed illegal acts in the conduct of its
strike. The NLRC ruled that the strike was illegal since, as shown by the
pictures21 presented by the Hotel, the Union officers and members formed
human barricades and obstructed the driveway of the Hotel. There is no
merit in the Union's argument that it was not its members but the Hotel's
security guards and the police officers who blocked the driveway, as it can
be seen that the guards and/or police officers were just trying to secure the
entrance to the Hotel. The pictures clearly demonstrate the tense and highly
explosive situation brought about by the strikers' presence in the Hotel's
driveway.
2. Employment of Strike-Breaker
"Strike-breaker" means any person who obstructs,
impedes, or interferes with by force, violence, coercion, threats, or
intimidation any peaceful picketing affecting wages, hours or
conditions of work or in the exercise of the right of self-
organization or collective bargaining [Article 219(r)].
3. Role of PNP/AFP Personnel
REVISED PHILIPPINE NATIONAL POLICE
OPERATIONAL PROCEDURES
RULE 24. RULES ON LABOR DISPUTES
24.1 General Policy and Guidelines
a. The involvement of PNP personnel during strikes,
lockouts and labor disputes in general shall be limited to the
maintenance of peace and order, enforcement of laws, and
implementation of legal orders of the duly constituted authorities.
b. The PNP shall only render assistance to labor disputes
upon written request addressed to the Regional Director/ District
Director concerned. In case of actual violence, the police can respond
without the written request.
c. Insofar as practicable, no PNP personnel shall be allowed
to render police assistance in connection with a strike or lockout if
there is question or complaint as regards his relationship by affinity or
consanguinity to any official/leader of the parties in the controversy or
if he has financial or pecuniary interest therein.
d. PNP personnel detailed as peace-keeping force in strike or
lockout areas shall be in prescribed uniform at all times.
e. They shall exercise maximum tolerance and when called
for by the situation or when all other peaceful and non-violent means
have been exhausted, police officers may employ such means as may be
necessary and reasonable to prevent or repel an aggression.
f. The matter of determining whether a strike, picket or
lockout is legal or not should be left to Department of Labor and
Employment (DOLE) and its appropriate agencies. PNP personnel
should not interfere in a strike, picket or lockout, except as herein
provided.
g. No personal escort shall be provided to any of the parties
to the controversy unless upon written request from DOLE. Whenever
escorts are to be provided, the other party shall be informed
accordingly. All escorts shall be in prescribed uniform at all times.
h. During the pendency of a strike/lockout, the police
personnel concerned are prohibited from socializing with any of the
parties involved in the controversy.
i. Liaison shall be established and maintained with the
representatives of DOLE, management and the union in the
strike/lockout area for the purpose of maintaining peace and order, as
well as to maintain a continuing peaceful dialogue between the parties
to the strike/ lockout.
j. The peace-keeping detail shall not be stationed in the
picket line (or confrontation line) but should be stationed in such
manner that their presence may deter the commission of criminal acts
or any untoward incident from either side. The members of the
peacekeeping detail shall stay outside a 50-meter radius from the
picket line. In cases wherein the 50-meter radius includes a public
thoroughfare, they may station themselves in such public thoroughfare
for the purpose of ensuring the free flow of traffic.
xxx
4. Hiring of Scabs
A scab is a person who works despite an ongoing strike.
Scabs are usually individuals who were not employed by the
company prior to the trade union dispute, but rather hired after or
during the strike to keep the organization running.
The hiring of scabs is not illegal per se. As a general rule,
the hiring of replacements for the strikers during a strike is not an
unfair labor practice act of an employer. He is entitled to do it in
his effort to carry on the business. Such hiring may even be done
on a permanent basis in the case of an economic strike. And in the
event that the strikers decide to resume their work, the employer is
not duty-bound to dismiss said permanent replacements
[Consolidated Labor v. Marsman].
But in an ULP strike, such replacements may not be
permanently employed. The employer is duty-bound to discharge
them when the strikers are reinstated to their former positions
[Insular Life Employees v. Insular Life].
5. Jurisdiction Over Prohibited Acts
Article 224(a)(5) of the Labor Code provides:
Article 224. [217] Jurisdiction of the Labor Arbiters
and the Commission. (a) Except as otherwise provided under
this Code, the Labor Arbiters shall have original and exclusive
jurisdiction to hear and decide, within thirty (30) calendar days
after the submission of the case by the parties for decision
without extension, even in the absence of stenographic notes, the
following cases involving all workers, whether agricultural or
non-agricultural:
xxx
(5) Cases arising from any violation of Article 279 of
this Code, including questions involving the legality of strikes
and lockouts; and
xxx
In general, the Labor Arbiter in the appropriate
Arbitration Branch of the NLRC has the power to determine
questions involving the legality or illegality of a strike or lockout
upon the filing of a proper complaint and after due hearing.
Where the matter of legality or illegality of a strike is
raised in the dispute which the Secretary assumed jurisdiction or in
Page 66 of 117
a compulsory arbitration, the same may be resolved by the
Secretary or the Commission, respectively [IPI v. Secretary of
Labor and Associated Labor Unions].
Other remedies against prohibited acts are:
a. Filing a case for ULP or Prohibited before the Labor
Arbiter; or
b. Filing a civil case for damages under the Civil Code
or a criminal case under the Labor Code before the
regular courts; or
c. File an injunction under the Labor Code before the
NLRC.
6. Liability of Union Officers and Ordinary
Workers/Members
a. Illegal Strike
(i) Union Officers
The mere finding or declaration of illegality of the strike
will result in the termination of all union officers who knowingly
participated in the illegal strike [Lapanday Workers Union v.
NLRC]. Unlike ordinary members, it is not required, for purposes
of termination, that the officers should be proven to have
committed illegal acts during the strike in order to be held liable
therefor [Phimco Industris v. Phimco Industries Labor Union].
Otherwise stated, the services of a participating union officer may
be terminated not only when he actually commits an illegal act
during a strike, but also if he knowingly participates in the conduct
and staging of an illegal strike. This is the most logical
consequence for knowingly participating in an illegal strike
[Abaria v. NLRC].
For purposes of identifying the union officers, the
certifications as to the names of the union officers issued by the
Chief of the Labor Organization Division of the Bureau of Labor
Relations (BLR), being public records, enjoy the presumption of
regularity and deserve weight and probative value. Thus, in the
absence of a clear and convincing evidence that said certifications
are flawed, they should be taken on their face value [Coca-Cola
Bottlers v. NLRC].
Note that the verb "participates" is preceded by the
adverb "knowingly." This reflects the intent of the legislature to
require "knowledge" as a condition sine qua non before a union
officer can be dismissed from employment for participating in an
illegal strike. The provision is worded in such a way as to make it
very difficult for employers to circumvent the law by arbitrarily
dismissing employees in the guise of exercising management
prerogative. This is but one aspect of the State’s constitutional and
statutory mandate to protect the rights of employees to self-
organization [Club Filipino v. Bautista].
(ii) Ordinary Union Members
The fate of ordinary union members is different. Mere
participation in an illegal strike is not a sufficient ground to
terminate their employment. The mere finding or declaration of
illegality of a strike will not result in their termination. For a union
member to suffer the consequence of loss of employment, it must
be shown by substantial evidence that he has knowingly
participated in the commission of illegal acts during the strike
[Fadriquelan v. Monterey Foods]. Obviously, the Labor Code
protects ordinary union members who participated in such an
illegal strike from losing their jobs provided that they did not
commit illegal acts in the course thereof [G&S Transport v.
Infante].
 Absent any showing that the employees are union
officers, they cannot be dismissed based sole on the declaration of
the illegality of the strike [Gold City Integrated v. NLRC].
b. Illegal Acts
As far as liability for commission of illegal acts during
the strike is concerned, the issue of legality or illegality of the
strike is irrelevant. As long as the union officer or member
commits an illegal act in the course of the strike, be it legal or
illegal, his employment can be validly terminated [Toyota Motor
Phils. Corp. Workers Association v. NLRC]. Mere substantial
evidence is required to hold strikers guilty of commission of illegal
acts [Phimco Industries v. Phimco Industries Labor Association].
Liability for illegal acts should be determined on an
individual basis. For this purpose, the individual identity of the
union members who participated in the commission of illegal acts
may be proved thru affidavits and photographs [Ibid]. Simply
referring to them as “strikers,” or “complainants in this case” is not
enough to justify their dismissal [G&S Transport v. Infante].
Only members who are identified as having participated
in the commission of illegal acts are liable. Those who did not
participate should be blamed therefor [Phimco Industries v.
Phimco Industries Labor Association].
However, a different conclusion would be called for if
the existence of force or other prohibited activities is pervasive and
widespread, consistently and deliberately resorted to as a matter of
policy by the union. In which case, the strike becomes illegal even
if the strike is justified as to its ends [Shell Oil Workers v. Shell
Oil].
7. Liability of Employers In Case of Strikes
a. Liability for Reinstatement (Illegal Strike)
If the employee participated in prohibited acts, the
employer may not reinstate the dismissed employee. However, if
the employee did not participate in the prohibited acts, the
employer must reinstate,
b. Separation Pay
If the employee participated in prohibited acts, the
employer, even if as a financial assistance, the employer is not
liable for payment of separation pay.
The alternative relief for union members who were
dismissed for having participated in an illegal strike is the payment
of separation pay in lieu of reinstatement under the following
circumstances: (a) when reinstatement can no longer be effected in
view of the passage of a long period of time or because of the
realities of the situation; (b) reinstatement is inimical to the
employer’s interest; (c) reinstatement is no longer feasible; (d)
reinstatement does not serve the best interests of the parties
involved; (e) the employer is prejudiced by the workers’ continued
employment; (f) facts that make execution unjust or inequitable
have supervened; or (g) strained relations between the employer
and employee.
Waiver
The grant of separation benefits is not condonation while
the determination of illegality of strike was still pending because it
was paid only to comply with the employer’s legal obligation
[Interphil Lab Employees v. Interphil].
However, in Citizens Labor Union v. Standard Vacuum
Oil, it was held that the act of voluntary reinstatement of workers
constitutes a waiver of the illegality of the strike. The difference
between the two cases is that in the latter, the act of the employer is
voluntary, whereas in the former the act of the employer was done
in compliance of its legal obligation.
Page 67 of 117
c. Payment of Backwages
Generally, strikers are not entitled to backwages. The
following are the exceptions:
a. If ordered by the labor court in case of a legal strike
only (not if illegal strike);
b. If striker is not guilty of illegal strike and is not in
pari delicto with the employer;
c. If strikers voluntarily abandon the legal strike to
return to work but are illegally locked out,
suspended or dismissed by the employer;
d. If employee is not reinstated despite RTWO;
e. If ULP termination (by reason of discrimination).
PMR Officers’ Association v. CIR
Held: The basic facts are stated in the opinion of the three
judges who denied the backpay claim:jgc:chanrobles.com.ph
"On February 25, 1954, this court issued an order setting the
hearing of the case on March 1, 1954. At the hearing, Atty. Cipriano Cid,
then counsel for the petitioner, was asked several times by the trial Court
and by counsel of Compañia Maritima whether he wanted the strikers to be
ordered back to work, and his reply was: ‘We have not asked that yet. (p.
15-19 hearing on March 1, 1954). And when counsel for PSNCO directly
asked him if he wanted the strikers to go back to work, his answer in effect
was, if ordered by the Court. . . ." (p. 5, Annex F-1 to Petition.)
It is clear from the above that the petitioner union never
demanded the privilege to have its members reinstated to their positions
immediately, but that they left this matter of their return to the discretion of
the court. The court, on the other hand, did not order the return of the
strikers; it did so only in its decision after the hearing and termination of the
case.
Under the circumstances as above indicated it is apparent that
the strikers never expressed a desire or willingness to return back to work,
leaving that to the court’s discretion. The denial of backpay to the strikers is
clearly justified, in accordance with previous decisions of this Court.
Philippine Diamond v. Manila Diamond Hotel
Employees
Held: This Court must thus hearken to its policy that "when
employees voluntarily go on strike, even if in protest against unfair labor
practices," no backwages during the strike is awarded.
In Cromwell Commercial Employees and Laborers Union
(PTUC) v. Court of Industrial Relations, this Court made a distinction
between two types of employees involved in a ULP: those who are
discriminatorily dismissed for union activities, and those who voluntarily
go on strike even if it is in protest of an ULP. Discriminatorily dismissed
employees were ordered entitled to backpay from the date of the act of
discrimination, that is, from the day of their discharge, whereas employees
who struck as a voluntary act of protest against what they considered a ULP
of their employer were held generally not entitled to backpay.
Jurisprudential law, however, recognizes several exceptions to
the "no backwages rule," to wit: when the employees were illegally locked
to thus compel them to stage a strike; when the employer is guilty of the
grossest form of ULP; when the employer committed discrimination in the
rehiring of strikers refusing to readmit those against whom there were
pending criminal cases while admitting nonstrikers who were also
criminally charged in court; or when the workers who staged a voluntary
ULP strike offered to return to work unconditionally but the employer
refused to reinstate them. Not any of these or analogous instances is,
however, present in the instant case.
Respondent urges this Court to apply the exceptional rule
enunciated in Philippine Marine Officers’ Guild v. Compañia Maritima and
similar cases where the employees unconditionally offered to return to
work, it arguing that there was such an offer on its part to return to work but
the Hotel screened the returning strikers and refused to readmit those whom
it found to have perpetrated prohibited acts during the strike.
It must be stressed, however, that for the exception in Philippine
Marine Officers’ Guild to apply, it is required that the strike must be legal.65
Reinstatement without backwages of striking members of
respondent who did not commit illegal acts would thus suffice under the
circumstances of the case. If reinstatement is no longer possible, given the
lapse of considerable time from the occurrence of the strike, the award of
separation pay of one (1) month salary for each year of service, in lieu of
reinstatement, is in order.
d. Payment of Attorney’s Fees
Strikers who are illegally dismissed are entitled to
Attorney’s Fees.
VII
JURISDICTION
A. PRELIMINARY CONSIDERATIONS ON
JURISDICTION AND REMEDIES
1. Existence of Employer-Employee Relationship
The existence of employer-employee relationship
between the parties-litigants, or a reasonable causal connection to
such relationship is a jurisdictional pre-requisite for the exercise of
jurisdiction over a labor dispute by the Labor Arbiters [Uy v.
Bueno] or any other labor tribunals.
Even if there is employer-employee relationship, if the
cause of action did not arise out of or was not incurred in the
connection with the employer-employee relationship, Labor
Arbiters have no jurisdiction thereover [Pondoc v. NLRC]. This is
so because not every dispute between an employer and employee
involves matters that only labor tribunals like the Labor Arbiters
and the NLRC can resolve in the exercise of their adjudicatory or
quasi-judicial power. Actions between employers and employees
where the employer-employee relationship is merely incidental are
within the exclusive original jurisdiction of the regular courts
[Villamaria, Jr. v. Court of Appeals].
Exception of OFW Cases
In cases filed by OFWs, the Labor Arbiters may exercise
jurisdiction even absent the employment relationship. In Santiago
v. CF Sharp Crew Management, Inc., it was held that a seafarer
who has already signed a POEA-approved employment contract
but was not deployed overseas and, therefore, there is no employer-
employee relationship, may file his monetary claims case with the
Labor Arbiter. This is because the jurisdiction of the Labor
Arbiters is not limited to claims arising from employer-employee
relationships. Under Section 10 of RA 8042, the Labor Arbiter may
exercise jurisdiction over the claims of OFWs arising out of an
employer-employee relationship or by virtue of any law or contract
involving Filipino workers for overseas deployment, including
claims for actual, moral, exemplary and other forms of damage.
2. Reasonable Causal Connection Rule
The Reasonable Causal Connection Rule is a rule to
determine jurisdiction between labor courts or regular courts.
Under this rule, if there is a reasonable causal connection between
the claim asserted and the employer-employee relations, then the
case is within the jurisdiction of the labor courts [Dai-ichi
Electronics v. Villarama, Jr]. In the absence of such nexus, it is the
regular courts that have jurisdiction [San Miguel Corporation v.
Etcuban].
3. Power to Determine Employment Relationship
Under labor laws, it is not only the Labor Arbiters and
the NLRC that are vested with the power to determine the
existence of employer-employee relationship.
a. DOLE Secretary and the DOLE Regional
Directors
In People’s Broadcasting Service v. Secretary, it was
held:
Page 68 of 117
No limitation in the law was placed upon the power
of the DOLE to determine the existence of an employer-
employee relationship.  No procedure was laid down where the
DOLE would only make a preliminary finding, that the power
was primarily held by the NLRC.  The law did not say that the
DOLE would first seek the NLRC’s determination of the
existence of an employer-employee relationship, or that should
the existence of the employer-employee relationship be
disputed, the DOLE would refer the matter to the NLRC.  The
DOLE must have the power to determine whether or not an
employer-employee relationship exists, and from there to decide
whether or not to issue compliance orders in accordance with
Art. 128(b) of the Labor Code, as amended by RA 7730.
The DOLE, in determining the existence of an
employer-employee relationship, has a ready set of guidelines to
follow, the same guide the courts themselves use.  The elements
to determine the existence of an employment relationship are:
(1) the selection and engagement of the employee; (2) the
payment of wages; (3) the power of dismissal; (4) the
employer’s power to control the employee’s conduct. The use of
this test is not solely limited to the NLRC. The DOLE Secretary,
or his or her representatives, can utilize the same test, even in
the course of inspection, making use of the same evidence that
would have been presented before the NLRC.
The determination of the existence of an employer-
employee relationship by the DOLE must be respected.  The
expanded visitorial and enforcement power of the DOLE
granted by RA 7730 would be rendered nugatory if the alleged
employer could, by the simple expedient of disputing the
employer-employee relationship, force the referral of the matter
to the NLRC.  The Court issued the declaration that at least a
prima facie showing of the absence of an employer-employee
relationship be made to oust the DOLE of jurisdiction.  But it is
precisely the DOLE that will be faced with that evidence, and it
is the DOLE that will weigh it, to see if the same does
successfully refute the existence of an employer-employee
relationship.
If the DOLE makes a finding that there is an existing
employer-employee relationship, it takes cognizance of the
matter, to the exclusion of the NLRC.  The DOLE would have
no jurisdiction only if the employer-employee relationship has
already been terminated, or it appears, upon review, that no
employer-employee relationship existed in the first place.
The Court, in limiting the power of the DOLE, gave
the rationale that such limitation would eliminate the prospect of
competing conclusions between the DOLE and the NLRC.  The
prospect of competing conclusions could just as well have been
eliminated by according respect to the DOLE findings, to the
exclusion of the NLRC, and this We believe is the more prudent
course of action to take.
This is not to say that the determination by the
DOLE is beyond question or review.  Suffice it to say, there are
judicial remedies such as a petition for certiorari under Rule 65
that may be availed of, should a party wish to dispute the
findings of the DOLE.
It must also be remembered that the power of the
DOLE to determine the existence of an employer-employee
relationship need not necessarily result in an affirmative
finding.  The DOLE may well make the determination that no
employer-employee relationship exists, thus divesting itself of
jurisdiction over the case.  It must not be precluded from being
able to reach its own conclusions, not by the parties, and
certainly not by this Court.
Under Art. 128(b) of the Labor Code, as amended by
RA 7730, the DOLE is fully empowered to make a
determination as to the existence of an employer-employee
relationship in the exercise of its visitorial and enforcement
power, subject to judicial review, not review by the NLRC.
There is a view that despite Art. 128(b) of the Labor
Code, as amended by RA 7730, there is still a threshold amount
set by Arts. 129 and 217 of the Labor Code when money claims
are involved, i.e., that if it is for PhP 5,000 and below, the
jurisdiction is with the regional director of the DOLE, under Art.
 129, and if the amount involved exceeds PhP 5,000, the
jurisdiction is with the labor arbiter, under Art. 217.  The view
states that despite the wording of Art. 128(b), this would only
apply in the course of regular inspections undertaken by the
DOLE, as differentiated from cases under Arts. 129 and 217,
which originate from complaints.  There are several cases,
however, where the Court has ruled that Art. 128(b) has been
amended to expand the powers of the DOLE Secretary and his
duly authorized representatives by RA 7730.   In these cases, the
Court resolved that the DOLE had the jurisdiction, despite the
amount of the money claims involved.  Furthermore, in these
cases, the inspection held by the DOLE regional director was
prompted specifically by a complaint.  Therefore, the initiation
of a case through a complaint does not divest the DOLE
Secretary or his duly authorized representative of jurisdiction
under Art. 128(b).
To recapitulate, if a complaint is brought before the
DOLE to give effect to the labor standards provisions of the
Labor Code or other labor legislation, and there is a finding by
the DOLE that there is an existing employer-employee
relationship, the DOLE exercises jurisdiction to the exclusion of
the NLRC.  If the DOLE finds that there is no employer-
employee relationship, the jurisdiction is properly with the
NLRC.  If a complaint is filed with the DOLE, and it is
accompanied by a claim for reinstatement, the jurisdiction is
properly with the Labor Arbiter, under Art. 217(3) of the Labor
Code, which provides that the Labor Arbiter has original and
exclusive jurisdiction over those cases involving wages, rates of
pay, hours of work, and other terms and conditions of
employment, if accompanied by a claim for reinstatement.  If a
complaint is filed with the NLRC, and there is still an existing
employer-employee relationship, the jurisdiction is properly
with the DOLE.  The findings of the DOLE, however, may still
be questioned through a petition for certiorari under Rule 65 of
the Rules of Court.
In the present case, the finding of the DOLE
Regional Director that there was an employer-employee
relationship has been subjected to review by this Court, with the
finding being that there was no employer-employee relationship
between petitioner and private respondent, based on the
evidence presented.  Private respondent presented self-serving
allegations as well as self-defeating evidence. The findings of
the Regional Director were not based on substantial evidence,
and private respondent failed to prove the existence of an
employer-employee relationship.  The DOLE had no jurisdiction
over the case, as there was no employer-employee relationship
present.  Thus, the dismissal of the complaint against petitioner
is proper.
b. Med-Arbiters
As the authority to determine the employer-employee
relationship is necessary and indispensable in the exercise of
jurisdiction by the med-arbiter, his finding thereon may only be
reviewed and reversed by the Secretary of Labor who exercises
appellate jurisdiction. It is absurd to suggest that the med-arbiter
and Secretary of Labor cannot make their own independent finding
as to the existence of such relationship and must have to rely and
wait for such a determination by the labor arbiter or NLRC in a
separate proceeding.  For then, given a situation where there is no
separate complaint filed with the labor arbiter, the med-arbiter
and/or the Secretary of Labor can never decide a certification
election case or any labor-management dispute properly brought
before them as they have no authority to determine the existence of
an employer-employee relationship.  Such a proposition is, to say
the least, anomalous [M.Y. San Biscuits v. Laguesma].
c. Social Security Commission (SSC)
The SSC is also vested with this power. In Republic v.
Asiapro Cooperative, involving the issue of coverage of owner-
members of respondent cooperative under the Social Security
System (SSS), it was held that it is not only the Labor Arbiter or
the NLRC that has the exclusive jurisdiction to determine the
Page 69 of 117
existence of the employer-employee relationship. The SSC also has
that power.
B. LABOR ARBITER
The Labor Arbiter is an official in the Regional
Arbitration Branch of the NLRC who hears and decides cases
falling under his original and exclusive jurisdiction as provided by
law.
Besides their adjudicatory power to hear and decide cases
over which they have jurisdiction, the Labor Arbiters have (1)
contempt power; and (2) power to conduct ocular inspection.
However, the Labor Arbiter has no more injunctive power. Only
the NLRC has that power.
The jurisdiction conferred upon the Labor Arbiters is
both original and exclusive. This means that as a general rule, no
other officers or tribunals can take cognizance of, or hear and
decide, any of the cases therein enumerated.
However, the following are the exceptions to the exercise
of original and exclusive jurisdiction of Labor Arbiters:
a. When the DOLE Secretary or the President
exercises his power under Article 278(g) of the
Labor Code to assume jurisdiction over national
interest cases and decide them himself.
b. When the NLRC exercises its power of compulsory
arbitration over similar national interest cases that
are certified to it by the DOLE Secretary pursuant to
the exercise by the latter of his certification power
under the same Article.
c. When cases arise from the interpretation or
implementation of collective bargaining agreements
and from the interpretation of enforcement of
company personnel policies which shall be disposed
of by the Labor Arbiter by referring the same to the
grievance machinery and voluntary arbitration, as
may be provided in said agreements.
d. When the parties agree to submit the case to
voluntary arbitration before a Voluntary Arbitrator
or panel of Voluntary Arbitrators who, under
Articles 274 and 275, are also possessed of original
and exclusive jurisdiction to hear and decide cases
mutually submitted to them by the parties for
arbitration and adjudication.
1. Jurisdiction of the Labor Arbiters
Article 224. [217] Jurisdiction of the Labor Arbiters and the
Commission. (a) Except as otherwise provided under this Code, the
Labor Arbiters shall have original and exclusive jurisdiction to hear
and decide, within thirty (30) calendar days after the submission of the
case by the parties for decision without extension, even in the absence
of stenographic notes, the following cases involving all workers,
whether agricultural or non-agricultural:
(1) Unfair labor practice cases;
(2) Termination disputes;
(3) If accompanied with a claim for reinstatement, those
cases that workers may file involving wages, rates of pay, hours of
work and other terms and conditions of employment;
(4) Claims for actual, moral, exemplary and other forms of
damages arising from the employer-employee relations;
(5) Cases arising from any violation of Article 264 of this
Code, including questions involving the legality of strikes and lockouts;
and
(6) Except claims for Employees Compensation, Social
Security, Medicare and maternity benefits, all other claims arising
from employer-employee relations, including those of persons in
domestic or household service, involving an amount exceeding five
thousand pesos (P5,000.00) regardless of whether accompanied with a
claim for reinstatement.
xxx
(c) Cases arising from the interpretation or implementation
of collective bargaining agreements and those arising from the
interpretation or enforcement of company personnel policies shall be
disposed of by the Labor Arbiter by referring the same to the
grievance machinery and voluntary arbitration as may be provided in
said agreements.
a. Jurisdiction over ULP Cases
The Labor Arbiters have jurisdiction only on the civil
aspect of ULP which may include claims for actual, moral,
exemplary and other forms of damages, attorney’s fees and other
affirmative reliefs. It must be noted that recovery of civil liability
in the administrative proceeding before the LA bars recovery under
the Civil Code.
b. Jurisdiction over Termination Disputes
The validity of the exercise of jurisdiction by Labor
Arbiters over illegal dismissal cases is not dependent on the kind or
nature of the ground cited in support of the dismissal; hence,
whether the dismissal is for just cause or authorized cause, it is of
no consequence [C. Alcantara & Sons v. Court of Appeals].
In case of conflict of jurisdiction between Labor Arbiter
and the Voluntary Arbitrator over termination cases, the former’s
jurisdiction shall prevail for the following reasons:
(i) Termination of employment is not a grievable
issue that must be submitted to the grievance
machinery or voluntary arbitration for
adjudication [Navarro III v. Damasco]. The
jurisdiction thereover remains within the
original and exclusive ambit of the Labor
Arbiter and not of the Voluntary Arbitrator
[Maneja v. NLRC].
(ii) Even if the CBA provides that termination
disputes are grievable, the same is merely
discretionary on the part of the parties thereto
[San Miguel Corporation v. NLRC].
(iii) Once there is actual termination, jurisdiction is
conferred upon Labor Arbiters by operation of
law [Atlas Farms v. NLRC].
(iv) Interpretation of CBA and enforcement of
company personnel policies are merely
corollary to an illegal dismissal case [Maneja
v. NLRC].
(v) Article 224 is deemed written into the CBA
being an intrinsic part thereof [Landtex
Industries v. Court of Appeals].
In other words, a Voluntary Arbitrator will only have
jurisdiction over illegal dismissal cases when there is express
agreement of the parties in the CBA, i.e., the employer and the
bargaining agent, to submit the termination case to voluntary
arbitration. Absent the express mutual agreement of the parties, the
Voluntary Arbitrator cannot acquire jurisdiction over termination
cases [Maneja v. NLRC].
The express agreement must be stated in the CBA or, in
its absence, there must be enough evidence on record unmistakably
showing that the parties have agreed to resort to voluntary
arbitration [University of the Immaculate Conception v. NLRC].
Atlas Farms v. NLRC
Held: Records show, however, that private respondents sought
without success to avail of the grievance procedure in their CBA. On this
point, petitioner maintains that by so doing, private respondents recognized
Page 70 of 117
that their cases still fell under the grievance machinery. According to
petitioner, without having exhausted said machinery, the private
respondents filed their action before the NLRC, in a clear act of forum-
shopping. However, it is worth pointing out that private respondents went
to the NLRC only after the labor arbiter dismissed their original complaint
for illegal dismissal. Under these circumstances private respondents had to
find another avenue for redress. We agree with the NLRC that it was
petitioner who failed to show proof that it took steps to convene the
grievance machinery after the labor arbiter first dismissed the complaints
for illegal dismissal and directed the parties to avail of the grievance
procedure under Article VII of the existing CBA. They could not now be
faulted for attempting to find an impartial forum, after petitioner failed to
listen to them and after the intercession of the labor arbiter proved futile.
The NLRC had aptly concluded in part that private respondents had already
exhausted the remedies under the grievance procedure. It erred only in
finding that their cause of action was ripe for arbitration.
In the case of Maneja vs. NLRC, we held that the dismissal case
does not fall within the phrase “grievances arising from the interpretation or
implementation of the collective bargaining agreement and those
arising from the interpretation or enforcement of company personnel
policies.” In Maneja, the hotel employee was dismissed without hearing.
We ruled that her dismissal was unjustified, and her right to due process
was violated, absent the twin requirements of notice and hearing. We also
held that the labor arbiter had original and exclusive jurisdiction over the
termination case, and that it was error to give the voluntary arbitrator
jurisdiction over the illegal dismissal case.
In Vivero vs. CA,  private respondents attempted to justify the
jurisdiction of the voluntary arbitrator over a termination dispute alleging
that the issue involved the interpretation and implementation of the
grievance procedure in the CBA. There, we held that since what was
challenged was the legality of the employee’s dismissal for lack of cause
and lack of due process, the case was primarily a termination dispute. The
issue of whether there was proper interpretation and implementation of the
CBA provisions came into play only because the grievance procedure in the
CBA was not observed, after he sought his union’s assistance. Since the
real issue then was whether there was a valid termination, there was no
reason to invoke the need to interpret nor question an implementation of
any CBA provision.
One significant fact in the present petition also needs stressing.
Pursuant to Article 260 of the Labor Code, the parties to a CBA shall name
or designate their respective representatives to the grievance machinery and
if the grievance is unsettled in that level, it shall automatically be referred
to the voluntary arbitrators designated in advance by the parties to a CBA.
Consequently only disputes involving the union and the company shall be
referred to the grievance machinery or voluntary arbitrators. In these
termination cases of private respondents, the union had no participation, it
having failed to object to the dismissal of the employees concerned by the
petitioner. It is obvious that arbitration without the union’s active
participation on behalf of the dismissed employees would be pointless, or
even prejudicial to their cause.
Coming to the merits of the petition, the NLRC found that
petitioner did not comply with the requirements of a valid dismissal. For a
dismissal to be valid, the employer must show that: (1) the employee was
accorded due process, and (2) the dismissal must be for any of the valid
causes provided for by law. No evidence was shown that private
respondents refused, as alleged, to receive the notices requiring them to
show cause why no disciplinary action should be taken against them.
Without proof of notice, private respondents who were subsequently
dismissed without hearing were also deprived of a chance to air their side at
the level of the grievance machinery. Given the fact of dismissal, it can be
said that the cases were effectively removed from the jurisdiction of the
voluntary arbitrator, thus placing them within the jurisdiction of the labor
arbiter. Where the dispute is just in the interpretation, implementation or
enforcement stage, it may be referred to the grievance machinery set up in
the CBA, or brought to voluntary arbitration. But, where there was already
actual termination, with alleged violation of the employee’s rights, it is
already cognizable by the labor arbiter.
In sum, we conclude that the labor arbiter and then the NLRC
had jurisdiction over the cases involving private respondents’ dismissal,
and no error was committed by the appellate court in upholding their
assumption of jurisdiction.
c. Jurisdiction over Money Claims Cases
 Money claims falling within the original and exclusive
jurisdiction of the Labor Arbiters may be classified as follows:
(i) Any money claim, regardless of amount,
accompanied with a claim for reinstatement; or
(ii) Any money claim, regardless of whether
accompanied with a claim for reinstatement,
exceeding the amount of P5,000.00.
Money claims must arise out of employer-employee
relationship [San Miguel Corporation v. NLRC]. If not, jurisdiction
is with the regular courts [Lapanday Agricultural v. Court of
Appeals].
The money claim in Item (i) above presupposes that it
proceeds from a termination case, it being accompanied with a
claim for reinstatement. Hence, it falls within the jurisdiction of the
Labor Arbiter since it is principally a termination dispute.
The money claim in item (ii) above does not necessarily
arise from or involve a termination case btu because the amount
exceeds P5,000.00, it falls within the jurisdiction of the Labor
Arbiter. If the amount does not exceed P5,000.00, it is the Regional
Director of the DOLE or his duly authorized hearing officers who
have jurisdiction to take cognizance thereof [Article 129].
The award of statutory benefits even if not prayed for is
valid [Oasis Academy v. DOLE].
San Miguel Corporation v. NLRC
Held: While paragraph 3 above refers to "all money claims of
workers," it is not necessary to suppose that the entire universe of money
claims that might be asserted by workers against their employers has been
absorbed into the original and exclusive jurisdiction of Labor Arbiters. In
the first place, paragraph 3 should be read not in isolation from but rather
within the context formed by paragraph 1 related to unfair labor practices),
paragraph 2 (relating to claims concerning terms and conditions of
employment), paragraph 4 (claims relating to household services, a
particular species of employer-employee relations), and paragraph 5
(relating to certain activities prohibited to employees or to
employers).<äre||anº•1àw>  It is evident that there is a unifying element
which runs through paragraphs 1 to 5 and that is, that they all refer to cases
or disputes arising out of or in connection with an employer-employee
relationship. This is, in other words, a situation where the rule of noscitur a
sociis may be usefully invoked in clarifying the scope of paragraph 3, and
any other paragraph of Article 217 of the Labor Code, as amended. We
reach the above conclusion from an examination of the terms themselves of
Article 217, as last amended by B.P. Blg. 227, and even though earlier
versions of Article 217 of the Labor Code expressly brought within the
jurisdiction of the Labor Arbiters and the NLRC "cases arising from
employer employee relations," 6 which clause was not expressly carried
over, in printer's ink, in Article 217 as it exists today. For it cannot be
presumed that money claims of workers which do not arise out of or in
connection with their employer-employee relationship, and which would
therefore fall within the general jurisdiction of the regular courts of justice,
were intended by the legislative authority to be taken away from the
jurisdiction of the courts and lodged with Labor Arbiters on an exclusive
basis. The Court, therefore, believes and so holds that the money claims of
workers" referred to in paragraph 3 of Article 217 embraces money claims
which arise out of or in connection with the employer-employee
relationship, or some aspect or incident of such relationship. Put a little
differently, that money claims of workers which now fall within the
original and exclusive jurisdiction of Labor Arbiters are those money
claims which have some reasonable causal connection with the employer-
employee relationship.
Applying the foregoing reading to the present case, we note that
petitioner's Innovation Program is an employee incentive scheme offered
and open only to employees of petitioner Corporation, more specifically to
employees below the rank of manager. Without the existing employer-
employee relationship between the parties here, there would have been no
occasion to consider the petitioner's Innovation Program or the submission
by Mr. Vega of his proposal concerning beer grande; without that
relationship, private respondent Vega's suit against petitioner Corporation
would never have arisen. The money claim of private respondent Vega in
Page 71 of 117
this case, therefore, arose out of or in connection with his employment
relationship with petitioner.
Labor Arbiter vs. Voluntary Arbitrator
The original and exclusive jurisdiction of the Labor
Arbiters under Article 224(c), over cases for money claims is
limited only to those arising from statutes or contracts other than a
CBA. The voluntary Arbitrators, under Article 274, have original
and exclusive jurisdiction over money claims “arising from the
interpretation or implementation of the CBA and, those arising
from the interpretation or enforcement of company personnel
policies.”
San Jose v. NLRC ruled that it was correct for the NLRC
to hold that the Labor Arbiter has no jurisdiction to hear and decide
the employee’s money claims (underpayment of retirement
benefits), as the controversy between the parties involved an issue
“arising from the interpretation or implementation” of a provision
of the CBA. The Voluntary Arbitrator has original and exclusive
jurisdiction over this controversy under Article 274.
Jurisdiction over Contested Cases under the Exception
Clause in Article 128(b)
Article 128(b) provides:
Article 128. Visitorial and Enforcement Power. xxx
xxx
(b) Notwithstanding the provisions of Articles 129
and 21789 of this Code to the contrary, and in cases where the
relationship of employer-employee still exists, the Secretary of
Labor and Employment or his duly authorized representatives
shall have the power to issue compliance orders to give effect to
the labor standards provisions of this Code and other labor
legislation based on the findings of labor employment and
enforcement officers or industrial safety engineers made in the
course of inspection. The Secretary or his duly authorized
representatives shall issue writs of execution to the appropriate
authority for the enforcement of their orders, except in cases
where the employer contests the findings of the labor
employment and enforcement officer and raises issues
supported by documentary proofs which were not
considered in the course of inspection.
xxx
The above highlighted portion of Article 128(b)
providing for the exception grants jurisdiction to Labor Arbiters
over contested cases falling thereunder.
In interpreting the afore-quoted provision of the
exception clause, three elements must concur to divest the Regional
Directors or their representatives of jurisdiction thereunder, to wit:
(i) That the employer contests the findings of the
labor inspector and raises issues thereon;
(ii) That in order to resolve such issues, there is a
need to examine evidentiary matters; and
(iii) That such matters are not verifiable in the
normal course of inspection [Ex-Bataan
Veterans v. Laguesma].
Reluctantly, if the said elements are present and therefore
the labor standards case is covered by said exception clause, then
the Regional Director will have to endorse the case to the Labor
Arbiters of the NLRC [Ex-Bataan Veterans v. Laguesma].
d. Jurisdiction over Claims for Damages
It is now well settled that claims for damages as well as
attorney’s fees in labor cases are cognizable by the Labor Arbiters,
to the exclusion of all other courts. Rulings to the contrary are
deemed abandoned or modified accordingly [Primero v. IAC]. No
matter how designated, for as long as the action primarily involves
an employer-employee relationship, the labor court has jurisdiction
over any damage claims [Rodriguez, Jr. v. Aguilar, Sr.].
It is now well settled that money claims of workers
provided by law over which the labor arbiter has original and
exclusive jurisdiction are comprehensive enough to include claims
for moral damages of a dismissed employee against his employer.
The Labor Arbiter has jurisdiction to award to the dismissed
employee not only the reliefs specifically provided by labor laws,
but also moral and the forms of damages governed by the Civil
Code. Moral damages would be recoverable, for example, where
the dismissal of the employee was not only effected without
authorized cause and/or due process - for which relief is granted by
the Labor Code — but was attended by bad faith or fraud, or
constituted an act oppressive to labor, or was done in a manner
contrary to morals, good customs or public policy — for which the
obtainable relief is determined by ‘the Civil Code [Suario v. BPI].
e. Jurisdiction over Legality of Strikes and
Lockouts
In general, the Labor Arbiter has the power to determine
questions involving the legality or illegality of a strike or lockout
upon the filing of a proper complaint and after due proceedings.
The employer, in case of a strike, or the union, in case of
a lockout, may file the proper petition with the Labor Arbiter to
seek a declaration of the illegality thereof. It shall be the duty of the
Labor Arbiter concerned to act on the case immediately and
dispose of the same, subject only to the requirements of due
process.
2. Jurisdiction Over Cases Involving Legislated
Wage Increases and Wage Distortions
In establishments where there are no CBAs or certified
SEBAs, the Labor Arbiters have jurisdiction to hear and decide
wage distortion cases after the parties and the NCMB failed to
correct the distortion [Article 124].
In establishments where there are existing CBAs or
SEBAs, RA 6727 vests upon the VA the jurisdiction to hear and
decide wage distortion cases, after the grievance procedure in the
CBA failed to settle the same [Ibid].
3. Jurisdiction Over Enforcement or Annulment of
Compromise Agreements
Article 233. [227] Compromise Agreements. Any compromise
settlement, including those involving labor standard laws, voluntarily
agreed upon by the parties with the assistance of the Bureau or the
regional office of the Department of Labor, shall be final and binding
upon the parties. The National Labor Relations Commission or any
court, shall not assume jurisdiction over issues involved therein except
in case of non-compliance thereof or if there is prima facie evidence
that the settlement was obtained through fraud, misrepresentation, or
coercion.
It is clear from the foregoing provision that although the
compromise agreement may have been entered into by the parties
before the BLR or the DOLE Regional office, it is the Labor
Arbiter who has jurisdiction to take cognizance of the following
issues related thereto, to the exclusion of the BLR and the DOLE
Regional Directors:
a. To enforce the compromise agreement in case of
non-compliance therewith by any of the parties
thereto; or
b. To nullify it if there is prima facie evidence that the
settlement was obtained through fraud,
misrepresentation, or coercion.
Page 72 of 117
4. Jurisdiction Over Execution and Enforcement of
Decisions of Voluntary Arbitrators
Article 276 prescribes the procedures that Voluntary
Arbitrators should follow in adjudicating cases filed before them.
Once a decision has been rendered in a case and subsequently
becomes final and executory, it may be enforced through the writ
of execution issued by the same Voluntary Arbitrator who rendered
it, addressed to and requiring certain public officers to execute the
final decision, order or award.
In situations, however, where the VA who rendered the
decision is absent or incapacitated for any reason, Article 276
grants jurisdiction to any Labor Arbiter in the region where the
winning party resides, to take cognizance of a motion for the
issuance of the writ of execution filed by such party and
accordingly issue such writ addressed to and requiring the public
officers to execute the final decision, order or award of the VA.
5. Jurisdiction Over Cases of Overseas Filipino
Workers
RA 8042 confers original and exclusive jurisdiction upon
Labor Arbiters, to hear and decide all claims arising from
employment relationship or by virtue of any law or contract
involving OFWs, including claims for actual, moral, exemplary
and other forms of damages.
If there is a CBA between the foreign employer and the
bargaining union of the OFWs, the jurisdiction over monetary
claims of OFWs is vested in the Voluntary Arbitrator and not in the
Labor Arbiter [Ace Navigation v. Fernandez].
PNB v. Cabansag
Held: More specifically, Section 10 of RA 8042 reads in part:
“SECTION 10. Money Claims. — Notwithstanding any
provision of law to the contrary, the Labor Arbiters of the National Labor
Relations Commission (NLRC) shall have the original and exclusive
jurisdiction to hear and decide, within ninety (90) calendar days after the
filing of the complaint, the claims arising out of an employer-employee
relationship or by virtue of any law or contract involving Filipino workers
for overseas deployment including claims for actual, moral, exemplary and
other forms of damages.
x x x                          x x x                   x x x”
Based on the foregoing provisions, labor arbiters clearly
have original and exclusive jurisdiction over claims arising from employer-
employee relations, including termination disputes involving all workers,
among whom are overseas Filipino workers (OFW).[15]
We are not unmindful of the fact that respondent was directly
hired, while on a tourist status in Singapore, by the PNB branch in that city
state. Prior to employing respondent, petitioner had to obtain an
employment pass for her from the Singapore Ministry of Manpower.
Securing the pass was a regulatory requirement pursuant to the immigration
regulations of that country.
Similarly, the Philippine government requires non-Filipinos
working in the country to first obtain a local work permit in order to be
legally employed here. That permit, however, does not automatically mean
that the non-citizen is thereby bound by local laws only, as averred by
petitioner. It does not at all imply a waiver of one’s national laws on labor.
Absent any clear and convincing evidence to the contrary, such permit
simply means that its holder has a legal status as a worker in the issuing
country.
Noteworthy is the fact that respondent likewise applied for and
secured an Overseas Employment Certificate from the POEA through the
Philippine Embassy in Singapore. The Certificate, issued on March 8, 1999,
declared her a bona fide contract worker for Singapore. Under Philippine
law, this document authorized her working status in a foreign country and
entitled her to all benefits and processes under our statutes. Thus, even
assuming arguendo that she was considered at the start of her employment
as a “direct hire” governed by and subject to the laws, common practices
and customs prevailing in Singapore[17] she subsequently became a contract
worker or an OFW who was covered by Philippine labor laws and policies
upon certification by the POEA. At the time her employment was illegally
terminated, she already possessed the POEA employment Certificate.
Moreover, petitioner admits that it is a Philippine corporation
doing business through a branch office in Singapore. Significantly,
respondent’s employment by the Singapore branch office had to be
approved by Benjamin P. Palma Gil, the president of the bank whose
principal offices were in Manila. This circumstance militates against
petitioner’s contention that respondent was “locally hired”; and totally
“governed by and subject to the laws, common practices and customs” of
Singapore, not of the Philippines. Instead, with more reason does this fact
reinforce the presumption that respondent falls under the legal definition
of migrant worker, in this case one deployed in Singapore. Hence,
petitioner cannot escape the application of Philippine laws or the
jurisdiction of the NLRC and the labor arbiter.
In any event, we recall the following policy pronouncement of
the Court in Royal Crown Internationale v. NLRC:
“x x x. Whether employed locally or overseas, all Filipino
workers enjoy the protective mantle of Philippine labor and social
legislation, contract stipulations to the contrary notwithstanding. This
pronouncement is in keeping with the basic public policy of the State to
afford protection to labor, promote full employment, ensure equal work
opportunities regardless of sex, race or creed, and regulate the relations
between workers and employers. For the State assures the basic rights of all
workers to self-organization, collective bargaining, security of tenure, and
just and humane conditions of work [Article 3 of the Labor Code of the
Philippines; See also Section 18, Article II and Section 3, Article XIII, 1987
Constitution]. This ruling is likewise rendered imperative by Article 17 of
the Civil Code which states that laws ‘which have for their object public
order, public policy and good customs shall not be rendered ineffective by
laws or judgments promulgated, or by determination or conventions agreed
upon in a foreign country.’”
6. Issuance of Writ of Execution
Pertinent portions of Sections 4 (a) and 6, Rule III, of the
NLRC Manual on Execution of Judgment, provide as follows:
Section 4. Issuance of a Writ: - Execution shall issue
upon an order, resolution or decision that finally disposes of the
actions or proceedings and after the counsel of record and the
parties have been duly furnished with the copies of the same in
accordance with the NLRC Rules of Procedure, provided:
a) The Commission or Labor Arbiter shall, motu
proprio or upon motion of any interested party, issue a writ of
execution on a judgment only within five (5) years from the date
it becomes final and executory, x x x
xxx  xxx  xxx
Section 6. Execution by Independent Action. - A
judgment after the lapse of five (5) years from the date it
becomes final and executory and before it is barred by
prescription, may only be enforced by an independent action.
Similarly, Section 6, Rule 39 of the Rules of Court,
which can be applied in a suppletory manner, provides:
Sec. 6. Execution by motion or by independent
action. - A final and executory judgment or order may be
executed on motion within five (5) years from the date of its
entry. After the lapse of such time, and before it is barred by the
statute of limitations, a judgment may be enforced by action.
The revived judgment may also be enforced by motion within
five years from the date of its entry and, thereafter, by action
before it is barred by the statute of limitations.
 A judgment may be executed on motion within five
years from the date of its entry or from the date it becomes final
and executory. After the lapse of such time, and before it is barred
by the statute of limitations, a judgment may be enforced by action.
If the prevailing party fails to have the decision enforced by a mere
motion after the lapse of five years from the date of its entry (or
from the date it becomes final and executory), the said judgment is
Page 73 of 117
reduced to a mere right of action in favor of the person whom it
favors and must be enforced, as are all ordinary actions, by the
institution of a complaint in a regular form [IBM v. Nestle
Philippines].
7. Jurisdiction Over Other Cases
In accordance with well-entrenched jurisprudence, the
issues, claims or cases of the following fall under the jurisdiction of
the Labor Arbiters:
a. Employees in government-owned and/or
controlled corporations without Original
Charters;
The hiring and firing of employees of GOCCs without
original charters are covered by the Labor Code, and therefore, the
Labor Arbiters have jurisdiction over illegal dismissal and other
cases that may be filed under this law; while those with original
charters are basically governed by the Civil Service Law, rules and
regulations, and therefore, jurisdiction on any of the cases that may
be initiated under this law is vested in the Civil Service
Commission (CSC) [Zamboanga City Water District v. Buat].
b. Alien parties;
A basic policy of contract is to protect the expectations of
the parties. Such party expectations are protected by giving effect
to the parties’ own choice of the applicable law. The choice of law
must, however, bear some relationship to the parties or their
transaction [Asia International v. Mondejar]. A manning agency,
for instance, cannot be faulted for complying with the applicable
foreign law. By so complying, it has discharged its monetary
obligation to the employee [Omanfil International v. NLRC].
c. Priests and ministers;
The fact that a case involves as parties thereto the church
and its religious minister does not ipso facto give the case a
religious significance. If what is involved is a labor case, the
relationship of the church, as employer, and the priest or minister,
as employee is a purely secular matter not related to the practice of
faith, worship, or doctrines of the church. Hence, Labor Arbiters
may validly exercise jurisdiction over the labor case.
The religious minister in Austria v. NLRC was not
excommunicated or expelled from the membership of the church
but was terminated from employment based on the just causes
provided in Article 297. Indeed, the matter of terminating an
employee which is purely secular in nature is different from the
ecclesiastical act of expelling a member from the religious
congregation. As such, the State, through the Labor Arbiter and the
NLRC, has the right to take cognizance of the case to determine
whether the church, as employer, rightfully exercised its
management prerogative to dismiss the religious minister as its
employee.
d. Employees of cooperatives;
The Labor Arbiter has jurisdiction only over monetary
claims and illegal dismissal cases involving employees of
cooperatives btu not the claims or termination of membership of
members thereof. Cooperatives organized under RA 6938 (The
Cooperative Code of the Philippines) are composed of members;
hence, issues on the termination of their membership with the
cooperative do not fall within the jurisdiction of the Labor Arbiter
but with the Cooperative Development Authority (CDA).
e. Counter-claims of employers against
employees.
In Banez v. Valdevilla, it was held that the jurisdiction of
the Labor Arbiters and the NLRC is comprehensive enough to
include claims for all forms of damages “arising from the
employer-employee relations.” By this clause, Article 224 should
apply with equal force to the claim of an employer for actual
damages against its dismissed employee, where the basis for the
claim arises from or is necessarily connected with the fact of
termination, and should be entered as a counter-claim in the illegal
dismissal case. This is in accord with paragraph 6 of Article 224(a),
which covers “all other claims, arising from employer-employee
relations.”
8. Cases Over Which Labor Arbiters Have NO
Jurisdiction
The following issues or cases do not fall under the
jurisdiction of Labor Arbiters:
a. Claims for Damages Arising from Breach of
Non-Compete Clause and Other Post-
Employment Prohibitions
In case of violation of the non-compete clause and
similar post-employment bans or prohibitions, the employer can
assert his claim for damages against the erring employee with the
regular courts and not with the labor courts, such breach being civil
in nature [Dai-Chi Electronics v. Villarama].
b. Employer’s Claims for Cash Advances, Car,
Appliance and Other Personal loans of
Employees
With respect to resolving issues involving loans availed
of by employees from their employers, it has been the consistent
ruling of the Supreme Court that the Labor Arbiters have no
jurisdiction thereover but the regular courts.
c. Dismissal of Directors and Corporate
Officers
A corporate officer’s dismissal is always a corporate act,
or an intra-corporate controversy, and the nature is not altered by
the reason or wisdom with which the Board of Directors may have
in taking such action. Also, an intra-corporate controversy is one
which arises between a stockholder and the corporation. There is
no distinction, qualification, nor any exemption whatsoever. The
provision is broad and covers all kinds of controversies between
stockholders and corporations [Tabang v. NLRC].
The president, vice-president, secretary and treasurer are
commonly regarded as the principal or executive officers of a
corporation, and they are usually designated as the officers of the
corporation. However, other officers are sometimes created by
the charter or by-laws of a corporation, or the board of directors
may be empowered under the by-laws of a corporation to create
additional offices as may be necessary. This Court expounded that
an "office" is created by the charter of the corporation and the
officer is elected by the directors or stockholders, while
an "employee" usually occupies no office and generally is
employed not by action of the directors or stockholders but by the
managing officer of the corporation who also determines the
compensation to be paid to such employee. From the foregoing,
that the creation of the position is under the corporation's charter or
by-laws, and that the election of the officer is by the directors or
stockholders must concur in order for an individual to be
considered a corporate officer, as against an ordinary employee or
officer. It is only when the officer claiming to have been illegally
dismissed is classified as such corporate officer that the issue is
deemed an intra-corporate dispute which falls within the
jurisdiction of the trial courts [Wesleyan University v. Maglaya].
Tan v. PNB Life
Page 74 of 117
Held: Here, following Wesleyan, and several other cases, the
NLRC was correct in ruling that jurisdiction is not conferred by estoppel or
agreement of the parties, but by law, following Republic Act No. 8799 in
relation to Presidential Decree No. 902-A. It is the Regional Trial Courts
that exercise exclusive jurisdiction over all controversies in the election or
appointment of directors, trustees, officers or managers of corporations,
partnerships or associations. Thus, since petitioner is questioning the
validity of her dismissal as the President and CEO of respondent PNB Life
Insurance Co., the determination of her rights and the corporation's liability
arising from her dismissal is an intra-corporate dispute subject to the
jurisdiction of the regular courts.
Matling Industrial v. Coros
Held: Coros was a regular employee of Matling. And his
complaint for illegal dismissal is within the jurisdiction of the LA.
The illegal dismissal of an officer or other employee of a private
employer is properly cognizable by the LA. This is pursuant to Article 217
(a) 2 of the Labor Code, as amended. Where the complaint for illegal
dismissal concerns a corporate officer, however, the controversy falls
under the jurisdiction of the Securities and Exchange Commission (SEC)
now with RTC effective August 8, 2000 pursuant to RA8799 or SRC. 
On Coros’ being a VP for Finance and Admin Section 25 of
the Corporation Code provides:
Section 25. Corporate officers, quorum.--Immediately after their
election, the directors of a corporation must formally organize by the
election of a president, who shall be a director, a treasurer who may or
may not be a director, a secretary who shall be a resident and citizen of the
Philippines, and such other officers as may be provided for in the by-
laws. Any two (2) or more positions may be held concurrently by the same
person, except that no one shall act as president and secretary or as
president and treasurer at the same time.
Conformably with Section 25 RCCP, a position must be
expressly mentioned in the By-Laws in order to be considered as a
corporate office. Thus, the creation of an office pursuant to or under a
By-Law enabling provision is not enough to make a position a
corporate office.
Thus, it was held in Easycall Communications Phils., Inc. v.
King: An "office" is created by the charter of the corporation and the officer
is elected by the directors or stockholders. On the other hand, an employee
occupies no office and generally is employed not by the action of the
directors or stockholders but by the managing officer of the corporation
who also determines the compensation to be paid to such employee.
In this case, respondent was appointed vice president for
nationwide expansion by Malonzo, petitioner’s general manager, not
by the board of directors of petitioner.
SEC OPINION on the interpretation of Sec 25 dated
November 25, 1993
Corporate officers are those enumerated in the by-laws. They are
the exclusive Officers of the corporation and the Board has no power to
create other Offices without amending first the corporate By-
laws. However, the Board may create appointive positions other than
the positions of corporate Officers, but the persons occupying such
positions are not considered as corporate officers within the meaning of
Section 25 of the Corporation Code
The Board of Directors of Matling could not validly delegate the
power to create a corporate office to the President, in light of Section 25 of
the Corporation Code requiring the Board of Directors itself to elect the
corporate officers.
Did Coros status as a director/stockholder of the
Corporation convert his dismissal into an intracorporate dispute to fall
under the jurisdiction of the SEC (now RTC)? NO
In an intra-corporate controversy, the Court considers two
elements, namely: (a) the status or relationship of the parties; and (b)
the nature of the question that is the subject of their controversy
Not every conflict between a corporation and its
stockholders involves corporate matters that only the SEC can resolve
in the exercise of its adjudicatory or quasi-judicial powers. If, for
example, a person leases an apartment owned by a corporation of which he
is a stockholder, there should be no question that a complaint for his
ejectment for non-payment of rentals would still come under the
jurisdiction of the regular courts
The fact that the parties involved in the controversy are all
stockholders or that the parties involved are the stockholders and the
corporation does not necessarily place the dispute within the ambit of the
jurisdiction of SEC.
Obviously enough, the respondent was not appointed as Vice
President for Finance and Administration because of his being a
stockholder or Director of Matling. He had started working for Matling on
September 8, 1966, and had been employed continuously for 33 years until
his termination on April 17, 2000, first as a bookkeeper, and his climb in
1987 to his last position as Vice President for Finance and Administration
had been gradual but steady
Coros promotion to the position of Vice President for
Finance and Administration in 1987 was by virtue of the length of
quality service he had rendered as an employee of Matling. His
subsequent acquisition of the status of Director/stockholder had no
relation to his promotion. Besides, his status of Director/stockholder was
unaffected by his dismissal from employment as Vice President for Finance
and Administration.
Nacpil v. Intercontinental Broadcasting
Held: The Court has consistently held that there are two
elements to be considered in determining whether the SEC has jurisdiction
over the controversy, to wit: (1) the status or relationship of the parties; and
(2) the nature of the question that is the subject of their controversy.
Even assuming that Nacpil was in fact appointed by the General
Manager, such appointment was subsequently approved by the Board of
Directors of the IBC. That the position of comptroller is not expressly
mentioned among the officers of the IBC in the By-Laws is of no moment,
because the IBC’s Board of Directors is empowered under Section 25 of the
Corporation Code and under the corporation’s By-Laws to appoint such
other officers as it may deem necessary. The By-Laws of the IBC
categorically provides:
XII. OFFICERS
The officers of the corporation shall consist of a President, a
Vice-President, a Secretary-Treasurer, a General Manager,
such other officers as the Board of Directors may from time to time does
fit to provide for. Said officers shall be elected by a majority vote of the
Board of Directors and shall have such powers and duties as shall
hereinafter provide.
The Court has held that in most cases, the “by-laws may and
usually do provide for such other officers,” and that where a corporate
office is not specifically indicated in the roster of corporate offices in the
by-laws of a corporation, the Board of directors may also be empowered
under the by-laws to create additional officers as may be necessary.
In the present case, since Nacpil’s appointment was approved
unanimously by the corporation’s Board of Directors, he is therefore
considered a corporate officer. His claim of illegal dismissal is a
controversy that falls under the jurisdiction of the SEC as
contemplated by Section 5 of P.D. 902-A. The rule is that dismissal or
nonappointment of a corporate officer is clearly an intra-corporate
matter, and jurisdiction over the case properly belongs to the SEC, not
to the NLRC.
As to Nacpil’s argument that the nature of his functions is
recommendatory, thereby making him a mere managerial officer, the Court
has previously held that the relationship of a person to a corporation,
whether as officer or agent or employee, is not determined by the nature of
the services performed, but instead by the incidents of the relationship as
they exist.
It is likewise of no consequence that petitioner’s complaint for
illegal dismissal includes money claims, for such claims are part of the
perquisites of his position in, and therefore linked with his relations with,
the corporation. The inclusion of such money claims does not convert the
issue into a simple labor problem. Clearly, the issues raised by Nacpil
against the IBC are matters that come within the area of corporate affairs
and management and constitute a corporate controversy in contemplation of
the Corporation Code.
Ellao v. Batangas I Electric Cooperative
Held: Here, the position of General Manager is expressly
provided for under Article VI, Section 10 of BATELEC I's By-laws,
enumerating the cooperative offices as follows:
ARTICLE VI- OFFICERS
xxxx
SECTION 10. General Manager
a. The management of the Cooperative shall be vested in a
General Manager who shall be appointed by the Board and who shall be
responsible to the Board for performance of his duties as set forth in a
position description adopted by the Board, in conformance with guidelines
established by the National Electrification Administration. It is incumbent
upon the Manager to keep the Board fully informed of all aspects of the
operations and activities of the Cooperative. The appointment and dismissal
of the General Manager shall require approval of NEA.
b. No member of the board may hold or apply for the position of
General Manager while serving as a Director or within twelve months
following his resignation or the termination of his tenure.45
Evidently, the functions of the office of the General
Manager, i.e., management of the Cooperative and to keep the Board fully
informed of all aspects of the operations and activities of the Cooperative
are specifically laid down under BATELEC I's By-laws itself. It is therefore
beyond cavil that Ellao's position as General Manager is a cooperative
office. Accordingly, his complaint for illegal dismissal partakes of the
nature of an intra-cooperative controversy; it involves a dispute between a
cooperative officer on one hand, and the Board of Directors, on the other.
On this score, the Court's pronouncement in Celso F. Pascual,
Sr. and Serafin Terencio v. Caniogan Credit and Development
Cooperative,46 finds suitable application:
Petitioners clarify that they do not take issue on the power of the
Board of Directors to remove them. Rather, they dispute the "manner,
cause[,] and legality" of their removal from their respective offices as
General Manager and Collection Manager. Even so, we hold that an
officer's dismissal is a matter that comes with the conduct and management
of the affairs of a cooperative and/or an intra-cooperative controversy, and
that nature is not altered by reason or wisdom that the Board of Directors
may have in taking such action. Accordingly, the case a quo is not a labor
dispute requiring the expertise of the Labor Arbiter or of the National Labor
Relations Commission. It is an intra-cooperative dispute that is within the
jurisdiction of the Regional Trial Court xxx.47
and
As such, the CA committed no reversible error when it ordered
the dismissal of Ellao's Complaint for illegal dismissal without prejudice to
the latter's filing of his complaint at the proper forum. Considering that the
Labor Arbiter and the NLRC were without ample jurisdiction to take
cognizance of Ellao's Complaint, the labor tribunals' rulings therein made
are resultantly void. There is therefore no need to discuss the issue on
illegal dismissal and monetary claims at this point.
Nacpil v. Intercontinental Broadcasting
Held: The Court has consistently held that there are two
elements to be considered in determining whether the SEC has jurisdiction
over the controversy, to wit: (1) the status or relationship of the parties; and
(2) the nature of the question that is the subject of their controversy.
Even assuming that Nacpil was in fact appointed by the General
Manager, such appointment was subsequently approved by the Board of
Directors of the IBC. That the position of comptroller is not expressly
mentioned among the officers of the IBC in the By-Laws is of no moment,
because the IBC’s Board of Directors is empowered under Section 25 of the
Corporation Code and under the corporation’s By-Laws to appoint such
other officers as it may deem necessary. The By-Laws of the IBC
categorically provides:
XII. OFFICERS
The officers of the corporation shall consist of a President, a
Vice-President, a Secretary-Treasurer, a General Manager, and
such other officers as the Board of Directors may from time to time does
fit to provide for. Said officers shall be elected by a majority vote of the
Board of Directors and shall have such powers and duties as shall
hereinafter provide.
The Court has held that in most cases, the “by-laws may and
usually do provide for such other officers,” and that where a corporate
office is not specifically indicated in the roster of corporate offices in the
by-laws of a corporation, the Board of directors may also be empowered
under the by-laws to create additional officers as may be necessary.
In the present case, since Nacpil’s appointment was approved
unanimously by the corporation’s Board of Directors, he is therefore
considered a corporate officer. His claim of illegal dismissal is a
controversy that falls under the jurisdiction of the SEC as
contemplated by Section 5 of P.D. 902-A. The rule is that dismissal or
nonappointment of a corporate officer is clearly an intra-corporate
matter, and jurisdiction over the case properly belongs to the SEC, not
to the NLRC.
Page 75 of 117
 As to Nacpil’s argument that the nature of his functions is
recommendatory, thereby making him a mere managerial officer, the Court
has previously held that the relationship of a person to a corporation,
whether as officer or agent or employee, is not determined by the nature of
the services performed, but instead by the incidents of the relationship as
they exist.
It is likewise of no consequence that petitioner’s complaint for
illegal dismissal includes money claims, for such claims are part of the
perquisites of his position in, and therefore linked with his relations with,
the corporation. The inclusion of such money claims does not convert the
issue into a simple labor problem. Clearly, the issues raised by Nacpil
against the IBC are matters that come within the area of corporate affairs
and management and constitute a corporate controversy in contemplation of
the Corporation Code.
d. Labor Cases Involving Entities Immune from
Suit
In this jurisdiction, we recognize and adopt the generally
accepted principles of international law as part of the law of the
land. Immunity of State from suit is one of these universally
recognized principles. In international law,
“immunity” is commonly understood as the exemption of the state
and its organs from the judicial jurisdiction of another state. [ This is
anchored on the principle of the sovereign equality of states under
which one state cannot assert jurisdiction over another in violation
of the maxim par in parem non habet imperium (an equal has no
power over an equal) [JUSMAG v. NLRC].
In USA v. Guinto, the Supreme Court ruled:
The traditional rule of immunity exempts a State
from being sued in the courts of another State without its
consent or waiver. This rule is a necessary consequence of the
principles of independence and equality of States. However, the
rules of International Law are not petrified; they are constantly
developing and evolving. And because the activities of states
have multiplied, it has been necessary to distinguish them —
between sovereign and governmental acts (jure imperii) and
private, commercial and proprietary acts (jure gestionis). The
result is that State immunity now extends only to acts  jure
imperii.
The restrictive application of State immunity is
proper only when the proceedings arise out of commercial
transactions of the foreign sovereign, its commercial activities or
economic affairs. Stated differently, a State may be said to have
descended to the level of an individual and can thus be deemed
to have tacitly given its consent to be sued only when it enters
into business contracts. It does not apply where the contract
relates to the exercise of its sovereign functions.
. From these circumstances, the Court can assume
that the restaurant services offered at the John Hay Air Station
partake of the nature of a business enterprise undertaken by the
United States government in its proprietary capacity. Such
services are not extended to the American servicemen for free as
a perquisite of membership in the Armed Forces of the United
States. Neither does it appear that they are exclusively offered to
these servicemen; on the contrary, it is well known that they are
available to the general public as well, including the tourists in
Baguio City, many of whom make it a point to visit John Hay
for this reason. All persons availing themselves of this facility
pay for the privilege like all other customers as in ordinary
restaurants. Although the prices are concededly reasonable and
relatively low, such services are undoubtedly operated for profit,
as a commercial and not a governmental activity.
The consequence of this finding is that the petitioners
cannot invoke the doctrine of state immunity to justify the
dismissal of the damage suit against them by Genove. Such
defense will not prosper even if it be established that they were
acting as agents of the United States when they investigated and
later dismissed Genove. For that matter, not even the United
States government itself can claim such immunity. The reason is
that by entering into the employment contract with Genove in
Page 76 of 117
the discharge of its proprietary functions, it impliedly divested
itself of its sovereign immunity from suit.
But these considerations notwithstanding, we hold
that the complaint against the petitioners in the court below must
still be dismissed. While suable, the petitioners are nevertheless
not liable. It is obvious that the claim for damages cannot be
allowed on the strength of the evidence before us, which we
have carefully examined.
The dismissal of the private respondent was decided
upon only after a thorough investigation where it was
established beyond doubt that he had polluted the soup stock
with urine.
Conversely, if the contract was entered into in the
discharge of its governmental functions, the sovereign state cannot
be deemed to have waived its immunity from suit. Such is the case
of JUSMAG v. NLRC, holding thus:
Prescinding from this premise, we need not
determine whether JUSMAG controls the employment
conditions of the private respondent.
We also hold that there appears to be no basis for
public respondent to rule that JUSMAG is estoppel from
denying the existence of employer-employee relationship with
private respondent. On the contrary, in its Opposition before the
public respondent, JUSMAG consistently contended that the
(74) SASP, including private respondent, working in JUSMAG,
are employees of the Armed Forces of the Philippines. This can
be gleaned from: (1) the Military Assistance Agreement, supra,
(2) the exchange of notes between our Government, thru
Department of Foreign Affairs, and the Unites States, thru the
US Embassy to the Philippines, and (3) the Agreement on May
21, 1991, supra, between the Armed Forces of the Philippines
and JUSMAG.
e. Doctrine of Forum Non Conveniens
This doctrine is an international law principle which has
been applied to labor cases. The following are the requisites for its
applicability:
(i) That the Philippine court is one to which the
parties may conveniently resort;
(ii) That the Philippine court is in a position to
make an intelligent decision as to the law and
the facts; and
(iii) That the Philippine court has or is likely to
have power to enforce its decision [Bank of
America v. Court of Appeals].
Manila Hotel v. NLRC
Held: Under the rule, a Philippine court or agency may assume
jurisdiction over the case if it chooses to do so provided: 
1. that the Philippine court is one to which the parties may conveniently
resort to; 
2. that the Philippine court is in a position to make an intelligent
decision as to the law and the facts; and 
3. that the Philippine court has or is likely to have power to enforce its
decision
LA is not a forum to which the parties may conveniently resort
to
The Palace Hotel and Manila Hotel are not nationals of the
Philippines. Neither are they "doing business in the Philippines." Likewise,
the main witnesses, are non-residents of the Philippines. The only factor
tying this case to the Philippines is that Santos was a Filipino Citizen
LA is not in a position to make an intelligent decision as to the
law.
Pursuant to lex loci contractus, an intelligent decision cannot be
made as to the law governing the employment contract as such was
perfected in foreign soil. 
LA is not in a position to make an intelligent decision as to the
facts. 
 All acts complained of took place in Beijing, People's Republic
of China. The NLRC was not in a position to determine whether the
Tiannamen Square incident truly adversely affected operations of the
Palace Hotel as to justify Santos' retrenchment.
f. Quasi-Delict or Tort Cases
Damages arising from quasi-delict or tort are often
confused with damages that may be claimed under labor laws and
labor agreements. Consequently, quasi-delict or tort damages are
asserted, though erroneously, in labor cases filed with the Labor
Arbiters. As earlier emphasized, however, Labor Arbiters and the
NLRC have no power or authority to grant reliefs in claims that do
not arise from employer-employee relationship such as those
emanating from quasi-delict or tort cases per Article 2176 of the
Civil Code that have no reasonable causal connection to any of the
claims provided in the Labor Code, other labor statutes, or
collective bargaining agreements.
Tolosa v. NLRC
Held: We affirm the CA’s ruling that the NLRC and the labor
arbiter had no jurisdiction over petitioner’s claim for damages, because that
ruling was based on a quasi delict or tort per Article 2176 of the Civil Code.
Time and time again, we have held that the allegations in the
complaint determine the nature of the action and, consequently, the
jurisdiction of the courts. After carefully examining the complaint/position
paper of petitioner, we are convinced that the allegations therein are in the
nature of an action based on a quasi delict or tort. It is evident that she sued
Pedro Garate and Mario Asis for gross negligence.
Petitioner’s complaint/position paper refers to and extensively
discusses the negligent acts of shipmates Garate and Asis, who had no
employer-employee relation with Captain Tolosa. Specifically, the paper
alleges the following tortious acts:
“x x x [R]espondent Asis was the medical officer of the Vessel,
who failed to regularly monitor Capt. Tolosa’s condition, and who needed
the USCG to prod him to take the latter’s vital signs. In fact, he failed to
keep a medical record, like a patient’s card or folder, of Capt. Tolosa’s
illness.”
“Respondents, however, failed Capt. Tolosa because Garate
never initiated actions to save him. x x x In fact, Garate rarely checked
personally on Capt. Tolosa’s condition, to wit:”[13]
“x x x Noticeably, the History (Annex “D”) fails to mention any
instance when Garate consulted the other officers, much less Capt. Tolosa,
regarding the possibility of deviation. To save Capt. Tolosa’s life was
surely a just cause for the change in course, which the other officers would
have concurred in had they been consulted by respondent Garate – which
he grossly neglected to do.
“Garate’s poor judgement, since he was the officer effectively in
command of the vessel, prevented him from undertaking these emergency
measures, the neglect of which resulted in Capt. Tolosa’s untimely
demise.”
The labor arbiter himself classified petitioner’s case as “a
complaint for damages, blacklisting and watchlisting (pending inquiry) for
gross negligence resulting in the death of complainant’s husband, Capt.
Virgilio Tolosa.”[
We stress that the case does not involve the adjudication of a
labor dispute, but the recovery of damages based on a quasi delict. The
jurisdiction of labor tribunals is limited to disputes arising from employer-
employee relations.
Not every dispute between an employer and employee involves
matters that only labor arbiters and the NLRC can resolve in the exercise of
their adjudicatory or quasi-judicial powers. The jurisdiction of labor
arbiters and the NLRC under Article 217 of the Labor Code is limited to
disputes arising from an employer-employee relationship which can only be
resolved by reference to the Labor Code, other labor statutes, or their
collective bargaining agreement.
The pivotal question is whether the Labor Code has any
relevance to the relief sought by petitioner. From her paper, it is evident
that the primary reliefs she seeks are as follows: (a) loss of earning capacity
denominated therein as “actual damages” or “lost income” and (b)
blacklisting. The loss she claims does not refer to the actual earnings of the
deceased, but to his earning capacity based on a life expectancy of 65 years.
Page 77 of 117
This amount is recoverable if the action is based on a quasi delict as
provided for in Article 2206 of the Civil Code, but not in the Labor Code.
While it is true that labor arbiters and the NLRC have
jurisdiction to award not only reliefs provided by labor laws, but also
damages governed by the Civil Code, these reliefs must still be based on an
action that has a reasonable causal connection with the Labor Code, other
labor statutes, or collective bargaining agreements.
It must be noted that a worker’s loss of earning capacity and
blacklisting are not to be equated with wages, overtime compensation or
separation pay, and other labor benefits that are generally cognized in labor
disputes. The loss of earning capacity is a relief or claim resulting from a
quasi delict or a similar cause within the realm of civil law.
“Claims for damages under paragraph 4 of Article 217 must
have a reasonable causal connection with any of the claims provided for in
the article in order to be cognizable by the labor arbiter. Only if there is
such a connection with the other claims can the claim for damages be
considered as arising from employer-employee relations.” In the present
case, petitioner’s claim for damages is not related to any other claim under
Article 217, other labor statutes, or collective bargaining agreements.
Petitioner cannot anchor her claim for damages to Article 161 of
the Labor Code, which does not grant or specify a claim or relief. This
provision is only a safety and health standard under Book IV of the same
Code. The enforcement of this labor standard rests with the labor
secretary. Thus, claims for an employer’s violation thereof are beyond the
jurisdiction of the labor arbiter. In other words, petitioner cannot enforce
the labor standard provided for in Article 161 by suing for damages before
the labor arbiter.
It is not the NLRC but the regular courts that have jurisdiction
over actions for damages, in which the employer-employee relation is
merely incidental, and in which the cause of action proceeds from a
different source of obligation such as a tort. [25] Since petitioner’s claim for
damages is predicated on a quasi delict or tort that has no reasonable causal
connection with any of the claims provided for in Article 217, other labor
statutes, or collective bargaining agreements, jurisdiction over the action
lies with the regular courts[26] -- not with the NLRC or the labor arbiters.
g. Criminal and Civil Actions Arising from
Violations of the Penal Provisions of the
Labor Code
The Labor Code has expressly conferred jurisdiction over
criminal and civil cases arising from violations of the Labor Code
with the regular courts.
h. Constitutionality of CBA Provisions
In Halaguena v. Philippine Airlines, it was pronounced
that it is not the Labor Arbiter but the regular court which has
jurisdiction to rule on the constitutionality of labor contracts such
as a CBA.
i. Replevin Intertwined with a Labor Dispute
Replevin is a possessory action, the gist of which is the
right of possession in the plaintiff. The primary relief sought
therein is the return of the property in specie wrongfully detained
by another person. It is an ordinary statutory proceeding to
adjudicate rights to the title or possession of personal property. The
question of whether or not a party has the right of possession over
the property involved and if so, whether or not the adverse party
has wrongfully taken and detained said property as to require its
return to plaintiff, is outside the pale of competence of a labor
tribunal; it is beyond the field of specialization of Labor Arbiters
[Basaya, Jr. v. Militante].
j.Cases Arriving from Violation of Training
Agreement
The primary relief sought is for liquidated damages for
breach of a contractual obligation. The other items demanded are
not labor benefits demanded by workers generally taken
cognizance of in labor disputes, such as payment of wages,
overtime compensation or separation pay. The items claimed are
the natural consequences flowing from breach of an obligation,
intrinsically a civil dispute [Singapore Airlines v. Pano].
C. NATIONAL LABOR RELATIONS COMMISSION
The NLRC exercises two (2) kinds of jurisdiction:
(1) Exclusive original jurisdiction; and
(2) Exclusive appellate jurisdiction.
1. Exclusive Original Jurisdiction
The NLRC exercises exclusive and original jurisdiction
over the following cases:
a. Petition for injunction in ordinary labor
disputes to enjoin or restrain any actual or
threatened commission of any or all prohibited
or unlawful acts or to require the performance
of a particular act in any labor dispute which,
if not restrained or performed forthwith, may
cause grave irreparable damage to any party
[Article 218(e)].
b. Petition for injunction in strikes or lockouts
under Article 279 of the Labor Code.
c. Certified cases which refer to labor disputes
causing or likely to cause a strike or lockout in
an industry indispensable to the national
interest, certified to it by the Secretary of
Labor and Employment for compulsory
arbitration by virtue of Article 278(g) of the
Labor Code [Article 278(g)].
d. Petition for extraordinary remedies from
orders or resolutions of Labor Arbiters
(including those issued during execution
proceedings).
2. Exclusive Appellate Jurisdiction
Article 229. [223] Appeal. Decisions, awards, or orders of the
Labor Arbiter are final and executory unless appealed to the
Commission by any or both parties within ten (10) calendar days from
receipt of such decisions, awards, or orders. Such appeal may be
entertained only on any of the following grounds:
(a) If there is prima facie evidence of abuse of discretion on
the part of the Labor Arbiter;
(b) If the decision, order or award was secured through
fraud or coercion, including graft and corruption;
(c) If made purely on questions of law; and
(d) If serious errors in the findings of facts are raised which
would cause grave or irreparable damage or injury to the appellant.
In case of a judgment involving a monetary award, an
appeal by the employer may be perfected only upon the posting of a
cash or surety bond issued by a reputable bonding company duly
accredited by the Commission in the amount equivalent to the
monetary award in the judgment appealed from.
In any event, the decision of the Labor Arbiter reinstating a
dismissed or separated employee, insofar as the reinstatement aspect is
concerned, shall immediately be executory, even pending appeal. The
employee shall either be admitted back to work under the same terms
and conditions prevailing prior to his dismissal or separation or, at the
option of the employer, merely reinstated in the payroll. The posting of
a bond by the employer shall not stay the execution for reinstatement
provided herein.
To discourage frivolous or dilatory appeals, the Commission
or the Labor Arbiter shall impose reasonable penalty, including fines
or censures, upon the erring parties.
In all cases, the appellant shall furnish a copy of the
memorandum of appeal to the other party who shall file an answer not
later than ten (10) calendar days from receipt thereof.
Page 78 of 117
The Commission shall decide all cases within twenty (20)
calendar days from receipt of the answer of the appellee.
The decision of the Commission shall be final and executory
after ten (10) calendar days from receipt thereof by the parties.
Any law enforcement agency may be deputized by the
Secretary of Labor and Employment or the Commission in the
enforcement of decisions, awards or orders.
xxx
The NLRC has exclusive appellate jurisdiction over the
following:
a. All cases decided by the Labor Arbiters
[Article 224(b)].
b. Cases by decided by the DOLE Regional
Directors or hearing officers involving small
money claims under Article 129 of the Labor
Code.
c. Contempt cases decided by the Labor Arbiters.
The perfection of an appeal shall stay the execution of
the decision of the Labor Arbiter except execution for
reinstatement pending appeal [NLRC Rules of Procedure].
a. Grounds for Appeal
The appeal to the NLRC may be entertained only on any
of the following grounds:
(i) If there is prima facie evidence of abuse of
discretion on the part of the labor arbiter;
(ii) If the decision, order or award was secured
through fraud or coercion, including graft and
corruption;
(iii) If made purely on questions of law; and/or
(iv) If serious errors in the findings of fact are
raised which, if not corrected, would cause
grave or irreparable damage or injury to the
appellant.
The NLRC has certiorari power. The first ground above
regarding prima facie evidence of abuse of discretion on the part of
the Labor Arbiter is actually an exercise of certiorari power by the
NLRC. The case of Triad Security v. Ortega expressly recognized
this certiorari power. Clearly, according to Auza, Jr. v. MOL
Philippines, the NLRC is possessed of the power to rectify any
abuse of discretion committed by the Labor Arbiter.
b.Requirements to Perfect an Appeal before
the NLRC
The perfection of appeal within the period and in the
manner prescribed by law is jurisdictional and non-compliance
with the legal requirements is fatal and has the effect of rendering
the judgment final and executory, hence, unappealable [Opinaldo
v. Ravina]. The date of receipt of decisions, resolutions, or orders
by the parties is of no moment. For purposes of appeal, the
reglementary period shall be counted from receipt of such
decisions, resolutions, or orders by the counsel or representative of
record [NLRC Rules of Procedure].
The date of mailing by registered mail of the appeal
memorandum is the date of its filing [Associated Anglo-American
Tobacco Corporation v. NLRC].
The requisites for perfection of appeal to the NLRC are
as follows:
(i) Observance of the reglementary period;
(ii) Payment of appeal and legal research fee;
(iii) Filing of a memorandum of appeal;
 (iv) Proof of service to the other party; and
(v) Posting of cash, property or surety bond, in
case of monetary awards.
Reglementary Period
The reglementary period is mandatory and not a mere
technicality [Calipay v. NLRC].
The reglementary period depends on where the appeal to
the NLRC emanates, viz:
(i) Ten (10) calendar days in case of appeals from
decisions of the Labor Arbiters under Article
229;
(ii) Five (5) calendar days in case of appeals in
contempt cases decided by Labor Arbiters; and
(iii) Five (5) calendar days in case of appeals from
decisions of the DOLE Regional Director
under Article 129 (small money claims of
P5000.00 or less).
Section 4, Rule III of the New Rules of Procedure of the
NLRC expressly mandates that "(F)or the purpose(s) of computing
the period of appeal, the same shall be counted from receipt of such
decisions, awards, or orders by the counsel of record. "Although
this rule explicitly contemplates an appeal before tile Labor
Arbiter and tile NLRC, we do not see any cogent reason why tile
same rule should not apply to petitions for certiorari filed with the
Court of Appeals from decisions of the NLRC. This procedure is in
line with the established rule that notice to counsel is notice to
party and when a party is represented by counsel, notices should
be made upon the counsel of record at his given address to which
notices of all kinds emanating from the court should be sent. It is
to be noted also that Section 7 of the NLRC Rules of
Procedure provides that "(A)ttorneys and other representatives of
parties shall have authority to bind their clients in all matters of
procedure"' a provision which is similar to Section 23, Rule 138 of
the Rules of Court. More importantly, Section 2, Rule 13 of the
1997 Rules of Civil Procedure analogously provides that if any
party has appeared by counsel, service upon him shall be made
upon his counsel [Cervantes v. City Service Corporation]. 
In Bello v. NLRC, citing anew Ginete v. Sunrise Manning
Agency, et al., the Court held that "the period for filing a petition
for certiorari should be reckoned from the time the counsel of
record received a copy of the Resolution denying the motion for
reconsideration."
The periods provided are all calendar days and not
working days [RJL Martinez Fishing v. NLRC]. Consequently,
Saturdays, Sundays and legal holidays are included in reckoning
and computing of the reglementary period [Judy Philippines v.
NLRC].
However, certain procedural lapses may be disregarded
where there is an acceptable reason to excuse tardiness in the
taking of the appeal [Philippine Airlines v. NLRC]. It is always
within the power of the court to suspend its own rules or to except
a particular case from its operation, whenever the purposes of
justice require it [Chronicle Securities v. NLRC]. Thus, procedural
rules may be waived, dispensed with, or relaxed in the interest of
substantial justice. The Court may deign to veer away from the
general rule if, on its face, the appeal appears to be absolutely
meritorious [Tiger Construction v. Abay].
The following are the specific instances where the rules
on the reckoning of the reglementary period have not been strictly
observed:
(i) 10th day (or 5th day) falling on a Saturday [Judy
Philippines v. NLRC], Sunday or Holiday
Page 79 of 117
[Philippine Geothermal v. NLRC], in which
case, the appeal may be filed the next working
day.
(ii) Reliance on erroneous notice of decision
[Firestone Tire and Rubber v. Lariosa] as
when the notice expressly states “working
days” and not “calendar days.”
(iii) Filing of petition or extraordinary remedies
from orders or resolutions of Labor Arbiters or
on third party claims – ten (10) calendar days.
(iv) When technical rules are disregarded under
Article 227 [City Fair Corporation v. NLRC].
(v) When there are some compelling reasons that
justify the allowance of the appeal despite its
late filing such as when it is granted in the
interest of substantial justice [Surima v.
NLRC].
Republic v. Guinmapang
Held: The general rule is that the perfection of an appeal in the
manner and within the period prescribed by law is, not only mandatory, but
jurisdictional, and failure to conform to the rules will render the judgment
sought to be reviewed final and unappealable. By way of exception,
unintended lapses are disregarded so as to give due course to appeals filed
beyond the reglementary period on the basis of strong and compelling
reasons, such as serving the ends of justice and preventing a grave
miscarriage thereof. The purpose behind the limitation of the period of
appeal is to avoid an unreasonable delay in the administration of justice
and to put an end to controversies.
In Chronicle Securities Corporation v. NLRC, we ruled:
In not a few instances, we relaxed the rigid application of the
rules of procedure to afford the parties the opportunity to fully ventilate
their cases on the merits. This is in line with the time honored principle that
cases should be decided only after giving all the parties the chance to argue
their causes and defenses. Technicality and procedural imperfections should
thus not serve as bases of decisions. In that way, the ends of justice would
be better served. For indeed, the general objective of procedure is to
facilitate the application of justice to the rival claims of contending parties,
bearing always in mind that procedure is not to hinder but to promote the
administration of justice.
Indeed the prevailing trend is to accord party litigants the
amplest opportunity for the proper and just determination of their causes,
free from the constraints of needless technicalities.
A one-day delay in the perfection of the appeal was excused in
Gana v. NLRC, Surigao del Norte Electric Cooperative v. NLRC, City Fair
Corporation v. NLRC, Pacific Asia Overseas Shipping Corp. v. NLRC,
and Insular Life Assurance Co., Ltd. v. NLRC.
We agree with the Court of Appeals that since no intent to delay
the administration of justice could be attributed to Guinmapang, a one day
delay does not justify the appeal’s denial. More importantly, the Court of
Appeals declared that Guinmapang’s appeal, on its face, appears to be
impressed with merit. The constitutional mandate to accord full protection
to labor and to safeguard the employee’s means of livelihood should be
given proper attention and sanction. A greater injustice may occur if said
appeal is not given due course than if the reglementary period to appeal
were strictly followed.25 In this case, we are inclined to excuse the one day
delay in order to fully settle the merits of the case. This is in line with our
policy to encourage full adjudication of the merits of an appeal.
Posting of Bond
In case the decision of the Labor Arbiter or the Regional
Director involves a monetary award, an appeal by the employer
may be perfected only upon the posting of a bond, which shall
either be in the form of cash deposit or surety bond in an amount
equivalent to the monetary award, exclusive of damages and
attorney’s fees.
Only in case the decision of the Labor Arbiter or the
DOLE Regional Director involves a monetary award, that an
appeal by the employer may be perfected upon the posting of a
bond. When the judgment of the Labor Arbiter does not involve
any monetary award, no appeal bond is necessary [Aba v. NLRC].
The Labor Arbiter’s decision or order should state the amount
awarded. If the amount of the monetary award is not contained or
fixed in the judgment, the appeal bond is not required to be posted
[Orozco v. Court of Appeals]. In case of conflict between the body
and the fallo of the decision, the latter should prevail [Mendoza, Jr.
v. San Miguel Foods, Inc.].
The surety bond must be issued by a reputable bonding
company duly accredited by the NLRC or the Supreme Court
[UERM-Memorial medical Center v. NLRC].
The amount of such bound should be equivalent to the
monetary award, exclusive of damages and attorney’s fees [NLRC
Rules of Procedure]. In other words, only monetary awards (such
as unpaid wages, backwages, separation pay, 13 th month pay, etc.)
are required to be covered by the bond. Moral and exemplary
damages and attorney’s fees are excluded. There is no conflict
between the two provisions. Article 223 lays down the requirement
that an appeal bond should be filed. The implementing rule, on the
other hand, explains how the appeal bond shall be computed. The
rule explicitly excludes moral and exemplary damages and
attorney's fees from the computation of the appeal bond. This
exclusion has been recognized by the Court in a number of cases.
Hence, in Erectors vs. NLRC,  the Court nullified an NLRC order
requiring the posting of an appeal bond which, among others,
"even included in the computation the award of P400,000.00 for
moral and exemplary damages." Indeed, the said implementing
rule is a contemporaneous construction of Article 223 by the
NLRC pursuant to the mandate of the Labor Code; hence, it is
accorded great respect by this Court.  bond.
The cash or surety bond required for the perfection
appeal should be posted within the reglementary period [Gaudia v.
NLRC]. If a party failed to perfect his appeal by the non-payment
of the appeal bond within the 10-calendar day period provided by
law, the decision of the Labor Arbiter becomes final and executory
upon the expiration the said period [Santos v. Velarde].
In case the employer failed to post a bond to perfect its
appeal, the remedy of the employee is to file a motion to dismiss
the appeal and not a petition for mandamus for the issuance of writ
of execution [Diaz v. Nora].
Motion to Reduce Appeal Bond
No motion to reduce bond shall be entertained except on
meritorious grounds, and only upon the posting of a bond in a
reasonable amount in relation to the monetary award. The mere
filing of a motion to reduce bond without complying with the
requisites in the preceding paragraphs shall not stop the running of
the period to perfect an appeal [NLRC Rules of Procedure].
The general rule is that the appeal bond that should be
posted should be equivalent to the monetary award of the Labor
Arbiter [Ramirez v. Court of Appeals]. In practice the NLRC has
allowed the reduction of the bond upon showing of meritorious
grounds and filed within the reglementary period for appeal.
The following are principles on reduction of bond:
 Bond may be reduced when the decision failed
to specify the exact amount of monetary award.
 Monetary award running into millions is not
justification to reduce bond.
 Financial difficulties or financial incapacity is
not sufficient grounds to reduce bond.
 Full amount of bond must be posted within the
reglementary period while motion to reduce
bond is pending. Alternatively, a reasonable
partial appeal bond may be paid within the
reglementary period.
Page 80 of 117
Rosewood v. NLRC
Held: In Globe General Services and Security Agency
vs. National Labor Relations Commission, 15 the Court observed that the
NLRC, in actual practice, allows the reduction of the appeal bond upon
motion of the appellant and on meritorious grounds; hence, petitioners in
that case should have filed a motion to reduce the bond within the
reglementary period for appeal.
That is the exact situation in the case at bar. Here, petitioner
claims to have received the labor arbiter's Decision on April 6, 1993. 16 On
April 16, 1993, it filed, together with its memorandum on appeal 17 and
notice of appeal, a motion to reduce the appeal bond 18 accompanied by a
surety bond for fifty thousand pesos issued by prudential Guarantee and
Assurance, Inc. 19 Ignoring petitioner's motion (to reduce bond),
Respondent Commission rendered its assailed Resolution dismissing the
appeal due to the late filing of the appeal bond.
The solicitor general argues for the affirmation of the assailed
Resolution for the sole reason that the appeal bond, even if it was filed on
time, was defective, as it was not in an amount "equivalent to the monetary
award in the judgment appealed from." The Court disagrees.
We hold that petitioner's motion to reduce the bond is a
substantial compliance with the Labor Code. This holding is consistent with
the norm that letter-perfect rules must yield to the broader interest of
substantial justice.
Where a decision may be made to rest on informed judgment
rather than rigid rules, the equities of the case must be accorded their due
weight because labor determinations should not only be "secundum
rationem but also secundum caritatem." 21 A judicious reading of the
memorandum of appeal would have made it evident to Respondent
Commission that the recourse was meritorious. Respondent Commission
acted with grave abuse of discretion in peremptorily dismissing the appeal
without passing upon - in fact, ignoring - the motion to reduce the appeal
We repeat: Considering the clear merits which appear, res ipsa
loquitur, in the appeal from the labor arbiter's Decision, and the petitioner's
substantial compliance with rules governing appeals, we hold that the
NLRC gravely abused its discretion in dismissing said appeal and in failing
to pass upon the grounds alleged in the Motion for Reconsideration.
c. Prohibited Motions
Rule V, Section 5 of the NLRC Rules of Procedure
provides:
SECTION 5. PROHIBITED PLEADINGS AND
MOTIONS. – The following pleadings and motions shall not be
allowed and acted upon nor elevated to the Commission:
(a) Motion to dismiss the complaint except on the
ground of lack of jurisdiction over the subject matter, improper
venue, res judicata, prescription and forum shopping;
(b) Motion for a bill of particulars;
(c) Motion for new trial;
(d) Petition for relief from judgment;
(e) Motion to declare respondent in default;
(f) Motion for reconsideration of any decision or any
order of the Labor Arbiter;
(g) Motion to Quash and/or Motion to Lift
Garnishment if a Petition had been filed under Rule XII;
(h) Appeal from any interlocutory order of the Labor
Arbiter, such as but not limited to, an order: (1) denying a
motion to dismiss; (2) denying a motion to inhibit; (3) denying a
motion for issuance of writ of execution; or (4) denying a
motion to quash writ of execution;
(i) Appeal from the issuance of a certificate of
finality of decision by the Labor Arbiter;
(j) Appeal from orders issued by the Labor Arbiter in
the course of execution proceedings; and
(k) Such other pleadings, motions and petitions of
similar nature intended to circumvent above provisions. (5a,
RIII) (As amended by En Banc Resolution No. 02-15, Series of
2015)
d. Frivolous Appeals
– No appeal from an interlocutory order shall be
entertained. To discourage frivolous or dilatory appeals, including
those taken from interlocutory orders, the Commission after
hearing may censure or cite in contempt the erring parties and their
counsels, or subject them to reasonable fine or penalty [Section 10,
NLRC Rules].
Although, as a general rule, an appeal should not be
dismissed on a ground which goes to the merits of the cause or to
the right of plaintiff or defendant to recover, yet; in exceptional
instances, an appellate court may order the dismissal when the
appeal appears to be manifestly and palpably frivolous. And where,
as in the instant case, the dismissal has been ordered by the trial
court, it will not be disturbed in the appellate court if the latter
finds the appeal to have been interposed ostensibly for delay. It has
been held that a frivolous appeal is one presenting no justiciable
question, or one so readily recognizable as devoid of merit on the
face of record that there is little, if any, prospect that it can ever
succeed. The instant case is one such instance in which the appeal
is evidently without merit, taken manifestly for delay [Dela Cruz v.
Blanco].
In Bongay v. Martinez, the contention of the private
respondents that the determination of whether or not their appeal
was filed seasonably should be left to the Commission as the latter
has exclusive jurisdiction to rule on the question failed. That
argument is belied by Section 5, Rule IX of the Rules of the NLRC
which empowers not only the Commission but also the Labor
Arbiter to impose reasonable penalties, including fines and
censures, upon a party for filing a frivolous appeal. This implies
that even when the appeal is still with the Labor Arbiter, and not
yet transmitted to the Commission, the former may already find it
frivolous and, there and then, terminate that appeal. Had it been as
the private respondents claim, the Labor Arbiter would not have
been given such power.
e. Reinstatement Pending Appeal
Reinstatement pending appeal applies to all kinds of
illegal dismissal cases, regardless of the grounds therefor [C.
Alcantara & Sons v. Court of Appeals].
An order of reinstatement issued by the Labor Arbiter
under Article 229 is self-executory even pending appeal by the
employer. This means that while perfection of an appeal shall stay
the execution of the decision of the Labor Arbiter the exception is
in respect to the execution of the reinstatement order which should
proceed even pending appeal by the employer. An order or award
for reinstatement does not require a writ of execution. The
employer has no way of staying execution of immediate
reinstatement. He cannot post bond to prevent its execution
[Pioneer Texturizing Corporation v. NLRC].
When the former position is already filled up, the
employee ordered reinstated pending appeal should be reinstated to
a substantially equivalent position [Medina v. Consolidated
Broadcasting System]. Reinstatement to a position lower in rank is
not proper [Panuncillo v. CAP Philippines].
Reinstatement pending appeal is not affected by the
reinstated employee’s employment elsewhere [Triad Security v.
Ortega]. Such employment elsewhere also does not affect the
obligation of the employer to pay reinstatement backwages.
The failure of the employee ordered reinstated pending
appeal to report back to work as directed by the employer does not
give the employer the right to remove him, especially when there is
a reasonable explanation for his failure [Buenviaje v. Court of
Appeals].
By way of distinction, the rule on reinstatement pending
appeal applies only to the order of reinstatement issued by the
Labor Arbiter and to no other. This means that if the reinstatement
order is issued by the NLRC on appeal, or by the Court of Appeals
or by the Supreme Court, there is a need to secure a writ of
execution from the Labor Arbiter of origin to enforce the
Page 81 of 117
reinstatement of the employee whose dismissal is declared illegal
[Mt. Carmel College v. Resuena].
Moreover, reinstatement pending appeal does not apply
when the dismissal is legal but reinstatement is ordered for some
reasons like equity and compassionate justice [Lansangan v.
Amkor Technology].
In case of two successive dismissals, the order of
reinstatement pending appeal under Article 229 issued in the first
case shall apply only to the first case and should not affect the
second dismissal [Sevilla v. NLRC].
Options of the Employer
To implement the reinstatement aspect of a Labor
Arbiter’s decision, there are only two (2) options available to the
employer, to wit:
(i) Actual reinstatement. – The employee should
be reinstated to his position which he occupies
prior to his illegal dismissal under the same
terms and conditions prevailing prior to his
dismissal or separation or, if no longer
available, to a substantially-equivalent
position; or
(ii) Payroll reinstatement. – The employee should
be reinstated in the payroll of the company
without requiring him to report back to his
work.
It is required that in case the decision of the Labor
Arbiter includes an order of reinstatement, it should contain:
(i) A statement that the reinstatement aspect is
immediately executory; and
(ii) A directive for the employer to submit a report
of compliance within 10 calendar days from
receipt of the said decision [NLRC Rules of
Procedure].
From the moment an employee is ordered reinstated by
the Labor Arbiter on the basis of the finding that his dismissal is
illegal, up to the time that an appellate tribunal like the NLRC, CA
or the Supreme Court, as the case may be, reverses the said finding,
the reinstated employee is generally entitled to his so-called
“reinstatement salaries/wages” and regular allowances, benefits,
incentives, and bonuses [Bago v. NLRC].
In cases where the employer totally fails or refuses to
reinstate the employee but nonetheless appeals from the Labor
Arbiter’s adverse decision, there arises the issue of whether the
employee would still be entitled to his accrued salaries/wages,
allowances and other benefits in the event that the employer is
subsequently successful in having the reinstatement order reversed
in its appeal.
Section 12, Rule XI of the NLRC Rules of Procedure
provides:
SECTION 12. EXECUTION OF
REINSTATEMENT PENDING APPEAL. – In case the
decision includes an order of reinstatement, and the employer
disobeys the directive under the second paragraph of Section 19
of Rule V or refuses to reinstate the dismissed employee, the
Labor Arbiter shall immediately issue writ of execution, even
pending appeal, directing the employer to immediately reinstate
the dismissed employee either physically or in the payroll, and
to pay the accrued salaries as a consequence of such non-
reinstatement in the amount specified in the decision.
The Labor Arbiter shall motu proprio issue a
corresponding writ to satisfy the reinstatement wages as they
 accrue until actual reinstatement or reversal of the order of
reinstatement. (En Banc Resolution No. 11-12, Series of 2012)
The Sheriff shall serve the writ of execution upon the
employer or any other person required by law to obey the same.
If he/she disobeys the writ, such employer or person may be
cited for contempt in accordance with Rule IX. (6a)
As a consequence of such disobedience, the employer
has the following liabilities [NLRC Rules of Procedure]:
(i) He shall be liable to pay the accrued salaries of
the reinstated employee as a consequence of
such non-reinstatement in the amount specified
in the decision; and
(ii) He may be cited for contempt, in accordance
with the NLRC Rules of Procedure, for his
refusal to comply with the writ of execution
ordering the reinstatement. This remedy,
however, is available only after the sheriff shall
have served the writ of execution upon the
employer or any other person required by law
to obey the same.
Roquero Doctrine
Roquero v. Philippine Airlines declared the rule that in
cases where an employee is ordered reinstated by the Labor Arbiter
and the employer fails or refuses to obey the reinstatement order
but initiates an appeal, the employer’s success in having the
decision of the Labor Arbiter’s decision reversed on appeal will not
exculpate him from the liability to pay the reinstatement wages and
benefits of the employee, reckoned and computed from the time the
employee was ordered reinstated by the Labor Arbiter until the date
of reversal on appeal.
No Obligation to Reimburse
In the Roquero case, both the CA and the SC reversed the
order of reinstatement as they upheld the employee's dismissal.
Must the employee pay back the salary he received during the
reinstatement? The Court said no.
"We reiterate the rule that technicalities have no
room in labor cases where the Rules of Court are applied only in
a suppletory manner and only to effectuate the objectives of the
Labor Code and not to defeat them. Hence, even if the order of
reinstatement of the Labor Arbiter is reversed on appeal, it is
obligatory on the part of the employer to reinstate and pay the
wages of the dismissed employee during the period of appeal
until reversal by the higher court. On the other hand, if the
employee has been reinstated during the appeal period and such
reinstatement order is reversed with finality, the employee is not
required to reimburse whatever salary he received for he is
entitled to such, more so if he actually rendered services during
the period."
But a deviation occurred in Genuino v. NLRC, also
known as the Genuino Doctrine. The Court in Genuino said:
xxx
If the decision of the labor arbiter is later reversed on
appeal upon the finding that the ground for dismissal is valid,
then the employer has the right to require the dismissed
employee on payroll reinstatement to refund the salaries s/he
received while the case was pending appeal, or it can be
deducted from the accrued benefits that the dismissed employee
was entitled to receive from his/her employer under existing
laws, collective bargaining agreement provisions, and company
practices. However, if the employee was reinstated to work
during the pendency of the appeal, then the employee is entitled
to the compensation received for actual services rendered
without need of refund.
Page 82 of 117
xxx
The case of Garcia v. Philippine Airlines, also known as
the Garcia Doctrine, downplays the "stray posture" of Genuino
and reaffirms the no-reimbursement doctrine in Roquero and
conforming rulings. The court explains in Garcia that pursuant to
the police power, the state may authorize an immediate
implementation, pending appeal, of a decision reinstating a
dismissed or separated employee. The immediate reinstatement is
"a saving act" designed to stop a continuing threat or danger to the
survival or even the life of the employee and his family. Moreover,
the social justice principles of labor law outweigh or render
inapplicable the civil law doctrine of unjust enrichment.
However, Garcia modified the doctrine enunciated in
Roquero, to wit:
xxx
After the labor arbiter's decision is reversed by a
higher tribunal, the employee may be barred from collecting
the accrued wages, if it is shown that the delay in enforcing
the reinstatement pending appeal was without fault on the
part of the employer.
The test is two-fold: (1) there must be actual delay or
the fact that the order of reinstatement pending appeal was not
executed prior to its reversal; and (2) the delay must not be due
to the employer's unjustified act or omission. If the delay is due
to the employer's unjustified refusal, the employer may still be
required to pay the salaries notwithstanding the reversal of the
Labor Arbiter's decision.
In Genuino, there was no showing that the employer
refused to reinstate the employee, who was the Treasury Sales
Division Head, during the short span of four months or from the
promulgation on May 2, 1994 of the Labor Arbiter's Decision up
to the promulgation on September 3, 1994 of the NLRC
Decision. Notably, the former NLRC Rules of Procedure did not
lay down a mechanism to promptly effectuate the self-executory
order of reinstatement, making it difficult to establish that the
employer actually refused to comply.
In a situation like that in International Container
Terminal Services, Inc. v. NLRC where it was alleged that the
employer was willing to comply with the order and that the
employee opted not to pursue the execution of the order, the
Court upheld the self-executory nature of the reinstatement
order and ruled that the salary automatically accrued from notice
of the Labor Arbiter's order of reinstatement until its ultimate
reversal by the NLRC. It was later discovered that the employee
indeed moved for the issuance of a writ but was not acted upon
by the Labor Arbiter. In that scenario where the delay was
caused by the Labor Arbiter, it was ruled that the inaction of the
Labor Arbiter who failed to act upon the employee's motion for
the issuance of a writ of execution may no longer adversely
affect the cause of the dismissed employee in view of the self-
executory nature of the order of reinstatement.
The new NLRC Rules of Procedure, which took
effect on January 7, 2006, now require the employer to submit a
report of compliance within 10 calendar days from receipt of the
Labor Arbiter's decision, disobedience to which clearly denotes
a refusal to reinstate. The employee need not file a motion for
the issuance of the writ of execution since the Labor
Arbiter shall thereafter  motu proprio issue the writ. With the
new rules in place, there is hardly any difficulty in
determining the employer's intransigence in immediately
complying with the order.
In the case at bar, petitioners exerted efforts to
execute the Labor Arbiter's order of reinstatement until they
were able to secure a writ of execution, albeit issued on October
5, 2000 after  the reversal by the NLRC of the Labor Arbiter's
decision. Technically, there was still actual delay which brings
to the question of whether the delay was due to respondent's
unjustified act or omission.
It is apparent that there was inaction on the part of
respondent to reinstate them, but whether such omission was
 justified depends on the onset of the exigency of corporate
rehabilitation.
It is settled that upon appointment by the SEC of a
rehabilitation receiver, all actions for claims before any court,
tribunal or board against the corporation shall ipso jure be
suspended. As stated early on, during the pendency of
petitioners' complaint before the Labor Arbiter, the SEC placed
respondent under an Interim Rehabilitation Receiver. After the
Labor Arbiter rendered his decision, the SEC replaced the
Interim Rehabilitation Receiver with a Permanent Rehabilitation
Receiver.
Case law recognizes that unless there is a restraining
order, the implementation of the order of reinstatement is
ministerial and mandatory. This injunction or suspension of
claims by legislative fiat partakes of the nature of a restraining
order that constitutes a legal justification for respondent's non-
compliance with the reinstatement order. Respondent's failure to
exercise the alternative options of actual reinstatement and
payroll reinstatement was thus justified. Such being the case,
respondent's obligation to pay the salaries pending appeal, as the
normal effect of the non-exercise of the options, did not attach.
While reinstatement pending appeal aims to avert the
continuing threat or danger to the survival or even the life of the
dismissed employee and his family, it does not contemplate the
period when the employer-corporation itself is similarly in
a judicially monitored state of being resuscitated in order to
survive.
The parallelism between a judicial order of
corporation rehabilitation as a justification for the non-exercise
of its options, on the one hand, and a claim of actual and
imminent substantial losses as ground for retrenchment, on the
other hand, stops at the red line on the financial statements.
Beyond the analogous condition of financial gloom, as discussed
by Justice Leonardo Quisumbing in his Separate Opinion, are
more salient distinctions. Unlike the ground of substantial losses
contemplated in a retrenchment case, the state of corporate
rehabilitation was judicially pre-determined by a competent
court and not formulated for the first time in this case by
respondent.
More importantly, there are legal effects arising from
a judicial order placing a corporation under rehabilitation.
Respondent was, during the period material to the case,
effectively deprived of the alternative choices under Article 223
of the Labor Code, not only by virtue of the statutory injunction
but also in view of the interim relinquishment of management
control to give way to the full exercise of the powers of the
rehabilitation receiver. Had there been no need to rehabilitate,
respondent may have opted for actual physical reinstatement
pending appeal to optimize the utilization of resources. Then
again, though the management may think this wise, the
rehabilitation receiver may decide otherwise, not to mention the
subsistence of the injunction on claims.
In sum, the obligation to pay the employee's salaries
upon the employer's failure to exercise the alternative options
under Article 223 of the Labor Code is not a hard and fast rule,
considering the inherent constraints of corporate rehabilitation.
xxx
3. Powers of the Commission
Article 225. [218] Powers of the Commission. The
Commission shall have the power and authority:
(a) To promulgate rules and regulations governing the
hearing and disposition of cases before it and its regional branches, as
well as those pertaining to its internal functions and such rules and
regulations as may be necessary to carry out the purposes of this Code;
(b) To administer oaths, summon the parties to a
controversy, issue subpoenas requiring the attendance and testimony of
witnesses or the production of such books, papers, contracts, records,
statement of accounts, agreements, and others as may be material to a
just determination of the matter under investigation, and to testify in
any investigation or hearing conducted in pursuance of this Code;
(c) To conduct investigation for the determination of a
question, matter or controversy within its jurisdiction, proceed to hear
Page 83 of 117
and determine the disputes in the absence of any party thereto who has
been summoned or served with notice to appear, conduct its
proceedings or any part thereof in public or in private, adjourn its
hearings to any time and place, refer technical matters or accounts to
an expert and to accept his report as evidence after hearing of the
parties upon due notice, direct parties to be joined in or excluded from
the proceedings, correct, amend, or waive any error, defect or
irregularity whether in substance or in form, give all such directions as
it may deem necessary or expedient in the determination of the dispute
before it, and dismiss any matter or refrain from further hearing or
from determining the dispute or part thereof, where it is trivial or
where further proceedings by the Commission are not necessary or
desirable; and
(d) To hold any person in contempt directly or indirectly
and impose appropriate penalties therefor in accordance with law.
A person guilty of misbehavior in the presence of or so near
the Chairman or any member of the Commission or any Labor Arbiter
as to obstruct or interrupt the proceedings before the same, including
disrespect toward said officials, offensive personalities toward others,
or refusal to be sworn, or to answer as a witness or to subscribe an
affidavit or deposition when lawfully required to do so, may be
summarily adjudged in direct contempt by said officials and punished
by fine not exceeding five hundred pesos (P500) or imprisonment not
exceeding five (5) days, or both, if it be the Commission or a member
thereof, or by a fine not exceeding one hundred pesos (P100) or
imprisonment not exceeding one (1) day, or both, if it be a Labor
Arbiter.
The person adjudged in direct contempt by a Labor Arbiter
may appeal to the Commission and the execution of the judgment shall
be suspended pending the resolution of the appeal upon the filing by
such person of a bond on condition that he will abide by and perform
the judgment of the Commission should the appeal be decided against
him. Judgment of the Commission on direct contempt is immediately
executory and unappealable. Indirect contempt shall be dealt with by
the Commission or Labor Arbiter in the manner prescribed under
Rule 71 of the Revised Rules of Court; and
(e) To enjoin or restrain any actual or threatened
commission of any or all prohibited or unlawful acts or to require the
performance of a particular act in any labor dispute which, if not
restrained or performed forthwith, may cause grave or irreparable
damage to any party or render ineffectual any decision in favor of such
party: Provided, That no temporary or permanent injunction in any
case involving or growing out of a labor dispute as defined in this Code
shall be issued except after hearing the testimony of witnesses, with
opportunity for cross-examination, in support of the allegations of a
complaint made under oath, and testimony in opposition thereto, if
offered, and only after a finding of fact by the Commission, to the
effect:
(1) That prohibited or unlawful acts have been threatened
and will be committed unless restrained, or have been committed and
will be continued unless restrained, but no injunction or temporary
restraining order shall be issued on account of any threat, prohibited
or unlawful act, except against the person or persons, association or
organization making the threat or committing the prohibited or
unlawful act or actually authorizing or ratifying the same after actual
knowledge thereof;
(2) That substantial and irreparable injury to complainant’s
property will follow
(3) That as to each item of relief to be granted, greater
injury will be inflicted upon complainant by the denial of relief than
will be inflicted upon defendants by the granting of relief;
(4) That complainant has no adequate remedy at law; and
(5) That the public officers charged with the duty to protect
complainant’s property are unable or unwilling to furnish adequate
protection.
Such hearing shall be held after due and personal notice
thereof has been served, in such manner as the Commission shall
direct, to all known persons against whom relief is sought, and also to
the Chief Executive and other public officials of the province or city
within which the unlawful acts have been threatened or committed,
charged with the duty to protect complainant’s property: Provided,
however, that if a complainant shall also allege that, unless a
temporary restraining order shall be issued without notice, a
substantial and irreparable injury to complainant’s property will be
unavoidable, such a temporary restraining order may be issued upon
testimony under oath, sufficient, if sustained, to justify the Commission
in issuing a temporary injunction upon hearing after notice. Such a
temporary restraining order shall be effective for no longer than
twenty (20) days and shall become void at the expiration of said twenty
(20) days. No such temporary restraining order or temporary
injunction shall be issued except on condition that complainant shall
first file an undertaking with adequate security in an amount to be
fixed by the Commission sufficient to recompense those enjoined for
any loss, expense or damage caused by the improvident or erroneous
issuance of such order or injunction, including all reasonable costs,
together with a reasonable attorney’s fee, and expense of defense
against the order or against the granting of any injunctive relief sought
in the same proceeding and subsequently denied by the Commission.
The undertaking herein mentioned shall be understood to
constitute an agreement entered into by the complainant and the surety
upon which an order may be rendered in the same suit or proceeding
against said complainant and surety, upon a hearing to assess damages,
of which hearing, complainant and surety shall have reasonable notice,
the said complainant and surety submitting themselves to the
jurisdiction of the Commission for that purpose. But nothing herein
contained shall deprive any party having a claim or cause of action
under or upon such undertaking from electing to pursue his ordinary
remedy by suit at law or in equity: Provided, further, That the
reception of evidence for the application of a writ of injunction may be
delegated by the Commission to any of its Labor Arbiters who shall
conduct such hearings in such places as he may determine to be
accessible to the parties and their witnesses and shall submit thereafter
his recommendation to the Commission.
A writ of preliminary injunction and a TRO are
injunctive reliefs and preservative remedies for the protection of
substantive rights and interests. An application for the issuance of a
writ of preliminary injunction and/or TRO may be granted upon the
filing of a verified application showing facts entitling the applicant
to the relief demanded. Essential for granting the injunctive relief is
the existence of an urgent necessity for the writ in order to prevent
serious damage. A TRO issues only if the matter is of such extreme
urgency that grave injustice and irreparable injury will arise unless
it is issued immediately [Brizuela v. Legaspi]
As with all equitable remedies, injunction must be issued
only at the instance of a party who possesses sufficient interest in
or title to the right or the property sought to be protected. It is
proper only when the applicant appears to be entitled to the relief
demanded in the complaint, which must aver the existence of the
right and the violation of the right, or whose averments must in the
minimum constitute a prima facieshowing of a right to the final
relief sought. Accordingly, the conditions for the issuance of the
injunctive writ are: (a) that the right to be protected exists prima
facie; (b) that the act sought to be enjoined is violative of that right;
and (c) that there is an urgent and paramount necessity for the writ
to prevent serious damage. An injunction will not issue to protect a
right not in esse, or a right which is merely contingent and may
never arise; or to restrain an act which does not give rise to a cause
of action; or to prevent the perpetration of an act prohibited by
statute. Indeed, a right, to be protected by injunction, means a right
clearly founded on or granted by law or is enforceable as a matter
of law [BPI v. Hontanosas].
D. VOLUNTARY ARBITRATOR
Article 274. [261] Jurisdiction of Voluntary Arbitrators and
Panel of Voluntary Arbitrators. The Voluntary Arbitrator or panel of
Voluntary Arbitrators shall have original and exclusive jurisdiction to
hear and decide all unresolved grievances arising from the
interpretation or implementation of the Collective Bargaining
Agreement and those arising from the interpretation or enforcement of
company personnel policies referred to in the immediately preceding
article. Accordingly, violations of a Collective Bargaining Agreement,
except those which are gross in character, shall no longer be treated as
Page 84 of 117
unfair labor practice and shall be resolved as grievances under the
Collective Bargaining Agreement. For purposes of this article, gross
violations of Collective Bargaining Agreement shall mean flagrant
and/or malicious refusal to comply with the economic provisions of
such agreement.
The Commission, its Regional Offices and the Regional
Directors of the Department of Labor and Employment shall not
entertain disputes, grievances or matters under the exclusive and
original jurisdiction of the Voluntary Arbitrator or panel of Voluntary
Arbitrators and shall immediately dispose and refer the same to the
Grievance Machinery or Voluntary Arbitration provided in the
Collective Bargaining Agreement.
In Sime Darby Pilipinas, Inc. v. Deputy Administrator
Magsalin, it was held that a voluntary arbitrator has plenary
jurisdiction and authority to interpret an agreement to arbitrate and
to determine the scope of his own authority when the said
agreement is vague — subject only, in a proper case, to
the certiorari jurisdiction of this Court.
Voluntary arbitrator may award backwages upon a
finding of illegal dismissal, even though the issue of entitlement
thereto is not explicitly claimed in the Submission Agreement.
Backwages, in general, are awarded on the ground of equity as a
form of relief that restores the income lost by the terminated
employee by reason of his illegal dismissal [7k Corporation v.
Albarico].
1. Interpretation or Implementation of The
Collective Bargaining Agreement
In San Jose v. NLRC, it was held that the Labor Arbiter
had no jurisdiction to hear and decide petitioners money-
claim underpayment of retirement benefits, as the controversy
between the parties involved an issue arising from the
interpretation or implementation of a provision of the collective
bargaining agreement. The Voluntary Arbitrator or Panel of
Voluntary Arbitrators has original and exclusive jurisdiction over
the controversy under Article 261 of the Labor Code, and not the
Labor Arbiter.
In the case of Maneja v. NLRC, we held that the
dismissal case does not fall within the phrase "grievances arising
from the interpretation or implementation of the collective
bargaining agreement and those arising from the interpretation or
enforcement of company personnel policies." In Maneja, the hotel
employee was dismissed without hearing. We ruled that her
dismissal was unjustified, and her right to due process was
violated, absent the twin requirements of notice and hearing. We
also held that the labor arbiter had original and exclusive
jurisdiction over the termination case, and that it was error to give
the voluntary arbitrator jurisdiction over the illegal dismissal case.
2. Interpretation or Enforcement of Company
Personnel Policies
Company personnel policies are guiding principles stated
in broad, long-range terms that express the philosophy or beliefs of
an organizations top authority regarding personnel matters. They
deal with matters affecting efficiency and well-being of employees
and include, among others, the procedure in the administration of
wages, benefits, promotions, transfer and other personnel
movements which are usually not spelled out in the collective
agreement. The usual source of grievances, however, are the rules
and regulations governing disciplinary actions [Maneja v. NLRC].
3. Other Labor Disputes
Article 275. [262] Jurisdiction over other Labor Disputes. The
Voluntary Arbitrator or panel of Voluntary Arbitrators, upon
agreement of the parties, shall also hear and decide all other labor
disputes including unfair labor practices and bargaining deadlocks.
4. Procedure
Article 276. [262-A] Procedures. The Voluntary Arbitrator
or panel of Voluntary Arbitrators shall have the power to hold
hearings, receive evidences and take whatever action is necessary to
resolve the issue or issues subject of the dispute, including efforts to
effect a voluntary settlement between parties.
All parties to the dispute shall be entitled to attend the
arbitration proceedings. The attendance of any third party or the
exclusion of any witness from the proceedings shall be determined by
the Voluntary Arbitrator or panel of Voluntary Arbitrators. Hearing
may be adjourned for cause or upon agreement by the parties.
Unless the parties agree otherwise, it shall be mandatory for
the Voluntary Arbitrator or panel of Voluntary Arbitrators to render
an award or decision within twenty (20) calendar days from the date of
submission of the dispute to voluntary arbitration.
The award or decision of the Voluntary Arbitrator or panel
of Voluntary Arbitrators shall contain the facts and the law on which it
is based. It shall be final and executory after ten (10) calendar days
from receipt of the copy of the award or decision by the parties.
Upon motion of any interested party, the Voluntary
Arbitrator or panel of Voluntary Arbitrators or the Labor Arbiter in
the region where the movant resides, in case of the absence or
incapacity of the Voluntary Arbitrator or panel of Voluntary
Arbitrators, for any reason, may issue a writ of execution requiring
either the sheriff of the Commission or regular courts or any public
official whom the parties may designate in the submission agreement to
execute the final decision, order or award.
The 10-day period stated in Article 276 should be
understood as the period within which the party adversely affected
by the ruling of the Voluntary Arbitrators or Panel of Arbitrators
may file a motion for reconsideration. Only after the resolution of
the motion for reconsideration may the aggrieved party appeal to
the CA by filing the petition for review under Rule 43 of the Rules
of Court within 15 days from notice pursuant to Section 4 of Rule
43 [Guagua National Colleges v. Court of Appeals].
Chin v. Maersk-Filipinas Crewing Inc.
Held: In the 2018 case of Guagua National Colleges vs.
CA (Guagua), the Court acknowledged the variance in its rulings and
categorically declared that the correct period to appeal the decision or
award of the Voluntary Arbitrator or Panel of Arbitrators to the CA via a
petition for review under Rule 43 of the Rules of Court is the fifteen (15)-
day period set forth in Section 4 thereof reckoned from notice or receipt of
the VA's resolution on the motion for reconsideration, and that the ten (10)-
day period provided in Article 276 of the Labor Code refers to the period
within which an aggrieved party may file said motion for reconsideration,
to wit:
Given the variable rulings of the Court, what should now be the
period to be followed in appealing the decisions or awards of the Voluntary
Arbitrators or Panel of Arbitrators?
In the 2010 ruling in Teng v. Pagahac, the Court clarified that
the 10-day period set in Article 276 of the Labor Code gave the aggrieved
parties the opportunity to file their motion for reconsideration, which was
more in keeping with the principle of exhaustion of administrative
remedies, holding thusly:
In the exercise of its power to promulgate implementing rules
and regulations, an implementing agency, such as the Department of Labor,
is restricted from going beyond the terms of the law it seeks to implement;
it should neither modify nor improve the law. The agency formulating the
rules and guidelines cannot exceed the statutory authority granted to it by
the legislature.
By allowing a 10-day period, the obvious intent of Congress
in amending Article 263 to Article 262-A is to provide an opportunity
for the party adversely affected by the VA's decision to seek recourse
via a motion for reconsideration or a petition for review under Rule 43
of the Rules of Court filed with the CA. Indeed, a motion for
reconsideration is the more appropriate remedy in line with the
Page 85 of 117
doctrine of exhaustion of administrative remedies. For this reason, an
appeal from administrative agencies to the CA via Rule 43 of the Rules
of Court requires exhaustion of available remedies as a condition
precedent to a petition under that Rule.
The requirement that administrative remedies be exhausted is
based on the doctrine that in providing for a remedy before an
administrative agency, every opportunity must be given to the agency to
resolve the matter and to exhaust all opportunities for a resolution under the
given remedy before bringing an action in, or resorting to, the courts of
justice. Where Congress has not clearly required exhaustion, sound judicial
discretion governs, guided by congressional intent.
By disallowing reconsideration of the VA's decision, Section
7, Rule XIX of DO 40-03 and Section 7 of the 2005 Procedural
Guidelines went directly against the legislative intent behind Article
262-A of the Labor Code. These rules deny the VA the chance to
correct himself and compel the courts of justice to prematurely
intervene with the action of an administrative agency entrusted with
the adjudication of controversies coming under its special knowledge,
training and specific field of expertise. In this era of clogged court
dockets, the need for specialized administrative agencies with the special
knowledge, experience and capability to hear and determine promptly
disputes on technical matters or intricate questions of facts, subject to
judicial review, is indispensable. In Industrial Enterprises, Inc. v. Court of
Appeals, we ruled that relief must first be obtained in an administrative
proceeding before a remedy will be supplied by the courts even though the
matter is within the proper jurisdiction of a court. (Emphasis supplied)
Hence, the 10-day period stated in Article 276 should be
understood as the period within which the party adversely affected by the
ruling of the Voluntary Arbitrators or Panel of Arbitrators may file a
motion for reconsideration. Only after the resolution of the motion for
reconsideration may the aggrieved party appeal to the CA by filing the
petition for review under Rule 43 of the Rules of Court within 15 days
from notice pursuant to Section 4 of Rule 43. (Citations omitted;
emphasis and underscoring supplied)
The Court further noted in Guagua that despite the clarification
made in Teng v. Pagahac in 2010, the Department of Labor and
Employment (DOLE) and NCMB have yet to revise or amend Section
7, Rule VII of the Revised Procedural Guidelines in the Conduct of
Voluntary Arbitration Proceedings and that such inaction has caused
confusion, particularly with respect to the filing of the motion for
reconsideration as a condition precedent to the filing of the petition for
review in the CA. Thus, the Court expressly directed the DOLE and the
NCMB to cause the revision or amendment of the aforesaid section in order
to allow the filing of motions for reconsideration in line with Article 276 of
the Labor Code. Unfortunately, no revision has yet been made in this
regard. Consequently, the DOLE and the NCMB are again reminded to
cause the revision or amendment of Section 7, Rule VII of the Revised
Procedural Guidelines in the Conduct of Voluntary Arbitration Proceedings
insofar as it prohibits the filing of a motion for reconsideration, if they have
not done so.
In view of the foregoing, petitioner in this case had fifteen (15)
days from receipt of the Resolution denying his motion for reconsideration
to file his petition for review with the CA. Having received a copy of the
VA's October 29, 2018 Resolution on November 22, 2018, petitioner
therefore had until December 7, 2018 to file his petition. As the records
show that the petition was filed on December 4, 2018, albeit through a
private courier, it was therefore timely filed and the CA erred in dismissing
it outright. To rule otherwise would be clearly antithetical to the tenets of
fair play, not to mention the undue prejudice to petitioner's rights.[30] Thus,
in light of the fact that the CA dismissed the petition for review outright
based solely on procedural grounds, a remand of the case for a resolution
on the merits is warranted.
Unicrafts Industries v. Court of Appeals
Held: While under the law decisions of voluntary arbitrators are
accorded finality, the same may still be subject to review, such as here
where there was a violation of to due process such as in this case. 
The proceedings before the Voluntary Arbitrator are non-
litigious in nature, and they are nit governed by technical rules applicable to
court or judicial proceedings but they must, at all times, comply with the
requirement of due process making reference to Rule VI, Section 6 of the
Procedural Guidelines in the Conduct of Voluntary Arbitration Proceeding
which provides:
 SECTION 6. Arbitration Hearing. — In the conduct of hearing,
the arbitrator shall provide the parties adequate opportunities to be heard.
He shall control the proceedings and see to it that proper decorum is
observed. He must render a ruling of the issue/s raised in the course of the
proceedings. He must treat all significant aspects of the proceedings as
confidential in nature unless confidentiality is waived by the parties.  well as the voluntary arbitrator, based their decisions on applicable law and
Further, While the intendment of our laws is to favor the
employee, it in no way implies that the employer is not entitled to due
process, hence, the finding of the Voluntary Arbitrator, however, was
premature and null and void, and there is a need to remand the case to the
Voluntary Arbitrator to allow Unicraft to present evidence. As such, the
Court of Appeals committed grave abuse of discretion amounting to lack of
jurisdiction when it ordered the immediate execution of the Voluntary
Arbitrator's decision.  findings of labor officials who are deemed to have acquired expertise in
Abalos v. Philex Mining
Held: A basic tenet in our rules of procedure is that an award
that is final and executory cannot be amended or modified anymore.
Nothing is more settled in law than that once a judgment attains finality it
thereby becomes immutable and unalterable. It may no longer be
modified in any respect, even if the modification is meant to correct what is
perceived to be an erroneous conclusion of fact or law, and regardless of
whether the modification is attempted to be made by the court rendering it
or by the highest court of the land.
However, this rule is subject to exceptions as stated in the case
of David vs. CA, 316 SCRA 710 (1999), cited by respondent:
One exception is that where facts and/or events transpire after a
decision has become executory, which facts and/or events present a
supervening cause or reason which renders the final and executory
decision no longer enforceable.  a.
Under the law, the court may modify or alter a judgment
even after the same has become executory whenever circumstances
transpire rendering its execution unjust and inequitable, as where
certain facts and circumstances justifying or requiring such
modification or alteration transpired after the judgment has become
final and executory.
The fact that the decision has become final does not preclude a
modification or an alteration thereof because even with the finality of
judgment, when its execution becomes impossible or unjust, it may be
modified or altered to harmonize the same with justice and the facts.
In Deltaventures Resources Inc. vs. Cabato, 327 SCRA 521
(2000), we held that “jurisdiction once acquired is not lost upon the
instance of the parties but continues until the case is terminated.” The
power of a voluntary arbitrator to issue a writ of execution carries with
it the power to inquire into the correctness of its execution and to
consider whatever supervening events transpire during execution.
Therefore, we are in agreement with the appellate court that a voluntary
arbitrator has jurisdiction to amend the mode of executing an award if
and when the case merits such amendment.
However, we find respondent’s reliance on the doctrine of
“strained relations” misplaced. In Mercury Drug Corporation vs.
Quijano, we stated that said doctrine is inapplicable to a situation where
the employee has no say in the operation of the employer’s business.  capacity as Ex-Officio Voluntary Arbitrators under
Petitioners herein are part of the rank-and-file workforce; they
are cooks, miners, helpers and mechanics of the respondent.
As held also in the Mercury Drug case:
To protect labor’s security of tenure, we emphasize that the
doctrine of strained relations should be strictly applied so as not to
deprive an illegally dismissed employee of his right to reinstatement.
Every labor dispute almost always results in strained relations and the
phrase cannot be given an overarching interpretation, otherwise an
unjustly dismissed employee can never be reinstated.
Considering the circumstances in the present case, we find
that the only issue to be resolved is whether the supervening events are
grave enough to warrant a modification in the execution of the
judgment.  Article 129 contemplates the recovery of wages and other
Both the voluntary arbitrator and the Court of Appeals found
that reinstatement is no longer possible due to the fact that respondent has
been continuously suffering business losses and reducing the number of its
employees pending litigation, and so the positions held by petitioners were
abolished as a cost-cutting measure.  The following requisites for the valid exercise of
Page 86 of 117
Despite our sympathy for the workers’ plight, however, we find
no legal support for their opposition to the conclusion and findings of the
voluntary arbitrator and the Court of Appeals.
On record, there is no showing that the abolition of the
petitioners positions was capricious or whimsical. The appellate court, as
the evidence. As confirmed by the appellate court, the voluntary arbitrator
also found that petitioners reinstatement had become not only inappropriate
but also impossible.
Regrettably, petitioners now raise questions the determination of
which would require the Court to look into the evidence adduced by the
parties. This cannot be done in a petition for review on certiorari. It is
outside its purview under Rule 45 of the 1997 Rules of Court. Factual
matters within their respective jurisdiction are generally accorded not only
respect but even finality, and bind us when supported by substantial
evidence.
E. DOLE REGIONAL DIRECTORS
The DOLE Regional Directors are the duly authorized
representatives of the DOLE Secretary referred to in Article 128 of
the Labor Code which grants to them both visitorial and
enforcement powers. They are in charge of the administration and
enforcement of labor standards within their respective territorial
jurisdiction [Atilano v. De la Cruz].
The DOLE Regional Directors have original and
exclusive jurisdiction over the following cases:
Visitorial (inspection) cases under Article 37 of the
Labor Code referring to the inspection of the
premises, books of accounts and records of any
person or entity covered by the Title I, Book I,
Labor Code.
b. Visitorial (inspection) and enforcement cases under
Article 128, (either routine or initiated through a
complaint).
c. Visitorial cases under Article 289, involving
examination of books of accounts of independent
unions, local chapters/chartered locals and workers’
associations.
d. Occupational safety and health violations.
e. Small money claims cases arising from labor
standards violations in an amount not exceeding
P5000.00 and not accompanied with a claim for
reinstatement under Article 129.
f. Cases related to private recruitment and placement
agencies for local employment.
g. Cases submitted for voluntary arbitration in their
D.O. No. 83-07
h. Request for SEBA certification when made in an
unorganized establishment with only one (1)
legitimate union.
1. Small Money Claims Cases
The DOLE Regional Director has original jurisdiction
over small money claims cases arising from labor standards
violations in the amount not exceeding P5000.00 and not
accompanied with a claim for reinstatement under Article 129 of
the Labor Code.
monetary claims and benefits, including legal interest, owing to an
employee arising from employer-employee relationship provided
the claim does not exceed P5000.00
jurisdiction over small money claims must all concur, to wit:
 a. The claim is presented by an employee or domestic
worker or kasambahay; a. Article 37 treats of the visitorial power of the DOLE
b. The claimant, no longer being employed, does not Secretary and the DOLE Regional Directors in
seek reinstatement; and relation to recruitment and placement of workers for
c. The aggregate money claim of the employee does both local and overseas employment.
not exceed P5000.00. b. Article 289 treats of the visitorial power of the
DOLE Secretary and the DOLE Regional Directors
In the absence of any of the aforesaid three (3) requisites, to inquire into the financial activities of legitimate
the Labor Arbiters have original and exclusive jurisdiction over all labor organizations.
claims arising from employer-employee relations, other than claims
for employees’ compensation, social security, PhilHealth and Article 129 vs. Article 128
maternity benefits.
Article 129 Article 128
2. Visitorial and Enforcement Powers Adjudication powers Visitorial and enforcement powers
Article 128 basically enunciates the three kinds of power Power to hear and decide any Inspection of establishments and
claim for recovery of wages, the issuance of orders to comply
which the DOLE Secretary and/or the Regional Directors, his duly
simple (small) money claims, and with labor standards, wage orders,
authorized representatives, may exercise in connection with the other benefits of employees, and other labor laws and
administration and enforcement of the labor standards provisions of domestic worker, or kasambahay, regulations
the Labor Code and of any labor law, wage order or rules and arising from a severed employer-
regulations issued pursuant thereto. employee relationship
No employer-employee Employment relationship is
What is being inspected in the exercise of the visitorial
relationship required
and enforcement powers granted to the DOLE Secretary or the Appealable to the NLRC Appealable to the DOLE
DOLE Regional Directors under Article 128 is the employer- Secretary
establishment and not the employees thereof. Consequently, in case
of a finding of violation of the labor standards, the awards granted 3. Appeals from Decisions of DOLE Regional
in the inspection case are not confined to employees who signed Directors
the complaint inspection but are equally applicable to all those who Decisions in the following cases relevant and related to
were employed by the establishment concerned at the time the labor relations are appealable to the BLR Director:
complaint was filed, even if they were not signatories [Maternity
Children’s Hospital v. Secretary of Labor]. a. Visitorial cases under Article 289, involving
examination of books of accounts of independent
Grant of Another Visitorial Power Under Articles 37 unions, local chapters/chartered locals and workers’
and 289 associations;
Besides the visitorial power granted under Article 128, b. Union registration-related cases such as:
another visitorial power is granted to the DOLE Secretary and the
DOLE Regional Directors under Article 37 and 289 of the Labor (i) Denial of applications for union registration
Code, to wit: of independent unions, local chapters and
workers’ associations;
Article 37. Visitorial Power. The Secretary of Labor (ii) Revocation or cancellation of registration
or his duly authorized representatives may, at any time, inspect of said unions
the premises, books of accounts and records of any person or
entity covered by this Title, require it to submit reports regularly
on prescribed forms, and act on violation of any provisions of
c. Notice of merger, consolidation, affiliation and
this Title. change of name of said unions and or petition for
denial thereof;
Article 289. [274] Visitorial Power. The Secretary of d. CBA-related cases, such as:
Labor and Employment or his duly authorized representative is
hereby empowered to inquire into financial activities of (i) Applications for registration of single-
legitimate labor organizations upon the filing of a complaint enterprise CBAs or petition for
under oath and duly supported by the written consent of at least
deregistration thereof;
twenty percent (20%) of the total membership of the labor
organization concerned and to examine their books of accounts (ii) Petition for denial of registration of
and other records to determine compliance or non-compliance single-enterprise CBAs or denial of
with the law and to prosecute any violations of the law and the petition thereof.
union constitution and by-laws: Provided, That such inquiry or
examination shall not be conducted during the sixty (60) days Decisions of the DOLE Regional Directors in the
freedom period nor within the thirty (30) days immediately following cases which are not related to labor relations are
preceding the date of election of union officials. appealable to the DOLE Secretary and not to the BLR Director:

Article 128 should not be confused with Articles 37 and a. Visitorial (inspection) cases under Article 37;
289 because the purpose and object of the DOLE Secretary’s b. Visitorial (inspection) and enforcement cases under
exercise of his visitorial power provided thereunder are completely Article 128, (either routine or initiated through a
distinct from each other. complaint);
While Article 128 dwells on the visitorial and c. Occupational safety and health violations;
enforcement powers of the DOLE Secretary to inquire into the d. Cases related to private recruitment and placement
employer’s compliance with labor standards prescribed under labor agencies (PRPAs) for local employment, such as:
laws and social legislations, the purposes of the other articles are
different, thus: (i) Application for license or denial thereof;

Page 87 of 117
 (ii) Complaints for suspension or
cancellation of license by reason of
administrative offenses;
(iii) Complaints for illegal recruitment; and
(iv) Petition for closure of agency.
Additionally, their decisions on small money claims
cases arising from labor standards violations in an amount not
exceeding P5000.00 and not accompanied with a claim for
reinstatement under Article 129 are appealable to the NLRC.
F. DOLE SECRETARY
1. Visitorial and Enforcement Powers
Article 128. Visitorial and Enforcement Power. (a) The
Secretary of Labor and Employment or his duly authorized
representatives, including labor regulation officers, shall have access to
or night whenever work is being undertaken therein, and the right to
copy therefrom, to question any employee and investigate any fact,
condition or matter which may be necessary to determine violations or
which may aid in the enforcement of this Code and of any labor law,
wage order or rules and regulations issued pursuant thereto.
(b) Notwithstanding the provisions of Articles 129 and 21789
of this Code to the contrary, and in cases where the relationship of
employer-employee still exists, the Secretary of Labor and
Employment or his duly authorized representatives shall have the
power to issue compliance orders to give effect to the labor standards
provisions of this Code and other labor legislation based on the
findings of labor employment and enforcement officers or industrial
safety engineers made in the course of inspection. The Secretary or his
duly authorized representatives shall issue writs of execution to the
appropriate authority for the enforcement of their orders, except in
cases where the employer contests the findings of the labor
employment and enforcement officer and raises issues supported by
documentary proofs which were not considered in the course of
inspection.
An order issued by the duly authorized representative of the
Secretary of Labor and Employment under this Article may be
appealed to the latter. In case said order involves a monetary award,
an appeal by the employer may be perfected only upon the posting of a
cash or surety bond issued by a reputable bonding company duly
accredited by the Secretary of Labor and Employment in the amount
equivalent to the monetary award in the order appealed from.
(c) The Secretary of Labor and Employment may likewise
order stoppage of work or suspension of operations of any unit or
department of an establishment when non-compliance with the law or
implementing rules and regulations poses grave and imminent danger
to the health and safety of workers in the workplace. Within twenty-
four hours, a hearing shall be conducted to determine whether an
order for the stoppage of work or suspension of operations shall be
lifted or not. In case the violation is attributable to the fault of the
employer, he shall pay the employees concerned their salaries or wages
during the period of such stoppage of work or suspension of operation.
(d) It shall be unlawful for any person or entity to obstruct,
impede, delay or otherwise render ineffective the orders of the
Secretary of Labor and Employment or his duly authorized
representatives issued pursuant to the authority granted under this
Article, and no inferior court or entity shall issue temporary or
permanent injunction or restraining order or otherwise assume
jurisdiction over any case involving the enforcement orders issued in
accordance with this Article.
(e) Any government employee found guilty of violation of, or
abuse of authority, under this Article shall, after appropriate
administrative investigation, be subject to summary dismissal from the
service.
(f) The Secretary of Labor and Employment may, by
appropriate regulations, require employers to keep and maintain such
employment records as may be necessary in aid of his visitorial and
enforcement powers under this Code.
Page 88 of 117
Article 37. Visitorial Power. The Secretary of Labor or his
duly authorized representatives may, at any time, inspect the premises,
books of accounts and records of any person or entity covered by this
Title, require it to submit reports regularly on prescribed forms, and
act on violation of any provisions of this Title.
Article 289. [274] Visitorial Power. The Secretary of Labor
and Employment or his duly authorized representative is hereby
empowered to inquire into financial activities of legitimate labor
organizations upon the filing of a complaint under oath and duly
supported by the written consent of at least twenty percent (20%) of
the total membership of the labor organization concerned and to
examine their books of accounts and other records to determine
compliance or non-compliance with the law and to prosecute any
violations of the law and the union constitution and by-laws: Provided,
That such inquiry or examination shall not be conducted during the
sixty (60) days freedom period nor within the thirty (30) days
immediately preceding the date of election of union officials.
As a summary, the DOLE Secretary has the following
enforcement powers:
a. To issue compliance orders to give effect to the
labor standards provisions of the Labor Code and
other labor legislation [Article 128(b)];
b. To issue writs of execution to the appropriate
authority for the enforcement of their orders, except
in cases where the employer contests the findings of
the labor and employment officers and raises issues
supported by documentary proofs which were not
considered in the course of inspection [Ibid].
c. To order stoppage of work or suspension of
operations of any unit or department of an
establishment when non-compliance with the law or
implementing rules and regulations poses grave and
imminent danger to the health and safety of workers
in the workplace [Article 128(c)];
d. To require employers to keep and maintain
employment records as may be necessary in aid of
his visitorial and enforcement powers under the
Labor Code [Article 128(f)].
2. Power to Suspend Effects of Termination
The DOLE Secretary may suspend the effects of
termination pending resolution of the dispute in the event of a
prima facie finding by the appropriate official of the DOLE before
whom the dispute is pending that:
a. The termination may cause a serious labor dispute;
and/or
b. The termination is in implementation of a mass lay-
off [Article 292(b)].
The Labor Arbiters and the Voluntary Arbitrators or
panel of Voluntary Arbitrators, as the case may be, are the
“appropriate officials” referred to in Article 292(b) who may make
the preliminary determination of the existence of prima facie
evidence that the termination will cause a serious labor dispute or
is being made in implementation of a mass lay-off. Such prima
facie finding will then become the basis for the issuance by the
DOLE Secretary of his order suspending the effects of termination
which, as earlier emphasized, would mean the immediate
reinstatement of the terminated employees pending the final
resolution of their termination case.
Suspension of Termination vs. Assumption or
Certification
 Suspension of Termination Assumption or Certification workers’ associations operating in more than one
Involves only the issue of Applicable to all labor disputes, region;
termination of employment which irrespective of the grounds, d. All cases decided by the POEA in its original and
may cause serious labor dispute or provided it will cause strikes or
exclusive jurisdiction.
mass lay-off lockouts in industries
indispensable to national interest
Requires preliminary Does not require preliminary 4. Contempt Powers
determination of the existence of prima facie determination. In fact,
prima facie evidence prior notice and hearing is not Article 231. [225] Contempt Powers of the Secretary. In the
required exercise of his powers under this Code, the Secretary of Labor may
Serious labor dispute may or may Labor dispute will cause or likely
hold any person in direct or indirect contempt and impose the
not involve a strike lockout to cause a strike or lockout
appropriate penalties therefor.
Irrespective of the nature of the Only in industries indispensable
business of the employer to national interest
Remedy is immediate Remedy is automatic return to 5. Petition for Certiorari under Rule 65
reinstatement pending resolution work of the strikers or locked-out It has long been settled that the remedy of an aggrieved
of the termination case employees or enjoining the strike party in a decision or resolution of the Secretary of Labor is to
or lockout.
timely file a motion for reconsideration as a precondition for any
further or subsequent remedy, and then seasonably file a special
The case of University of Sto. Tomas v. NLRC and UST
civil action for certiorari under Rule 65 of the 1997 Rules on Civil
Faculty Union illustrates the situation where the DOLE Secretary
Procedure; it is a condition sine qua non to afford an opportunity
ordered both the suspension of the effects of termination and the
for the correction of the error or mistake complained of [Philtranco
return to work of employees pursuant to a certification order. In
Service v. Philtranco Workers Union].
this case, all the sixteen (16) officers and directors of the faculty
Accordingly, the Secretary of Labor’s Decision is a
union were terminated on the grounds of grave misconduct, serious
proper subject of certiorari. In fact, the Court said that there is no
disrespect to a superior and conduct unbecoming a faculty member.
distinction: when the Secretary of Labor assumes jurisdiction over
As a result of said dismissal, some faculty members staged mass
a labor case in an industry indispensable to national interest "he
leaves of absence for several days, disrupting classes in all levels at
exercises great breadth of discretion" in finding a solution to the
the university., the faculty union filed a complaint for illegal
parties’ dispute. "[T]he authority of the Secretary of Labor to
dismissal and unfair labor practice with the Labor Arbiter who, on
assume jurisdiction over a labor dispute causing or likely to cause a
a prima facie showing that the termination was causing a serious
strike or lockout in an industry indispensable to national interest
labor dispute, certified the matter to the DOLE Secretary for a
includes and extends to all questions and controversies arising
possible suspension of the effects of termination. On this basis,
therefrom. This power may not be the subject of appeal [Ibid].
Secretary Franklin Drilon issued an order suspending the effects of
the termination of the union officers and directors and directing the
G. BUREAU OF LABOR RELATIONS
university to accept them back to work under the same terms and
conditions prevailing prior to their dismissal. Later, on the asis of a
1. Administrative Functions
petition for assumption or certification filed by the university,
The BLR has to exercise its administrative functions over
Drilon modified said order by certifying the labor dispute to the
the following:
NLRC for compulsory arbitration pursuant to Article 278(g). He
accordingly ordered the university to readmit all its faculty
a. Applications for registration of federations, national
members, including the 16 union officers and directors, under the
unions or workers’ associations operating in more
same terms and conditions prevailing prior to the dispute.
than one region.
Based on the foregoing, it may be said that suspension of
b. Notice for change of name of a registered labor
the effects of termination has the same effect as assumption or
organization.
certification as far as the reinstatement of the affected employees is
c. Notice of merger or consolidation of federations or
concerned.
national unions
d. Keeping of registry of legitimate labor organizations
3. Exclusive Appellate Jurisdiction
e. Petition for the conduct of election of officers of
The DOLE Secretary has appellate jurisdiction over the
federations, national, or industry unions and trade
following cases:
union centers.
f. Request for examination of books of accounts of
a. Orders issued by the Regional Director under:
federations or national unions and trade union
centers (Article 289)
(i) Article 128
g. Petition for cancellation or application for voluntary
(ii) Occupational safety and health violations;
dissolution of federations, national or industry
(iii) Complaints against private recruitment and
unions and trade union centers.
placement agencies (PRPAs) for local
h. Registration of multi-employer collective bargaining
employment.
agreements.
b. Order of the Med Arbiter granting the petition for
NOTE: All issues pertaining to the (1) validity of the
Certification Election (in an organized
petitioning union’s certificate of registration or its legal personality
establishment) and denying the petition for
as a labor organization, (2) validity of registration and execution of
certification election (either in organized or
CBA shall be heard and resolved by the Regional Director in an
unorganized establishment);
independent petition or cancellation of its registration and not by
c. All cases decided by the BLR in its original and
the Mediator-Arbiter in the petition or certification election, unless
exclusive jurisdiction including denial of application
the petitioning union is not listed in the Department’s roster of
for union registration or cancellation of union
registration of federations, national unions or
Page 89 of 117
legitimate labor organizations, or an existing collective bargaining
agreement is not registered with the Department.
2. Exclusive Original Jurisdiction
Article 232. [226] Bureau of Labor Relations. The Bureau of
Labor Relations and the Labor Relations Divisions in the regional
offices of the Department of Labor shall have original and exclusive
authority to act, at their own initiative or upon request of either or
both parties, on all inter-union and intra-union conflicts, and all
disputes, grievances or problems arising from or affecting labor-
management relations in all workplaces, whether agricultural or non-
agricultural, except those arising from the implementation or
interpretation of collective bargaining agreements which shall be the
subject of grievance procedure and/or voluntary arbitration.
The Bureau shall have fifteen (15) working days to act on
labor cases before it, subject to extension by agreement of the parties.
The BLR has exclusive original jurisdiction over:
a. Intra/inter-union disputes of federations, national or
industry unions, trade union centers, its officers or
member organizations.
b. Petitions for cancellation of registration of
federations, national or industry unions, trade union
centers.
Labor Relations Division (LRD) refers to the following
units in the DOLE Regional Office: (1) Labor Organization and
CBA Registration Unit; and (2) Med-Arbitration Unit.
The BLR and the LRDs in the Regional Offices have
concurrent jurisdiction over the cases described in Article 232. This
concurrent character is stressed not only in the provision of this
article but in Article 219 of the Labor Code which defines the term
“Bureau” as referring to both the BLR and/or the LRD in the
regional offices.
For purposes of clarifying the issue of jurisdiction over
cases mentioned in Article 232, there is a need to cite first the
following labor officials who exercise such jurisdiction, to wit:
a. Mediator-Arbiters (Med-Arbiters);
b. DOLE Regional Directors; and
c. BLR Director
3. Mediator-Arbiter
The Mediator-Arbiter refers to an officer in the Regional
Office or in the BLR authorized to hear and decide representation
cases, inter-union or intraunion disputes and other related labor
relations disputes, except cancellation of union registration cases.
Thus, the cases falling under the original and exclusive
jurisdiction of the Mediator-Arbiter are as follows:
a. Inter-union disputes (representation or certification
election conflicts), such as
(i) Request for SEBA certification when made
in an unorganized establishment with only
one or more than one (1) legitimate union
or in an organized establishment, or
(ii) Petition for certification election, consent
election, run-off election or re-run election;
b. Intra-union disputes;
c. Other related labor relations disputes;
d. Contempt cases.
Page 90 of 117
Other related labor relations dispute refers to any conflict
between a labor union and the employer or any individual, entity or
group that is not a labor union or workers’ association. More
specifically, it may refer to any of the following:
a. Any conflict between:
(i) A labor union and an employer, or
(ii) A labor union and a group that is not a
labor organization; or
(iii) A labor union and an individual who is
not a member of such union.
b. Cancellation of registration of unions and workers’
associations filed by individuals other than their
members, or by a group that is not a labor
organization; and
c. A petition for interpleader involving labor relations.
The Mediator-Arbiter has the following administrative
functions:
a. Grant or deny a Petition for Certification Election
b. Conduct preliminary conference and hearing to
determine: (i) the bargaining unit to be represented;
(ii) contending labor unions; (iii) possibility of a
consent election; (iv) existence of any of the bars to
certification election under Section 3 of this Rule;
and (v) such other matters as may be relevant for the
final disposition of the case.
NOTE: The Med-Arbiter can rule on all issues pertaining
to the existence of employer-employee relationship raised before
the Med-Arbiter during the hearing and in the pleadings
4. Appeals from Decisions of Med-Arbiters
Decisions in cases falling under the original and
exclusive jurisdiction of the Med-Arbiters are appealable as
follows:
a. Inter-union disputes (representation or certification
election conflicts) – DOLE Secretary
(i) Request for SEBA Certification when
made in an unorganized establishment
with only one or more than 1 legitimate
union or in an organized establishment –
DOLE Secretary
(ii) Petition for certification election, consent
election, run-off election or re-run
election – DOLE Secretary
b. Intra-union disputes – BLR Director
c. Other related labor relations disputes – BLR
Director
d. Injunction cases – BLR Director
e. Contempt Cases – BLR Director
5. BLR Director
The following cases fall under the original jurisdiction of
the BLR Director:
a. Complaints and petitions involving the application
for registration, revocation or cancellation of
registration of federations, national unions, industry
 unions, trade union centers and their local
chapters/chartered locals, affiliates and member
organizations;
b. Request for examination of books of accounts of
said labor organizations under Article 289;
c. Intra-union disputes involving said labor
organizations;
d. Notice of merger, consolidation, affiliation and
change of name of said unions and or petition for
denial thereof;
e. Registration of multi-employer CBAs or petitions
for deregistration thereof;
f. Contempt cases.
6. Appeals from Decisions of BLR Director
Decisions in the cases falling under the original and
exclusive jurisdiction of the BLR Director are all appealable to the
DOLE Secretary, to wit:
a. Complaints and petitions involving the application
for registration, revocation, or cancellation of
registration of federations, national unions, industry
unions, trade union centers and their local
chapters/chartered locals, affiliates and member
organizations;
b. Request for examination of books of accounts of
said labor organizations under Article 289 of the
Labor Code;
c. Intra-union disputes involving said labor
organizations;
d. Notice of merger, consolidation, affiliation and
change of name of said unions and or petition for
denial thereof;
e. Registration of multi-employer CBAs or petitions
for deregistration thereof; and
f. Contempt cases.
The Secretary of Labor and Employment has no
jurisdiction over decisions of the Bureau of Labor Relations
rendered in the exercise of its appellate power to review the
decision of the Regional Director in a petition to cancel the union’s
certificate of registration, said decisions being final and
unappealable [Abbott v. Abbot Union].
H. NATIONAL CONCILIATION AND MEDIATION
BOARD (NCMB)
The NCMB is an agency attached to the DOLE
principally in-charge of the settlement of labor disputes through
conciliation, mediation and voluntary arbitration. It is charged with
the promotion of voluntary approaches to labor dispute prevention
and settlement. It also administers the voluntary arbitration
program; maintains/updates a list of voluntary arbitrators; compiles
arbitration awards and decisions; and provides counselling and
preventive mediation assistance particularly in the administration
of collective agreements. It is with the NCMB that Notices of
Strike or Lockout are filed.
The NCMB is not a quasi-judicial agency. Its decisions,
not having been rendered in the exercise of its quasi-judicial
functions, cannot be elevated to the Court of Appeals under Rule
43 of the Rules of Court [Tabigue v. International Copra Export
Corporation].
1. Conciliation and Mediation
Both terms refer to a process whereby a neutral third
person usually called Conciliator (in case of conciliation) or
Mediator (in case of mediation), intervenes in a dispute involving
Page 91 of 117
two or more conflicting parties for the purpose of reconciling their
differences or persuading them into adjusting or settling their
dispute. The Conciliator or Mediator normally does not make or
render any decision, his role being confined to the functions afore-
described.
Conciliator-Mediator
A Conciliator-Mediator refers to an officer of the NCMB
whose principal function is to assist in the settlement and
disposition of labor-management disputes through conciliation and
preventive mediation, including the promotion and encouragement
of voluntary approaches to labor disputes prevention and settlement
[D.O. No. 40-03].
2. Preventive Mediation
Preventive mediation, as a remedy, is not found in the
Labor Code. But under the law which created the NCMB, it is
expressly stated that one of its functions is to provide preventive
mediation to disputing parties [E.O. No. 126]. It covers potential
labor disputes that are the subject of a formal or informal request
for conciliation and mediation assistance sought by either or both
parties or upon the initiative of the NCMB to avoid the occurrence
of actual labor disputes and in order to remedy, contain or prevent
its degeneration into a full-blown dispute through amicable
settlement [NCMB Manual of Procedures].
Preventive mediation proceeding may be intiated in two
(2) ways:
a. By filing a notice or request of preventive
mediation, as distinguished from a notice of
strike/lockout; or
b. By conversion of the notice of strike/lockout into a
preventive mediation case.
Procedurally, the filing of the notice of preventive
suspension is the first step to submit a case for mediation. It is only
after this step that a submission agreement may be entered into by
the parties concerned [Insular Hotel Employees Union v.
Waterfront Insular Hotel Davao]. Moreover, just like in notices of
strike or lockout, only certified SEBAs may file a notice or request
for preventive mediation in cases of bargaining deadlocks and
unfair labor practices, the only two (2) grounds that may be
invoked in support of a strike or lockout [Ibid].
As distinguished from a notice of strike/lockout, “notice
of preventive mediation” refers to the notification filed by either an
employer or a duly registered labor union with the NCMB-DOLE
informing the latter of its desire to submit the issues between them
for preventive mediation and conciliation. The issues that may be
submitted for preventive mediation may either be strikeable or non-
strikeable.
In case of strikeable issues, the parties may mutually
agree that the same be treated or converted into a preventive
mediation case, in which event, no strike or lockout may be legally
and validly mounted based on the same issues since their
conversion into a preventive mediation case has the effect of
dismissing the notice of strike/lockout and removing it from the
docket of notices of strike/lockout.
In case of non-strikeable issues raised in a notice of strike
or notice of lockout, the NCMB may, motu proprio, convert the
same into a preventive mediation case or, alternatively, refer said
issues to voluntary arbitration, if they are in the nature of
unresolved grievances or to the Med-Arbiter, if they involve
representation or inter-union disputes.
3. Authority to Convert a Notice of Strike/Lockout
Into a Preventive Mediation Case
 The NCMB has the authority to convert a notice of
strike/lockout filed by the union/employer into a preventive
mediation case under any of the following circumstances:
a. When the issues raised in the notice of
strike/lockout are not strikeable in character.
b. When the party which filed the notice of
strike/lockout voluntarily asks for the conversion.
c. When both parties to a labor dispute mutually agree
to have it subjected to preventive mediation
proceeding.
Such authority is in pursuance of the NCMB’s duty to
exert all efforts at mediation and conciliation to enable the parties
to settle their dispute amicably and in line with the State policy of
favoring voluntary modes of settling labor disputes [NCMB
Primer].
I. PROCEDURE
1. Technical Rules
Article 227. [221] Technical Rules not Binding and Prior
Resort to Amicable Settlement. 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,
without regard to technicalities of law or procedure, all in the interest
of due process. In any proceeding before the Commission or any Labor
Arbiter, the parties may be represented by legal counsel but it shall be
the duty of the Chairman, any Presiding Commissioner or
Commissioner or any Labor Arbiter to exercise complete control of the
proceedings at all stages.
Any provision of law to the contrary notwithstanding, the
Labor Arbiter shall exert all efforts towards the amicable settlement of
a labor dispute within his jurisdiction on or before the first hearing.
The same rule shall apply to the Commission in the exercise of its
original jurisdiction.
It is well settled that the application of technical rules of
procedure may be relaxed to serve the demands of substantial
justice, particularly in labor cases. Again, while as a rule, the Court
strictly adheres to the rules of procedure, it may take exception to
such general rule when a strict implementation of the rules would
cause substantial injustice to the parties [Reyes v. Global Beer].
Millenium Erectors v. Magallanes
Held: The NLRC did not err in treating respondent’s motion for
reconsideration as an appeal, the presence of some procedural flaws
including the lack of verification and proof of service notwithstanding.
In labor cases, rules of procedure should not be applied in a
very rigid and technical sense.  They are merely tools designed to
facilitate the attainment of justice, and where their strict application would
result in the frustration rather than promotion of substantial justice,
technicalities must be avoided. Technicalities should not be permitted to
stand in the way of equitably and completely resolving the rights and
obligations of the parties. Where the ends of substantial justice shall be
better served, the application of technical rules of procedure may be
relaxed.
Respecting the lack of verification, Pacquing v. Coca-Cola
Philippines, Inc. instructs:
As to the defective verification in the appeal memorandum
before the NLRC, the same liberality applies.  After all, the
requirement regarding verification of a pleading is formal, not
jurisdictional. Such requirement is simply a condition affecting the form of
pleading, the non-compliance of which does not necessarily render the
pleading fatally defective. Verification is simply intended to secure an
assurance that the allegations in the pleading are true and correct and not
Page 92 of 117
the product of the imagination or a matter of speculation, and that the
pleading is filed in good faith. The court or tribunal may order the
correction of the pleading if verification is lacking or act on the pleading
although it is not verified, if the attending circumstances are such that strict
compliance with the rules may be dispensed with in order that the ends of
justice may thereby be served. 
Huntington v. NLRC
Held: The NLRC is a quasi-judicial agency, hence, initiatory
pleadings filed before it should be accompanied by a certificate of non-
forum-shopping.
Nevertheless, in Loyola v. Court of Appeals, 17 we held that
substantial compliance with the requirement of certificate of non-forum
shopping is sufficient. Here, we find that the certification of non-forum
shopping was not filed simultaneously with the initiatory pleading. But we
held that the filing of the certification within the reglementary period of
filing the initiatory pleading was substantial compliance. The fact that the
Circular requires strict compliance merely underscores its mandatory nature
that it cannot be dispensed with or its requirements altogether disregarded,
but it does not thereby interdict substantial compliance with its provisions
under justifiable circumstances.
Additionally, Supreme Court Administrative Circular No. 04-94,
now Section 5, Rule 7 of the Rules of Civil Procedure, must be construed
and applied to achieve its purpose. The Supreme Court promulgated the
Circular to promote and facilitate the orderly administration of justice. It
should not be interpreted with such absolute literalness as to subvert its own
ultimate and legitimate objective which is the goal of all rules of procedure
- that is, to achieve substantial justice as expeditiously as possible.
Meanwhile, in the case of Melo v. Court of Appeals,  we said that
in those cases where we excused non-compliance with the requirements of
Supreme Court Administrative Circular No. 04-94, there were special
circumstances or compelling reasons that made the strict application of said
Circular clearly unjustified. The rule is crystal clear and plainly
unambiguous that the certification is a mandatory part of an initiatory
pleading, i.e., the complaint, and its omission may be excused only upon
manifest equitable grounds proving substantial compliance therewith.
In the present case, the respondents reasoned that they failed to
comply with the Circular because the complaint form supplied by the Labor
Arbiter did not contain the required undertaking. They simply filled up the
blanks therein. Hence, we agree with the Court of Appeals’ conclusion that
respondents should not be faulted for not having the certification of non-
forum shopping in their complaint.
The strict application of the Circular in the instant case, in our
view, would be contrary to the goals of the Rules of Civil Procedure – that
is, "just, speedy and inexpensive disposition of every action and
proceeding."23 Technical rules of procedure in labor cases are not to be
strictly applied if the result would be detrimental to the working-man. Thus,
the NLRC did not err in ordering that the corrections be made at the
Arbitration Branch, since the NLRC has also the power to order corrections
in case of irregularities in the proceedings before it.
Anent petitioners’ contention that the Labor Arbiter did not
acquire jurisdiction over the case for failure to include the certificate of
non-forum shopping in the complaint, this contention finds no support in
law and in jurisprudence. Supreme Court Administrative Circular No. 04-
94 is mandatory but not jurisdictional, as jurisdiction over the subject or
nature of the cause of action is conferred by law
2. Appearances and Attorney’s Fees
Article 228. [222] Appearances and Fees. 172 (a) Non-
lawyers may appear before the Commission or any Labor Arbiter
only:
1. If they represent themselves; or
2. If they represent their organization or members thereof.
(2) No attorney’s fees, negotiation fees or similar charges of
any kind arising from any collective bargaining agreement shall be
imposed on any individual member of the contracting union: Provided,
However, that attorney’s fees may be charged against union funds in
an amount to be agreed upon by the parties. Any contract, agreement,
or arrangement of any sort to the contrary shall be null and void.
 Article 228 of the Labor Code requiring an individual
written authorization as a prerequisite to wage deductions seeks to
protect the employee against unwarranted practices that would
diminish his compensation without his knowledge and
consent.  However, for all intents and purposes, the deductions
required of the petitioner and the employees do not run counter to
the express mandate of the law since the same are not unwarranted
or without their knowledge and consent. Also, the deductions for
the union service fee in question are authorized by law and do not
require individual check-off authorizations [RCPI v. Secretary of
Labor].
J. PRESCRIPTION OF ACTIONS
Filing a case with the grievance machinery tolls the
running of the prescriptive period.
1. Money Claims
The prescriptive period of money claims (like separation
pay) and benefits arising from employer-employee relationship is
three (3) years under Article 306 of the Labor Code, reckoned from
the time the cause of action accrued; otherwise, they shall be
forever barred [IRR].
Money claims under Article 306 include those arising
from:
a. Law
b. CBA
c. Incremental proceeds from tuition increases
d. Overseas employment of OFWs.
A cause of action for money claims accrues upon the
categorical denial of a claim. The three-year prescriptive period is
not applicable to execution of final judgment which should be done
within 5 years.
2. Illegal Dismissal
The 3-year prescriptive period in Article 291 solely
applies to money claims but not to illegal dismissal cases which are
not in the nature of money claims. The prescriptive period of illegal
dismissal cases is 4 years under Article 1146 of the Civil Code.
Article 291 covers claims for overtime pay, holiday pay, service
incentive leave pay, bonuses, salary differentials, and illegal
deductions by an employer.  It also covers money claims arising
from seafarer contracts [Arriola v. Pilipino Star Ngayon].
Settled is the rule that when one is arbitrarily and
unjustly deprived of his job or means of livelihood, the action
instituted to contest the legality of one’s dismissal from
employment constitutes, in essence, an action predicated upon an
injury to the rights of the plaintiff, as contemplated under Article
1146 of the New Civil Code, which must be brought within four
years [Montero v. Times Transportation].
3. Unfair Labor Practice (ULP)
The prescriptive period for criminal complaints involving
ULPs is one (1) year from the time the acts complained of were
committed; otherwise, they shall be forever barred [Article 305].
However, before a criminal case for ULP can be filed, it
is a pre-requisite that a labor case for ULP involving the same set
of facts should first be initiated with the competent labor court. It is
only upon a finding of guilt in the labor case and after the decision
herein has become final and executory that the one-year
prescriptive period to prosecute the criminal aspect of ULP starts to
run.
4. Offenses Under The Labor Code
The prescriptive period of all criminal offenses penalized
under the Labor Code and its IRR is three (3) years from the time
of commission thereof [Article 305].
Page 93 of 117
5. Illegal Recrutiment Cases
The prescriptive period of simple illegal recruitment
cases is five (5) years [RA 8042].
The prescriptive period of illegal recruitment cases
involving economic sabotage is twenty (20) years [Ibid].
6. Actions Involving Union Funds
Actions involving union funds must be brought within 3
years from the date of submission of audited financial statements or
from the date they should have been submitted as required by law,
whichever comes first.
VIII
TERMINATION OF EMPLOYMENT BY
EMPLOYER
A. SECURITY OF TENURE
Article 294. Security of Tenure. In cases of regular
employment, the employer shall not terminate the services of an
employee except for a just cause or when authorized by this Title. An
employee who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other privileges and
to his full backwages, inclusive of allowances, and to his other benefits
or their monetary equivalent computed from the time his compensation
was withheld from him up to the time of his actual reinstatement.
Termination Law is the implementation of security
tenure which is a policy translated by the 1987 Constitution in
Article 13 in Section 3 which states:
The State shall afford full protection to labor, local
and overseas, organized and unorganized, and promote full
employment and equality of employment opportunities for all.
It shall guarantee the rights of all workers to self-
organization, collective bargaining and negotiations, and
peaceful concerted activities, including the right to strike in
accordance with law. They shall be entitled to security of tenure,
humane conditions of work, and a living wage. They shall also
participate in policy and decision-making processes affecting
their rights and benefits as may be provided by law.
B. JUST CAUSES
Article 297.Termination by Employer. An employer may
terminate an employment for any of the following causes:
(a) Serious misconduct or willful disobedience by the
employee of the lawful orders of his employer or representative in
connection with his work;
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust
reposed in him by his employer or duly authorized representative;
(d) Commission of a crime or offense by the employee
against the person of his employer or any immediate member of his
family or his duly authorized representatives; and
(e) Other causes analogous to the foregoing.
Dismissal is cessation of an employment due to a just
cause, attributable to the employee. Termination is cessation of an
employment due to an authorized cause, which is not the fault of
the employee. Dismissal does not merit separation pay;
termination carries with it separation pay.
Tenure is presumed. The burden of proving that the
termination was for a valid or authorized cause shall rest on the
employer.
The just causes in the Labor Code are found in the
following provisions thereof:
 (1) Article 297 [282] - (Termination by the
Employer) which provides for the following
grounds:
(a) Serious misconduct or willful disobedience
by the employee of the lawful orders of his
employer or representative in connection
with his work;
(b) Gross and habitual neglect by the employee
of his duties;
(c) Fraud or willful breach by the employee of
the trust reposed in him by his employer or
duly authorized representative;
(d) Commission of a crime or offense by the
employee against the person of his employer
or any immediate member of his family or
his duly authorized representatives; and
(e) Other causes analogous to the foregoing.
(2) Article 279(a) [264(a)] - (Prohibited
Activities) which provides for the termination of
the following:
(a) Union officers who knowingly participate in
an illegal strike and therefore deemed to
have lost their employment status.
(b) Any employee, union officer or ordinary
member who knowingly participates in the
commission of illegal acts during a strike
(irrespective of whether the strike is legal or
illegal), is also deemed to have lost his
employment status.
(3) Article 278(g) [263(g)] - (National Interest
Cases) where strikers who violate orders,
prohibitions and/or injunctions as are issued by the
DOLE Secretary or the NLRC, may be imposed
immediate disciplinary action, including dismissal
or loss of employment status.
(4) Article 259(e) [248(e)] - (Union Security
Clause) where violation of the union security
agreement in the CBA may result in termination of
employment. Under this clause, the bargaining
union can demand from the employer the
dismissal of an employee who commits a breach
of union security arrangement, such as failure to
join the union or to maintain his membership in
good standing therein. The same union can also
demand the dismissal of a member who commits
an act of disloyalty against it, such as when the
member organizes a rival union.
The Secretary of Labor has extraordinary, express
power to intervene in a labor dispute to enjoin a potential
termination
Article 292 [b] of the Labor Code provides:
Subject to the constitutional right of workers to
security of tenure and their right to be protected against
dismissal except for a just and authorized cause and without
prejudice to the requirement of notice under Article 283 of this
Code, employer shall furnish the worker whose employment is
sought to be terminated a written notice containing a statement
of the causes for termination and shall afford the latter ample
opportunity to be heard and to defend himself with the
assistance of his representative if he so desires in accordance
with company rules and regulations promulgated pursuant to
Page 94 of 117
guidelines set by the Department of Labor and Employment.
Any decision taken by the employer shall be without prejudice
to the right of the worker to contest the validity or legality of his
dismissal by filing a complaint with the regional branch of the
National Labor Relations Commission. The burden of proving
that the termination was for a valid or authorized cause shall rest
on the employer. The Secretary of the Department of Labor and
Employment may suspend the effects of the termination pending
resolution of the dispute in the event of a prima facie finding by
the appropriate official of the Department of Labor and
Employment before whom such dispute is pending that the
termination may cause a serious labor dispute or is in
implementation of a mass lay-off.
1. Serious Misconduct
For serious misconduct or improper behavior to be a just
cause for dismissal, the following requisites must concur:
(a) It must be serious;
(b) It must relate to the performance of the employee’s
duties;
(c) It must show that he has become unfit to continue
working for the employer; and
(d) It must have been performed with wrongful intent.
The 2014 case of Imasen v. Alcon added the 4th requisite
above which, it said, is “equally important and required.” All the
above requisites must concur [Coca-Cola Bottlers v. KMMC-
FFW].
Colegio de San Juan de Letran v. Meris
Held: The fact that eight students were made beneficiaries of
such increase does not justify the irregular alteration since the rule is, the
rating of the pupil should be based on his scholastic record, even if the
same is non-tested or qualitative in nature, as in the case at bar.
Respondent’s prerogative to give her students the grade that they deserve is
not incoherent with having a fair and reasonable basis therefor.
To our mind, the acts of the respondent in altering the grades in
the Clean Records even after the same were already reviewed and approved
by the subject coordinators; of effecting the alterations and erasures without
placing her initials thereon; of not informing the subject coordinators of
such alterations and erasures; of allowing the discrepancies to last without
any effort to reconcile the same to avoid any doubts on the grading system
of petitioner; of refusing to accept the memo informing her of the aforesaid
tampering and snubbing any explanation relevant thereto, are all acts of
transgression of school rules, regulations and policies. Truly, then,
respondent had committed a misconduct, serious enough to warrant her
dismissal from employment under paragraph (a) of Article 282 of the Labor
Code, as well as Section 94(b), Article XVII of the Manual of Regulations
for Private Schools, which provides that the employment of a teacher may
be terminated for negligence in keeping school or student records, or
tampering with or falsification of the same.
Settled Principles
 Serious misconduct implies that it must be of such grave
and aggravated character and not merely trivial or
unimportant.
 Simple or minor misconduct would not justify the
termination of the services of an employee.
 Possession or use of shabu or other drugs is a valid ground
to terminate employment.
 Immorality, as a general rule, is not a just ground to
terminate employment. The exception is when such
immoral conduct is prejudicial or detrimental to the
interest of the employer
 Immoral act committed beyond office hours is a valid
ground to terminate employment.
  Sexual intercourse inside company premises constitutes
serious misconduct.
 The act of a 30-year old lady teacher in falling in love
with a 16-year old student is not immoral.
 Fighting is a ground for termination but only the
instigator or aggressor and not the victim who was
constrained to defend himself should be dismissed.
 Challenging superiors to a fight is a just cause for
termination.
 Assaulting another employee is a just cause for
termination.
 Utterance of obscene, insulting or offensive words
constitutes serious misconduct.
 Gambling within company premises is a serious
misconduct.
 Rendering service to business rival is a just cause to
terminate employment.
 Selling products of a competitor is a just cause for
termination.
 Organizing a credit union by employees in a bank is a
serious misconduct.
 Deceiving a customer for personal gain is a just cause for
termination.
 Contracting work in competition with employer
constitutes serious misconduct.
 Intoxication which interferes with the employee’s work
constitutes serious misconduct.
 The act of a teacher in pressuring a colleague to change
the failing grade of a student is serious misconduct.
 Sexual harassment is a just ground to dismiss.
 Sleeping while on duty is a ground for termination.
 Dismissal is too harsh a penalty for eating while at work.
 Pilferage or theft of company-owned property is a just
cause to terminate.
 Theft of funds or property not owned by employer is not a
ground to terminate.
 Act of falsification is a valid ground to terminate
employment.
 Punching-in of time cards of other employees is a just
cause for termination.
2. Insubordination or Willful Disobedience of
Lawful Orders
One of the fundamental duties of an employer is to obey
all reasonable rules, orders and instructions of the employer. In
order to validly invoke this ground, the following requisites must
be complied with, to wit:
(a) The employee’s assailed conduct must have been
willful or intentional, the willfulness being
characterized by a wrongful and perverse attitude;
and
(b) The order violated must be based on a reasonable
and lawful company rule, regulation or policy and
made known to the employee and must pertain to
the duties for which he has been engaged to
discharge.
Requisites for validity of company rules and
regulations
As far as the second requisite for insubordination or
willful disobedience is concerned, it is required that there should
exist a rule, regulation or policy upon which the order is based
which must be:
(a) Lawful and reasonable;
Page 95 of 117
(b) Sufficiently known to the employee; and
(c) In connection with the duties for which the
employee has been engaged to discharge.
An order which is not based on a rule, regulation or
policy which does not satisfy the foregoing three (3) requisites is
not lawful and thus may not be invoked as basis for terminating an
employee on the ground of insubordination. Needlessly, absent any
of the foregoing elements would make the refusal of the employee
to comply with the rule, regulation, or policy justified and not
constitutive of “willful disobedience” as would warrant the
imposition of the penalty of dismissal for such refusal.
Settled Principles
 Making false allegations in complaint does not constitute
insubordination.
 Failure to answer memo to explain constitutes willful
disobedience.
 Another notice is required in case of termination on the ground
of failure to answer memo to explain.
 Refusal to undergo random drug testing constitutes both
serious misconduct and insubordination.
 Refusal to render overtime to meet production deadline
constitutes insubordination.
 Refusal to comply with a lawful transfer constitutes
insubordination.
3. Gross and Habitual Neglect of Duties
The following are the requisites:
(a) There must be negligence which is gross and/or
habitual in character; and
(b) It must be work-related as would make him unfit to
work for his employer.
Settled Principles
 Simple negligence is not sufficient to terminate employment.
 The negligence must be gross in character which means absence
of that diligence that an ordinarily prudent man would use in his
own affairs.
 As a general rule, negligence must be both gross and habitual
to be a valid ground to dismiss.
 Habituality may be disregarded if negligence is gross or the
damage or loss is substantial. “Habitual negligence” implies
repeated failure to perform one’s duties for a period of time,
depending upon the circumstances.
 Actual damage, loss or injury is not an essential requisite.
 Gross negligence may result to loss of trust and confidence.
 Absences, if authorized, cannot be cited as a ground to terminate
employment.
 Tardiness or absenteeism, if not habitual, cannot be cited as a
ground to terminate employment.
 Tardiness or absenteeism, if habitual, may be cited as a ground to
terminate employment.
 Tardiness or absenteeism, if habitual, may be tantamount to
serious misconduct.
 Absences or tardiness due to emergency, ailment or fortuitous
event are justified and may not be cited as just cause to terminate
employment.
 Unsatisfactory or poor performance, inefficiency and
incompetence are considered just causes for dismissal only if
they amount to gross and habitual neglect of duties.
4. Abandonment of Work
 Abandonment is a form of neglect of duty, hence, a just
cause for termination of employment under Article 297 of the
Labor Code. To constitute abandonment, two (2) elements must
concur, namely:
(a) The employee must have failed to report for work or
must have been absent without valid or justifiable
reason; and
(b) There must have been a clear intention on the part of
the employee to sever the employer-employee
relationship manifested by some overt act.
No hearing is required to validly dismiss an employee for
abandonment [Intertranz Container v. Bautista].
a. Due Process
Due process in abandonment cases consists only of the
service of two (2) notices to the employee, viz:
i. First notice directing the employee to explain why
he should not be declared as having abandoned his
job; and
ii. Second notice to inform him of the employer’s
decision to dismiss him on the ground of
abandonment.
Batangas Laguna Tayabas Bus Company v. NLRC
Held: The contention of the petitioner that the private
respondents abandoned their position is also not acceptable. An employee
who forthwith takes steps to protest his lay-off cannot by any logic be said
to have abandoned his work.
For abandonment to constitute a valid cause for termination of
employment, there must be a deliberate, unjustified refusal of the employee
to resume his employment.[4] This refusal must be clearly established. As
we stressed in a recent case, [5] mere absence is not sufficient; it must be
accompanied by overt acts unerringly pointing to the fact that the employee
simply does not want to work anymore. In the case at bar, the affidavit of
Eduardo Azucena, BLTBCo operations manager,[6] besides being hearsay,
lacks credibility in light of the subsequent acts of the private respondents in
complaining about their separation.
A worker who joins a strike does so precisely to assert or
improve the terms and conditions of his employment. If his purpose is to
abandon his work, he would not go to the trouble of joining a strike.
b. Settled Principles
 Mere absence is not enough to constitute abandonment.
 Clear intention to sever employment relationship is necessary.
 Due process in abandonment cases consists only of the service
of 2 notices to the employee, viz.:
i. First notice directing the employee to explain why he
should not be declared as having abandoned his job; and
ii.Second notice to inform him of the employer’s decision
to dismiss him on the ground of abandonment.
 No hearing is required to validly dismiss an employee for
abandonment.
 Notices in abandonment cases must be sent to employee’s last
known address per record of the company. The employer need
not look for the employee’s current whereabouts.
 Immediate filing of a complaint for illegal dismissal praying for
reinstatement negates abandonment.
 Lapse of time between dismissal and filing of a case is not a
material indication of abandonment. Hence, lapse of 2 years and
5 months or 20 months or 9 months or 8 months before filing the
complaint for illegal dismissal is not an indication of
abandonment. Under the law, the employee has a 4-year
Page 96 of 117
prescriptive period within which to institute his action for illegal
dismissal.
 Filing of a case to pre-empt investigation of the administrative
case is tantamount to abandonment.
 When what is prayed for in the complaint is separation pay
and not reinstatement, the filing of complaint does not negate
abandonment.
 It is abandonment when what is prayed for in the complaint is
separation pay and it was only in the position paper that
reinstatement was prayed for.
 Employment in another firm coinciding with the filing of
complaint does not indicate abandonment.
 Offer of reinstatement by employer during proceedings before
Labor Arbiter and refusal by employee does not indicate
abandonment but more of a symptom of strained relations
between the parties.
 An employee may be absolved from the charge of abandonment
of work but adjudged guilty of AWOL. These two grounds are
separate and distinct from each other.
 An employee who failed to report for work after the expiration of
the duly approved leave of absence is considered to have
abandoned his job.
 An employee who failed to comply with the order for his
reinstatement is deemed to have abandoned his work.
 An employee who, after being transferred to a new assignment,
did not report for work anymore is deemed to have abandoned
his job.
 An employee who deliberately absented from work without leave
or permission from his employer for the purpose of looking for a
job elsewhere is deemed to have abandoned his work.
 Imprisonment or detention by military does not constitute
abandonment.
 Absence to evade arrest is not a valid justification. To do so
would be to place an imprimatur on the employee’s attempt to
derail the normal course of the administration of justice.
5. Fraud
Fraud is separate and distinct from the other ground
provided in the same paragraph, that is, loss of trust and confidence
[Sanden Aircon v. Rosales].
The following are the requisites of this ground:
(a) The employee has committed fraud, an intentional
deception and used dishonest methods for personal
gain or to damage he employer; and
(b) The fraud is work-related and rendered him unfit for
work for his employer.
Falsification constitutes not only serious misconduct but
fraud under the Labor Code [San Miguel Corp v. NLRC].
Settled Principles
 Failure to deposit collection constitutes fraud.
 Lack of damage or losses is not necessary in fraud cases. The fact
that the employer did not suffer losses from the dishonesty of the
dismissed employee because of its timely discovery does not
excuse the latter from any culpability.
 Lack of misappropriation or shortage is immaterial in case of
unauthorized encashment of personal checks by teller and
cashier.
 Restitution does not have absolutory effect.
6. Willful Breach of Trust and Confidence
For the doctrine of loss of trust and confidence to apply,
the following requisites must concur:

(a) The employee holds a position of trust and
confidence;
(b) There exists an act justifying the loss of trust and
confidence, which means that the act that betrays
the employer’s trust must be real, i.e., founded on
clearly established facts;
(c) The employee’s breach of the trust must be willful,
i.e., it was done intentionally, knowingly and
purposely, without justifiable excuse; and
(d) The act must be in relation to his work which would
render him unfit to perform it.
a. Guidelines
As a safeguard against employers who indiscriminately
use “loss of trust and confidence” to justify arbitrary dismissal of
employees, the Court, in addition to the above elements, imposes
the following guidelines for the doctrine to apply:
(a) The loss of confidence must not be simulated;
(b) It should not be used as a subterfuge for causes
which are illegal, improper or unjustified;
(c) It may not be arbitrarily asserted in the face of
overwhelming evidence to the contrary; and
(d) It must be genuine, not a mere afterthought, to
justify earlier action taken in bad faith.
b. Settled Principles
 Employee’s position must be reposed with trust and
confidence.
 “Position of trust and confidence” is one where a person is
entrusted with confidence on delicate matters, or with the
custody, handling, or care and protection of the employer’s
property.
 Two (2) classes of positions of trust. The first class consists of
managerial employees or those who, by the nature of their
position, are entrusted with confidential and delicate matters
and from whom greater fidelity to duty is correspondingly
expected. They refer to those vested with the powers or
prerogatives to lay down and execute management policies
and/or to hire, transfer suspend, lay-off, recall, discharge,
assign or discipline employees or to effectively recommend
such managerial actions. Their primary duty consists of the
management of the establishment in which they are employed
or of a department or a subdivision thereof.
 The second class consists of fiduciary rank-and-file
employees who, though rank-and-file, are routinely charged
with the custody, handling or care and protection of the
employer's money or property, or entrusted with confidence
on delicate matters, and are thus classified as occupying
positions of trust and confidence. Included under this class are
“cashiers, auditors, property custodians, or those who, in the
normal and routine exercise of their functions, regularly
handle significant amounts of [the employer’s] money or
property.”
 Rules on termination of managerial and supervisory
employees different from those applicable to rank- and-file
employees. Thus, with respect to rank-and-file personnel, loss
of trust and confidence as a ground for valid dismissal
requires proof of involvement in the alleged events in question
and that mere uncorroborated assertions and accusations by
the employer will not be sufficient. But as regards a
managerial employee, the mere existence of a basis for
believing that he has breached the trust of his employer would
suffice for his dismissal.
Page 97 of 117
 There must be “some basis” for the loss of trust and
confidence which means that there is reasonable ground to
believe, if not to entertain the moral conviction, that the
concerned employee is responsible for the misconduct and
that the nature of his participation therein rendered him
absolutely unworthy of trust and confidence demanded by his
position.
 Dismissal due to feng shui mismatch is not a valid ground to
lose trust and confidence.
 Command responsibility of managerial employees is a ground
to dismiss.
 Confidential employee may be dismissed for loss of trust and
confidence.
 Grant of promotions and bonuses negates loss of trust and
confidence.
 Long years of service, absence of derogatory record and small
amount involved are deemed inconsequential insofar as loss of
trust and confidence is concerned.
 Dropping of criminal charges or acquittal in a criminal case
arising from the same act does not affect the validity of
dismissal based on loss of trust and confidence.
7. Commission of Crime or Offense
The following are the requisites for the valid invocation
of this ground:
(a) A crime or offense was committed by the employee;
(b) It was committed against any of the following
persons:
(i) His employer;
(ii) Any immediate member of his employer’s
family; or
(iii) His employer’s duly authorized
representative.
Because of its gravity, work-relation is not necessary.
Neither is it necessary to show that the commission of the criminal
act would render the employee unfit to perform his work for the
employer.
The conviction of an employee in a criminal case is not
indispensable to warrant his dismissal by his employer. If there is
sufficient evidence to show that the employee has been guilty of a
breach of trust, or that his employer has ample reason to distrust
him, it cannot justly deny to the employer the authority to dismiss
such employee. All that is incumbent upon the Court of Industrial
Relations (now National Labor Relations Commission) to
determine is whether the proposed dismissal is for just cause xxx. It
is not necessary for said court to find that an employee has been
guilty of a crime beyond reasonable doubt in order to authorize his
dismissal [Concepcion v. Minex Import Corporation].
In Philippine Long Distance Telephone Co.(BLTB Co.)
vs. NLRC, the Court held that the acquittal of the employee from
the criminal prosecution for a crime committed against the interest
of the employer did not automatically eliminate loss of confidence
as a basis for administrative action against the employee; and that
in cases where the acts of misconduct amounted to a crime, a
dismissal might still be properly ordered notwithstanding that the
employee was not criminally prosecuted or was acquitted after a
criminal prosecution.
8. Other Causes
a. Union Officers who knowingly participate in
an Illegal Strike
Article 279(a) provides:
 No labor organization or employer shall declare a
strike or lockout without first having bargained collectively in
accordance with Title VII of this Book or without first having
filed the notice required in the preceding Article or without the
necessary strike or lockout vote first having been obtained and
reported to the Ministry.
No strike or lockout shall be declared after
assumption of jurisdiction by the President or the Minister or
after certification or submission of the dispute to compulsory or
voluntary arbitration or during the pendency of cases involving
the same grounds for the strike or lockout.
Any worker whose employment has been terminated
as a consequence of any unlawful lockout shall be entitled to
reinstatement with full backwages. Any union officer who
knowingly participates in an illegal strike and any worker or
union officer who knowingly participates in the commission of
illegal acts during a strike may be declared to have lost his
employment status: Provided, That mere participation of a
worker in a lawful strike shall not constitute sufficient ground
for termination of his employment, even if a replacement had
been hired by the employer during such lawful strike.
Jackbilt Industries v. Jackbilt Employees Workers Union
Held: The principle of conclusiveness of judgment, embodied in
Section 47(c), Rule 39 of the Rules of Court,[24]  holds that the parties to a
case are bound by the findings in a previous judgment with respect to
matters actually raised and adjudged therein.[25]
Article 264(e) of the Labor Code prohibits any person engaged
in picketing from obstructing the free ingress to and egress from the
employer's premises. Since respondent was found in the July 17, 1998
decision of the NLRC to have prevented the free entry into and exit of
vehicles from petitioner's compound, respondent's officers and employees
clearly committed illegal acts in the course of the March 9, 1998 strike
The use of unlawful means in the course of a strike renders such
strike illegal.[26] Therefore, pursuant to the principle of conclusiveness of
judgment, the March 9, 1998 strike was ipso facto illegal. The filing of a
petition to declare the strike illegal was thus unnecessary.
Consequently, we uphold the legality of the dismissal of
respondent's officers and employees. Article 264 of the Labor
Code[27] further provides that an employer may terminate employees found
to have committed illegal acts in the course of a strike. [28] Petitioner clearly
had the legal right to terminate respondent's officers and employees
b.
Employees who knowingly violate the union
security clause stipulated in the CBA
Another cause for termination is dismissal from
employment due to the enforcement of the union security clause in
the CBA [Alabang Country Club v. NLRC].
General Milling Corp. v. Casio
Held: Union security clauses are recognized and explicitly
allowed under Article 248(e) of the Labor Code, which provides that:
Art. 248. Unfair Labor Practices of Employers. x x x
(e) To discriminate in regard to wages, hours of work, and other
terms and conditions of employment in order to encourage or discourage
membership in any labor organization. Nothing in this Code or in any
other law shall stop the parties from requiring membership in a
recognized collective bargaining agent as a condition for employment,
except those employees who are already members of another union at
the time of the signing of the collective bargaining
agreement.  (Emphasis supplied.)
It is State policy to promote unionism to enable workers to
negotiate with management on an even playing field and with more
persuasiveness than if they were to individually and separately bargain with
the employer. For this reason, the law has allowed stipulations for "union
shop" and "closed shop" as means of encouraging workers to join and
support the union of their choice in the protection of their rights and
interest vis-à-vis the employer.[24]
Moreover, a stipulation in the CBA authorizing the dismissal of
employees are of equal import as the statutory provisions on dismissal
under the Labor Code, since "a CBA is the law between the company and
the union and compliance therewith is mandated by the express policy to
give protection to labor."[25]
Page 98 of 117
In terminating the employment of an employee by enforcing the
union security clause, the employer needs only to determine and prove that:
(1) the union security clause is applicable; (2) the union is requesting for
the enforcement of the union security provision in the CBA; and (3) there is
sufficient evidence to support the decision of the union to expel the
employee from the union. These requisites constitute just cause for
terminating an employee based on the union security provision of the CBA.
[26]
There is no question that in the present case, the CBA between
GMC and IBM-Local 31 included a maintenance of membership and closed
shop clause as can be gleaned from Sections 3 and 6 of Article II. IBM-
Local 31, by written request, can ask GMC to terminate the employment of
the employee/worker who failed to maintain its good standing as a union
member.
It is similarly undisputed that IBM-Local 31, through Gabiana,
the IBM Regional Director for Visayas and Mindanao, twice requested
GMC, in the letters dated March 10 and 19, 1992, to terminate the
employment of Casio, et al. as a necessary consequence of their expulsion
from the union.
It is the third requisite - that there is sufficient evidence to
support the decision of IBM-Local 31 to expel Casio, et al. - which appears
to be lacking in this case.
The provisions of the CBA are clear enough. The termination
of employment on the basis of the closed shop provision of the CBA is well
recognized in law and in jurisprudence.
There is no valid ground to refuse to terminate. On the other
hand as pointed out in the union's strongly demanding letter dated March
19, 1992, the company could be sued for unfair labor practice. While
we would have wanted not to accommodate the union's request, we are
left with no other option. The terms of the CBA should be respected. To
refuse to enforce the CBA would result in the breakdown of industrial
peace and the end of harmonious relations between the union and
management. The company would face the collective anger and enmity of
its employees who are union members.
In the light of the union's very insistent demand, verbal and in
writing and to avoid the union accusation of "coddling" you, and
considering the explicitly mandatory language of the closed shop provision
of the CBA, the company is constrained to terminate your employment, to
give you ample time to look and find another employment, and/or exert
efforts to become again a member of good standing of your union, effective
April 24, 1992.
In the meantime, to prevent serious danger to the life and
property of the company and of its employees, we are placing you under
preventive suspension beginning today.
It is apparent from the aforequoted letter that GMC terminated
the employment of Casio, et al. relying upon the Resolution dated February
29, 1992 of Pino, et al. expelling Casio, et al. from IBM-Local 31;
Gabiana's Letters dated March 10 and 19, 1992 demanding that GMC
terminate the employment of Casio, et al. on the basis of the closed shop
clause in the CBA; and the threat of being sued by IBM-Local 31 for unfair
labor practice. The letter made no mention at all of the evidence supporting
the decision of IBM-Local 31 to expel Casio, et al. from the union. GMC
never alleged nor attempted to prove that the company actually looked into
the evidence of IBM-Local 31 for expelling Casio, et al. and made a
determination on the sufficiency thereof. Without such a determination,
GMC cannot claim that it had terminated the employment of Casio, et al.
for just cause.
The failure of GMC to make a determination of the sufficiency
of evidence supporting the decision of IBM-Local 31 to expel Casio, et al.
is a direct consequence of the non-observance by GMC of procedural due
process in the dismissal of employees.
As a defense, GMC contends that is an employer, its only duty
was to ascertain that IBM-Local 31 accorded Casio, et al. due process; and,
it is the finding of the company that IBM-Local 31 did give Casio, et al. the
opportunity to answer the charges against them, but they refused to avail
themselves of such opportunity.
This argument is without basis.
The Court has stressed time and again that allegations must be
proven by sufficient evidence because mere allegation is definitely not
evidence.[28] Once more, in Great Southern Maritime Services Corporation.
v. Acuña,[29] the Court declared:
Time and again we have ruled that in illegal dismissal cases like
the present one, the onus of proving that the employee was not dismissed or
if dismissed, that the dismissal was not illegal, rests on the employer and
failure to discharge the same would mean that the dismissal is not justified Department of Labor and Employment within the sixty-day period before
and therefore illegal. Thus, petitioners must not only rely on the the expiration of a collective bargaining agreement, the Med-Arbiter shall
weakness of respondents' evidence but must stand on the merits of automatically order an election by secret ballot when the verified petition is
their own defense. A party alleging a critical fact must support his supported by the written consent of at least twenty-five percent (25%) of all
allegation with substantial evidence for any decision based on the employees in the bargaining unit to ascertain the will of the employees
unsubstantiated allegation cannot stand as it will offend due process. in the appropriate bargaining unit. To have a valid election, at least a
majority of all eligible voters in the unit must have cast their votes. The
PICOP Resources v. Taneca labor union receiving the majority of the valid votes cast shall be certified
as the exclusive bargaining agent of all the workers in the unit. When an
Held: However, in terminating the employment of an employee
election which provides for three or more choices results in no choice
by enforcing the union security clause, the employer needs to determine
receiving a majority of the valid votes cast, a run-off election shall be
and prove that: (1) the union security clause is applicable; (2) the union is
conducted between the labor unions receiving the two highest number of
requesting for the enforcement of the union security provision in the CBA;
votes: Provided, That the total number of votes for all contending unions is
and (3) there is sufficient evidence to support the decision of the union to
at least fifty per cent (50%) of the number of votes cast.
expel the employee from the union. These requisites constitute just cause
At the expiration of the freedom period, the employer shall
for terminating an employee based on the union security provision of the
continue to recognize the majority status of the incumbent bargaining
CBA.[
agent where no petition for certification election is filed.[19]
As to the first requisite, there is no question that the CBA
Applying the same provision, it can be said that while it is
between PRI and respondents included a union security clause, specifically,
incumbent for the employer to continue to recognize the majority status of
a maintenance of membership as stipulated in Sections 6 of Article II,
the incumbent bargaining agent even after the expiration of the freedom
Union Security and Check-Off.  Following the same provision, PRI, upon
period, they could only do so when no petition for certification election was
written request from the Union, can indeed terminate the employment of
filed. The reason is, with a pending petition for certification, any such
the employee who failed to maintain its good standing as a union member.
agreement entered into by management with a labor organization is fraught
Secondly, it is likewise undisputed that NAMAPRI-SPFL, in
with the risk that such a labor union may not be chosen thereafter as the
two (2) occasions demanded from PRI, in their letters dated May 16 and 23,
collective bargaining representative.[20] The provision for status quo  is
2000, to terminate the employment of respondents due to their acts of
conditioned on the fact that no certification election was filed during the
disloyalty to the Union.
freedom period.  Any other view would render nugatory the clear statutory
However, as to the third requisite, we find that there is no
policy to favor certification election as the means of ascertaining the true
sufficient evidence to support the decision of PRI to terminate the
expression of the will of the workers as to which labor organization would
employment of the respondents.
represent them.[21]
PRI alleged that respondents were terminated from employment
In the instant case, four (4) petitions were filed as early as May
based on the alleged acts of disloyalty they committed when they signed an
12, 2000. In fact, a petition for certification election was already ordered by
authorization for the Federation of Free Workers (FFW) to file a Petition
the Med-Arbiter of DOLE Caraga Region on August 23, 2000. [22] 
for Certification Election among all rank-and-file employees of PRI.  It
Therefore, following Article 256, at the expiration of the freedom period,
contends that the acts of respondents are a violation of the Union Security
PRI's obligation to recognize NAMAPRI-SPFL as the incumbent
Clause, as provided in their Collective Bargaining Agreement.
bargaining agent does not hold true when petitions for certification election
We are unconvinced.
were filed, as in this case.
We are in consonance with the Court of Appeals when it held
Moreover, the last sentence of Article 253 which provides for
that the mere signing of the authorization in support of the Petition for
automatic renewal pertains only to the economic provisions of the CBA,
Certification Election of FFW on March 19, 20 and 21, or before the
and does not include representational aspect of the CBA. An existing CBA
"freedom period," is not sufficient ground to terminate the employment of
cannot constitute a bar to a filing of a petition for certification election.
respondents inasmuch as the petition itself was actually filed during the
When there is a representational issue, the status quo provision in so far as
freedom period.  Nothing in the records would show that respondents failed
the need to await the creation of a new agreement will not apply.
to maintain their membership in good standing in the Union. Respondents
Otherwise, it will create an absurd situation where the union members will
did not resign or withdraw their membership from the Union to which they
be forced to maintain membership by virtue of the union security clause
belong. Respondents continued to pay their union dues and never joined the
existing under the CBA and, thereafter, support another union when filing a
FFW.
petition for certification election. If we apply it, there will always be an
Significantly, petitioner's act of dismissing respondents stemmed
issue of disloyalty whenever the employees exercise their right to self-
from the latter's act of signing an authorization letter to file a petition for
organization. The holding of a certification election is a statutory policy
certification election as they signed it outside the freedom period. However,
that should not be circumvented,[23] or compromised.
we are constrained to believe that an "authorization letter to file a petition
Time and again, we have ruled that we adhere to the policy of
for certification election" is different from an actual "Petition for
enhancing the welfare of the workers. Their freedom to choose who should
Certification Election."  Likewise, as per records, it was clear that the actual
be their bargaining representative is of paramount importance. The fact that
Petition for Certification Election of FFW was filed only on May 18, 2000.
there already exists a bargaining representative in the unit concerned is of
[17]
 Thus, it was within the ambit of the freedom period which commenced
no moment as long as the petition for certification election was filed within
from March 21, 2000 until May 21, 2000. Strictly speaking, what is
the freedom period. What is imperative is that by such a petition for
prohibited is the filing of a petition for certification election outside the 60-
certification election the employees are given the opportunity to make
day freedom period.[18] This is not the situation in this case. If at all, the
known of who shall have the right to represent them thereafter. Not only
signing of the authorization to file a certification election was merely
some, but all of them should have the right to do so. What is equally
preparatory to the filing of the petition for certification election, or an
important is that everyone be given a democratic space in the bargaining
exercise of respondents' right to self-organization.
unit concerned.[24]
Moreover, PRI anchored their decision to terminate respondents'
We will emphasize anew that the power to dismiss is a normal
employment on Article 253 of the Labor Code which states that "it shall be
prerogative of the employer. This, however, is not without limitations. The
the duty of both parties to keep the status quo and to continue in full
employer is bound to exercise caution in terminating the services of his
force and effect the terms and conditions of the existing agreement
employees especially so when it is made upon the request of a labor union
during the 60-day period and/or until a new agreement is reached by the
pursuant to the Collective Bargaining Agreement. Dismissals must not be
parties."  It claimed that they are still bound by the Union Security Clause
arbitrary and capricious. Due process must be observed in dismissing an
of the CBA even after the expiration of the CBA; hence, the need to
employee, because it affects not only his position but also his means of
terminate the employment of respondents.
livelihood. Employers should, therefore, respect and protect the rights of
Petitioner's reliance on Article 253 is misplaced.
their employees, which include the right to labor.
The provision of Article 256 of the Labor Code is particularly
An employee who is illegally dismissed is entitled to the twin
enlightening.  It reads:
reliefs of full backwages and reinstatement. If reinstatement is not viable,
Article 256. Representation issue in organized establishments. -
separation pay is awarded to the employee. In awarding separation pay to
In organized establishments, when a verified petition questioning the
an illegally dismissed employee, in lieu of reinstatement, the amount to be
majority status of the incumbent bargaining agent is filed before the

Page 99 of 117
awarded shall be equivalent to one month salary for every year of service.
Under Republic Act No. 6715, employees who are illegally dismissed are
entitled to full backwages, inclusive of allowances and other benefits, or
their monetary equivalent, computed from the time their actual
compensation was withheld from them up to the time of their actual
reinstatement.  But if reinstatement is no longer possible, the backwages
shall be computed from the time of their illegal termination up to the
finality of the decision.  Moreover, respondents, having been compelled to
litigate in order to seek redress for their illegal dismissal, are entitled to the
award of attorney's fees equivalent to 10% of the total monetary award.
c. National Interest Cases
Where strikers who violate orders, prohibitions and/or
injunctions as are issued by the DOLE Secretary or the NLRC,
dismissal or loss of employment status may be imposed.
d. Failure to comply with drug test
Plantation Bay v. Dubrico
Held: As reflected in the above matrix, the confirmatory test
results were released earlier than those of the drug test, thereby casting
doubts on the veracity of the confirmatory results.
Indeed, how can the presence of shabu be confirmed when the
results of the initial screening were not yet out? Plantation Bay's arguments
that it should not be made liable thereof and that the doubt arising from the
time of the conduct of the drug and confirmatory tests was the result of the
big volume of printouts being handled by Martell do not thus lie. It was
Plantation Bay's responsibility to ensure that the tests would be properly
administered, the results thereof being the bases in terminating the
employees' services.
Time and again, we have ruled that where there is no showing
of a clear, valid and legal cause for termination of employment, the law
considers the case a matter of illegal dismissal. The burden is on the
employer to prove that the termination of employment was for a valid
and legal cause. For an employee's dismissal to be valid, (a) the dismissal
must be for a valid cause and (b) the employee must be afforded due
process.
In fine, as petitioners failed to indubitably prove that
respondents were guilty of drug use in contravention of its drug-free
workplace policy amounting to serious misconduct, respondents are
deemed to have been illegally dismissed.
e.Other Just Causes under Prevailing
Jurisprudence
In addition to the just causes mentioned in the Labor
Code, the following are also found to be just causes:
a. Violation of Company Rules and Regulations or
Code of Conduct or Code of Discipline
[Sampaguita Auto Transport v. NLRC].
b. Theft of property owned by a co-employee [John
Hancock Life Insurance v. Davis], as distinguished
from company-owned property, which is considered
serious misconduct.
c. Incompetence, inefficiency or ineptitude [Reyes-
Rayel v. Philippine Luen Thai Holdings].
d. Failure to Attain Work Quota [Aliling v. Feliciano].
e. Failure to comply with weight standards of
employer [Yrasuegui v. Philippine Airlines].
f. Attitude Problem [Reyes-Rayel v Philippine Luen
Thai Holdings].
C. JUST CAUSE TERMINATION DUE PROCESS
The Supreme Court has standardized procedural due
process in just cause termination in the 2007 case of King of Kings
Transport v. Mamac. It proclaimed the following steps should be
complied with:
Page 100 of 117
1. Service of First Written Notice (show-cause
notice).
The first written notice to be served on the employee
should:
(a) Contain the specific causes or grounds for
termination against him;
(b) Contain a directive that the employee is given the
opportunity to submit his written explanation with in
the reasonable period of five (5) calendar days from
receipt of the notice;
(i) To enable him to prepare adequately for his
defense;
(ii) To study the accusation against him;
(iii) To consult a union official or lawyer;
(iv) To gather data and evidence; and
(v) To decide on the defenses he will raise
against the complainant.
(c) Contain a detailed narration of the facts and
circumstances that will serve as a basis for the
charge against the employee. This is required in
order to enable him to intelligently prepare his
explanation and defenses. A general description of
the charge will not suffice.
(d) Specifically mention which company rules, if any,
are violated and/or which among the grounds under
Article 297 is being charged against the employee.
Remedy if employee refuses to receive notice: service by
registered mail to last known address
In Nueva Ecija Electric Coop v. NLRC, it was held:
That private respondent refused to receive the
memorandum is to us, too self-serving a claim on the part of
petitioner in the absence of any showing of the signature or
initial of the proper serving office. Moreover, petitioner could
have easily remedied the situation by the expediency of sending
the memorandum to private respondent by registered mail at his
last known address as usually contained in the Personal Data
Sheet or any personal file containing his last known address.
Employee is given a reasonable period to answer
charges
In R.B. Michael Press v. Galit, the Supreme Court
reiterated the rule enunciated in King of Kings Transport v.
Mamac, that the reasonable period within which an employee being
cited administratively should submit his written explanation is five
(5) calendar days from receipt of the first notice to give him an
opportunity to study the accusation against him, consult a union
official or lawyer, or gather data and evidence, and decide on the
defenses he will raise against the complaint.
CBA Grievance proceedings, held after employee had
been dismissed, do not take the place of the required procedure
demanded by the Labor Code before effecting dismissal
In Standard Electric Manufacturing v. Standard Electric
Employees Union, the Court held:
Further, we cannot subscribe to the petitioner's
contention that the due process requirement relative to the
dismissal of respondent Javier was duly complied with when he
was allowed to explain his side during the grievance machinery
conferences. Indeed, in the case at bar, the petitioner did not
conduct any investigation whatsoever prior to his termination,
despite being informed of respondent Javier's predicament by
the latter's siblings, his Union and his counsel. The meetings
 held pursuant to the grievance machinery provisions of the
collective bargaining agreement were only done after  his
dismissal had already taken effect on February 5, 1996. Clearly,
well-meaning these conferences might be, they cannot cure an
otherwise unlawful termination.
2. Conduct of hearing.
After serving the first notice above, the employer should
schedule and conduct a hearing or conference wherein the
employee will be given the opportunity to:
(a) Explain and clarify his defenses to the charge/s against
him;
(b) Present evidence in support of his defenses; and
(c) Rebut the evidence presented against him by the
management.
During the hearing or conference, the employee should
be given the chance to defend himself personally, with the
assistance of a representative or counsel of his choice. Moreover,
this conference or hearing could be used by the parties as an
opportunity to come to an amicable settlement.
Perez Doctrine: New Guiding Principle on the Hearing
Requirement
The above 2007 King of Kings concept of hearing as part
of due process has been significantly changed in 2009 in the en
banc case of Perez v. Philippine Telegraph and Telephone
Company. It enunciates the new guiding principles on the hearing
aspect of procedural thus, a formal hearing or conference is no
longer mandatory. It becomes mandatory only under any of the
following circumstances:
a. When requested by the employee in writing; or
b. When substantial evidentiary disputes exist; or
c. When a company rule or practice requires it; or
d. When similar circumstances justify it.
Thus, the Supreme Court held:
We note a marked difference in the standards of due
process to be followed as prescribed in the Labor Code and its
implementing rules. The Labor Code, on one hand, provides that
an employer must provide the employee ample opportunity to
be heard and to defend himself  with the assistance of his
representative if he so desires. x x x
The omnibus rules implementing the Labor Code, on
the other hand, require a hearing and conference during which
the employee concerned is given the opportunity to respond to
the charge, present his evidence or rebut the evidence presented
against him.
Therefore, while the phrase "ample opportunity to be
heard" may in fact include an actual hearing, it is not limited to a
formal hearing only. In other words, the existence of an actual,
formal "trial-type" hearing, although preferred, is not absolutely
necessary to satisfy the employee's right to be heard.
In sum, the following are the guiding principles in
connection with the hearing requirement in dismissal cases:
(a) "ample opportunity to be heard" means any
meaningful opportunity (verbal or written) given to
the employee to answer the charges against him and
submit evidence in support of his defense, whether in
a hearing, conference or some other fair, just and
reasonable way.
(b) a formal hearing or conference becomes mandatory
only when requested by the employee in writing or
substantial evidentiary disputes exist or a company
Page 101 of 117
rule or practice requires it, or when similar
circumstances justify it.
(c) the "ample opportunity to be heard" standard in the
Labor Code prevails over the "hearing or conference"
requirement in the implementing rules and
regulations:
(i) under Article 292(b) of the Labor Code, the
employer is required to afford the employee
“ample opportunity to be heard and to defend
himself with the assistance of his
representative if he so desires”; while –
(ii) Under Section 2(d), Rule I, Book VI of the
IRR, the employee is required to afford the
employee a “hearing or conference during
which the employee concerned, with the
assistance of counsel, if he so desires, is
given opportunity to respond to the charge,
present his evidence or rebut the evidence
presented against him.”
If the employee admits his responsibility for the act he
was accused of, a formal hearing is no longer necessary, as held in
Bernardo v. NLRC.
The unilateral confession made by an alleged co-
conspirator cannot be the basis for terminating an employee. Such
confession must be corroborated by other competent and
convincing evidence. Absent any such corroborative evidence, the
confession must be received with considerable caution [Century
Textile Mills, Inc. v. NLRC]. Likewise, it was held that the act of
the employer in making “prior consultation” with the union of
which the dismissed employee is a member, is not sufficient
compliance with due process.
It is important to stress that the rights of an employee
whose services are sought to be terminated to be informed
beforehand of his proposed dismissal (or suspension) as well as
of the reasons therefor, and to be afforded an adequate
opportunity to defend himself from the charges levelled against
him, are rights personal to the employee. Those rights were not
satisfied by petitioner Corporation's obtaining the consent of or
consulting with the labor union; such consultation or consent
was not a substitute for actual observance of those rights of
private respondent Calangi. The employee can waive those
rights, if he so chooses, but the union cannot waive them for
him. That the private respondent simply 'kept silent" all the
while, is not adequate to show an effective waiver of his rights.
Notice and opportunity to be heard must be accorded by an
employer even though the employee does not affirmatively
demand them.
NOTA BENE: It is surprising that the SC does not quote
from a long line of decisions starting from Rabago v. NLRC
(1991); Rase v. NLRC (1994); Libres v. NLRC (1999). Those cases,
and many more thereafter, held that personal confrontation and
cross examination cannot be invoked as a matter of right in
procedural due process of employee dismissal cases. The right to
cross-examine belongs to the accused only in criminal prosecutions
by the “people of the state. In Manggagawa ng Komunikasyon v.
NLRC (1992), the Court however conceded that “actual adversarial
proceedings may be necessary for clarification purposes or when
there is need to propound searching questions to unclear
witnesses.” That has to do with the duty of the trier of facts, usually
the labor arbiter, to ascertain whether or not there is “substantial
evidence” supporting a claim.
Technol Eight Philippines v. NLRC
Held: The labor arbiter ruled that Technol failed to afford
Amular procedural due process, since he was not able to present his side
regarding the incident; at the time he was called to a hearing, he had already
filed the illegal dismissal complaint. The NLRC, on the other hand, held
that the memorandum terminating Amular's employment was a mere
formality, an afterthought designed to evade company liability since
Amular had already filed an illegal dismissal case against Technol.
We disagree with these conclusions. The notice of preventive
suspension/notice of discharge served on Amular and Ducay required them
to explain within forty-eight (48) hours why no disciplinary action should
be taken against them for their involvement in the mauling incident.
Amular submitted two written statements: the first received by the company
on May 19, 2002 and the other received on May 20, 2002. On June 8, 2002,
Technol management sent Amular a memorandum informing him of an
administrative hearing on June 14, 2002 at 10:00 a.m., regarding the
charges against him. At the bottom left hand corner of the memorandum,
the following notation appears: "accept the copy of notice but refused to
receive, he will study first." A day before the administrative hearing or on
June 13, 2002, Amular filed the complaint for illegal
suspension/dismissal and did not appear at the administrative hearing. On
July 4, 2002, the company sent Amular a notice of dismissal.
What we see in the records belie Amular's claim of denial of
procedural due process. He chose not to present his side at the
administrative hearing. In fact, he avoided the investigation into the charges
against him by filing his illegal dismissal complaint ahead of the scheduled
investigation. Under these facts, he was given the opportunity to be heard
and he cannot now come to us protesting that he was denied this
opportunity. To belabor a point the Court has repeatedly made in employee
dismissal cases, the essence of due process is simply an opportunity to be
heard; it is the denial of this opportunity that constitutes violation of due
process of law.
When hearing is not required
a. Termination of project, seasonal, causal or fixed-term
employment.
b. Termination of probationary employment on the ground
of failure of the probationary employee to qualify as a
regular employee in accordance with reasonable
standards made known to him at the start of the
employment.
c. Termination due to abandonment of work.
d. Termination due to authorized causes under Article 298.
In such cases, there are no allegations which the
employees should refute and defend themselves from by
way of a hearing.
e. Termination due to disease under Article 299.
f. Termination by the employee (resignation) under Article
300.
g. Termination after 6 months of bona-fide suspension of
operation under Article 301. For purposes of satisfying
due process, what is required is simply hat notices
provided under Article 298 be served to both the
affected employees and the DOLE at lease one (1)
month before the termination becomes effective.
h. Termination due to retirement under Article 302.
i. Termination due to expiration of tenure made
coterminous with lease.
j. Termination due to closure or stoppage of work by
government authorities when non-compliance with the
law or implementing rules and regulations poses grave
and imminent danger to the health and safety of workers
in the workplace.
k. Termination of employee who has admitted his guilt for
the offense charged.
Confrontation of witnesses, not a matter of right in
company investigations
Confrontation of witnesses is required only in adversarial
criminal prosecutions, and not in company investigations for the
administrative liability of the employee. Additionally, actual
Page 102 of 117
adversarial proceedings become necessary only for clarification, or
when there is a need to propound searching questions to witnesses
who give vague testimonies. This is not an inherent right, and in
company investigations, summary proceedings may be conducted
[Tuazon v. Wenphil].
If employee refuses to answer/participate, investigation
should still proceed
In Hagonoy Rural Bank v. NLRC, the Court held that
petitioners simply kept silent from the time they were suspended
until they were formally dismissed is not adequate to constitute a
waiver of their rights. Notice and hearing must be accorded by an
employer, even though the employee does not affirmatively
demand it.
3. Service of Second Written Notice (Notice of
Termination)
After determining that termination of employment is
justified, the employer shall serve the employees a written notice of
termination indicating that:
(a) All circumstances involving the charge/s
against the employee have been considered;
and
(b) Grounds have been established to justify the
severance of his employment.
D. AUTHORIZED CAUSES
The authorized causes provided in the Labor Code may
generally be classified into two (2), namely:
(1) Business-related causes. – Referring to the grounds
specifically mentioned in Article 298, to wit:
(a) Installation of labor-saving device;
(b) Redundancy
(c) Retrenchment;
(d) Closure or cessation of business operations
NOT due to serious business losses or financial
reverses; and
(e) Closure or cessation of business operations.
(2) Health-related causes. – Referring to disease under
Article 299.
There are certain requisites that are common to the five
(5) grounds in Article 298. To simplify the discussion, the
following five (5) common requisites are applicable to the said
grounds:
1. There is good faith in effecting the termination;
2. The termination is a matter of last resort, there being
no other option available to the employer after
resorting to cost-cutting measures;
3. Two (2) separate written notices are served on both
the affected employee and the DOLE at least one (1)
month prior to the intended date of termination;
4. Separation pay is paid to the affected employee, to
wit:
(a) If based on (1) installation of labor-saving
device, or (2) redundancy. – One (1) month pay
or at least one (1) month pay for every year of
service, whichever is higher, a fraction of at
least six (6) months shall be considered as one
(1) year.
 (b) If based on (1) retrenchment, or (2) closure NOT
due serious business losses or financial reverses.
– One (1) month pay or at lease one-half (1/2)
month pay for every year of service, whichever
is higher, a fraction of at least six (6) months
shall be considered as one (1) whole year.
(c) If closure is due to serious business losses or
financial reverses, NO separation pay is required
to be paid.
(d) In case the CBA or company policy provides for
a higher separation pay, the same must be
followed instead of he one provided in Article
298.
5. Fair and reasonable criteria in ascertaining what
positions are to be affected by the termination, such
as, but not limited to: nature of work; status of
employment (whether casual, temporary, or regular);
experience; efficiency; seniority; dependability;
adaptability; flexibility; trainability; job performance;
discipline; and attitude towards work. Failure to
follow fair and reasonable criteria in selecting who to
terminate would render the termination invalid.
Each of the five grounds has its own unique requisite/s
that distinguishes it from the others. For instance, the requisite for
extreme business losses or financial reverses is distinctively
applicable to retrenchment in order for termination based on this
ground to be valid and legal. Termination due to redundancy does
not require existence of losses or financial reverses to validate it.
While losses or reverses may be considered as a major factor in
cases of closure or cessation of business operations, but their
relevance is only in relation to the determination of whether the
employer is liable for separation pay or not. Consequently, if the
closure or cessation of business operations is due to serious
business losses or financial reverses, the employer is not liable to
pay any separation pay [North Davao Mining v. NLRC].
1. Installation of Labor-Saving Device
Article 298. Closure of Establishment and Reduction of
Personnel. The employer may also terminate the employment of any
employee due to the installation of labor-saving devices, redundancy,
retrenchment to prevent losses or the closing or cessation of operation
of the establishment or undertaking unless the closing is for the
purpose of circumventing the provisions of this Title, by serving a
written notice on the workers and the Ministry of Labor and
Employment at least one (1) month before the intended date thereof. In
case of termination due to the installation of labor-saving devices or
redundancy, the worker affected thereby shall be entitled to a
separation pay equivalent to at least his one (1) month pay or to at least
one (1) month pay for every year of service, whichever is higher. In
case of retrenchment to prevent losses and in cases of closures or
cessation of operations of establishment or undertaking not due to
serious business losses or financial reverses, the separation pay shall be
equivalent to one (1) month pay or at least one-half (1/2) month pay for
every year of service, whichever is higher. A fraction of at least six (6)
months shall be considered one (1) whole year.
In addition to the five (5) common requisites above, the
unique requisite for this ground is that the purpose for such
installation of labor-saving device/s must be valid, such as to save
on cost, enhance efficiency and other justifiable economic reasons.
The installation of these devices is a management
prerogative and the courts will not interfere with its exercise in the
absence of abuse of discretion, arbitrariness, or malice on the part
of management [Magnolia Dairy Products v. NLRC].
Page 103 of 117
Redundancy results from installation of labor-saving
device. The installation of labor-saving device will result in making
the positions being held by employees who will be adversely
affected thereby redundant and unnecessary [Soriano v. NLRC].
2. Redundancy
In addition to the five (5) common requisites earlier
mentioned, any of the following factors must be present in order
for redundancy to be a valid ground to terminate employment:
a. Where the services of employees are in excess of
what is reasonably demanded by the actual
requirements of the enterprise [Nippon Housing v.
Leynes].
b. Where the position is superfluous because of a
number of factors, such as over-hiring of workers,
decreased volume of business, dropping of a
particular product line or service activity previously
manufactured or undertaken by the enterprise or
phasing out of service activity priorly undertaken by
the business.
c. Where there is duplication of work. Indeed, in any
well-organized business enterprise, it would be
surprising to find duplication of work and two (2) or
more people doing the work of one person [Caltex
v. NLRC].
d. Where it is validly resorted to as a cost-cutting
measure and to streamline operations so as to make
them more viable [Maya Farms Employees
Organization v. NLRC].
Time and again, it has been ruled that employer has no
legal obligation to keep more employees than are necessary for the
operation of its business [Morales v. Metrobank]. Thus, the
employer has the prerogative to implement reorganization and
redundancy and to adopt such measures as will promote greater
efficiency, reduce overhead costs and enhance prospects of
economic gains, albeit always within the framework of existing
laws [Smart Comms v. Astorga]. However, if there is no proof that
the essential requisites for a valid redundancy program as a ground
for the termination of the employee are present, the termination
should be declared illegal [Lamber Pawnbrokers v. Binamira].
3. Retrenchment
Retrenchment has been defined as the termination of
employment initiated by the employer through no fault of the
employees and without prejudice to the latter, resorted by
management during periods of business recession, industrial
depression, or seasonal fluctuations; or during lulls occasioned by
lack of work or orders, shortage of materials or considerable
reduction in the volume of the employer’s business, conversion of
the plant for a new production program or the introduction of new
methods or more efficient machinery, or of automation [Anabe v.
Asian Construction].
In addition to the five (5) common requisites mentioned
earlier, the unique requisite for this ground is that there should be
proof of actual losses or possible imminent losses that would
justify termination of employment. This is the most singular
distinctive requisite of retrenchment. This, in fact, is the only
statutory ground in Article 298 which requires this kind of proof.
As stressed earlier, the grounds of installation of labor-saving
device and redundancy do not impose this requirement. The other
ground of closure or cessation of business operations may be
resorted to with or without losses [Precision Electronics v. NLRC].
Standards to determine validity of losses
 The general standards in terms of which the act of an
employer in retrenching or reducing the number of its employees
must be appraised are as follows:
a. The losses expected should be substantial and not
merely de minimis or insubstantial and
inconsequential in extent.
b. The substantial loss apprehended must be
reasonably imminent, as such imminence can be
perceived objectively and in good faith by the
employer.
c. Retrenchment must be reasonably necessary and
likely to effectively prevent the expected losses. The
employer should have taken other measures prior or
parallel to retrenchment to forestall losses, i.e., cut
other costs other than labor costs.
d. The alleged losses, if already realized, and the
expected imminent losses sought to be forestalled,
must be proved by sufficient and convincing
evidence through presentation of externally audited
financial statements.
If the above standards are present, the wisdom to retrench
cannot be questioned [NDC v. NLRC].
Retrenchment to prevent losses, meaning
In its ordinary connotation, this phrase means that
retrenchment must be undertaken by the employer before the losses
anticipated are actually sustained or realized. The Supreme Court,
in a plethora of cases, has thus interpreted it to mean that the
employer need not keep all his employees until after its losses shall
have materialized [TPI Philippines v. Cajucom]. This is never the
intention of the lawmaker. If such an intent were expressly written
into the law, that law may well be vulnerable to constitutional
attack as unduly taking property from one man to be given to
another [Asian Alcohol v. NLRC].
Redundancy v. Retrenchment
Retrenchment and redundancy are two different
concepts; they are not synonymous; thus, they should not be used
interchangeably [Arabit v. Jardine Pacific].
Redundancy exists when the services of an employee are
in excess of what is required by an enterprise. Retrenchment, on
the other hand, is resorted to primarily to avoid or minimize
business losses. Thus, a “Redundancy Program,” while
denominated as such, is more precisely termed “retrenchment” if it
was primarily intended to prevent serious business losses [Atlantic
Gulf v. NLRC].
Redundancy does not need to be always triggered by a
decline in the business. Primarily, employers resort to redundancy
when the functions of an employee have already become
superfluous, duplicitous or in excess of what the business requires.
Thus, even if a business is doing well, an employer can still validly
dismiss an employee from service due to redundancy if that
employee’s position has already become in excess of what the
employer’s enterprise requires [Andrada v. NLRC].
In terms of monetary consequence, the employer stands
to pay more separation pay if it denominates the personnel
reduction program it is implementing as redundancy and not
retrenchment. Under Article 298, redundancy would require the
employer to pay its employees a separation pay equivalent to at
least their one (1) month pay or to at least one (1) month pay for
every year of service, whichever is higher; while retrenchment
would only entail half of this amount.
4. Closure or Cessation of Business Operations
Page 104 of 117
Closure or cessation of business is the complete or partial
cessation of the operations and/or shutdown of the establishment of
the employer. It is carried out to either stave off the financial ruin
or promote business interest of the employer [Eastridge Gold Club
v. Eastridge Labor Union]. Closure involves two (2) situations:
(a) When NOT due to serious business losses or
financial reverses; or
(b) When not due to serious business losses or financial
reverses.
It is only in the first that payment of separation pay is
required. No such requirement is imposed in the second [North
Davao Mining v. NLRC].
Employer may close its business whether its suffering
from business losses or not; court cannot order employer to
continue its business [Penafrancia Tours v. Sarmienta].
Retrenchment v. Closure of business
In a number of cases. Retrenchment has been confused
with closure of the entire business establishment or department,
division or outlet thereof. While the two are often used
interchangeably and are interrelated, they are actually two separate
and independent authorized causes for termination of employment.
Termination of an employment may be predicated on one without
need of resorting to the other.
Closure of business, on one hand, is the reversal of
fortune of the employer whereby there is a complete cessation of
business operations and/or an actual locking-up of the doors of the
establishment, usually due to financial losses. Closure of business
as an authorized cause for termination of employment aims to
prevent further financial drain upon an employer who cannot pay
anymore his employees since business has already stopped. On the
other hand, retrenchment is a reduction of personnel usually due to
poor financial returns so as to cut down on costs of operations in
terms of salaries and wages to prevent bankruptcy of the company.
It is sometimes also referred to as down-sizing. It is an authorizes
cause for termination of employment which the law accords an
employer who is not making good in its operations in order to cut
back on expenses for salaries and wages by laying off some
employees. The purpose of retrenchment is to save a financially
ailing business establishment from eventually collapsing [Sanoh
Fulon Phils v. Bernardo].
Unlike retrenchment, closure or cessation of business, as
an authorized cause of termination of employment, need not
depend for its validity on evidence of actual or imminent reversal
of the employer’s fortune. Article 298 authorizes termination of
employment due to business closure regardless of the underlying
reasons and motivations therefor, be it financial losses or not
[Eastridge Golf Club v. Eastridge Labor Union].
MPCEU v. Manila Polo Club summarized:
a. Closure or cessation of operations of establishment or
undertaking may either be partial or total.
b. Closure or cessation of operations of establishment or
undertaking may or may not be due to serious
business losses or financial reverses. However, in both
instances, proof must be shown that: (1) it was done in
good faith to advance the employer's interest and not
for the purpose of defeating or circumventing the
rights of employees under the law or a valid
agreement; and (2) a written notice on the affected
employees and the DOLE is served at least one month
before the intended date of termination of
employment.
 c. The employer can lawfully close shop even if not due
to serious business losses or financial reverses but
separation pay, which is equivalent to at least one
month pay as provided for by Article 283 of the Labor
Code, as amended, must be given to all the affected
employees.
d. If the closure or cessation of operations of
establishment or undertaking is due to serious
business losses or financial reverses, the employer
must prove such allegation in order to avoid the
payment of separation pay.  Otherwise, the affected
employees are entitled to separation pay.
e. The burden of proving compliance with all the above-
stated falls upon the employer.
5. Disease
Article 299. Disease as Ground for Termination. An employer
may terminate the services of an employee who has been found to be
suffering from any disease and whose continued employment is
prohibited by law or is prejudicial to his health as well as to the health
of his co-employees: Provided, That he is paid separation pay
equivalent to at least one (1) month salary or to one-half (1/2) month
salary for every year of service, whichever is greater, a fraction of at
least six (6) months being considered as one (1) whole year.
In the case of Deoferio v. Intel Technology Philippines,
Inc., the requisites that must be complied with before termination
of employment due to disease may be justified were specifically
divided into two, namely:
a. Substantive requisites; and
b. Procedural requisites.
a. Substantive Requisites
Based on the Labor Code and its Implementing Rules,
the following three (3) substantive elements, according to Deoferio
v. Intel Technology may be drawn therefrom, to wit:
(i) An employee has been found to be suffering from
any disease;
(ii) His continued employment is:
 Prohibited by law; or
 Prejudicial o his health as well as to the health
of his co-employees; and
(iii) A competent public health authority issues a
medical certificate that the disease of such nature or
at such a stage that it cannot be cured within a
period of six (6) months even with proper medical
treatment.
1st Substantive Element
The fact alone that an employee is suffering from a
disease is not generally a sufficient ground to terminate his
employment. That a person has a disease does not per se entitle the
employer to terminate his or her services. Termination is the last
resort. Even if the disease is a contagious one, like pulmonary
tuberculosis, mere sufferance thereof by an employee does not ipso
facto make him a sure candidate for dismissal [Tan v. NLRC].
2nd Substantive Element
Contagious or communicable diseases or infecions, like
sexually transmitted diseases or infections, tuberculosis, hepatitis
A, malaria, and among others, are bext examples of diseases which
would render an employee’s “continued employment prejudicial to
Page 105 of 117
his health as well as to the health of his co-employees.” This
ground may not, however, be solely confined to these kinds of
diseases. Deoferio enunciates that the phrase “prejudicial to his
health as well as to the health of his co-employees” should be
liberally construed to mean “prejudicial to his health or to the
health of his co-employees.” It is clear, therefore, that the intent of
the law is to allow the termination of an employee if he suffers a
disease and his continued employment will either be prejudicial:
(i) To his own health; or
(ii) To the health of his co-employees.
Consistent with this construction, this provision has been
applied in resolving illegal dismissal cases due to non-contagious
diseases such as stroke, heart attack, osteoarthritis, and eye
cataract, among others.
3rd Substantive Element
The third element on presentation of a medical certificate
issued by a competent public health authority substantiates the
contention that the employee has indeed been suffering from a
disease that:
(i) Is prejudicial to his health as well as to the health of
his co-employees; and
(ii) Cannot be cured within a period of six months even
with proper medical treatment.
Without the medical certificate, there can be no
authorized cause for the employee’s dismissal. The absence of this
element thus renders he dismissal void and illegal. Deoforio
instructs that this 3rd element is not merely a procedural
requirement but a substantive one. That certification from a
competent public health authority is precisely the substantial
evidence required by law to prove the existence of the disease
itself, its non-curability within a period of 6 months even with
proper medical treatment, and the prejudice it would cause to the
health of the sick employee and to those of his co-employees.
The company’s own physician engaged by the employer
as its employee or hired on a retainer fee basis to whom sick
workers are referred for consultation or treatment, is not the
“competent public health authority: referred to in the law. Hence, a
medical certificate issued by the company’s own physician is not
an acceptable certificate for purposes of terminating an
employment based on Article 299 [Cebu Royal Plant v. Deputy
Minister].
As to who should procure the medical certificate, the
Court ruled in Tan v. NLRC, that it devolves upon the employer the
obligation to obtain a medical certificate from a competent public
health authority that the employee’s disease is at such stage or of
such nature that it cannot be cured within 6 months even with
proper medical treatment. It is the employer and not the employee,
who has the burden of proof to justify that the termination was
supported by said certificate. Clearly, it is only where there is such
prior certification that the employee could be validly terminated
from his job. The burden of proving the existence of the medical
certificate required under the law is upon the employer, not the
employee [ATCI Overseas Corporation v. Court of Appeals].
b. Procedural Requisites
Deoferio pronounced the rule that due process in
termination due to disease is similar to due process for just cause
termination. Thus, the employer must furnish the employee two (2)
written notices, namely:
 (i) The notice to apprise the employee of the ground for
which his dismissal is sought; and
(ii) The notice informing the employee of his dismissal,
to be issued after the employee has been given
reasonable opportunity to answer and be heard on
his defense.
Under this present rule, the employee should be given
reasonable opportunity to answer and to be heard on his defense.
Although sufferance of disease is not to be equated with
commission of a wrongful act which is the principal requisite of
just cause termination, the ailing employee needs to be given
“reasonable opportunity to answer and to be heard on his defense”
before he could validly be dismissed on the ground of disease.
Consequently, once the substantive requisites for termination due
to disease are complied with, the employer should comply the other
equally important procedural requisite as prescribed in Deoferio.
Per Deoferio, the 2nd required notice informing the
employee of his dismissal should be issued “after the employee has
been given reasonable opportunity to answer and to be heard on his
defense.” This requirement, in effect, dictates that before an
employee may be terminated due to disease, he must first be given
a show-cause notice that would afford him “a reasonable
opportunity to answer” the charge of his being terminable by
reason of his suffering a disease, and secondly, for him to be
afforded a hearing on his defense.
Employee has the right to present countervailing
medical certificates
The employee has the right to present countervailing
evidence in the form of medical certificates to prove that his
dismissal due to disease is not proper and therefore illegal [Fuji
Television Network v. Espiritu].
E. AUTHORIZED CAUSE TERMINATION DUE
PROCESS
Due process in authorized cause termination is classified
into two (2), as follows:
1. Termination due to Business-Related Causes, such
as: installation of labor-saving device, redundancy,
retrenchment and closure of business or
establishment.
2. Termination due to Health-Related Causes
(Disease).
1. Due Process in Termination Due to Business-
Related Authorized Causes
Procedural due process in termination due to any of the
authorized causes of installation of labor-saving device,
redundancy, retrenchment and closure of business or establishment
is deemed complied with upon the separate and simultaneous
service of a written notice of the intended termination to both:
a. The employee to be terminated; and
b. The appropriate DOLE Regional Office
At least one (1) month before the intended date of the
termination specifying the ground/s therefor and the undertaking to
pay the separation pay required under Article 298 of the Labor
Code or the employment contract or the CBA, whichever is higher.
To iterate, hearing is required.
One-month period is mandatory
The observance of the period of 1 month mentioned in
Article 298 is mandatory. There is deprivation of right to statutory
Page 106 of 117
due process if notice requirement is not complied with at least a
month prior to the effectivity of the termination. Hence, the
dismissal, if properly and validly effected for authorized cause,
would still be declared legal but the employer shall be held liable to
pay for indemnity in the form of nominal damages in the stiffer
amount of P50,000, per Jaka Food Processing v. Pacot.
F. EFFECT OF LEGAL DISMISSAL WITHOUT DUE
PROCESS
The substantive (just or authorized cause) and procedural
due process requirements in termination of employment can only
be better understood and appreciated by looking at them through
the prism of the four (4) standard situations provided in the Labor
Code and enunciated in pertinent jurisprudence. Thus, the dismissal
is:
(1) LEGAL if it was done with both substantive and
procedural due process.
(2) ILLEGAL if it was done without substantive due
process although procedural process was observed.
(3) ILLEGAL if it was done without both substantive
and procedural due process.
(4) LEGAL if it was done with substantive due process
but without procedural due process.
1. Belated Due Process Rule
Prior to 1989, the rule was that a dismissal or termination
is illegal if the employee was not given procedural due process. In
the 1989 case of Wenphil Corp v. NLRC (Feb, 8, 1989), the Court
reversed this long-standing rule and held that the dismissed
employee, although not given any notice and hearing, was not
entitled to reinstatement and backwages because the dismissal was
for a just cause, i.e., grave miscoundct and insubordination, a just
ground for termination under Article 297. The employee here had a
violent temper and caused trouble during office hours and defying
superiors who tried to pacify him. The Court concluded that
reinstating the employee and awarding backwages may encourage
him to do even worse and will render a mockery of the rules of
discipline that employees are required to observe.
However, the employer committed an infraction of the
second requirement; thus, it must be imposed a sanction for its
failure to give a formal notice and conduct an investigation as
required by law before dismissing the employee from employment.
Considering the circumstances of this case, the employer must
indemnify the employee. The measure of this award depends of the
facts of each case and the graviy of the omission committed by the
employer.
The rule thus evolved: where the employer had a valid
reason to dismiss an employee but did not follow the due process
requirement, the dismissal may be upheld but the employer will be
penalized to pay an indemnity to the employee.
2. Ineffectual Dismissal Rule
In 2000, the rule on the extent of the sanction was
changed in the en banc decision in Serrano v. NLRC. The Court
held that the vilation by the employer of the notice requirement in
termination for just or authorized causes was not a denial of due
process that will nullify the termination. However, the dismissal is
declared ineffectual and the employer must pay the full backwages
from the time of termination until it is judicially declared that the
dismissal was for a just cause or authorized cause. The Court, in
effect, re-examined the Wenphil doctrine. Hence, instead of
penalty, Serrano now required payment of full backwages from the
time of dismissal until the time the Court finds the dismissal was
for a just or authorized cause. Serrano thus confronted the practice
of employers to dismiss now and pay later by imposing full
backwages as penalty.
3. Statutory Due Process Rule
About 4 years after Serrano, the Supreme Court, in the
2004 en banc decision in Agabon v. NLRC, abandoned Serrano and
reverted to the Wehnphil doctrine. It thus ruled that where the
dismissal is for a just cause, as in the instant case, the lack of
statutory due process should not nullify the dismissal, or render it
illegal, or ineffectual. However, the employer should indemnify the
employee for the violation of his right to statutory due process.
Such indemnity or sanction, however, must be stiffer than that
imposed in Wenphil. Consequently, the sanction imposed upon the
employer in this case was in the form of nominal damages in the
higher amount of P30,000. The imposition of this form of damages
would serve to deter employers from future violations of the
statutory due processs rights of employees. At the very least., it
provides a vindication or recognition of his fundamental right
granted to the latter under the Labor Code and its Implementing
Rules.
4. Contractual Due Process Rule
A new doctrine of contractual due process was
pronounced in the 2013 en banc decision in Abbott Laboratories v.
Alcaraz. It was held here that in a situation where there is an
existing company policy enunciating the procedural due process
that must be observed in termination of employment, compliance
alone with the statutory due process, would not suffice.
Additionally, there must be compliance too with the company-
prescribed due process procedure or the so-called contractual due
process. Otherwise, the same consequence as in Agabon case will
ensue, that is, the termination shall be considered legal and valid
but for lack of contractual due process, the employer will be
penalized with the payment of indemnity in the form of nominal
damages in the same amount of P30,000 as awarded in Agabon.
5. Indemnity in the Form of Nominal Damages
Termination for a just cause or authorized cause but
without affording the employee procedural due process should no
longer be considered illegal or ineffectual [Per Serrano v. NLRC]
but legal. Consequently, the employee will not be ordered
reinstated but will be awarded an indemnity in the form of nominal
damages, the amount of which will depend on whether the
termination is grounded on just cause or authorized cause, thus:
a. If based on just cause – P30,000.00 per Agabon
Doctrine
b. If based on authorized cause – P50,000.00 per Jaka
Doctrine.
The measure of penalty or indemnity is no longer full
backwages but nominal damages.
G. ILLEGAL DISMISSAL
Under the Labor Code, the ordinary and proper recourse
of an illegally dismissed employee is to file a complaint for illegal
dismissal with the labor arbiter [Philippine Airlines v. NLRC].
1. Burden and Degree of Proof
It is a basic rule in evidence, however, that the burden of
proof is on the part of the party who makes the allegations – ei
incumbit probatio, qui dicit, non qui negat. If he claims a right
granted by law, he must prove his claim by competent evidence,
relying on the strength of his own evidence and not upon the
weakness of that of his opponent. While this Court is not
unmindful of the rule that in cases of illegal dismissal, the
Page 107 of 117
employer bears the burden of proof to prove that the termination
was for a valid or authorized cause. However, before the employer
must bear the burden of proving that the dismissal was legal, the
employee must first establish by substantial evidence the fact of
his dismissal from service. Logically, if there is no dismissal, then
there can be no question as to the legality or illegality thereof
[Ledesma, Jr. v. NLRC].
2. Quitclaims
Quitclaims are valid provided that these are voluntarily
signed by the employee involved, the consideration is reasonable,
and it is not against the law or public policy [More Maritime
Agencies v. NLRC].
However, quitclaims entered into by union officers and
some members do not bind those who did not sign it [Liana’s
Supermarket v. NLRC].
3. Reliefs for Illegal Dismissal
Article 294. [279] Security of Tenure. In cases of regular
employment, the employer shall not terminate the services of an
employee except for a just cause or when authorized by this Title. An
employee who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other privileges and
to his full backwages, inclusive of allowances, and to his other benefits
or their monetary equivalent computed from the time his compensation
was withheld from him up to the time of his actual reinstatement
Under Article 294, an illegally dismissed employee is
entitled to the following reliefs:
a. Reinstatement without loss of seniority rights and
other privileges;
b. Full backwages, inclusive of allowances; and
c. Other benefits or their monetary equivalent.
The following reliefs that are awarded in illegal dismissal
cases are missing in Article 279:
a. Award of separation pay in lieu of reinstatement.
b. Award of penalty in the form of nominal damages in
case of termination due to just or authorized cause
but without observance of procedural due process.
c. Reliefs to illegally dismissed employee whose
employment is for a fixed period. The proper relief
is only the payment of the employee’s salaries
corresponding to the unexpired portion of the
employment contract.
d. Award of damages and attorney’s fees.
e. Award of financial assistance in cases where the
employee’s dismissal is declared legal but because
of long years of service, and other considerations,
financial assistance is awarded.
f. Imposition of legal interest on separation pay,
backwages and other monetary awards.
a. Reinstatement
Reinstatement, in its generally accepted sense, refers to a
restoration to a state from which one has been removed or
separated, it is the return to the position from which he was
removed [San Miguel Brewery v. Santos].
Reinstatement in Article 229 vs. 294
Article 229 Article 294
Finality No finality yet. Already final and
Subject of an appeal executory
 Employer’s option Employer has the No option but to  To prevent further delay in the execution of the
to reinstate option to actual actually reinstate to decision to the prejudice of private respondent.
reinstatement or former position or to
payroll reinstatement. a substantially  Other circumstances such as (a) when
equivalent position reinstatement is inimical to the employer’s
Duty of Labor Ministerial for the Not ministerial. interest; (b) reinstatement does not serve the
Arbiter to LA to implement his Requires motion for best interests of the parties involved; (c) the
implement order reinstatement order. the issuance of writ employer is prejudiced by the workers’
Reinstatement is self- of execution before
executory LA can implement continued employment; or (d) that it will not
the reinstatement serve any prudent purpose as when
order supervening facts transpired which made
Necessity of Not necessary Indispensable to execution unjust or inequitable.
issuance of Writ of effect reinstatement
Execution
Computation
Per prevailing jurisprudence, the following are the
b. Separation Pay in Lieu of Reinstatement
components of separation pay in lieu of reinstatement:
This remedy is not found in the Labor Code but is
granted in case reinstatement is no longer possible or feasible, such
(i) The amount equivalent to at least one (1)
as when any of the following circumstances exists:
month salary or to one (1) month salary for
every year of service, whichever is higher, a
(i) Where the continued relationship between the
fraction of at least six (6) months being
employer and the employee is no longer viable
considered as one (1) whole year.
due to the strained relations and antagonism
(ii) Allowances that the employee has been
between them (Doctrine of Strained Relations).
receiving on a regular basis
(ii) When reinstatement proves impossible,
impracticable, not feasible or unwarranted for
The salary rate prevailing at the end of the period of
varied reasons and thus hardly in the best
putative service should be the basis for computation which refers to
interest of the parties such as:
the period of imputed service for which the employee is entitled to
backwages.
 Where the employee has already been
replaced permanently as when his position has
Period Covered
already been taken over by a regular employee
The period for computation shall be from start of
and there is no substantially equivalent
employment up to the date of finality of decision except:
position to which he may be reinstated.
 Where the dismissed employee’s position is
(i) When the employer has ceased its operation
no longer available at the time of
earlier, in which case, the same should be
reinstatement for reasons not attributable to
computed up to the date of closure.
the fault of the employer.
(ii) When the employee is a fixed term employee,
 When there has been long lapse or passage of in which case, it shall only be up to the
time that the employee was out of employer’s unexpired portion of the fixed-term contract.
employ from the date of the dismissal to the (iii) When the employee reached retirement or
final resolution of the case or because of the retirement, in which case, it shall only be up to
realities of the situation. retirement age or date of retrenchment
 By reason of the injury suffered by the (iv) When the employee dies during the pendency
employee. of the case, in which case, it shall only be up to
 The employee has already reached retirement the time of the death of such employee.
age under a Retirement Plan.
 When the illegally dismissed employees are Principles
over-age or beyond the compulsory retirement
age and their reinstatement would unjustly  Award of separation pay and backwages are not inconsistent
prejudice their employer. with each other. Hence, both may be awarded to an illegally
dismissed employee. The payment of separation pay is in
(iii) Where the employee decides not to be addition to payment of backwages.
reinstated as when he does not pray for  Reinstatement cannot be granted when what is prayed for by
reinstatement in his complaint or position paper employee is separation pay in lieu thereof.
but asked for separation pay instead.  Award of separation pay in lieu of reinstatement is not proper
(iv) When reinstatement is rendered moot and if there is no finding of illegal dismissal.
academic due to supervening events, such as:
 Separation pay, as a substitute remedy, is only proper for
reinstatement but not for backwages.
 Death of the illegally dismissed employee.
 Employer has no option to choose between reinstatement and
 Declaration of insolvency of the employer by separation pay in lieu thereof. Reinstatement is still the
the court. preference.
 Fire which gutted the employer’s establishment  Grant of separation pay in lieu of reinstatement converts the
and resulted in its total destruction. award of reinstatement into a monetary award; hence, legal
 In case the establishment where the employee interest may be imposed thereon.
is to be reinstated has closed or ceased
operation.

Page 108 of 117

 An employee is not entitled to separation pay when he or she
resigns voluntarily, unless it is a company practice or provided
in the CBA [Hanford Philippines v. Joseph].
c. Backwages
Backwages is a relief that restores the income that was
lost by reason of the illegal dismissal. It refers to the compensation
which an employee would have earned had he not been unjustly
dismissed. On the other hand, “unpaid wages” refer to
compensation for services already rendered but withheld by the
employer.
In 1996, the Supreme Court changed the rule on the
reckoning of backwages. It announced a new doctrine in the case of
Bustamante v. NLRC, which is now known as the Bustamante
doctrine. Under this rule, the term “full backwages” should mean
exactly that, i.e., without deducting from backwages the earnings
derived elsewhere by the concerned employee during the period of
his illegal dismissal.
The components of backwages are as follows:
(i) Salaries or wages computed on the basis of the
wage rate level at the time of the illegal
dismissal and not in accordance with the latest,
current wage level of the employee’s position.
(ii) Allowances and other benefits regularly
granted to and received by the employee
should be made part of backwages.
This is computed from the time compensation was
withheld up to the time of the employee’s reinstatement (actual or
payroll) except:
(i) If reinstatement is not possible (e.g. if what is
awarded is separation pay in lieu of
reinstatement) – only up to the date of finality
of decision.
(ii) If employer ceased operations – only up to the
date of closure.
(iii) If fixed-term/probationary employee – only up
to the unexpired portion of the fixed-term
contract or probationary employment contract.
(iv) If employee was confined in prison – only up
to the date of confinement in prison.
(v) If employee reached retirement or
retrenchment – only up to retirement age or
date of retrenchment.
(vi) If employee becomes physically or mentally
incapacitated – only up to the date of
incapacity.
(vii) If employee dies during the pendency of the
case – only up to the time of death.
Settled Principles
 Any amount received during payroll reinstatement is
deductible from backwages.
 Salary increases during period of unemployment are not
included as component in the computation of backwages.
 Dismissed employee’s ability to earn is irrelevant in the award
of backwages.
 Employee is entitled to backwages even if it is not included in
his prayer or even if the LA or NLRC failed to award
backwages.
 Backwages excludes period of valid suspension but includes
period of preventive suspension.
Page 109 of 117
 Employers offer to reinstate does not forestall payment of full
backwages.
Limited Backwages
There are also instances where backwages were not
awarded in full but merely limited for the reason of good faith on
the part of the employer.
No Backwages
Under the following situations, reinstatement of an
illegally dismissed employee is granted without the accompanying
backwages:
(i) When the dismissal is deemed too harsh a
penalty;
(ii) When the employer acted in good faith; or
(iii) Where there is no evidence that the employer
dismissed the employee.
Thus, the backwages will not be granted in full but
limited to 1 year, 2 years or 5 years.
As to the first situation, one illustrative case is ALU-
TUCP v. NLRC, where reinstatement with no backwages was
ordered because the penalty imposed on the employee for
committing theft of company property was reduced to suspension
due to mitigating circumstances. The justification was that the
entire period when the employee was out of job because of his
dismissal should already be considered as the period of his
suspension; hence, he should no longer be entitled to backwages
for the same period.
Another case is Yupangco v. NLRC, where, after finding
that the employee was illegally dismissed but at the same time
guilty of misconduct, it was ruled that there was no grave abuse of
discretion in the resolution of the NLRC which meted only the
penalty of suspension without backwages.
In Pepsi-Cola v. NLRC, where the employee filed a leave
of absence for one day after he suffered stomach ache and upon the
advice of his doctor, he took a rest for 25 days without prior leave.
When he reported back for work, he was told he had been
dismissed for being absent without leave. It was held that while he
was at fault, he could not be dismissed. He was thus ordered
reinstated but he was denied backwages.
d. Damages
The employee is entitled to moral damages when the
employer acted a) in bad faith or fraud; b) in a manner oppressive
to labor; or c) in a manner contrary to morals, good customs, or
public policy [Montinola v. Philippine Airlines].
Bad faith "implies a conscious and intentional design to
do a wrongful act for a dishonest purpose or moral obliquity."
Cathay Pacific Airways v. Spouses Vazquez established that bad
faith must be proven through clear and convincing evidence. This
is because "[b]adfaith and fraud . . . are serious accusations that can
be so conveniently and casually invoked, and that is why they are
never presumed. They amount to mere slogans or mudslinging
unless convincingly substantiated by whoever is alleging them."76
Here, there was clear and convincing evidence of bad faith adduced
in the lower tribunals.
e. Attorney’s Fees
To recapitulate, both the Labor Code and the Civil Code
provide that attorney's fees may be recovered in the following
instances, namely, (i) in cases involving the unlawful withholding
of wages;[38] (ii) where the defendant's act or omission has
compelled the plaintiff to litigate with third persons or the plaintiff
incurred expenses to protect his interest;[39] (iii) in actions for the
recovery of wages of household helpers, laborers and skilled
workers;[40] (iv) in actions for indemnity under workmen's
compensation and employer's liability laws;[41] and (v) in cases
where the court deems it just and equitable that attorney's fees and
expenses of litigation should be recovered [Alva v. High Capacity
Security Force].
In a catena of cases, the Court awarded attorney's fees in
favor of illegally dismissed employees who were compelled to file
an action for the recovery of their lawful wages, which were
withheld by the employer without any valid and legal basis.[43] A
plain showing that the lawful wages were not paid without
justification was sufficient to warrant an award of attorney's fees
[Kaisahan v. Manila Water].
H. PREVENTIVE SUSPENSION
Preventive suspension may be legally imposed against an
errant employee only while he is undergoing an investigation for
certain serious offenses. Consequently, its purpose is to prevent
him from causing harm or injury to the company as well as to his
fellow employees, hence, his actual presence in the workplace
would not be desirable for the meaningful conduct of the
investigation of his case. Its imposition is thus justified only in
cases where the employee’s continued presence in the company
premises during the investigation poses a serious and imminent
threat to the life or property of the employer or of the
employee’s co-workers. Without this threat, preventive
suspension is not proper.
Settled Principles
 Preventive suspension, by itself, does not signify that the
company has already adjudged the employee guilty of the
charges for which she was asked to answer and explain.
 Preventive suspension is not a penalty. This is different from
PUNITIVE SUSPENSION which is imposed as a penalty less
harsh than dismissal.
 Preventive suspension is neither equivalent nor tantamount to
dismissal.
 If the basis of the preventive suspension is the employee’s
absences and tardiness, the imposition of preventive suspension
on him is not justified as his presence in the company premises
does not pose any such serious or imminent threat to the life or
property of the employer or of the employee’s co-workers
simply “by incurring repeated absences and tardiness.”
 Preventive suspension does not mean that due process may be
disregarded.
 Preventive suspension should only be for a maximum period of
thirty (30) days. After the lapse of the 30-day period, the
employer is required to reinstate the worker to his former
position or to a substantially equivalent position. For the
construction industry, preventive suspension should only be for
a maximum of 15 days.
 During the 30-day preventive suspension, the worker is not
entitled to his wages and other benefits. However, if the
employer decides, for a justifiable reason, to extend the period
of preventive suspension beyond said 30- day period, he is
obligated to pay the wages and other benefits due the worker
during said period of extension. In such a case, the worker is not
bound to reimburse the amount paid to him during the extension
if the employer decides to dismiss him after the completion of
the investigation.
 Extension of period must be justified. During the 30-day period
of preventive suspension, the employer is expected to conduct
and finish the investigation of the employee’s administrative
case. The period of thirty (30) days may only be extended if the
Page 110 of 117
employer failed to complete the hearing or investigation within
said period due to justifiable grounds. No extension thereof can
be made based on whimsical, capricious or unreasonable
grounds.
 Preventive suspension lasting longer than 30 days, without the
benefit of valid extension, amounts to constructive dismissal.
 Indefinite preventive suspension amounts to constructive
dismissal.
IX
TERMINATION OF EMPLOYMENT BY
EMPLOYEE
Article 300. [285] Termination by Employee. (a) An employee
may terminate without just cause the employee-employer relationship
by serving a written notice on the employer at least one (1) month in
advance. The employer upon whom no such notice was served may
hold the employee liable for damages.
(b) An employee may put an end to the relationship without
serving any notice on the employer for any of the following just causes:
1. Serious insult by the employer or his representative on the
honor and person of the employee;
2. Inhuman and unbearable treatment accorded the
employee by the employer or his representative;
3. Commission of a crime or offense by the employer or his
representative against the person of the employee or any of the
immediate members of his family; and
4. Other causes analogous to any of the foregoing.
A. VOLUNTARY RESIGNATION
Resignation is the voluntary act of an employee who
finds herself in a situation where she believes that personal reasons
cannot be sacrificed in favor of the exigency of the service and that
she has no other choice but to disassociate herself from
employment. Employees resign for various reasons. A big salary is
certainly no hindrance to a voluntary cessation of employment.
Human resource studies reveal that various factors (in and out of
the workplace) affect an employee’s employment decision [Globe
Telecom v. Crisologo].
1. Requisites
In case of voluntary resignation without just cause, the
following requisites must concur:
(a) The resigning employee should tender a written (not
verbal) notice of the termination (commonly known
as “resignation letter”);
(b)Service of such notice to the employer at least one
(1) month in advance; and
(c) Written acceptance by the employer of the
resignation.
Written acceptance of resignation is necessary to make it
binding and effective. A duly accepted resignation effectively
terminates the employer-employee relationship [BMG Records v.
Aparecio].
Phimco v. NLRC
Held: As regards the validity of the dismissal of Carpio,
petitioner claims that Carpio received a copy of the company’s Handbook
on 26 October 1990 which clearly states that if an employee resigns from
work he has to serve an advance written notice at least thirty (30) days
before he leaves the service with a proviso that a shorter notification would
be acceptable only if authorized by the department head concerned and that
he should continue to render service during the interim unless he has
secured authority to go on leave. Moreover, any resignation shall be
effected only upon its proper acceptance by management. The penalty
prescribed for the violation thereof is dismissal. Accordingly, PHIMCO
maintains that since Carpio violated the rules and regulations of the
company with respect to his leaving the company which resulted in the
disruption of its operations, then his termination was for a just cause based
particularly on willful disobedience under the law. Corollarily, PHIMCO
was not obligated to give separation pay to Carpio.
We find the penalty of dismissal imposed on Carpio for non-
observance of the rules and regulations provided in the Handbook of
PHIMCO, particularly Rules 7, 7.1 and 7.2 concerning the resignation of
the employee, too harsh. There is no dispute that Carpio failed to comply
with company rules and regulations regarding his resignation. Nonetheless,
it has to be noted and emphasized that he did not outrightly disregard the
same. Looking back at the antecedents, it was on 14 August 1991 that he
tendered his resignation to take effect fifteen (15) days later or on 30
August 1991. Before that period expired he still reported for work.
Significantly, the fact that his letter of resignation was only acted upon after
he had left for United States opens the avenues for speculations and
suspicions. While he continued to work to await the acceptance of his
resignation, he was not even informed of the status thereof or that he had to
stay for fifteen (15) more days. The rule could have been easily pointed out
or relayed to him by Mr. Lopez to whom he handed his letter of resignation
and who was staying with him in the same office. But management waited
until after he had left for the United States. Evidently, there was bad faith in
the manner his resignation was resolved.
Petitioner also avers that Carpio’s termination was for a just
cause under the law grounded on his willful disobedience to comply with
the company’s rules and regulation. But to constitute willful disobedience
the employee’s conduct must be willful or intentional, the willfulness being
characterized by a wrongful and perverse attitude and the order violated
must have been reasonable, lawful, made known to the employee and must
pertain to the duties which he has been engaged to discharge. 10 In the
instant case, we find absent any intentional or willful conduct on the part of
Carpio to disregard the rules regarding voluntary resignation. On the
contrary, there was earnest and sincere effort on the part of Carpio to
comply.
In cases of voluntary resignation, the employee finds himself in
a situation where he believes that personal reasons cannot be sacrificed in
favor of the exigency of the service and he has no other choice but to
disassociate himself from his employment; 11 hence, the law affords the
employee the right to resign regardless of whether the company has found
an able and competent replacement and whether the operation of the
company would be affected provided he serves a written notice on the
employer at least one (1) month in advance. The rule of requiring an
employee to stay or complete the 30-day period prior to the effectivity of
his resignation becomes discretionary on the part of management as an
employee who intends to resign may be allowed a shorter period before his
resignation becomes effective. In the instant case, the noncompliance with
the period should not be used by management as a subterfuge to avoid the
payment of separation pay.  employment contract or Collective Bargaining Agreement (CBA),
2. Liability for Damages
The failure by the resigning employee to comply with the
legal requirement of service of a written notice (resignation letter)
at least 30 days from its effectivity does not result in making his
resignation void but only in making him liable for damages
[Serrano v. NLRC].
3. Withdrawal of Resignation
Resignations, once accepted, may not be withdrawn
without the consent of the employer. If the employer accepts the
withdrawal, the employee retains his job. If the employer does not,
the employee cannot claim illegal dismissal. To say that an
employee who has resigned is illegally dismissed, is to encroach
upon the right of employers to hire persons who will be of service
to them. Obviously, this is a recognition of the contractual nature
of employment which requires mutuality of consent between the
parties. An employment contract is consensual and voluntary.
Hence, if the employee "finds-himself in a situation where he
believes that personal reasons cannot be sacrificed in favor of the
exigency of the service, then he has no other choice but to
disassociate himself from his employment". If accepted by the
Page 111 of 117
employer, the consequent effect of resignation is severance of the
contract of employment [Philippines Today v. NLRC].
A resigned employee who desires to take his job back has
to re-apply therefor and he shall have the status of a stranger who
cannot unilaterally demand an appointment. He cannot arrogate
unto himself the same position which he earlier decided to leave.
To allow him to do so would be to deprive the employer of his
basic right to choose whom to employ. Such is tantamount to
undue oppression of the employer. It has been held that an
employer is free to regulate, according to his own discretion and
judgment, all aspects of employment including hiring. The law, in
protecting the rights of the laborer, impels neither the oppression
nor self-destruction of the employer [Ibid].
Intertrod v. NLRC
Held: Resignations, once accepted and being the sole act of the
employee, may not be withdrawn without the consent of the employer. In
the instant case, the Master had already accepted the resignation and,
although the private respondent was being required to serve the thirty (30)
days notice provided in the contract, his resignation was already approved.
Private respondent cannot claim that his resignation ceased to be effective
because he was not immediately discharged in Port Pylos, Greece, for he
could no longer unilaterally withdraw such resignation. When he later
signified his intention of continuing his work, it was already up to the
petitioners to accept his withdrawal of his resignation. The mere fact that
they did not accept such withdrawal did not constitute illegal dismissal for
acceptance of the withdrawal of the resignation was their (petitioners’) sole
prerogative.
Once an employee resigns and his resignation is accepted, he no
longer has any right to the job. If the employee later changes his mind, he
must ask for approval of the withdrawal of his resignation from his
employer, as if he were re-applying for the job. It will then be up to the
employer to determine whether or not his service would be continued. If the
employer accepts said withdrawal, the employee retains his job. If the
employer does not, as in this case, the employee cannot claim illegal
dismissal for the employer has the right to determine who his employees
will be. To say that an employee who has resigned is illegally dismissed, is
to encroach upon the right of employers to hire persons who will be of
service to them.
4. Separation Pay
The general rule is that an employee who voluntarily
resigns from employment is not entitled to separation pay unless,
however. there is a stipulation for payment of such in the
or payment of the amount is sanctioned by established employer
practice or policy [Travelaire & Tours v. NLRC].
B. INVOLUNTARY RESIGNATION
The following are the just causes that may justify the
termination by the employee of the employment relationship
without need to comply with the 30-day prior written notice
requirement:
(a) Serious insult by the employer or his representative
on the honor and person of the employee;
(b) Inhuman and unbearable treatment accorded the
employee by the employer or his representative;
(c) Commission of a crime or offense by the employer
or his representative against the person of the
employee or any of the immediate members of his
family; and
(d) Other causes analogous to any of the foregoing.
C. CONSTRUCTIVE DISMISSAL
Constructive dismissal contemplates any of the following
situations:
 a. An involuntary resignation resorted to when
continued employment is rendered impossible,
unreasonable or unlikely;
b. A demotion in rank and/or a diminution in pay; or
c. A clear discrimination, insensibility or disdain by
an employer which becomes unbearable to the
employee that it could foreclose any choice by him
except to forego his continued employment.
The employer has to prove that such managerial actions
do not constitute constructive dismissal [Blue Dairy Corp. v.
NLRC].
The test of constructive dismissal is whether a reasonable
person in the employee’s position would have felt compelled to
give up his position under the circumstances. It is an act amounting
to dismissal but made to appear as if it were not. In fact, the
employee who is constructively dismissed may be allowed to keep
on coming to work. Constructive dismissal is, therefore, a
DISMISSAL IN DISGUISE. The law recognizes and resolves this
situation in favor of the employees in order to protect their rights
and interests from the coercive acts of the employer [Ang v. San
Joaquin].
Singa Ship Management v. NLRC
Held: Corollarily, the contention of petitioners that respondent
Sangil voluntarily quit and was not illegally dismissed is without merit. We
defer to the findings of the NLRC -
Since complainant is not the aggressor, and since he figured a
head injury, he is then afraid to go back to the ship and to mix with his
aggressor. This apprehension or fear is normal to an ordinary prudent
individual and is tantamount to self-preservation. Therefore, his decision to
leave the ship "Crown Odyssey" is not voluntary. He did not leave the ship
out of his own free will but his departure was precipitated by fear. Without
that incident on 20 July 1990 he would have no reason not to go back to the
ship but with that incident, he fears for his life and limb.
In People's Security, Inc. v. NLRC we said that "constructive
dismissal exists when there is a quitting because continued employment is
rendered impossible, unreasonable or unlikely x x x x" Then in Philippine
Advertising Counselors, Inc. v. NLRC we held that "[c]onstructive
dismissal, however, does not always involve such kinds of diminution; an
act of clear discrimination, insensibility, or disdain by an employer may
become so unbearable on the part of the employee that it could foreclose
any choice by him except to forego his continued employment."
In the instant case, respondent Sangil quit because he feared for
his life and his fear was well founded. He already figured in an incident
with the much taller, bigger and heavier Zakkas who had been intimidating
him. He already suffered a cut in his head. Earlier, Zakkas threatened to
pour hot coffee on his head. Indeed, the intense undercurrent between the
Filipinos and the Greeks that could erupt into violence at the slightest
provocation was apparent as manifested by the writings in blood on the
wall of the word "magkaisa," as witnessed by another Greek steward on the
day of the incident. And, Sangil could not get any protection from the
Greek ship captain, not even the slightest assurance of safety from him. In
fine, the decision of respondent Sangil to leave the ship was not voluntary
at all but was impelled by a legitimate desire for self-preservation. He did
not leave the ship out of his own free will, whim or caprice but was moved
by fear for his life. Without that incident on 20 July 1990 where he was
pushed by the Greek Zakkas, respondent Sangil would not have had any
reason not to return to his ship. After all, he must have worked so hard to
get on board "Crown Odyssey."
Mandapat v. Add Force Personnel Services
Held: Petitioner reiterates that she was constructively dismissed.
She harps on the alleged pattern of harassment committed by respondent as
tantamount to constructive dismissal, such as, illegally placing her under
preventive suspension, the disconnection of her internet account, and the
pressure exerted by respondent to force her to resign.
Petitioner claims that the preventive suspension meted upon her
is illegal for being indefinite, as the duration of her suspension was not
stated in the company’s memorandum.
Page 112 of 117
On the other hand, respondent employer argues that petitioner’s
preventive suspension for one day can hardly be considered indefinite,
given the fact that petitioner immediately resigned one day after the
suspension.
We find that there was no act of discrimination committed
against petitioner that would render her employment unbearable.
Preventive suspension may be legally imposed against an
employee whose alleged violation is the subject of an investigation. The
purpose of his suspension is to prevent him from causing harm or injury to
the company as well as to his fellow employees.
The pertinent rules dealing with preventive suspension are found
in Section 8 and Section 9 of Rule XXIII, Book V of the Omnibus Rules
Implementing the Labor Code, as amended by Department Order No. 9,
Series of 1997, which read as follows:
Section 8. Preventive suspension. The employer may place the
worker concerned under preventive suspension only if his continued
employment poses a serious and imminent threat to the life or property of
the employer or of his co-workers.
Section 9. Period of suspension. No preventive suspension shall
last longer than thirty (30) days. The employer shall thereafter reinstate the
worker in his former or in a substantially equivalent position or the
employer may extend the period of suspension provided that during the
period of extension, he pays the wages and other benefits due to the worker.
In such case, the worker shall not be bound to reimburse the amount paid to
him during the extension if the employer decides, after completion of the
hearing, to dismiss the worker.
When preventive suspension exceeds the maximum period
allowed without reinstating the employee either by actual or payroll
reinstatement or when preventive suspension is for indefinite period, only
then will constructive dismissal set in.
While no period was mentioned in the show-cause
memorandum, it was wrong for petitioner to infer that her suspension was
for an indefinite period. It must be pointed out that the inclusion of the
phrase "during the course of investigation" would lead to a reasonable and
logical presumption that said suspension in fact has a duration which could
very well be not more than 30 days as mandated by law. And, as the Court
of Appeals correctly observed, the suspension has been rendered moot by
petitioner’s resignation tendered a day after the suspension was made
effective.
Petitioner contests the grounds for her suspension as she denies
posing a danger on the lives of the officers or employees of respondent or
of their properties. Petitioner adds that she was not in a position to bind
respondent to any contract, therefore, she could not and would not be able
to sabotage the operations of respondent. Upon the other hand, respondent
asserts that preventive suspension was necessary in order to protect the
assets and operations of the company pending investigation of the alleged
infractions committed by the employee concerned.
Respondent is correct. Indeed, as sales manager, petitioner had
the power and authority to enter into contracts that would bind respondent,
regardless of whether these contracts would prove to be beneficial or
prejudicial to the interest of respondent. Respondent has every right to
protect its assets and operations pending investigation of petitioner.
Neither could we consider the acts of disconnection of computer
and internet access privileges as harassment. Respondent clearly explained
that the cessation of her internet and network privileges were but a
consequence of the investigation against her and not for the purpose of
harassment. The Court of Appeals gave merit to respondent’s explanation
and held, thus:
x x x while her suspension, cessation of internet privileges, and
exclusion from local network access were but a consequence of the
investigation against her, and were intended to prevent her from having
further access to the company’s network-based documents and forms.
The acts respondent complains about are just measures enforced
by respondent to protect itself while the investigation was ongoing.
Petitioner claims that Longstaff forced her to resign by baiting
her with the promise of separation pay; but respondent maintains that there
was nothing illegal in giving petitioner the option to either resign or be
separated for a just cause.
We agree with the Court of Appeals that there was no coercion
employed on petitioner. The appellate court made the following
observation:
Unfortunately, however, before the investigation could proceed
to the second step of the termination process into a hearing or conference,
Mandapat chose to resign from her job. Mandapat’s bare allegation that she
was coerced into resigning can hardly be given credence in the absence of
clear evidence proving the same. No doubt, Mandapat read the writing on
the wall, knew that she would be fired for her transgressions, and beat the
company to it by resigning. Indeed, by the disrespectful tenor of her
memorandum, Mandapat practically indicated that she was no longer
interested in continuing cordial relations, much less gainful employment
with Add Force.
Mere allegations of threat or force do not constitute evidence to
support a finding of forced resignation. In order for intimidation to vitiate
consent, the following requisites must concur: (1) that the intimidation
caused the consent to be given; (2) that the threatened act be unjust or
unlawful; (3) that the threat be real or serious, there being evident
disproportion between the evil and the resistance which all men can offer,
leading to the choice of doing the act which is forced on the person to do as
the lesser evil; and (4) that it produces a well-grounded fear from the fact
that the person from whom it comes has the necessary means or ability to
inflict the threatened injury to his person or property.
None of these requisites was proven by petitioner. No demand
was made on petitioner to resign. At most, she was merely given the option
to either resign or face disciplinary investigation, which respondent had
every right to conduct in light of the numerous infractions committed by
petitioner. There is nothing irregular in providing an option to petitioner.
Ultimately, the final decision on whether to resign or face disciplinary
action rests on petitioner alone.
All told, the instances of harassment alleged by petitioner appear
to be more apparent than real. We find no reason to disturb the conclusion
of the Court of Appeals that petitioner resigned and was not constructively
dismissed.
Consolidated Foods v. NLRC
Held: We find that petitioners acts of conducting audits and
investigation on the alleged irregularities committed by private respondent
and in reassigning him to another place of work pending the results of the
investigation were based on valid and legitimate grounds. As such, these
acts of management cannot amount to constructive dismissal. It is worthy to
note that petitioners gave Baron every opportunity to raise his defense and
fully explain the discrepancies in the funds in his possession. In fact private
respondent informed petitioners that he would be returning for work on 5
March 1991 after his sick leave. But instead of doing so, he filed a
complaint for constructive dismissal before the Labor Arbiter.
By leaving his job without submitting the required final
explanation on the alleged irregularities, private respondent deprived
himself of the opportunity to face his accusers and prove his innocence of
the charges hurled against him.
Dangan v. NLRC
Held: Instead of terminating the petitioner’s employment, the
private respondent merely reassigned her to other temporary positions
before giving her a permanent job as secretary in the Technical Training
Department located at Bicutan, Taguig, Metro Manila. The acts of the
company negate the petitioner’s claim of discrimination and illegal
constructive dismissal. It tried its best to continue using her services.
Needless to say, no reinstatement can be effected because the petitioner has
not been dismissed. Neither may she be reinstated to her former position
which no longer exists. Ad imposible nemo tenetur. Insofar as this aspect of
the petition is concerned, the respondent NLRC committed no abuse of
discretion in dismissing the petitioner’s appeal.
Doble v. ABB, Inc.
Held: Since Doble claims to have been forced to submit a
resignation letter, it is incumbent upon him to prove with clear and
convincing evidence that his resignation was not voluntary, but was
actually a case of constructive dismissal, i.e., a product of coercion or
intimidation.37 Coercion exists when there is a reasonable or well-grounded
fear of an imminent evil upon a person or his property or upon the person or
property of his spouse, descendants or ascendants.38 The requisites for
intimidation to vitiate one's consent are stated in St. Michael Academy v.
NLRC, thus:
... (1) that the intimidation caused the consent to be given; (2)
that the threatened act be unjust or unlawful; (3) that the threat be real or
serious, there being evident disproportion between the evil and the
resistance which all men can offer, leading to the choice of doing the act
Page 113 of 117
which is forced on the person to do as the lesser evil; and (4) that it
produces a well-grounded fear from the fact that the person from whom it
comes has the necessary means or ability to inflict the threatened injury to
his person or property x x x.
After a careful review of the records, the Court finds that the
above-stated requisites are absent, and that the NLRC has exhaustively
discussed that Doble was not coerced into submitting a resignation letter,
thus:
"[c]omplainant has been employed with Respondent-ABB for
nineteen (19) years. He is holding one of the top positions in the company
and answerable only to the President, herein Respondent-Desai. He is a
highly educated man. It is improbable that a man of his stature may be
pressured into doing something that he does not want to do. Being a man of
high educational attainment and qualifications, he is expected to know the
import of everything he executes. His claim that he was forced to resign by
HR Miranda is unbelievable. The Complainant is the Vice-President and
Local Division Manager of the Power System Division of the
Respondent-ABB, while HR Miranda is the Country HR Manager. The
latter docs not outrank the former. It is likewise unbelievable that the
HR Manager would prevent the Complainant from leaving the
premises of the company nor prevent him from taking his lunch
wherever he wants to take it. HR Miranda simply docs not have that
power and she cannot possibly do that to a high-ranking officer who
has served the company for nineteen (19) years. The event of 13 March
2012 is undoubtedly stressful to the Complainant as the top management
had already expressed displeasure with his performance. But such degree of
tension is expected in a corporation environment where the primordial
consideration is to earn profit. As stated in the sworn statement of HR
Miranda, the Complainant was given the option to resign by
Respondent-Desai. Her statement that the Complainant negotiated for
a higher benefit is more attuned with what actually transpired on 13
March 2012. The retirement plan for Respondent-ABB only gives a
retiree 75% of his monthly pay for every year of service. The
Complainant was able to get a higher rate equivalent to one (1) month
salary for every year of service.
The Complainant prepared his resignation letter in his own
office. His first letter was not accepted by HR Miranda because it gave the
impression that he was being directed or ordered to resign. HR Miranda
made it clear to him that he is not being ordered to resign as it is his own
decision whether to resign or not. The Complainant submitted another
resignation letter which was accepted by Respondent-ABB through its
Country HR Manager. Thereafter, the Complainant no longer reported for
work as his resignation was effective immediately. It was ten (10) days
after he submitted his resignation letter that he again met with HR Miranda
to get his retirement benefits. The meeting took place outside the company
premises. If, indeed, the resignation of the Complainant was
involuntary, he could have easily sought legal counsel or advice right
after he left the company premises on 13 March 2012. Instead, he
waited for his clearance to be processed and his check prepared. He
cannot claim that he was still under duress from March 14 to 22, 2012.
The Complainant waited to be given his benefits first, and three (3)
days thereafter filed his complaint before this Office. This is hardly the
mindset of a person who is not in control of his life.
On the other hand, the Court disagrees with the findings of the
Labor Arbiter that Doble's resignation was not voluntary based on the
following events, to wit: (1) on March 2, 2012, Doble's Performance and
Development Approval rating in 2011 is unsatisfactory; (2) there are no
prior circumstances that may show his intention to resign; (3) on March 13,
2012, Desai raised the option for him to resign, after explaining that due to
the extent of losses and level of discontent among the ranks of the PS
Division, the Global and Regional management have demanded for a
change in leadership; (4) from the circumstances surrounding his
resignation, the option to resign did not originate from Doble but from
Desai, whose actuations was not a mere suggestion but a directive or order
that was effected on the same day of March 13, 2012; (5) HR Manager
Miranda's affidavit clearly show that Doble underwent pressure to resign
because starting 11:00 a.m. until 6:00 p.m. of even date, the option to resign
was reiterated and repeated until he handed a revised resignation letter; and
(6) Doble was not given the opportunity or option to stay in the service.
Even if the option to resign originated from the employer, what
is important for resignation to be deemed voluntary is that the employee's
intent to relinquish must concur with the overt act of relinquishment. There
can be no doubt as to the drastic and shocking nature of the abrupt decision
of ABB, Inc. to let Doble resign on March 13, 2012 after almost 19 years of
dedicated and satisfactory service, on account of the extent of losses, the
level of discontent among the ranks of PS Division, and the ABB, Inc.
Global and Regional management's demand for a change in leadership. It
bears emphasis, however, that between the start of the conference at around
11:00 a.m. and about eight (8) hours later in the evening when he left the
company premises, Doble negotiated for a higher separation pay, i.e., from
75% of the monthly salary for every year of service allowed under the
company retirement plan up to double that amount, or 1.5 month's pay for
every year of service. In fact, Doble tendered a resignation letter only after
being offered a better separation benefit of 1-month pay for every year of
service, and even submitted a separate letter expressing his intent to buy his
service vehicle. After considering the acts of Doble before and after his
resignation, the Court is convinced of Doble's clear intention to sever his
employment with ABB, Inc.
Doble claimed that while inside the conference room at about
2:00 p.m. of March 13, 2012, "he was aware that respondents were actually
terminating his services illegally and without due process, that the letter of
resignation he was being made to prepare was only a 'palusot' (to borrow
the word of Cong. Fariñas) of respondents (ABB, Inc. and Desai)." Despite
being aware of the illegality of his dismissal, Doble submitted a resignation
letter and a letter of intent to purchase his service vehicle, allowed Miranda
to process his resignation papers, met her outside company premises on
March 23, 2012 to sign a waiver and quitclaim and to receive his separation
benefits. In view of the lapse of considerable period between his resignation
until the execution of a quitclaim and receipt of his separation benefits
about ten (10) days later, the Court is inclined to rule that the filing of his
complaint for illegal dismissal on March 26, 2012 is a mere afterthought, if
not a mere pretention.
Cases where there was constructive dismissal
 Denying to the workers entry to their work area and placing
them on shifts “not by weeks but almost by month” by reducing
their workweek to three days.
 Reducing employee’s functions
 Blackmailing an employee to resign
 Delaying when the employee can start working or asking the
employee to wait for a long period of time before rehiring
 Barring the employees from entering the premises whenever
they would report for work in the morning without any
justifiable reason, and they were made to wait for a certain
employee who would arrive in the office at around noon, after
they had waited for a long time and had left.
 Sending to an employee a notice of indefinite suspension which
is tantamount to dismissal.
 Imposing indefinite preventive suspension without actually
conducting any investigation.
 Changing the employee’s status from regular to casual
constitutes constructive dismissal.
 Preventing the employee from reporting for work by ordering
the guards not to let her in. This is clear notice of dismissal.
Illegal Dismissal vs. Constructive Dismissal
In illegal dismissal, the employer openly shows his
intention to dismiss the employee. In fact, the employer, in
compliance with due process, asks the employee to explain why he
should not be dismissed for committing a wrongful act and he is
given due process prior to terminating him.
In contrast, in constructive dismissal, the employer will
never indicate that he is terminating the employee. He will even
allow the employee to report to his work every day. But he will do
any of the three (3) acts mentioned above that indicates his
intention to get rid of the services of the employee. This is the
reason why it is called “dismissal in disguise.”
D. WHEN EMPLOYMENT NOT DEEMED TERMINATED
Article 301. [286] When Employment not Deemed
Terminated. The bona fide suspension of the operation of a business or
Page 114 of 117
undertaking for a period not exceeding six (6) months, or the
fulfillment by the employee of a military or civic duty shall not
terminate employment. In all such cases, the employer shall reinstate
the employee to his former position without loss of seniority rights if he
indicates his desire to resume his work not later than one (1) month
from the resumption of operations of his employer or from his relief
from the military or civic duty.
Article 301 of the Labor Code allows the bona
fide suspension of operations for a period not exceeding six (6)
months.  During the suspension, an employee is not deemed
terminated.  As a matter of fact, the employee is entitled to be
reinstated once the employer resumes operations within the 6-
month period.  However, Article 301 is silent with respect to the
rights of the employee if the suspension of operations lasts for
more than 6 months [Manila Mining Corp. Employees v. Manila
Mining Corp.].
Manila Mining Corp. Employees v. Manila Mining
Held: MMC subscribes to the view that for purposes of
determining employer responsibility, an employment should likewise not be
deemed terminated, should the suspension of operation go beyond six (6)
months as long as the continued suspension is due, as in this case, to a
cause beyond the control of the employer.
We disagree.
As correctly elucidated upon by the Court of Appeals:
We observe that MMC was forced by the circumstances, hence,
it resorted to a temporary suspension of its mining and milling operations. 
It is clear that MMC had no choice.  It would be well to reiterate at this
juncture that the reason for such suspension cannot be attributed to DENR-
EMB. It is thus, evident, that the MMC declared temporary suspension of
operations to avert further losses.
The decision to suspend operation ultimately lies with the
employer, who in its desire to avert possible financial losses, declares, as
here, suspension of operations
Article 283 of the Labor Code applies to MMC and it provides:
ARTICLE 283.Closure of establishment and reduction of
personnel. - The employer may also terminate the employment of any
employee due to the installation of labor-saving devices, redundancy,
retrenchment to prevent losses or the closing or cessation of operation of
the establishment or undertaking unless the closing is for the purpose of
circumventing the provisions of this Title, by serving a written notice on the
workers and the Ministry of Labor and Employment at least one (1) month
before the intended date thereof. In case of termination due to the
installation of labor-saving devices or redundancy, the worker affected
thereby shall be entitled to a separation pay equivalent to at least his one (1)
month pay or to at least one (1) month pay for every year of service,
whichever is higher. In case of retrenchment to prevent losses and in cases
of closures or cessation of operations of establishment or undertaking not
due to serious business losses or financial reverses, the separation pay shall
be equivalent to one (1) month pay or at least one-half (1/2) month pay for
every year of service, whichever is higher. A fraction of at least six (6)
months shall be considered one (1) whole year.
Said provision is emphatic that an employee, who was dismissed
due to cessation of business operation, is entitled to the separation pay
equivalent to one (1) month pay or at least one-half (1/2) month pay for
every year of service, whichever is higher.  And it is jurisprudential that
separation pay should also be paid to employees even if the closure or
cessation of operations is not due to losses.
The Court is not impressed with the claim that actual severe
financial losses exempt MMC from paying separation benefits to
complainants.  In the first place, MMC did not appeal the decision of the
Court of Appeals which affirmed the NLRC's award of separation pay to
complainants.  MMC's failure had the effect of making the awards final so
that MMC could no longer seek any other affirmative relief.  In the second
place, the non-issuance of a permit forced MMC to permanently cease its
business operations, as confirmed by the Court of Appeals.  Under Article
283, the employer can lawfully close shop anytime as long as cessation of
or withdrawal from business operations is bona fide in character and not
impelled by a motive to defeat or circumvent the tenurial rights of
employees, and as long as he pays his employees their termination pay in
the amount corresponding to their length of service. [26]  The cessation of
operations, in the case at bar is of such nature.  It was proven that MMC
stopped its operations precisely due to failure to secure permit to operate a
tailings pond. Separation pay must nonetheless be given to the separated
employees.
Floating Status
At the outset, it bears reiterating that although placing an
employee like a security guard on “floating” status (or sometimes
called temporary “off-detail” status) is considered a temporary
retrenchment measure, the Supreme Court, in Exocet v. Serrano,
recognized the fact that there is similarly no provision in the Labor
Code which treats of a temporary retrenchment or lay-off. Neither
is there any provision which provides for its requisites or its
duration.
E. RETIREMENT
Retirement and dismissal are entirely different from each
other. Retirement is the result of a bilateral act of the parties, a
voluntary agreement between the employer and the employees
whereby the latter after reaching a certain age agrees and/or
consents to severe his employment with the former. On the other
hand, dismissal refers to the unilateral act of the employer in
terminating services of an employee with or without cause. In fine,
in the case of dismissal, it is only the employer who decides when
to terminate the services of an employee. Moreover, concomitant
with the provisions on retirement in a Labor Agreement is a
stipulation regarding retirement benefits pertaining to a retired
employee. Here again, the retirement benefits are subject to
stipulation by the parties unlike in dismissals were separation pay
is fixed by law in cases of dismissals without just cause. Evident,
therefore, from the foregoing is that retirements which are agreed
upon by the employer and the employee in their collective
bargaining agreement are not dismissals . . . . To further fortify the
aforesaid conclusion, it is noteworthy that even the New Labor
Code recognizes this distinction when it treats retirement form
service under a separate title from that of dismissal or termination
of employment, aside from expressly recognizing the right of the
employer to retire any employee who has reached the retirement
age established in the collective bargaining agreement or other
applicable employment contract and the latter to receive such
retirement benefits as he may have earned under existing laws and
any collective bargaining or other agreement [Pantranco v. NLRC].
1. Coverage
The following employees are eligible to avail of
retirement benefits under Article 302 [287] of the Labor Code:
a. All employees in the private sector, regardless of
their position, designation or status and irrespective
of the method by which their wages are paid;
b. Part-time employees;
c. Employees of service and other job contractors;
d. Domestic workers/kasambahays or persons in the
personal service of another;
e. Underground mine workers;
f. Employees of government-owned and/or controlled
corporations organized under the Corporation Code
(without original charters).
Article 302 [287], as amended, does not apply to the
following employees:
a. Employees of the national government and its political
subdivisions, including government-owned and/or
controlled corporations, if they are covered by the
Civil Service Law and its regulations.
Page 115 of 117
b. Employees of retail, service and agricultural
establishments or operations regularly employing not
more than ten (10) employees. These terms are
defined as follows:
(i) “Retail establishment” is one principally
engaged in the sale of goods to end-users for
personal or household use. It shall lose its
retail character qualified for exemption if it is
engaged in both retail and wholesale of goods.
(ii) “Service establishment” is one principally
engaged in the sale of service to individuals
for their own or household use and is
generally recognized as such.
2. Options
The two (2) types of retirement under the law (Article
302 [287] of the Labor Code) are:
a. Optional retirement upon reaching the age of
sixty (60) years (50 if underground/surface
mine employees).
b. Compulsory retirement upon reaching the age
of sixty-five (65) years (60 if
underground/surface mine employees).
It is the employee who exercises the option under No. 1
above. At age 65, there is no more option of the employee to speak
of. He has to retire as this age is considered compulsory retirement
age.
Article 302 provides for two types of retirement; (a)
compulsory and (b) optional. The first takes place at age 65, while
the second is primarily determined by the collective bargaining
agreement or other employment contract or employer’s retirement
plan. In the absence of any provision on optional retirement in a
collective bargaining agreement, other employment contract or
employer’s retirement plan, an employee may optionally retire
upon reaching the age of 60 years or more, but not beyond 65
years, provided he has served at least five years in the
establishment concerned. That prerogative is exclusively lodged in
the employee [Capili v. NLRC].
In almost all countries today, early retirement, i.e., before
age 60, is considered a reward for services rendered since it enables
an employee to reap the fruits of his labor — particularly
retirement benefits, whether lump-sum or otherwise — at an earlier
age, when said employee, in presumably better physical and mental
condition, can enjoy them better and longer. As a matter of fact,
one of the advantages of early retirement is that the corresponding
retirement benefits, usually consisting of a substantial cash
windfall, can early on be put to productive and profitable uses by
way of income — generating investments, thereby affording a
more significant measure of financial security and independence
for the retiree who, up till then, had to contend with life’s
vicissitudes within the parameters of his fortnightly or weekly
wages. Thus we are now seeing many CBAs with such early
retirement provisions. And the same cannot be considered a
diminution of employment benefits. Incidentally, we call attention
to Republic Act No. 7641, known as "The Retirement Pay Law,"
which went into effect on January 7, 1993 [Pantranco v. NLRC]. 
Laya v. Court of Appeals
Held: The CA concluded that the petitioner had agreed to be
bound by the retirement plan of PVB when he accepted the letter of
appointment as its Chief Legal Counsel.
We disagree with the conclusion. We declare that based on the
clear circumstances herein the CA erred in so concluding.
 The petitioner's letter of appointment pertinently stated:
3. As a Senior Officer of the Bank, you are entitled to the
following executive benefits:
Car Plan limit of P700,000.00, without equity on your part; a
gasoline subsidy of 300 liters per month and subject further to The Car Plan
Policy of the Bank.
Membership in a professional organization in relation to your
profession and/or assigned functions in the Bank.
Membership in the Provident Fund Program/Retirement
Program.
Entitlement to any and all other basic and fringe benefits
enjoyed by the officers; core of the Bank relative to Insurance covers,
Healthcare Insurance, vacation and sick leaves, among others.
Obviously, the mere mention of the retirement plan in the letter
of appointment did not sufficiently inform the petitioner of the contents or
details of the retirement program. To construe from the petitioner's
acceptance of his appointment that he had acquiesced to be retired earlier
than the compulsory age of 65 years would, therefore, not be warranted.
This is because retirement should be the result of the bilateral act of both
the employer and the employee based on their voluntary agreement that the
employee agrees to sever his employment upon reaching a certain age.
That the petitioner might be well aware of the existence of the
retirement program at the time of his engagement did not suffice. His
implied knowledge, regardless of duration, did not equate to the voluntary
acceptance required by law in granting an early retirement age option to the
employee. The law demanded more than a passive acquiescence on the part
of the employee, considering that his early retirement age option involved
conceding the constitutional right to security of tenure.
In Cercado v. Uniprom, Inc., we have underscored the character
of the employee's consent in agreeing to the early retirement policy of the
employer, viz.:
Acceptance by the employees of an early retirement age option
must be explicit, voluntary, free, and uncompelled. While an employer may
unilaterally retire an employee earlier than the legally permissible ages
under the Labor Code, this prerogative must be exercised pursuant to a
mutually instituted early retirement plan. In other words, only the
implementation and execution of the option may be unilateral, but not the
adoption and institution of the retirement plan containing such option. For
the option to be valid, the retirement plan containing it must be voluntarily
assented to by the employees or at least by a majority of them through a
bargaining representative.
Furthermore, the petitioner's membership in the retirement plan
could not be justifiably attributed to his signing of the letter of appointment
that only listed the minimum benefits provided to PVB's employees.
Indeed, in Cercado, we have declared that the employee's consent to the
retirement plan that came into being two years after the hiring could not be
inferred from her signature on the personnel action forms accepting the
terms of her job description, and compliance with the company policies,
rules and regulations, to wit:
We also cannot subscribe to respondent's submission that
petitioner's consent to the retirement plan may be inferred from her
signature in the personnel action forms containing the phrase: "Employee
hereby expressly acknowledges receipt of and undertakes to abide by tile
provisions of his/her Job Description, Company Code of Conduct and such
other policies, guidelines, rules and regulations the company may
prescribe."
It should be noted that the personnel action forms relate to the
increase in petitioner's salary at various periodic intervals. To conclude that
her acceptance of the salary increases was also, simultaneously, a
concurrence to the retirement plan would be tantamount to compelling her
to agree to the latter. Moreover, voluntary and equivocal acceptance by an
employee of an early retirement age option in a retirement plan necessarily
connotes that her consent specifically refers to the plan or that she has at
least read the same when she affixed her conformity thereto.
A perusal of PVB's retirement plan shows that under its Article
III all the regular employees of PVB were automatically admitted into
membership, thus:
ARTICLE III
MEMBERSHIP IN THE PLAN
Section 1. Eligibility at Effective Date. Any Employee of the
Bank as of January 1, 1996 shall automatically be a Member of the Plan as
of such date.
Section 2. Eligibility after Effective Date. Any person who
becomes an Employee after January 1, 1996 shall automatically become a
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Member of the Plan on the date he becomes a regular permanent Employee,
provided he is less than 55 years old as of such date.
Section 3. Continuation/Termination of Membership.
Membership in the Plan shall be concurrent with employment with the
Bank, and shall cease automatically upon termination of the Member's
service with the Bank for any reason whatsoever.74 (Bold underscoring
supplied for emphasis)
Having thus automatically become a member of the retirement
plan through his acceptance of employment as Chief Legal Officer of
PVB,75 the petitioner could not withdraw from the plan except upon his
termination from employment.
It is also notable that the retirement plan had been in existence
since January 1, 1996, or more than five years prior to the petitioner's
employment by PVB. The plan was established solely by the PVB, and
approved by its president. As such, the plan was in the nature of a contract
of adhesion, in respect to which the petitioner was reduced to mere
submission by accepting his employment, and automatically became a
member of the plan. With the plan being a contract of adhesion, to consider
him to have voluntarily and freely given his consent to the terms thereof as
to warrant his being compulsorily retired at the age of 60 years is factually
unwarranted.
In view of the foregoing, the Court disagrees with the view
tendered by Justice Leonen to the effect that the petitioner, because of his
legal expertise and educational attainment, could not now validly claim that
he was not informed of the provisions of the retirement program. The
pertinent rule on retirement plans does not presume consent or
acquiescence from the high educational attainment or legal knowledge of
the employee. In fact, the rule provides that the acquiescence by the
employee cannot be lightly inferred from his acceptance of employment.
Moreover, it was incumbent upon PVB to prove that the
petitioner had been fully apprised of the terms of the retirement program at
the time of his acceptance of the offer of employment. PVB did not
discharge its burden, for the petitioner's appointment letter apparently
enumerated only the minimum benefits that he would enjoy during his
employment by PVB, and contained no indication of PVB having given
him a copy of the program itself in order to fully apprise him of the
contents and details thereof. Nonetheless, even assuming that he
subsequently obtained information about the program in the course of his
employment, he still could not opt to simply withdraw from the program
due to his membership therein being automatic for the regular employees of
PVB.
To stress, company retirement plans must not only comply with
the standards set by the prevailing labor laws but must also be accepted by
the employees as commensurate to their faithful services to the employer
within the requisite period.80 Although the employer could be free to
impose a retirement age lower than 65 years for as long its employees
consented, the retirement of the employee whose intent to retire was not
clearly established, or whose retirement was involuntary is to be treated as a
discharge.
3. Amount of Retirement Pay
In the absence of a retirement plan or agreement
providing for retirement benefits of employees in the
establishment, an employee, upon reaching the optional or
compulsory retirement age specified in Article 287, shall be
entitled to retirement pay equivalent to at least one-half (½) month
salary for every year of service, a fraction of at least six (6) months
being considered as one (1) whole year.
For purposes of determining the minimum retirement pay
due an employee under Article 287, the term “one- half month
salary” shall include all of the following:
(i) Fifteen (15) days salary of the employee based on
his latest salary rate.
(ii) The cash equivalent of five (5) days of service
incentive leave;
(iii)One-twelfth (1/12) of the 13th month pay due the
employee; and
(iv) All other benefits that the employer and employee
may agree upon that should be included in the
computation of the employee’s retirement pay.
 “One-half (½) month salary” means 22.5 days.
“One-half [½] month salary” is equivalent to “22.5
days” arrived at after adding 15 days plus 2.5 days representing
one-twelfth [1/12] of the 13th month pay plus 5 days of service
incentive leave [Grace Christian High School v. Lavandera].

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