I.

Introduction  of work, and a living wage. They shall also participate in policy and decision-making processes affecting their rights and
A. Constitutional Basis benefits as may be provided by law.

ARTICLE II The State shall promote the principle of shared responsibility between workers and employers and the preferential use of
DECLARATION OF PRINCIPLES AND STATE POLICIES PRINCIPLES voluntary modes in settling disputes, including conciliation, and shall enforce their mutual compliance therewith to foster
industrial peace.
Section 2. The Philippines renounces war as an instrument of national policy, adopts the generally accepted principles of
international law as part of the law of the land and adheres to the policy of peace, equality, justice, freedom, cooperation, and The State shall regulate the relations between workers and employers, recognizing the right of labor to its just share in the
amity with all nations. fruits of production and the right of enterprises to reasonable returns to investments, and to expansion and growth.

STATE POLICIES WOMEN

Section 10. The State shall promote social justice in all phases of national development. Section 14. The State shall protect working women by providing safe and healthful working conditions, taking into account
Section 18. The State affirms labor as a primary social economic force. It shall protect the rights of workers and promote their maternal functions, and such facilities and opportunities that will enhance their welfare and enable them to realize their
their welfare. full potential in the service of the nation.

ARTICLE III B. Statutory Basis

BILL OF RIGHTS Labor code
Chapter I
Section 8. The right of the people, including those employed in the public and private sectors, to form unions, associations, or GENERAL PROVISIONS
societies for purposes not contrary to law shall not be abridged. ART. 3. Declaration of Basic Policy.2 – The State shall 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.
ARTICLE IX The State shall assure the rights of workers to self-organization, collective bargaining, security of tenure, and just and
CONSTITUTIONAL COMMISSION humane conditions of work.

ART. 218. [211] Declaration of Policy. – A. It is the policy of the State:

B. THE CIVIL SERVICE COMMISSION
(a) To promote and emphasize the primacy of free collective bargaining and negotiations, including voluntary arbitration,
Section 2.
mediation and conciliation, as modes of settling labor or industrial disputes;
(b) To promote free trade unionism as an instrument for the enhancement of democracy and the promotion of social justice
1. The civil service embraces all branches, subdivisions, instrumentalities, and agencies of the Government, including
and development;
government-owned or controlled corporations with original charters.
2. Appointments in the civil service shall be made only according to merit and fitness to be determined, as far as (c) To foster the free and voluntary organization of a strong and united labor movement;
practicable, and, except to positions which are policy-determining, primarily confidential, or highly technical, by (d) To promote the enlightenment of workers concerning their rights and obligations as union members and as employees;
competitive examination. (e) To provide an adequate administrative machinery for the expeditious settlement of labor or industrial disputes;
3. No officer or employee of the civil service shall be removed or suspended except for cause provided by law. (f) To ensure a stable but dynamic and just industrial peace; and
4. No officer or employee in the civil service shall engage, directly or indirectly, in any electioneering or partisan (g) To ensure the participation of workers in decision and policy-making processes affecting their rights, duties and welfare.
political campaign.
5. The right to self-organization shall not be denied to government employees.
B. To encourage a truly democratic method of regulating the relations between the employers and employees by means of
agreements freely entered into through collective bargaining, no court or administrative agency or official shall have the
ARTICLE XII power to set or fix wages, rates of pay, hours of work or other terms and conditions of employment, except as
NATIONAL ECONOMY AND PATRIMONY otherwise provided under this Code.

Section 12. The State shall promote the preferential use of Filipino labor, domestic materials and locally produced goods, and
adopt measures that help make them competitive.

ARTICLE XIII
SOCIAL JUSTICE AND HUMAN RIGHTS

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
C. Labor Relations
1. Dispute Settlement Methodology
2. Collective Bargaining 
G.R. No. L-54334 January 22, 1986
KIOK LOY, doing business under the name and style SWEDEN ICE CREAM PLANT, petitioner, vs.
NATIONAL LABOR RELATIONS COMMISSION (NLRC) and PAMBANSANG KILUSAN NG PAGGAWA
(KILUSAN),  part of this decision, sent by the Union (Private respondent) to the respondent (petitioner herein) and
CUEVAS, J.:
Petition for certiorari to annul the decision 1 of the National Labor Relations Commission (NLRC) dated July 20, 1979 which
found petitioner Sweden Ice Cream guilty of unfair labor practice for unjustified refusal to bargain, in violation of par. (g) of
Article 2492 of the New Labor Code, 3 and declared the draft proposal of the Union for a collective bargaining agreement as
the governing collective bargaining agreement between the employees and the management.
The pertinent background facts are as follows:
In a certification election held on October 3, 1978, the Pambansang Kilusang Paggawa (Union for short), a legitimate late
labor federation, won and was subsequently certified in a resolution dated November 29, 1978 by the Bureau of Labor
Relations as the sole and exclusive bargaining agent of the rank-and-file employees of Sweden Ice Cream Plant (Company
for short). The Company's motion for reconsideration of the said resolution was denied on January 25, 1978.
Thereafter, and more specifically on December 7, 1978, the Union furnished 4 the Company with two copies of its proposed
collective bargaining agreement. At the same time, it requested the Company for its counter proposals. Eliciting no response
to the aforesaid request, the Union again wrote the Company reiterating its request for collective bargaining negotiations and
for the Company to furnish them with its counter proposals. Both requests were ignored and remained unacted upon by the
Company.
Left with no other alternative in its attempt to bring the Company to the bargaining table, the Union, on February 14, 1979,
filed a "Notice of Strike", with the Bureau of Labor Relations (BLR) on ground of unresolved economic issues in collective
bargaining. 5
Conciliation proceedings then followed during the thirty-day statutory cooling-off period. But all attempts towards an
amicable settlement failed, prompting the Bureau of Labor Relations to certify the case to the National Labor Relations
Commission (NLRC) for compulsory arbitration pursuant to Presidential Decree No. 823, as amended. The labor arbiter,
Andres Fidelino, to whom the case was assigned, set the initial hearing for April 29, 1979. For failure however, of the parties
to submit their respective position papers as required, the said hearing was cancelled and reset to another date. Meanwhile,
the Union submitted its position paper. The Company did not, and instead requested for a resetting which was granted. The
Company was directed anew to submit its financial statements for the years 1976, 1977, and 1978.
The case was further reset to May 11, 1979 due to the withdrawal of the Company's counsel of record, Atty. Rodolfo dela
Cruz. On May 24, 1978, Atty. Fortunato Panganiban formally entered his appearance as counsel for the Company only to
request for another postponement allegedly for the purpose of acquainting himself with the case. Meanwhile, the Company
submitted its position paper on May 28, 1979.
When the case was called for hearing on June 4, 1979 as scheduled, the Company's representative, Mr. Ching, who was
supposed to be examined, failed to appear. Atty. Panganiban then requested for another postponement which the labor arbiter
denied. He also ruled that the Company has waived its right to present further evidence and, therefore, considered the case
submitted for resolution.
On July 18, 1979, labor arbiter Andres Fidelino submitted its report to the National Labor Relations Commission. On July 20,
1979, the National Labor Relations Commission rendered its decision, the dispositive portion of which reads as follows:
WHEREFORE, the respondent Sweden Ice Cream is hereby declared guilty of unjustified refusal to
bargain, in violation of Section (g) Article 248 (now Article 249), of P.D. 442, as amended. Further, the
draft proposal for a collective bargaining agreement (Exh. "E ") hereto attached and made an integral
which is hereby found to be reasonable under the premises, is hereby declared to be the collective
agreement which should govern the relationship between the parties herein.
SO ORDERED. (Emphasis supplied)
Petitioner now comes before Us assailing the aforesaid decision contending that the National Labor Relations Commission
acted without or in excess of its jurisdiction or with grave abuse of discretion amounting to lack of jurisdiction in rendering
the challenged decision. On August 4, 1980, this Court dismissed the petition for lack of merit. Upon motion of the petitioner,
however, the Resolution of dismissal was reconsidered and the petition was given due course in a Resolution dated April 1,
1981.
Petitioner Company now maintains that its right to procedural due process has been violated when it was precluded from
presenting further evidence in support of its stand and when its request for further postponement was denied. Petitioner
further contends that the National Labor Relations Commission's finding of unfair labor practice for refusal to bargain is not
supported by law and the evidence considering that it was only on May 24, 1979 when the Union furnished them with a copy
of the proposed Collective Bargaining Agreement and it was only then that they came to know of the Union's demands; and
finally, that the Collective Bargaining Agreement approved and adopted by the National Labor Relations Commission is
unreasonable and lacks legal basis.
The petition lacks merit. Consequently, its dismissal is in order.
Collective bargaining which is defined as negotiations towards a collective agreement,6 is one of the democratic frameworks
under the New Labor Code, designed to stabilize the relation between labor and management and to create a climate of sound
and stable industrial peace. It is a mutual responsibility of the employer and the Union and is characterized as a legal
obligation. So much so that Article 249, par. (g) of the Labor Code makes it an unfair labor practice for an employer to refuse
"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
question arising under such an agreement and executing a contract incorporating such agreement, if requested by either party.
While it is a mutual obligation of the parties to bargain, the employer, however, is not under any legal duty to initiate contract
negotiation.7 The mechanics of collective bargaining is set in motion only when the following jurisdictional preconditions are
present, namely, (1) possession of the status of majority representation of the employees' representative in accordance with
any of the means of selection or designation provided for by the Labor Code; (2) proof of majority representation; and (3) a
demand to bargain under Article 251, par. (a) of the New Labor Code . ... all of which preconditions are undisputedly present
in the instant case.
From the over-all conduct of petitioner company in relation to the task of negotiation, there can be no doubt that the Union
has a valid cause to complain against its (Company's) attitude, the totality of which is indicative of the latter's disregard of,
and failure to live up to, what is enjoined by the Labor Code — to bargain in good faith.
We are in total conformity with respondent NLRC's pronouncement that petitioner Company is GUILTY of unfair labor
practice. It has been indubitably established that (1) respondent Union was a duly certified bargaining agent; (2) it made a
definite request to bargain, accompanied with a copy of the proposed Collective Bargaining Agreement, to the Company not
only once but twice which were left unanswered and unacted upon; and (3) the Company made no counter proposal
whatsoever all of which conclusively indicate lack of a sincere desire to negotiate. 8 A Company's refusal to make counter
proposal if considered in relation to the entire bargaining process, may indicate bad faith and this is specially true where the
Union's request for a counter proposal is left unanswered. 9 Even during the period of compulsory arbitration before the
NLRC, petitioner Company's approach and attitude-stalling the negotiation by a series of postponements, non-appearance at
the hearing conducted, and undue delay in submitting its financial statements, lead to no other conclusion except that it is
unwilling to negotiate and reach an agreement with the Union. Petitioner has not at any instance, evinced good faith or
willingness to discuss freely and fully the claims and demands set forth by the Union much less justify its opposition
thereto. 10
3. Trade Unionism;
The case at bar is not a case of first impression, for in the Herald Delivery Carriers Union (PAFLU) vs. Herald
Publications  11 the rule had been laid down that "unfair labor practice is committed when it is shown that the respondent ART. 218. [211] Declaration of Policy. \
employer, after having been served with a written bargaining proposal by the petitioning Union, did not even bother to submit
an answer or reply to the said proposal This doctrine was reiterated anew in  Bradman vs. Court of Industrial (b) To promote free trade unionism as an instrument for the enhancement of democracy and the promotion of social justice
Relations  12 wherein it was further ruled that "while the law does not compel the parties to reach an agreement, it does and development;
contemplate that both parties will approach the negotiation with an open mind and make a reasonable effort to reach a
common ground of agreement
(c) To foster the free and voluntary organization of a strong and united labor movement;
As a last-ditch attempt to effect a reversal of the decision sought to be reviewed, petitioner capitalizes on the issue of due
process claiming, that it was denied the right to be heard and present its side when the Labor Arbiter denied the Company's ART. 219. [212] Definitions.
motion for further postponement.
(g) "Labor organization" means any union or association of employees which exists in whole or in part for the purpose of
Petitioner's aforesaid submittal failed to impress Us. Considering the various postponements granted in its behalf, the claimed collective bargaining or of dealing with employers concerning terms and conditions of employment.
denial of due process appeared totally bereft of any legal and factual support. As herein earlier stated, petitioner had not even
honored respondent Union with any reply to the latter's successive letters, all geared towards bringing the Company to the
bargaining table. It did not even bother to furnish or serve the Union with its counter proposal despite persistent requests
made therefor. Certainly, the moves and overall behavior of petitioner-company were in total derogation of the policy
enshrined in the New Labor Code which is aimed towards expediting settlement of economic disputes. Hence, this Court is
not prepared to affix its imprimatur to such an illegal scheme and dubious maneuvers.

Neither are WE persuaded by petitioner-company's stand that the Collective Bargaining Agreement which was approved and
adopted by the NLRC is a total nullity for it lacks the company's consent, much less its argument that once the Collective
Bargaining Agreement is implemented, the Company will face the prospect of closing down because it has to pay a
staggering amount of economic benefits to the Union that will equal if not exceed its capital. Such a stand and the evidence in
support thereof should have been presented before the Labor Arbiter which is the proper forum for the purpose.

We agree with the pronouncement that it is not obligatory upon either side of a labor controversy to precipitately accept or
agree to the proposals of the other. But an erring party should not be tolerated and allowed with impunity to resort to schemes
feigning negotiations by going through empty gestures.13 More so, as in the instant case, where the intervention of the
National Labor Relations Commission was properly sought for after conciliation efforts undertaken by the BLR failed. The
instant case being a certified one, it must be resolved by the NLRC pursuant to the mandate of P.D. 873, as amended, which
authorizes the said body to determine the reasonableness of the terms and conditions of employment embodied in any
Collective Bargaining Agreement. To that extent, utmost deference to its findings of reasonableness of any Collective
Bargaining Agreement as the governing agreement by the employees and management must be accorded due respect by this
Court.

WHEREFORE, the instant petition is DISMISSED. The temporary restraining order issued on August 27, 1980, is LIFTED
and SET ASIDE.

No pronouncement as to costs.

SO ORDERED.
4. Worker Enlightenment; arts. 218 (d); 250 (p); 292 (a) February 28, 2018
G.R. No. 218390
HONGKONG BANK INDEPENDENT LABOR UNION (HBILU), Petitioner vs. HONGKONG AND SHANGHAI
ART. 218. [211] Declaration of Policy.
BANKING CORPORATION LIMITED, Respondent

(d) To promote the enlightenment of workers concerning their rights and obligations as union members and as employees;
VELASCO, JR., J.:

ART. 250. [241] Rights and Conditions of Membership in a Labor Organization. The following are the rights and conditions
of membership in a labor organization: The Case

For consideration is a Petition for Review on Certiorari under Rule 45 of the Rules of Court questioning the Decision1 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 prevail Resolution of the Court of Appeals (CA), dated October 23, 2014 and May 21, 2015, respectively, in CA-G.R. SP No.
130798. The challenged rulings sustained the validity of the external credit check as a condition before respondent could
grant the application for salary loans of petitioner's members. This is notwithstanding the non-mention of the said condition
ART. 292. [277] Miscellaneous Provisions in the parties' Collective Bargaining Agreement (CBA).

(a) All unions are authorized to collect reasonable membership fees, union dues, assessments and fines and other The Facts
contributions for labor education and research, mutual death and hospitalization benefits, welfare fund, strike fund
and credit and cooperative undertakings.
In 2001, the Bangko Sentral ng Pilipinas (BSP) issued the Manual of Regulations for Banks (MoRB). Relevant to the instant
case is Section X338 thereof which reads:

Banks may provide financial assistance to their officers and employees, as part of their fringe benefits program, to meet
housing, transportation, household and personal needs of their officers and employees. Financing plans and amendments
thereto shall be with prior approval of the BSP. (emphasis added)

Pursuant to the above-cited provision, respondent Hongkong and Shanghai Banking Corporation Limited (HSBC), on March
12, 2003, submitted its Financial Assistance Plan (Plan) to the BSP for approval. The Plan allegedly contained a credit
checking proviso stating that "[r]epayment defaults on existing loans and adverse information on outside loans will be
considered in the evaluation of loan applications." The BSP approved the Plan on May 5, 2003.2 Said Plan was later amended
thrice,3 all of which amendments were approved by the BSP.4

Meanwhile, petitioner Hongkong Bank Independent Labor Union (HBILU), the incumbent bargaining agent of HSBC's rank-
and-file employees, entered into a CBA with the bank covering the period from April 1, 2010 to March 31, 2012. Pertinent to
the instant petition is Article XI thereof, which reads:

Article XI

Salary Loans

Section 1. Housing/house Improvement Loan. The BANK, or other financial institution when appropriate, shall extend
housing loan to qualified employees with at least three (3) YEARS OF SERVICE, UP TO One Million Five Hundred
Thousand Pesos (₱l,500,000.00) payable in twenty-five (25) years or up to the retirement date of the employee, whichever
comes first. Subject to BSP approval, an additional Five Hundred Thousand Pesos (₱500,000.00) can be availed subject to the
terms above with interest rate at the BLR less 3% but not less than six percent (6%) per annum.

Section 2. Personal Loans. The BANK, or the Retirement Trust Fund Inc. or other financial institutions, when appropriate,
shall extend personal loan to qualified employees, with at least 1 year service, up to six months basic pay of the employees at
six percent (6%) interest per annum, payable in three years.
Section 3. Car Loans. The BANK, or the Retirement Trust Fund Inc. or other financial institutions when appropriate, shall
extend a car loan to qualified employees with at least 3 years service up to Five Hundred Fifty Thousand Pesos
(PHP550,000.00) payable in seven (7) years. Interest rate shall be six percent (6%) per annum.
Section 4. Credit Ratio. The availment of any of the foregoing loans shall be subject to the BANK's credit ratio policy.
When the CBA was about to expire, the parties started negotiations for a new one to cover the period from April 1, 2012 to
March 31, 2017. During the said negotiations, HSBC proposed amendments to the above-quoted Article XI allegedly to align
the wordings of the CBA with its BSP-approved Plan. Particularly, HSBC proposed the deletion of Article XI, Section 4
(Credit Ratio) of the CBA, and the amendment of Sections 1 to 3 of the same Article to read as follows:
Article XI
Salary Loans
Section 1. Housing/house Improvement Loan. Based on the Financial Assistance Plan duly approved by Bangko Sentral ng
Pilipinas (BSP), the BANK, or other financial institution when appropriate, shall extend housing loan to qualified employees
with at least three (3) YEARS OF SERVICE UP TO One Million Five Hundred Thousand Pesos (₱l,500,000.00) payable in
twenty-five (25) years or up to the retirement date of the employee, whichever comes first, subject to employee's credit ratio.
An additional Five hundred thousand Pesos (₱500,000.00) can be availed subject to the terms above with interest rates at the
BLR less 3% but not less than six percent (6%) per annum.
Section 2. Personal Loans. Based on the financial Assistance Plan duly approved by Bangko Sentral ng Pilipinas (BSP), the
BANK, or other financial institutions when appropriate, shall extend personal loan to qualified employees, with at least 1
year service, up to six months basic pay of the employees at six percent (6%) interest per annum, payable in three (3) years,
subject to employee's credit ratio.
Section 3. Car loans. Based on the Financial Assistance Plan duly approved by Bangko Sentral ng Pilipinas (BSP), the
BANK, or other financial institutions when appropriate, shall extend a car loan to qualified employees with at least three
years service, up to Five Hundred Fifty Thousand Pesos (PHP550,000.00) payable in seven (7) years. Interest rate shall be six
percent (6%) per annum. (emphasis added)
HBILU vigorously objected to the proposed amendments, claiming that their insertions would curtail its members' availment
of salary loans. This, according to the Union, violates the existing exceptions set forth in BSP Circular 423, Series of
2004,5 and Section X338.36 of the MoRB. In view of HBILU's objection, HSBC withdrew its proposed amendments and,
consequently, Article XI remained unchanged.
Despite the withdrawal of the proposal, HSBC sent an e-mail to its employees on April 20, 2012 concerning the enforcement
of the Plan, including the Credit Checking provisions thereof. The e-mail reads:
Dear All
We wish to reiterate the following provisions included in the Financial Assistance Plan (F AP) as approved by Bangko
Sentral ng Pilipinas (BSP). Note that the F AP is the official guideline and policy governing Staff Loans and Credit Cards.
>>>>CREDIT CHECKING
Below are the specific provisions included in the F AP regarding credit checking.
Housing Loan, Car Loan, Personal Loan & Computer/Club Repayment defaults on existing loans and adverse information
Membership/Medical Equipment Loan considered in the evaluation of loan applications.
Credit Card Repayment defaults on existing loans and adverse information
considered in the evaluation of loan applications.
With the strict implementation of these provisions, adverse credit findings may result to disapproval of loan or credit card
applications. These findings will include the following:
(1) Frequency of confirmed ADA failure on staff/commercial loans and credit cards (3 consecutive incidents within the past 6
months or 6 incidents within the past 12 months). Note that applications with pending ADA for investigation will only be
processed upon confirmation of status (Confirmed or Reprieved);
(2) Adverse findings on HSBC cards; or
(3) Adverse findings from external credit checks.7
Thereafter, in September 2012, HBILU member Vince Mananghaya (Mananghaya) applied for a loan under the provisions of
Article XI of the CBA. His first loan application in March 2012 was approved, but adverse findings from the external checks
on his credit background resulted in the denial of his September application. 8 HBILU then raised the denial as a grievance
issue with the National Conciliation Mediation Board (NCMB). It argued that the imposition of an additional requirement-the
external credit checking prior to approval of any loan application under Article XI of the CBA-is not sanctioned under the
CBA. The Union emphasized that under the terms of Article XI, there is no such requirement and that it cannot, therefore, be
unilaterally imposed by HSBC.
Justifying its denial of the loan application, HSBC countered that the external credit check conducted in line with
Mananghaya's loan application was merely an implementation of the ESP-approved Plan. The adoption of the Plan, HSBC
stressed, is a condition sine qua non for any loan grant under Section X338 of the MoRB. Moreover, the Credit Check policy
has been in place since 2003, and is a sound practice in the banking industry to protect the interests of the public and preserve
confidence in banks.
The issue was then submitted for resolution by the NCMB Panel of Accredited Voluntary Arbitrators (the Panel). 9 In the
interim, the parties, on September 29, 2012, inked a new CBA for the period covering April 1, 2012 up to March 31, 2017.10
NCMB-PVA Decision
On May 17, 2013, the Panel rendered a Decision finding for HSBC. It held that herein respondent, as an employer, has the
right to issue and implement guidelines for the availment of loan accommodations under the CBA as part of its management
prerogative. The repeated use of the term "qualified employees" in Article XI of the CBA was deemed indicative of room for
the adoption of further guidelines in the availment of the benefits thereunder. The Panel also agreed that HSBC's Plan is not a
new policy as it has already been approved by the BSP as early as 2003. Thus, the Panel ruled that the salary loan provisions
under Article XI of the CBA must be read in conjunction with the provisions of the Plan.
The Panel further discussed that HSBC's adoption of the Plan was not done for any whimsical or arbitrary reason, but because
the bank was constrained to comply with Section X338 of the MoRB. As a banking institution, HSBC cannot divorce itself
from the regulatory powers of the BSP. Observance of Section X338 of the MoRB was then necessary before the bank could
have been allowed to extend loan accommodations to its officers and employees.
On the basis thereof, the Panel held that they are not ready to rule that HSBC's Plan violates Article XI of the CBA.
Aggrieved, HBILU elevated the case to the CA.
CA Decision
The CA sustained the findings and conclusions of the NCMB-PV A in toto on the ratiocination that HSBC was merely
complying with Section X338 of the MoRB when it submitted the Plan to BSP. When BSP, in turn, approved the said Plan,
HSBC became legally bound to enforce its provisions, including the conduct of external credit checks on its loan
applicants11 The appellate court further ruled that the Plan should be deemed incorporated in the CBA because it is a
regulatory requirement of BSP without which the salary loan provisions of the CBA are rendered inoperative.
Petitioner's motion for reconsideration having been denied by the CA thru its May 21, 2015 Resolution, HBILU now seeks
recourse from this Court.
The Issues
HBILU presents the following grounds to warrant the reversal of the assailed Decision, viz:
The decisions and resolutions of the Hon. Panel of Voluntary Arbitrators and the Hon. Court of Appeals are tainted with
grave abuse of discretion and it showed patent errors in the appreciation of facts which led to wrong conclusions of law; or
stated otherwise;
The Hon. Panel of Voluntary Arbitrators and Court of Appeals committed serious, reversible and gross error in law in ruling
that the Bank's Financial Assistance Plan as not in violation of Article XI of the Parties' CBA provision on Salary Loans
(Article XII of the new and existing CBA)12
Simply put, the issue for Our resolution is whether or not HSBC could validly enforce the credit-checking requirement under
its BSP-approved Plan in processing the salary loan applications of covered employees even when the said requirement is not
recognized under the CBA.
Arguments of Petitioner
In support of its position, HBILU argues, among others, that HSBC failed to present in court the Plan that was supposedly
submitted to the BSP for approval, and to show that the requirement of external credit checking had already been included
therein.13 Too, said Plan is not a set of policies for salary loans that came from the BSP, but was devised solely by HSBC.14
Furthermore, HBILU claims that it is not privy to the Plan and has not been consulted, much less informed, of the impositions
therein prior to its implementation. No proof was offered that the Plan had been disseminated to the employees prior to the
April 20, 2012 e-mail blast.15
Lastly, the implementation of the Plan, according to HBILU, is tantamount to diminution of benefits 16 and a unilateral
amendment of the existing CBA,17 which are both proscribed under the Labor Code. Had the parties to the CBA intended to
include the external credit check as an additional condition to the availment of employee salary loans, then it should have
been plainly provided in their agreement.18
Arguments of Respondent
In its Comment, HSBC claims that the Plan is neither new nor was it issued on a mere whim or caprice. On the contrary, the
Plan was established as early as 2003, way before Mananghaya's application was denied, to conform to Section X338 of the
BSP MoRB. HSBC reminds the Court that the loan and credit accommodations could have only formed part of the
employees' fringe benefit program if they were extended through a financing scheme (i.e., the Plan) approved by the BSP.
Moreover, HSBC argues that the dissemination of the Plan via e-mail blast on April 20, 2012 was but a reiteration, as
opposed to a first publication. It contends that even prior to the establishment and approval of the Plan in 2003, the then-loan
policy already included the requirement on external credit checking. According to the bank, there was already a provision that
required the conduct of credit checking in the processing and evaluation of loan applications in their General Policies on
Loans, cascaded through the Intranet system to HSBC employees on October 24, 2002, viz:
CREDIT CHECKING  
  Repayment defaults on existing loans and adverse information on outside loans will be
considered m the evaluation of loan applications.
The union members cannot then feign ignorance of the external credit checking requirement in staff loan applications,
according to HSBC. Consequently, petitioner's bare denial of any knowledge about it cannot be given any credence.
Considering too that the Plan reiterating the requirement has been approved by the BSP in 2003, HBILU slept on its rights
when it questioned its strict imposition almost a decade after its issuance.
Finally, HSBC postulates that the non-mention of the Plan in the CBA is no justification for the bank to disregard the same in
processing employee loan applications. Provisions of applicable laws, especially those relating to matters affected with public
policy, are deemed written into the contract.19
Our Ruling
The petition is meritorious.
The constitutional right of employees
to participate in matters affecting
their benefits and the sanctity of the
CBA
Preliminarily, it is crucial to stress that no less than the basic law of the land guarantees the rights of workers to collective
bargaining and negotiations as well as to participate in policy and decision-making processes affecting their rights and
benefits. Section 3, Article XIII of the 1987 Constitution 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.
Pursuant to said guarantee, Article 211 of the Labor Code, as amended, declares it a policy of the State:
(a) To promote and emphasize the primacy of free collective bargaining and negotiations, including voluntary arbitration,
mediation and conciliation, as modes of settling labor or industrial disputes;
xx xx
(d) To promote the enlightenment of workers concerning their rights and obligations as union members and as employees;
xx xx
(g) To ensure the participation of workers in decision and policymaking processes affecting their rights, duties and welfare.
(Emphasis ours)
Corollary thereto, Article 255 of the same Code provides:
ART. 255. EXCLUSIVE BARGAINING REPRESENTATION AND WORKERS PARTICIPATION IN POLICY AND
DECISION-MAKING.
xx xx
Any provision of law to the contrary notwithstanding, workers shall have the right, subject to such rules and regulations as
the Secretary of Labor and Employment may promulgate, to participate in policy and decision-making process of the
establishment where they are employed insofar as said processes will directly affect their rights, benefits and welfare. For this
purpose, workers and employers may form labor-management councils: Provided, That the representatives of the workers in
such labor management councils shall be elected by at least the majority of all employees in said establishment. (Emphasis
and underscoring ours)
We deem it necessary to remind HSBC of the basic and well-entrenched rule that although jurisprudence recognizes the
validity of the exercise by an employer of its management prerogative and will ordinarily not interfere with such, this
prerogative is not absolute and is subject to limitations imposed by law, collective bargaining agreement, and general
principles of fair play and justice.20
Indeed, being a product of said constitutionally-guaranteed right to participate, the CBA is, therefore, .the law between the
parties and they are obliged to comply with its provisions.
Unilateral amendments to the CBA
violate Article 253 of the Labor Code
A collective bargaining agreement or CBA is the negotiated contract between a legitimate labor organization and the
employer concerning wages, hours of work and all other terms and conditions of employment in a bargaining unit. As in all
contracts, the parties in a CBA may establish such stipulations, clauses, terms and conditions as they may deem convenient
provided these are not contrary to law, morals, good customs, public order or public policy. Thus, where the CBA is clear and
unambiguous, it becomes the law between the parties and compliance therewith is mandated by the express policy of the
law.21
In Faculty Association of Mapua Institute of Technology (FAMJT) v. Court of Appeals, 22 this Court was emphatic in its
pronouncement that the CBA during its lifetime binds all the parties. The provisions of the CBA must be respected since its
terms and conditions constitute the law between the parties. And until a new CBA is 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.23 This finds basis under Article 253 of the Labor Code, which states:
ARTICLE 253. Duty to bargain collectively when there exists a collective bargaining agreement. - When there is a collective
bargaining agreement, the duty to bargain collectively shall also mean that neither party shall terminate nor modify such
agreement during its lifetime. x x x It shall be the duty of both parties to keep the status quo and to continue in full force and
effect the terms and conditions of the existing agreement during the 60-day period and/or until a new agreement is reached by
the parties. (emphasis added)
In the present controversy, it is clear from the arguments and evidence submitted that the Plan was never made part of the
CBA. As a matter of fact, HBILU vehemently rejected the Plan's incorporation into the agreement. Due to this lack of
consensus, the bank withdrew its proposal and agreed to the retention of the original provisions of the CBA. The subsequent
implementation of the Plan's external credit check provisions in relation to employee loan applications under Article XI of the
CBA was then an imposition solely by HSBC.
In this respect, this Court is of the view that tolerating HSBC's conduct would be tantamount to allowing a blatant
circumvention of Article 253 of the Labor Code. It would contravene the express prohibition against the unilateral
modification of a CBA during its subsistence and even thereafter until a new agreement is reached. It would unduly license
HSBC to add, modify, and ultimately further restrict the grant of Salary Loans beyond the terms of the CBA by simply
adding stringent requirements in its Plan, and having the said Plan approved by BSP in the guise of compliance with the
MoRB.
HSBC' s defense, that there was no modification of the CBA since the external credit check has been a long-standing policy
of the Bank applied to all of its employees, is unconvincing. Noteworthy is that the bank failed to submit in evidence the very
Plan that was supposedly approved by the BSP in 2003. Nevertheless, even if We were to rely on the later versions of the
Plan approved by the BSP, Our ruling will not change.
The only provision relative to the credit checking requirement under the 2006 and 2011 Plans is this and nothing else:
CREDIT CHECKING  
  Repayment defaults on existing loans and adverse information on outside loans will be
considered in the evaluation of loan applications.24
As for the manner in which said credit checking will be done, as well as any additional requirements that will be imposed for
the purpose, the 2006 Plan and even its later 2011 version are silent thereon.25 Nowhere in these Plans can We find the
requirement for the submission of an "Authority to Conduct Checks Form," as well as the details on adverse credit finding,
specifically:
With the strict implementation of these provisions, adverse credit findings may result to disapproval of loan or credit card
applications. These findings will include the following:
(1) Frequency of confirmed ADA failure on staff/commercial loans and credit cards (3 consecutive incidents within the past 6
months or 6 incidents within the past 12 months). Note that applications with pending ADA for investigation will only be
processed upon confirmation of status (Confirmed or Reprieved);
(2) Adverse findings on HSBC cards; or
(3) Adverse findings from external credit checks.26
In fact, regrettably, HSBC's only documentary basis for proving that the credit checking requirement and the manner of its
enforcement have been set in place much earlier is the use of the term "reiterate" in its April 20, 2012 e-mail. Thus, we quote:
Dear All
We wish to reiterate the following provisions included in the Financial Assistance Plan (FAP) as approved by Bangko Sentral
ng Pilipinas (BSP).
xxx
20. Accordingly, the above email dated 20 April 2012 clearly indicates that the dissemination therein of the FAP and its
provisions is merely a reiteration, and not a first publication as the Union now conveniently claims.27 xx x (emphasis
supplied)
What further convinces Us that the external credit check as well as the manner of its enforcement is a new imposition by
HSBC is the fact that the bank made no attempt to rebut HBILU's evidence that the former's requirements for the grant of
salary loans changed only after the April 20, 2012 email blast. HBILU sufficiently proved that prior to the April 20, 2012
email, members of the bargaining unit were using only four (4) documents in applying for a loan, to wit: 1) Application for
Personal Loan Form; 2) Authority to Deduct Form; 3) Set-Off of Retirement Fund Form; and 4) Promissory Note
Form.28 Thereafter, management imposed a new set of requirements, which includes the "Authority to Conduct Checks
Form."29 As testified to by Mananghaya, he only signed the first four (4) requirements for his March 2012 loan. However, for
the September 2012 loan, he was asked to complete a new set of documents which included the Authority to Conduct Checks
Form.30 Too, even the email itself states that said credit checking requirement, among others, is to be strictly enforced
effective May 2012.31 Though HSBC claims that credit checking has been the bank's long-standing policy, it failed to show
that it indeed required such before its covered employees could avail of a salary loan under the CBA prior to April 20, 2012-
the date of the email blast.
Thus, no other conclusion can be had in this factual milieu other than the fact that HSBC's enforcement of credit checking on
salary loans under the CBA invalidly modified the latter's provisions thereon through the imposition of additional
requirements which cannot be found anywhere in the CBA.
If it were true that said credit checking under the Plan covers salary loans under the CBA, then the bank should have
negotiated for its inclusion thereon as early as the April 1, 2010 to March 31, 2012 CBA which it entered into with HBILU.
However, the express provisions of said CBA inked by the parties clearly make no reference to the Plan. And even in the
enforcement thereof, credit checking was not included as one of its requirements. This leads Us to conclude that HSBC
originally never intended the credit checking requirement under the Plan to apply to salary loans under the CBA. At most, its
application thereto is a mere afterthought, as evidenced by its sudden, belated, and hurried enforcement on said salary loans
via the disputed email blast.
In other words, it appears that, based on its actuations, HSBC never intended to apply the credit checking item under the Plan
to salary loans under the CBA. Otherwise, it would have enforced such requirement from the moment the salary loans
provisions under the old CBA were implemented, which it did not. It may be that said requirement was being applied to other
types of loans under the Plan, but based on the evidence presented, We cannot say the same for salary loans under the CBA.
The minority argues that primacy is being accorded to the CBA over the Plan approved by the BSP. Such, however, is not the
case. We are not saying that the Plan should yield to the CBA. The point that we are driving at in this lengthy discussion is
that on the basis of the evidence presented, We are convinced that the credit checking provision of the Plan was never
intended to cover salary loans under the CBA. Otherwise, HSBC would have implemented such the moment said salary loans
under the previous CBA were made available to its covered employees. Thus, HSBC cannot now insist on its imposition on
loan applications under the disputed CBA provision without violating its duty to bargain collectively.
If We were to allow this practice of leaving to HSBC the determination, formulation, and implementation of the guidelines,
procedures, and requirements for the availment of salary loans granted under the CBA, which guidelines, procedures, and
requirements unduly restrict the provisions of the CBA, this Court would in effect be permitting HSBC to repeatedly violate
its duty to bargain collectively under the guise of enforcing the general terms of the Plan.
Salary loans subject of this case are
not covered by the credit checking
requirement under the MORB
In maintaining that the credit checking requirement under the MoRB should be deemed written into the CBA, the minority
makes reference to Sec. X304.1 of the 2011 MoRB in maintaining that financial institutions must look into the obligor' s
repayment history, among other things, before approving a loan application. Said provision reads:
§ X304. l General guidelines. Consistent with safe and sound banking practices, a bank shall grant loans or other credit
accommodations only in amounts and for the periods of time essential for the effective completion of the operation to be
financed. Before granting loans or other credit accommodations, a bank must ascertain that the borrower, co-maker, endorser,
surety, and/or guarantor, if applicable, is/are financially capable of fulfilling his/their commitments to the bank. For this
purpose, a bank shall obtain adequate information on his/their credit standing and financial capacities x x x.
At this point it is well to draw attention to the fact that said provision is a general one as specifically indicated thereat. It is
also equally important to emphasize that Sec. X304.1 must be interpreted in conjunction with Section X338.3, the provision
which specifically applies to salary loans under the fringe benefit program of the bank. Thus:
Subsection X338.3 Other conditions/limitations
The investment by a bank in equipment and other chattels under its fringe benefits program for officers and employees shall
be included in determining the extent of the investment of the bank in real estate and equipment for purposes of Section 51 of
R.A. No. 8791.
The investment by a bank in equipment and other chattels contemplated under these guidelines shall not be for the purpose of
profits in the course of business for the bank.
All loans or other credit accommodations to bank officers and employees, EXCEPT those granted under the fringe benefit
program of the bank, shall be subject to the same terms and conditions imposed on the regular lending operations of the bank.
Loans or other credit accommodations granted to officers shall, in addition, be subject to the provisions of Section 36 of RA.
No. 8791 and Sections X326 to X336 but not to the individual ceilings where such loans or other credit accommodations are
obtained under the bank's fringe benefits program. (emphasis ours)
In specifying that "[a]ll loans or other credit accommodations to bank officers and employees, except those granted under the
fringe benefit program of the bank, shall be subject to the same terms and conditions imposed on the regular lending
operations of the bank," Sec. X338.3 clearly excluded loans and credit accommodations under the bank's fringe benefits
program from the operation of Sec. X304.1. This fact is even recognized in the dissent. To ignore this clear exception and
insist on interpreting the general guidelines under Section X304.1 would be to renege from Our duty to apply a clear and
unambiguous provision.32
It may also be argued that HSBC, being a bank, is statutorily required to conduct a credit check on all of its borrowers, even
though it be made under a loan accommodation scheme, applying Section 4033 of Republic Act No. (RA) 8791 (General
Banking Law of 2000). A reading of RA 8791, however, reveals that loan accommodations to employees are not covered by
said statute. Nowhere in the law does it state that its provisions shall apply to loans extended to bank employees which are
granted under the latter's fringe benefits program. Had the law intended otherwise, it could have easily specified such, similar
to what was done for directors, officers, stockholders and their related interests under Section 36 thereof. This conclusion is
supported by the very wording of Subsection X338.3 of the MORE. To reiterate:
Subsection X338.3 Other conditions/limitations
The investment by a bank in equipment and other chattels under its fringe benefits program for officers and employees shall
be included in determining the extent of the investment of the bank in real estate and equipment for purposes of Section 51 of
R.A. No. 8791.
The investment by a bank in equipment and other chattels contemplated under these guidelines shall not be for the purpose of
profits in the course of business for the bank.
All loans or other credit accommodations to bank officers and employees, except those granted under the fringe benefit
program of the bank, shall be subject to the same terms and conditions imposed on the regular lending operations of the bank.
Loans or other credit accommodations granted to officers shall, in addition, be subject to the provisions of Section 36 of R.A.
No. 8791 and Sections X326 to X336 but not to the individual ceilings where such loans or other credit accommodations are
obtained under the bank's fringe benefits program.
Notably, even though the provision covers loans extended to both bank officers and employees, paragraph 3 thereof singled
out loans and credit accommodations granted to officers when it provided for the applicability of RA 8791.
What the law does not include, it excludes.
These convince Us to conclude that RA 8791 only intended to cover loans by third persons and those extended to directors,
officers, stockholders and their related interests. Consequently, Section 40 thereof, which requires a bank to ascertain that the
debtor is capable of fulfilling his commitments to it before granting a loan or other credit accommodation, does not
automatically apply to the type of loan subject of the instant case.
Furthermore, it is inaccurate to state that credit checking is necessary, or even indispensable, in the grant of salary loans to the
bank's employees, since the business of banking is imbued with public interest and there is a fiduciary relationship between
the depositor and the bank. It is also incorrect to state that allowing bank employees to borrow funds from their employer via
salary loans without the prior conduct of a credit check is inconsistent with this fiduciary obligation. This is so because there
are other ways of securing payment of said salary loans other than ascertaining whether the borrowing employee has the
capacity to pay the loan. BSP Circular 423, Series of 2004 itself provides for such, thus:
Subsection X338.l Mechanics. The mechanics of such financing plan shall have the following minimum features:
Participation shall be limited to full-time and permanent officers and employees of the bank;
xx xx
The bank shall adopt measures to protect itself from losses such as by incorporating in the plan or contract provisions
requiring co-makers or co-signor, chattel, or real estate mortgages, fire insurance, mortgage redemption insurance,
assignment of money value of leave credits, pension or retirement benefits. (Emphasis ours)
Additionally, both the BSP Circular 423, Series of 2004 and Section X338.3 of the MoRB provide for a safeguard in order to
protect the funds of the Bank's depositors while allowing the Bank to extend such benefits to its employees, in that both
require that:
The aggregate outstanding loans and other credit accommodations granted under the bank's fringe benefits program, inclusive
of those granted to officers in the nature of lease with option to purchase, shall not exceed five percent (5%) of the bank's
total loan portfolio.34
There are, therefore, sufficient safety nets consistent with the bank's fiduciary duty to its depositors even without requiring
the conduct of an external credit check in the availment of salary loans under the subject CBA. As a matter of fact, there is no
showing that the bank's finances suffered because it has been granting said salary loans under the CBA without the external
credit check.
Withal, We cannot subscribe to HSBC's position that its imposition of the credit checking requirement on salary loans
granted under the CBA is valid. The evidence presented convinces Us to hold that the credit checking requirement imposed
by HSBC under the questioned Plan which effectively and undoubtedly modified the CBA provisions on salary loans was a
unilateral imposition violative of HSBC's duty to bargain collectively and, therefore, invalid. HSBC miserably failed to
present even an iota of concrete documentary evidence that the credit checking requirement has been imposed on salary loans
even before the signing of the CBA subject of the instant dispute and that the Plan was sufficiently disseminated to all
concerned. In contrast, HBILU sufficiently proved that HSBC violated its duty to bargain collectively under Article 253 of
the Labor Code when it unilaterally restricted the availment of salary loans under Article XI of the CBA on the excuse of
enforcing the Plan approved by the BSP.
As this Court emphasized in Philippine Airlines, Inc. v. NLRC, industrial peace cannot be achieved if the employees are
denied their just participation in the discussion of matters affecting their rights, 35 more so in the case at bar where the
employees have been led to believe that they were given the chance to participate in HSBC's policy-formulation with respect
to the subject benefit, only to find out later that they would be deprived of the fruits of said involvement.
On interpretation of CBAs
At this point, We deem it proper to recall the basics in resolving issues relating to the provisions and enforcement of CBAs.
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.36 (emphasis ours)
Thus, in resolving issues concerning CBAs, We must not forget that the foremost consideration therein is upholding the
intention of both parties as stated in the agreement itself, or based on their negotiations. Should it appear that a proposition or
provision has clearly been rejected by one party, and said provision was ultimately not included in the signed CBA, then We
should not simply disregard this fact. We are duty-bound to resolve the question presented, albeit on a different ground, so
long as it is consistent with law and jurisprudence and, more importantly, does not ignore the intention of both parties.
Otherwise, We would be substituting Our judgment in place of the will of the parties to the CBA.
With these, We find no need to resolve the other matters presented.
WHEREFORE, premises considered, the petition is GRANTED. The Decision dated October 23, 2014 and Resolution dated
May 21, 2015 of the Court of Appeals in CA-G.R. SP No. 130798 are hereby REVERSED and SET ASIDE.
Respondent Hongkong and Shanghai Banking Corporation's Financial Assistance Plan, insofar as it unilaterally imposed a
credit checking proviso on the availment of Salary Loans by its employees under Article XI of the 2010-2012 CBA, is hereby
declared legally ineffective and invalid for being in contravention of Article 253 of the Labor Code.
SO ORDERED.

5.Machinery Dispute Settlement; Art. 218 (e)
ART. 218. [211] Declaration of Policy. – A. It is the policy of the State:
(e) To provide an adequate administrative machinery for the expeditious settlement of labor or industrial disputes
6. Industrial Peace; Arts. 218 (f) and 288 (a) – (i)
ART. 218. [211] Declaration of Policy. – A. It is the policy of the State:
(f) To ensure a stable but dynamic and just industrial peace; and
ART. 288. [273] Study of Labor-Management Relations. – The Secretary of Labor shall have the power and it shall be his
duty to inquire into:
(a) the existing relations between employers and employees in the Philippines;
(b) the growth of associations of employees and the effect of such associations upon employer-employee relations;
(c) the extent and results of the methods of collective bargaining in the determination of terms and conditions of employment;
(d) the methods which have been tried by employers and associations of employees for maintaining mutually satisfactory
relations;
(e) desirable industrial practices which have been developed through collective bargaining and other voluntary arrangements;
(f) the possible ways of increasing the usefulness and efficiency of collective bargaining for settling differences;
(g) the possibilities for the adoption of practical and effective methods of labormanagement cooperation;
(h) any other aspects of employer-employee relations concerning the promotion of harmony and understanding between the
parties; and
(i) the relevance of labor laws and labor relations to national development.
The Secretary of Labor shall also inquire into the causes of industrial unrest and take all the necessary steps within his power
as may be prescribed by law to alleviate the same, and shall from time to time recommend the enactment of such remedial
legislation as in his judgment may be desirable for the maintenance and promotion of industrial peace
7. Worker Participation in Decision-Making; Arts. 218 (g) and 219 (g)
ART. 218. [211] Declaration of Policy. – A. It is the policy of the State:
(g) To ensure the participation of workers in decision and policy-making processes affecting their rights, duties and welfare.
ART. 219. [212] Definitions.
(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.
EN BANC
[G.R. No. 200418. November 10, 2020.]
CONFEDERATION FOR UNITY, RECOGNITION AND ADVANCEMENT OF
GOVERNMENT EMPLOYEES [COURAGE],represented by its National President
FERDINAND GAITE, SOCIAL WELFARE EMPLOYEES ASSOCIATION OF THE
PHILIPPINES [SWEAP-DSWD],represented by its National President RAMON FELIPE E.
LOZA, NATIONAL FEDERATION OF EMPLOYEES ASSOCIATIONS IN THE
DEPARTMENT OF AGRICULTURE [NAFEDA],represented by its National President
SANTIAGO Y. DASMARIÑAS, JR. AND DEPARTMENT OF AGRARIAN REFORM
EMPLOYEES ASSOCIATION [DAREA],represented by its National President ANTONIA H.
PASCUAL,petitioners,vs. FLORENCIO B. ABAD, in his capacity as the Secretary of the
DEPARTMENT OF BUDGET AND MANAGEMENT and CORAZON J. SOLIMAN, in her
capacity as Secretary of the DEPARTMENT OF SOCIAL WELFARE AND
DEVELOPMENT,respondents.
DECISION
LEONEN, J  p:
The grant of benefits to government employees under collective negotiation agreements is conditioned on all
applicable laws, rules and regulations, including those issued by the Department of Budget and Management and the
Public Sector Labor-Management Council. aScITE
This Court resolves a Petition for Certiorari/Prohibition with Prayer for Issuance of a Temporary Restraining
Order and/or Writ of Preliminary/Mandatory Injunction  seeking to declare Department of Budget and Management
Circular No. 2011-5 as unconstitutional, and to enjoin Social Welfare and Development Secretary Corazon Soliman
(Secretary Soliman) from enforcing the Circular in her department.
The Circular in question had placed a P25,000.00 ceiling on the amount of the Collective Negotiations
Agreement (CNA) incentive for 2011. The Department of Social Welfare and Development initially authorized the
payment of CNA incentives in two tranches for 2011, totaling P30,000.00. It later issued a January 20, 2012
Memorandum directing its employees to refund the excess, prompting this Petition's filing. 
Petitioners before this Court pray that upon the filing of the Petition, a temporary restraining order and/or writ
of preliminary injunction be issued enjoining the implementation of Budget Circular No. 2011-5, the January 20, 2012
Memorandum, and other issuances to enforce the Circular. They seek that, after notice and hearing, the Circular, as with
the Memorandum, be declared void for being unconstitutional, contrary to law, or issued with grave abuse of discretion. 
Among the petitioners is the Social Welfare Employees Association of the Philippines (SWEAP-DSWD)
which, on November 16, 2007, entered into a CNA with the Department of Social Welfare and Development's
Management. This CNA would last for three years or until a new agreement is signed.  Article XI, Section 1 of the CNA
grants a yearly cash incentive, pursuant to Budget Circular No. 2006-1,  which states:
SECTION 1. The DEPARTMENT and the ASSOCIATION shall jointly institute cost-
cutting measures to generate savings for the grant of yearly Collective Negotiation Agreement
 (C.N.A.) Cash Incentives in accordance with the provisions of Budget Circular No. 2006-1 dated
February 1, 2006. For this purpose, the parties herein shall work together to generate savings and
aim to save at least 10% of its MOOE from the regular programs/projects/activities of the
Department.  (Emphasis supplied)
On September 29, 2011, the Department of Budget and Management issued Circular Letter 2011-9, with
subject "Reminder on the Observance of the Guidelines on the Grant of the Collective Negotiation Agreement (CNA)
Incentive."  Its Section 3.0 reiterates Budget Circular No. 2006-1 by mentioning the Senate and the House of
Representatives' Joint Resolution No. 4, series of 2009, approving the grant of CNA incentives to both management and
rank-and-file employees:
3.0. Pursuant to item (4)(h)(ii)(aa) of the Senate and House of Representatives Joint Resolution No.
4, s. 2009, the CNA Incentive may be granted to both management and rank-and-file employees of
agencies with approved and successfully implemented CNAs in recognition of their joint efforts in
accomplishing performance targets at lesser cost, and in attaining more efficient and viable
operations through cost-cutting measures and systems improvement. (Emphasis supplied)
On October 26, 2011, Secretary Soliman issued a Memorandum authorizing the CNA incentive grant of
P10,000.00, "to be paid to existing regular, contractual and casual employees" and released not later than October 28,
2011.  On December 3, 2011, she issued another Memorandum for a second tranche of CNA incentive, worth
P20,000.00, to be released on or before the third week of December 2011.  Ninth, whether or not Section 5 of Public Sector Labor-Management Council (PSLMC) Resolution No. 4,
On December 26, 2011, the Department of Budget and Management issued the assailed Budget Circular No.
2011-5, which provides the supplemental policy and procedural guidelines for the grant of CNA incentives.  Among
others, it set a P25,000.00 ceiling on the amount of the CNA incentives for 2011:
3.5 The CNA Incentive for FY 2011 shall be determined based on the amount of savings generated
by an agency following the guidelines herein, but not to exceed P25,000 per qualified employee.
On December 28, 2011, Social Welfare and Development Assistant Secretary Ma. Chona O. David-Casis
(Assistant Secretary David-Casis) issued a Memorandum directing every employee to refund the CNA incentive
received in excess of P25,000.00 through salary deductions.  Subsequently, she issued the assailed January 20, 2012
Memorandum, which directed the employees to refund the P5,000.00 received in excess, and to sign the conforme form
consenting to the refund, made through monthly salary deductions of P500.00 for 10 months beginning February
2012.  HEITAD
Aggrieved, the associations filed this Petition  on February 21, 2012.
On March 28, 2012, petitioners filed an Urgent Motion for the Issuance of a Temporary Restraining
Order/Writ of Preliminary Injunction (with Compliance to the Resolution dated February 28, 2012). They cite cases  on
the requisites of Rule 58, Section 3 of the Rules of Court for the issuance of a writ of preliminary injunction.  I
In the same pleading, petitioners attached a copy of the Commission on Audit's March 14, 2002 Audit
Observation Memorandum, where it had been observed that the P35,500.00 worth of CNA incentives paid to employees
of the Protected Areas and Wildlife Bureau exceeded the P25,000.00 ceiling amount prescribed in Budget Circular No.
2011-5.  The Constitution itself
In his Comment to the Urgent Motion, respondent Secretary Florencio Abad (Secretary Abad) of the
Department of Budget and Management discussed that CNAs create no vested rights, and the grant of 2011 CNA
incentives suffers from irregularities.  He submits that Budget Circular No. 2011-5 enjoys the presumption of regularity,
and that this did not cause petitioners irreparable injury.  SECTION 1. Petition for certiorari.— When any tribunal, board or officer exercising
Respondent Secretary Soliman manifested that she adopts her Comment to the Petition, which she says has
extensively discussed the grounds to deny the prayer for injunctive relief. She reiterates the irrelevance of the refund in
the attached Audit Memorandum, since the Protected Areas and Wildlife Bureau is not a party to this case.  any plain, speedy, and adequate remedy in the ordinary course of law, a person aggrieved thereby
This Court noted respondents' respective comments to the Petition  and the Urgent Motion.  Petitioners'
Consolidated Reply  and the parties' respective memoranda were likewise noted.
In a February 10, 2015 Resolution,  this Court included issues to be addressed for a complete resolution of the
case, and the parties filed the required supplemental memoranda.  corporation, board, officer or person, whether exercising judicial, quasi-judicial or ministerial
The issues for this Court's resolution are the following:
First, whether or not petitioners have legal standing;
Second, whether or not petitioners violated the doctrine on the hierarchy of courts;
Third, whether or not petitioners availed the proper remedy, considering: (a) the doctrine on exhaustion of
administrative remedies; (b) the requisites for availing the writs of certiorari and prohibition; (c) the requisites when
invoking transcendental interest;
Fourth, whether or not the issuance of Budget Circular No. 2011-5 is within the jurisdiction and authority of
respondent Secretary Abad;
Fifth, whether or not Budget Circular No. 2011-5's provisions limiting the source and amount of the CNA
incentive are contrary to, or improperly amend, Administrative Order No. 135, series of 2005;
Sixth, whether or not Budget Circular No. 2011-5 modifies or nullifies provisions of validly executed CNAs
and violates the constitutional provision on the non-impairment of obligations;
Seventh, whether or not petitioners have a vested right to CNA incentives;
Eighth, whether or not the January 20, 2012 Memorandum directing the refund violates Section 43 of
the General Appropriations Act of 2011, which enumerates the allowed deductions from employees' salaries;
series of 2002, as well as subsequent issuances implementing this provision, is unconstitutional for violating Article VI,
Section 25 (5) of the Constitution by:
a. authorizing the PSLMC to declare where savings are to be allocated; and/or
b. authorizing government agencies, instrumentalities, and offices other than the President, the Senate
President, the House of Representatives Speaker, the Supreme Court Chief Justice, and the heads
of constitutional commissions, to allocate savings by contract or collective negotiation agreements;
and
Tenth, whether or not Section 15 of Executive Order No. 180, series of 1987, which created the PSLMC, is
unconstitutional in that:
a. it subsumes the Civil Service Commission or its Chair under the executive branch to implement this law, in
violation of Article IX-A, Section 1 of the Constitution; or
b. it grants the Civil Service Commission or its Chair powers other than those enumerated under Article IX-B
of the Constitution.
Any determination of whether this Court may answer a question posed to it begins with the issue of
jurisdiction. Jurisdiction is the authority to hear and decide a case as conferred by the Constitution. Similarly,
the Constitution grants Congress the power to "define, prescribe, and apportion"  the jurisdiction of various courts. 
confers upon this Court original jurisdiction over petitions
for certiorari,prohibition, mandamus,quo warranto,and habeas corpus. In this regard, Rule 65 of the Rules of
Court enumerates the requisites of a petition for certiorari and prohibition. The rules require that the acts to be assailed
were done in the exercise of judicial, quasi-judicial, or ministerial functions:
judicial or quasi-judicial functions has acted without or in excess of its or his jurisdiction, or with
grave abuse of discretion amounting to lack or excess of jurisdiction, and there is no appeal, nor
may file a verified petition in the proper court, alleging the facts with certainty and praying that
judgment be rendered annulling or modifying the proceedings of such tribunal, board or officer,
and granting such incidental reliefs as law and justice may require. ...
SECTION 2. Petition for prohibition.— When the proceedings of any tribunal,
functions,are without or in excess of its or his jurisdiction, or with grave abuse of discretion
amounting to lack or excess of jurisdiction, and there is no appeal or any other plain, speedy, and
 adequate remedy in the ordinary course of law, a person aggrieved thereby may file a verified
petition in the proper court alleging the facts with certainty and praying that judgment be rendered
commanding the respondent to desist from further proceedings in the action or matter specified
therein, or otherwise granting such incidental reliefs as law and justice may require[.] (Emphasis
supplied)
Quasi-judicial or adjudicatory functions refer to "the power to hear and determine questions of fact to which
the legislative policy is to apply and to decide in accordance with the standards laid down by the law itself in enforcing
and administering the same law."  Quasi-legislative or rule-making functions refer to "the power to make rules and
regulations which results in delegated legislation that is within the confines of the granting statute and the doctrine of
non-delegability and separability of powers."  discretion amounting to lack or excess of jurisdiction on the part of any
The nature of the governmental functions affects the available remedies of those who seek to assail
an act. Rule 65 specifies that the remedy of certiorari assails acts in the exercise of judicial and quasi-judicial functions,
with the addition of ministerial functions for the remedy of prohibition.
In several cases, this Court has dismissed petitions for certiorari and prohibition for being the wrong remedy
to assail the issuance of an executive order,  department order, and a republic act,  as these were not done in the exercise
of judicial or quasi-judicial functions.
Here, respondent Secretary Abad was exercising rule-making functions when he issued Budget Circular No.
2011-5. Several laws enumerating the Department of Budget and Management's powers and functions include providing
guidelines for allowance grants to government employees.  Yet, petitioners filed a petition for certiorari and prohibition.
Nonetheless, beyond the conception of certiorari and prohibition under Rule 65 of the Rules of Court, the
power of judicial review in Article VIII, Section 1 of the Constitution contemplates the correction, by way of petitions
for certiorari and prohibition, of grave abuses of discretion by any governmental branch or instrumentality. This may lie
even if no judicial, quasi-judicial, or ministerial function was exercised.  upon the rights of the people, but it, in effect, encouraged further violations
Article VIII, Section 1 of the Constitution states:
SECTION 1. The judicial power shall be vested in one Supreme Court and in such lower
courts as may be established by law.
Judicial power includes the duty of the courts of justice to settle actual controversies
involving rights which are legally demandable and enforceable, and to determine whether or not
there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of
any branch or instrumentality of the Government.
In Kilusang Mayo Uno v. Aquino:
This Court has discussed in several cases how the 1987 Constitution has expanded the
scope of judicial power from its traditional understanding. As such, courts are not only expected to
"settle actual controversies involving rights which are legally demandable and enforceable[,]" but
are also empowered to determine if any government branch or instrumentality has acted beyond the
scope of its powers, such that there is grave abuse of discretion.
This development of the courts' judicial power arose from the use and abuse of the
political question doctrine during the martial law era under former President Ferdinand Marcos.
In Association of Medical Clinics for Overseas Workers, Inc. v. GCC Approved Medical Centers
Association, Inc.,this Court held:
In Francisco v. The House of Representatives,we recognized that
this expanded jurisdiction was meant "to ensure the potency of the power of
judicial review to curb grave abuse of discretion by 'any branch or
instrumentalities of government.'" Thus, the second paragraph of Article VIII,
Section 1 engraves, for the first time in its history, into black letter law the
"expanded certiorari jurisdiction" of this Court, whose nature and purpose
had been provided in the sponsorship speech of its proponent, former Chief
Justice Constitutional Commissioner Roberto Concepcion[:]
The first section starts with a sentence copied from
former Constitutions. It says:
The judicial power shall be vested in one Supreme Court and in
such lower courts as may be established by law.
I suppose nobody can question it.
The next provision is new in our constitutional law. I will read it
first and explain.
Judicial power includes the duty of the courts of justice to settle
actual controversies involving rights which are legally demandable and
enforceable, and to determine whether or not there has been a grave abuse of
branch or instrumentality of the government. 
Fellow Members of this Commission, this is actually a product of
our experience during martial law. As a matter of fact, it has some
antecedents in the past, but the role of the judiciary during the deposed regime
was marred considerably by the circumstance that in a number of cases
against the government, which then had no legal defense at all, the solicitor
general set up the defense of political question and got away with it. As a
consequence, certain principles concerning particularly the writ of habeas
corpus,that is, the authority of courts to order the release of political
detainees, and other matters related to the operation and effect of martial law
failed because the government set up the defense of political question. And
the Supreme Court said: "Well, since it is political, we have no authority to
pass upon it." The Committee on the Judiciary feels that this was not a proper
solution of the questions involved. It did not merely request an encroachment
thereof during the martial law regime.
xxx xxx xxx
Briefly stated, courts of justice determine the limits of power of the
agencies and offices of the government as well as those of its officers. In
other words, the judiciary is the final arbiter on the question whether or not a
branch of government or any of its officials has acted without jurisdiction or
in excess of jurisdiction, or so capriciously as to constitute an abuse of
discretion amounting to excess of jurisdiction or lack of jurisdiction. This is
not only a judicial power but a duty to pass judgment on matters of this
nature.
This is the background of paragraph 2 of Section 1, which means
that the courts cannot hereafter evade the duty to settle matters of this nature,
by claiming that such matters constitute a political question. (Emphasis in the
original, citations omitted)
Rule 65, Sections 1 and 2 of the Rules of Court provides remedies to address grave
abuse of discretion by any government branch or instrumentality, particularly through petitions
for certiorari and prohibition:
xxx xxx xxx
While these provisions pertain to a tribunal's, board's, or an officer's exercise of
discretion in judicial, quasi-judicial, or ministerial functions, Rule 65 still applies to invoke the
expanded scope of judicial power. In Araullo v. Aquino III,this Court differentiated certiorari from
prohibition, and clarified that Rule 65 is the remedy to "set right, undo[,] and restrain any act of
grave abuse of discretion amounting to lack or excess of jurisdiction by any branch or
instrumentality of the Government, even if the latter does not exercise judicial, quasi-judicial[,] or
ministerial functions."
This Court further explained:
 The present Rules of Court uses two special civil actions for
determining and correcting grave abuse of discretion amounting to lack or
excess of jurisdiction. These are the special civil actions for certiorari and
prohibition, and both are governed by Rule 65. . . .
The ordinary nature and function of the writ of certiorari in our
present system are aptly explained in Delos Santos v. Metropolitan Bank and
Trust Company:
xxx xxx xxx
The sole office of the writ of certiorari  is the correction
of errors of jurisdiction, which includes the commission of grave
abuse of discretion amounting to lack of jurisdiction. In this regard,
mere abuse of discretion is not enough to warrant the issuance of
the writ. The abuse of discretion must be grave, which means either
that the judicial or quasi-judicial power was exercised in an
arbitrary or despotic manner by reason of passion or personal
hostility, or that the respondent judge, tribunal or board evaded a
positive duty, or virtually refused to perform the duty enjoined or
to act in contemplation of law, such as when such judge, tribunal or
board exercising judicial or quasi-judicial powers acted in a
capricious or whimsical manner as to be equivalent to lack of
jurisdiction.
Although similar to prohibition in that it will lie for want or excess
of jurisdiction, certiorari is to be distinguished from prohibition by the fact
that it is a corrective remedy used for the re-examination of some action of an
inferior tribunal, and is directed to the cause or proceeding in the lower court
and not to the court itself, while prohibition is a preventative remedy issuing
to restrain future action, and is directed to the court itself. The Court
expounded on the nature and function of the writ of prohibition in Holy Spirit
Homeowners Association, Inc. v. Defensor: SDAaTC
A petition for prohibition is also not the proper remedy
to assail an IRR issued in the exercise of a quasi-legislative
function. Prohibition is an extraordinary writ directed against any
tribunal, corporation, board, officer or person, whether exercising
judicial, quasi-judicial or ministerial functions, ordering said entity
or person to desist from further proceedings when said proceedings
are without or in excess of said entity's or person's jurisdiction, or
are accompanied with grave abuse of discretion, and there
is no appeal or any other plain, speedy and adequate remedy in the
ordinary course of law. Prohibition lies against judicial or
ministerial functions, but not against legislative or quasi-legislative
functions. Generally, the purpose of a writ of prohibition is to keep
a lower court within the limits of its jurisdiction in order to
maintain the administration of justice in orderly channels.
Prohibition is the proper remedy to afford relief against usurpation
of jurisdiction or power by an inferior court, or when, in the
exercise of jurisdiction in handling matters clearly within its
cognizance the inferior court transgresses the bounds prescribed to
it by the law, or where there is no adequate remedy available in the
ordinary course of law by which such relief can be obtained. Where
the principal relief sought is to invalidate an IRR, petitioners'
remedy is an ordinary action for its nullification, an action which
properly falls under the jurisdiction of the Regional Trial Court. In
any case, petitioners' allegation that "respondents are performing or
threatening to perform functions without or in excess of their
jurisdiction" may appropriately be enjoined by the trial court
through a writ of injunction or a temporary restraining order.
With respect to the Court, however, the remedies of certiorari and
prohibition are necessarily broader in scope and reach, and the writ
of certiorari or prohibition may be issued to correct errors of jurisdiction
committed not only by a tribunal, corporation, board or officer exercising
judicial, quasi-judicial or ministerial functions but also to set right, undo and
restrain any act of grave abuse of discretion amounting to lack or excess of
jurisdiction by any branch or instrumentality of the Government, even if the
latter does not exercise judicial, quasi-judicial or ministerial functions. This
application is expressly authorized by the text of the second paragraph of
Section 1, . . .
Thus, petitions for certiorari and prohibition are appropriate
remedies to raise constitutional issues and to review and/or prohibit or nullify
the acts of legislative and executive officials.  (Citations omitted)
Thus, if any governmental branch or instrumentality is shown to have gravely abused its discretion amounting
to lack or excess of jurisdiction, and has overstepped the delimitations of its powers, courts may "set right, undo, or
restrain" such act by way of certiorari and prohibition.
But even as this Court is vested with judicial power, it does not follow that we should resolve every question
we may have the authority to answer. The Constitution grants the Judiciary the power to mediate the boundaries of the
government's powers, but this mediation is circumscribed by the will of the people, in whom sovereignty resides, 39 as
expressed by their representatives in the executive and legislative branches. This Court's place in the constitutional order
requires that we "decide on legal principle only in concrete controversies":
This court is not the venue to continue the brooding and vociferous political debate that
has already happened and has resulted in legislation. Constitutional issues normally arise when the
right and obligations become doubtful as a result of the implementation of the statute. This forum
does not exist to undermine the democratically deliberated results coming from the Congress and
approved by the President. Again, there is no injury to a fundamental right arising from concrete
facts established with proof. Rather, the pleadings raise grave moral and philosophical issues
founded on facts that have not yet happened. They are the product of speculation by the petitioners.
To steeled advocates who have come to believe that their advocacy is the one true moral
truth, their repeated view may seem to them as the only factual possibility. Rabid advocacy of any
view will be intolerant of the nuanced reality that proceeds from conscious and deliberate
examination of facts.
This kind of advocacy should not sway us.
Our competence is to decide on legal principle only in concrete controversies. We
should jealously and rigorously protect the principle of justiciability of constitutional challenges.
We should preserve our role within the current constitutional order. We undermine the legitimacy
of this court when we participate in rulings in the abstract because there will always be the strong
possibility that we will only tend to mirror our own personal predilections. We should thus adopt a
deferential judicial temperament especially for social legislation.  (Citation omitted) acEHCD
For this reason, the requisites of justiciability, long established in our jurisprudence, must be present in the
cases this Court resolves:
As a rule, "the constitutionality of a statute will be passed on only if, and to the extent
that, it is directly and necessarily involved in a justiciable controversy and is essential to the
protection of the rights of the parties concerned." A controversy is said to be justiciable if: first,
there is an actual case or controversy involving legal rights that are capable of judicial
determination; second, the parties raising the issue must have standing or locus standi to raise the
constitutional issue; third, the constitutionality must be raised at the earliest opportunity; and
fourth, resolving the constitutionality must be essential to the disposition of the case.  (Citations
omitted)
 I (A)
An actual case exists "when the act being challenged has had a direct adverse effect on the individual
challenging it."  Thus, actual case means the presence of that concrete adverseness that can be drawn from the
allegations raised by the parties in their pleadings:
Jurisprudence provides that an actual case or controversy is one which "involves a conflict of legal
rights, an assertion of opposite legal claims, susceptible of judicial resolution as distinguished from
a hypothetical or abstract difference or dispute." In other words, "[t]here must be a contrariety of
legal rights that can be interpreted and enforced on the basis of existing law and
jurisprudence." Related to the requirement of an actual case or controversy is the requirement of
"ripeness," meaning that the questions raised for constitutional scrutiny are already ripe for
adjudication. "A question is ripe for adjudication when the act being challenged has had a direct
adverse effect on the individual challenging it. It is a prerequisite that something had then been
accomplished or performed by either branch before a court may come into the picture, and the
petitioner must allege the existence of an immediate or threatened injury to itself as a result of the
challenged action." "Withal, courts will decline to pass upon constitutional issues through advisory
opinions, bereft as they are of authority to resolve hypothetical or moot questions." (Emphasis
supplied, citations omitted)
Laws are general in nature. The courts' constitutional duty is "to settle actual controversies involving rights
which are legally demandable and enforceable[.]"  Courts cannot and will not decide hypothetical issues, render
advisory opinions, or engage academic questions.  The parties must present concrete facts that demonstrate the problems
vis-à-vis a legal provision.  The parties represented must show the contradicting considerations as a result of the alleged
facts. Absent such actual case anchored on concrete adverseness, no factual basis exists for giving a petition due course.
In Falcis v. Civil Registrar General:
This Court's constitutional mandate does not include the duty to answer all of life's
questions. No question, no matter how interesting or compelling, can be answered by this Court if
it cannot be shown that there is an "actual and an antagonistic assertion of rights by one party
against the other in a controversy wherein judicial intervention is unavoidable."
This Court does not issue advisory opinions. We do not act to satisfy academic questions
or dabble in thought experiments. We do not decide hypothetical, feigned, or abstract disputes, or
those collusively arranged by parties without real adverse interests. If this Court were to do
otherwise and jump headlong into ruling on every matter brought before us, we may close off
avenues for opportune, future litigation. We may forestall proper adjudication for when there are
actual, concrete, adversarial positions, rather than mere conjectural posturing:
Even the expanded jurisdiction of this Court under Article VIII,
Section 1 does not provide license to provide advisory opinions. An advisory
opinion is one where the factual setting is conjectural or hypothetical. In such
cases, the conflict will not have sufficient concreteness or adversariness so as
to constrain the discretion of this Court. After all, legal arguments from
concretely lived facts are chosen narrowly by the parties. Those who bring
theoretical cases will have no such limits. They can argue up to the level of
absurdity. They will bind the future parties who may have more motives to
choose specific legal arguments. In other words, for there to be a real conflict
between the parties, there must exist actual facts from which courts can
properly determine whether there has been a breach of constitutional text. ...
As this Court makes "final and binding construction[s] of law[,]" our opinions cannot be
mere counsel for unreal conflicts conjured by enterprising minds. Judicial decisions, as part of the
legal system, bind actual persons, places, and things. Rulings based on hypothetical situations
weaken the immense power of judicial review.  (Citations omitted)
I (B)
Legal standing means "personal and substantial interest in a case such that the party has sustained or will
sustain direct injury as a result of the governmental act that is being challenged." 50 That the party must present a
personal stake in the case ensures the presence of concrete adverseness: 
In public or constitutional litigations, the Court is often burdened with the determination
of the locus standi of the petitioners due to the ever-present need to regulate the invocation of the
intervention of the Court to correct any official action or policy in order to avoid obstructing the
efficient functioning of public officials and offices involved in public service. It is required,
therefore, that the petitioner must have a personal stake in the outcome of the controversy, for, as
indicated in Agan, Jr. v. Philippine International Air Terminals Co.,Inc.:
The question on legal standing is whether such parties have
"alleged such a personal stake in the outcome of the controversy as to
assure that concrete adverseness which sharpens the presentation of issues
upon which the court so largely depends for illumination of difficult
constitutional questions." Accordingly, it has been held that the interest of a
person assailing the constitutionality of a statute must be direct and personal.
He must be able to show, not only that the law or any government act is
invalid, but also that he sustained or is in imminent danger of sustaining some
direct injury as a result of its enforcement, and not merely that he suffers
thereby in some indefinite way. It must appear that the person complaining
has been or is about to be denied some right or privilege to which he is
lawfully entitled or that he is about to be subjected to some burdens or
penalties by reason of the statute or act complained of.  (Emphasis supplied)
Here, respondent Secretary Soliman submits that petitioners Confederation for Unity, Recognition, and
Advancement of Government Employees (COURAGE),National Federation of Employees Associations in the
Department of Agriculture (NAFEDA),and Department of Agrarian Reform Employees Association (DAREA) should
all be dropped as parties for having no legal standing.  She, however, concedes that petitioner SWEAP-DSWD has legal
standing
Petitioners counter that COURAGE, NAFEDA, and DAREA "represent hundreds of government employees
unions and associations, composing of hundreds of thousands of employees in the civil service, whose validly executed
CNAs have been infringe[d] by the impugned budget circular." 
Nearly all of the petitioners here are organizations purporting to act on behalf of other organizations.
Generally, representative parties such as organizations cannot be surrogates for the real party in interest suffering the
actual injury. Should they desire to act as such, they must convincingly show that their representation through one voice
would be more efficient than just some of the members suing and defending on behalf of all the
members. 55 In National Federation of Hog Farmers, Inc. v. Board of Investments
For organizations to become real parties in interest, the following criteria must first be
met so that actions may be allowed to be brought on behalf of third parties:
[F]irst, "the [party bringing suit] must have suffered an 'injury-in-fact,' thus
giving him or her a 'sufficiently concrete interest' in the outcome of the issue
in dispute";second, "the party must have a close relation to the third
party";and third, "there must exist some hindrance to the third party's ability
to protect his or her own interests."
Organizations may possess standing to sue on behalf of their members if they
sufficiently show that "the results of the case will affect their vital interests" and that their members
have suffered or will stand to suffer from the application of the assailed governmental acts. The
petition must likewise show that a hindrance exists, preventing the members from personally filing
the complaint.
In White Light Corporation v. City of Manila,hotel and motel operators protested the
implementation of the City of Manila's Ordinance No. 7774, which prohibited short-time
admission, or the admittance of guests for less than 12 hours in motels, inns, hotels, and similar
establishments within the city. The petitioners argued, among others, that the Ordinance violated
their clients' right to privacy, freedom of movement, and equal protection of the laws.
In White Light,the petitioners were allowed to represent their clients based on third-party
standing. This Court noted the close relationship between hotel and motel operators and their
clients, as the former "rely on the patronage of their customers for their continued viability." On
 the requirement of hindrance, this Court stated that "[t]he relative silence in constitutional litigation
of such special interest groups in our nation such as the American Civil Liberties Union in the
United States may also be construed as a hindrance for customers to bring suit."  (Citations
omitted)
The Petition does not allege whether petitioners COURAGE, NAFEDA, and DAREA have existing CNAs,
nor does it allege the amount granted to them as CNA incentives. The Petition fails to show that these three petitioners
"sustained or will sustain direct injury" from the issuance of Budget Circular No. 2011-5. Not all government employees
are similarly situated. Some have existing CNAs, while others do not. Some government offices have year-end savings
resulting from efficiency and lesser costs, but this may not be true for all. Decisions cannot cut across different contexts.
Those who fail to raise an actual case should not be covered by a decision that considered the factual milieu alleged by
those with legal standing.
Nonetheless, labor organizations occupy a unique position in that they have the constitutional and statutory
right and duty to represent the workers within their membership.
Article XIII, Section 3 of the Constitution states:
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. HESIcT
The State shall promote the principle of shared responsibility between workers and
employers and the preferential use of voluntary modes in settling disputes, including conciliation,
and shall enforce their mutual compliance therewith to foster industrial peace.
The State shall regulate the relations between workers and employers, recognizing the
right of labor to its just share in the fruits of production and the right of enterprises to reasonable
returns on investments, and to expansion and growth. (Emphasis supplied)
Article 242 of the Labor Code, as amended, provides that a labor organization has the right to represent its
members in collective bargaining, and to undertake all activities to benefit the organization and its members:
ARTICLE 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. (Emphasis supplied)
Labor organizations also ensure that workers participate in decision-making processes that affect their rights,
duties, and welfare. In Samahan ng Manggagawa sa Hanjin Shipyard v. Bureau of Labor Relations
As Article 246 (now 252) of the Labor Code provides, the right to self-organization
includes the right to form, join or assist labor organizations for the purpose of collective bargaining
through representatives of their own choosing and to engage in lawful concerted activities for the
same purpose for their mutual aid and protection. This is in line with the policy of the State to
foster the free and voluntary organization of a strong and united labor movement as well as to
make sure that workers participate in policy and decision-making processes affecting their rights,
duties and welfare.
The right to form a union or association or to self-organization comprehends two
notions, to wit: (a) the liberty or freedom, that is, the absence of restraint which guarantees that the
employee may act for himself without being prevented by law; and (b) the power, by virtue of
which an employee may, as he pleases, join or refrain from joining an association.
In view of the revered right of every worker to self-organization, the law expressly
allows and even encourages the formation of labor organizations. A labor organization is defined
as "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." A labor organization has two broad rights: (1) to bargain collectively and (2) to deal
with the employer concerning terms and conditions of employment. To bargain collectively is a
right given to a union once it registers itself with the DOLE. Dealing with the employer, on the
other hand, is a generic description of interaction between employer and employees concerning
grievances, wages, work hours and other terms and conditions of employment, even if the
employees' group is not registered with the DOLE.
A union refers to any labor organization in the private sector organized for collective
bargaining and for other legitimate purpose, while a workers' association is an organization of
workers formed for the mutual aid and protection of its members or for any legitimate purpose
other than collective bargaining.
Many associations or groups of employees, or even combinations of only several
persons, may qualify as a labor organization yet fall short of constituting a labor union. While
every labor union is a labor organization, not every labor organization is a labor union. The
difference is one of organization, composition and operation. 
Collective bargaining is just one of the forms of employee participation. Despite so
much interest in and the promotion of collective bargaining, it is incorrect to say that it is the
device and no other, which secures industrial democracy. It is equally misleading to say that
collective bargaining is the end-goal of employee representation. Rather, the real aim is employee
participation in whatever form it may appear, bargaining or no bargaining, union or no union. Any
labor organization which may or may not be a union may deal with the employer. This explains
why a workers' association or organization does not always have to be a labor union and why
employer-employee collective interactions are not always collective bargaining.  (Citations
omitted)
As discussed above, though not to the same extent as private employees, the right to self-organize is likewise
granted to government employees. Petitioner SWEAP-DSWD is one such organization. It may act to protect its
members' interests in CNAs, which includes acting to contest issuances that may jeopardize these interests. It has the
legal standing to bring their Petition to this Court.
I (C)
As for the third requisite: "A case is ripe for adjudication when the challenged governmental act is a
completed action such that there is a direct, concrete, and adverse effect on the petitioner." 
Closely linked with the requisite of an actual case, ripeness pertains to the challenged
governmental act having reached the state where it is neither anticipatory nor too late, but rather, necessary for the
Judiciary to intervene:
Both these concepts relate to the timing of the presentation of a controversy before the
Court — ripeness relates to its prematurity, while mootness relates to a belated or unnecessary
judgment on the issues. The Court cannot preempt the actions of the parties, and neither should it
(as a rule) render judgment after the issue has already been resolved by or through external
developments.
The importance of timing in the exercise of judicial review highlights and reinforces the
need for an actual case or controversy — an act that may violate a party's right. Without any
completed action or a concrete threat of injury to the petitioning party, the act is not yet ripe for
adjudication. It is merely a hypothetical problem. The challenged act must have been accomplished
or performed by either branch or instrumentality of government before a court may come into the
picture, and the petitioner must allege the existence of an immediate or threatened injury to itself as
a result of the challenged action.  from an actual case or controversy, the Court must satisfy itself that the reliefs prayed for by the
Ripeness must be viewed in light of the doctrine on exhaustion of administrative remedies. Before judicial
intervention, the challenged act must fulfill the prerequisite that another governmental branch or instrumentality has
already performed the act; the petitioner has immediately suffered or is threatened to suffer injury due to the act;
and no more succor is found in another branch or instrumentality.  The doctrine "does not warrant a court to arrogate
unto itself the authority to resolve, or interfere in, a controversy the jurisdiction over which is lodged initially with an
administrative body"; rather, it is anchored on comity, respect, and convenience:
This Court has also said in a number of cases that —
When an adequate remedy may be had within the Executive
Department of the government, but nevertheless, a litigant fails or refuses to
avail himself of the same, the judiciary shall decline to interfere. This
traditional attitude of the courts is based not only on convenience but likewise
on respect: convenience of the party litigants and respect for a coequal office
in the government. If a remedy is available within the administrative
machinery, this should be resorted to before the resort can be made to (the)
courts.  I (E)
Our Constitution should also be read by the executive branch. The doctrine demands deference to co-equal
departments, allowing the appropriate authorities the opportunity "to act and correct the errors committed in the
administrative forum."  The regional trial courts, the Court of Appeals, and this Court all have original jurisdiction to issue writs
Petitioners here failed to exhaust all the administrative remedies before coming to this Court.
Aside from Budget Circular No. 2011-5, petitioners also question the constitutionality of the January 20,
2012 Memorandum signed by Assistant Secretary David-Casis.  The Memorandum does not show any signature of
approval or conforme by respondent Secretary Soliman. 
Petitioners should have allowed the administrative process to run its course by first questioning the validity of
the Memorandum, along with the Assistant Secretary's authority, before respondent Secretary Soliman. The Secretary's
action may, in turn, be appealed to the Office of the President. 
True, the doctrine on exhaustion of administrative remedies does not apply when the assailed act was done in
the exercise of quasi-legislative or rule-making functions.  Yet, the January 20, 2012 Memorandum, which directs the
refund of excess CNA incentive, cannot be an exercise of quasi-legislative functions only when it created an imperative
obligation upon the affected employees.
This Court has dismissed petitions, explaining that "liberality and the transcendental doctrine cannot trump
blatant disregard of procedural rules," more so when "the petitioner had other available remedies[.]" 
The mere issuance of a regulation does not justify an immediate resort to this Court. Petitioner DSWD-
SWEAP could have availed of administrative remedies before respondent Secretary Soliman, and then before the Office
of the President.
I (D)….
When the unconstitutionality of a governmental act is raised as a ground for judicial review, the constitutional
issue must be properly presented, and its resolution must be necessary for a complete determination of the case. 71 In
other words, the constitutional question must be the lis mota of the case; otherwise, the issues may be resolved and
reliefs may be granted on some other ground. 
In Parcon-Song v. Song:
The requirement that a constitutional issue seasonably raised should be the lis mota of
the case is an aspect of judicial review that is rooted on two constitutional principles. First, the
principle of deference. Second, the principle of reasonable caution in striking down an act by a co-
equal political branch of government.
Article VIII, Section 1 of the Constitution which now specifies that this Court may
now act on any grave abuse of discretion by any organ or department or branch of government,
should never be interpreted as providing license for the Court to issue advisory opinions. Apart
parties requires the resolution of a constitutional issue. The exceptions are (i) when a facial review
of the statute is allowed as in cases of actual or clearly imminent violation of the sovereign rights
to free expression and its cognate rights, or (ii) when there is a clear and convincing showing that a
fundamental constitutional right has been actually violated in the application of a statute, which are
of transcendental interest. That is, that the violation is so demonstrably and urgently egregious that
it outweighs a reasonable policy of deference in such specific instance.
The facts constituting the demonstrable and egregious violation of a fundamental
constitutional right must either be uncontested or established in a trial court for this court to take
cognizance of the constitutional issue and rule upon it. The basis for ruling on the Constitutional
issue must also be clearly alleged and traversed by the parties.
The relief of the party in this case can be granted simply by examining the statute
applicable. It has not pleaded nor demonstrably shown a constitutional violation that is so urgently
egregious that it should outweigh our reasonable policy of deference to the two other constitutional
branches of government. 
On the alleged violation of the rule on hierarchy of courts raised by respondents,  petitioners take exception
by invoking transcendental importance of the constitutional questions involved. 
of certiorari and prohibition.  The doctrine on hierarchy of courts ensures that every level of the Judiciary can focus on
effectively and efficiently performing its designated functions within the judicial system: Territorially organized trial
courts weigh evidence and rule on factual issues; the Court of Appeals reviews these findings as a collegiate body; and
this Court leads the Judiciary by resolving constitutional questions and promulgating doctrinal devices. 
Nevertheless, exceptions exist. This Court can exercise its discretionary power and assume jurisdiction over
petitions filed directly before it when warranted. For one, a direct resort to this Court requires the existence of serious
and important reasons:
The Supreme Court is a court of last resort, and must so remain if it is to satisfactorily
perform the functions assigned to it by the fundamental charter and immemorial tradition.It
cannot and should not be burdened with the task of dealing with causes in the first instance. Its
original jurisdiction to issue the so-called extraordinary writs should be exercised only where
absolutely necessary or where serious and important reasons exist therefor. Hence, that
jurisdiction should generally be exercised relative to actions or proceedings before the Court of
 Appeals, or before constitutional or other tribunals, bodies or agencies whose acts for some reason
or another are not controllable by the Court of Appeals. Where the issuance of an extraordinary
writ is also within the competence of the Court of Appeals or a Regional Trial Court, it is in
either of these courts that the specific action for the writ's procurement must be presented.
This is and should continue to be the policy in this regard, a policy that courts and lawyers
must strictly observe. (Emphasis in the original)
These important reasons include the following: "(1) when dictated by the public welfare and the advancement
of public policy; (2) when demanded by the broader interest of justice; (3) when the challenged orders were patent
nullities; or (4) when analogous exceptional and compelling circumstances called for and justified the immediate and
direct handling of the case."  process of collective bargaining. In government employment, however, it is the legislature and,
This Court has allowed petitions raising genuine issues of constitutionality against actions done by other
branches of government 81 and constitutional bodies.  It has also assumed jurisdiction over cases of first
impression 83 and those of transcendental interest.  circulars, rules and regulations, not through collective agreements.  (Emphasis supplied)
Benefits awarded to government employees come from public funds. The challenged Budget Circular No.
2011-5 affects all government employees with valid CNAs, allowing the grant of CNA incentives.
Concededly, no facts are disputed in this case that would burden this Court with the task of exhaustively
examining evidentiary matters, for which it is ill-equipped.  In the interest of judicial economy, 86 preventing further
delay in the disposition of this case, 87 we consider the merits.  "government employees, including employees of government-owned and/or controlled corporations" from the right to
II
To put in context the substantive issues, a recall of the history of collective negotiations in the public sector is
needed.
The Constitution and applicable laws, evolving through the years, provide the right of government employees
to self-organize and engage in collective negotiation.
As early as 1953, Republic Act No. 875 or the Industrial Peace Act stated that employment terms and
conditions of those in government service are governed by law:
SECTION 11. Prohibition Against Strikes in the Government. — The terms and
conditions of employment in the Government, including any political subdivision or
instrumentality thereof, are governed by law and it is declared to be the policy of this Act that
employees therein shall not strike for the purpose of securing changes or modification in their
terms and conditions of employment. Such employees may belong to any labor organization which
does not impose the obligation to strike or to join in strike: Provided, however, That this section
shall apply only to employees employed in governmental functions and not to those employed in
proprietary functions of the Government including but not limited to government corporations.
The 1983 case of Alliance of Government Workers v. Minister of Labor and Employment  raised whether the
requirement under Presidential Decree No. 851 for employers "to pay all their employees receiving a basic salary of not
more than P1,000.00 a month, a thirteenth (13th) month pay not later than December 24 of every year" included
government employees.  However, the concept of the government employees' right of self-organization differs
This Court dismissed the petition. It found that Section 3 of the Implementing Rules and Regulations, which
excluded government employers from the coverage, was the correct interpretation of the decree. This Court then
distinguished between private and public employees insofar as taking collective action as bargaining power in seeking
concessions:
The workers in the respondents institutions have not directly petitioned the heads of
their respective offices nor their representatives in the Batasang Pambansa. They have acted
through a labor federation and its affiliated unions. In other words, the workers and employees of
these state firms, college, and university are taking collective action through a labor federation
which uses the bargaining power of organized labor to secure increased compensation for its
members.
Under the present state of the law and pursuant to the express language of
the Constitution, this resort to concerted activity with the ever present threat of a strike
can no longer be allowed.
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
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
The 1973 Constitution included in its declaration of principles and state policies that "[t]he State shall assure
the rights of workers to self-organization, collective bargaining, security of tenure, and just and humane conditions of
work." 
In 1974, Presidential Decree No. 442, or the Labor Code of the Philippines, was signed into law. It excluded
self-organization for purposes of collective bargaining.  Even the employment terms and conditions for government-
owned and controlled corporations' employees are governed by the Civil Service Law,rules and regulations:
ARTICLE 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.
Further qualification for employees of government corporations was made in 1986 when former President
Corazon C. Aquino (President Aquino) issued Executive Order No. 111. In amending the Labor Code, it granted
employees "of government corporations established under the Corporation Code . . . the right to organize and to bargain
collectively with their respective employers." 
The 1987 Constitution followed, stating that "[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." 
The State "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." 96 Article IX-B on the Civil Service
Commission also states that "[t]he right to self-organization shall not be denied to government employees." 
Nonetheless, in the 1990 case of Arizala v. Court of Appeals, this Court reiterated that the right of
government employees to self-organize is not as extensive as in the private sector:
significantly from that of employees in the private sector. The latter's right of self-
organization, i.e., "to form, join or assist labor organizations for purposes of collective bargaining,"
admittedly includes the right to deal and negotiate with their respective employers in order to fix
the terms and conditions of employment and also, to engage in concerted activities for the
attainment of their objectives, such as strikes, picketing, boycotts. But the right of government
employees to "form, join or assist employees organizations of their own choosing" under Executive
Order No. 180 is not regarded as existing or available for "purposes of collective bargaining," but
simply "for the furtherance and protection of their interests."
In other words, the right of Government employees to deal and negotiate with their
respective employers is not quite as extensive as that of private employees. Excluded from
negotiation by government employees are the "terms and conditions of employment . . . that are
fixed by law," it being only those terms and conditions not otherwise fixed by law that "may be
subject of negotiation between the duly recognized employees' organizations and appropriate
government authorities." And while EO No. 180 concedes to government employees, like their
 counterparts in the private sector, the right to engage in concerted activities, including the right to
strike, the executive order is quick to add that those activities must be exercised in accordance with
law, i.e., are subject both to "Civil Service Law and rules" and "any legislation that may be enacted
by Congress," that "the resolution of complaints, grievances and cases involving government
employees" is not ordinarily left to collective bargaining or other related concerted activities, but to
"Civil Service Law and labor laws and procedures whenever applicable"; and that in case "any
dispute remains unresolved after exhausting all available remedies under existing laws and
procedures, the parties may jointly refer the dispute to the (Public Sector Labor-Management)
Council for appropriate action." What is more, the Rules and Regulations implementing Executive
Order No. 180 explicitly provide that since the "terms and conditions of employment in the
government, including any political subdivision or instrumentality thereof and government-owned
and controlled corporations with original charters are governed by law, the employees therein shall
not strike for the purpose of securing changes thereof."
On the matter of limitations on membership in labor unions of government
employees, Executive Order No. 180 declares that "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.["] A
"high level employee" is one "whose functions are normally considered policy determining,
managerial or one whose duties are highly confidential in nature. A managerial function refers to
the exercise of powers such as: 1. To effectively recommend such managerial actions; 2. To
formulate or execute management policies and decisions; or 3. To hire, transfer, suspend, lay off,
recall, dismiss, assign or discipline employees."  (Citations omitted)
Exercising her legislative powers,  on June 1, 1987, then President Aquino issued Executive Order No. 180,
entitled Providing Guidelines for the Exercise of the Right to Organize of Government Employees, Creating a Public
Sector Labor-Management Council and for Other Purposes.
Executive Order No. 180 created a Public Sector Labor-Management Council (PSLMC), which was
composed of officers who shall implement Executive Order No. 180:
SECTION 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.(Emphasis supplied)
Subsequently, PSLMC issued the Implementing Rules and Regulations of Executive Order No. 180. 
On November 14, 2002, PSLMC issued Resolution No. 4, series of 2002, entitled Grant of Collective
Negotiation Agreement (CNA) Incentive for National Government Agencies, State Universities and Colleges and Local
Government Units.It also issued Resolution No. 2, series of 2003, entitled Grant of Collective Negotiation Agreement
(CNA) Incentive for Government Owned or Controlled Corporations (GOCCs) and Government Financial Institutions
(GFIs).
PSLMC Resolution No. 4, which covers national government agencies, provides that "CNA Incentive can be
paid every year that savings are generated during the life of the CNA,"  and "[s]hould the grant of CNA Incentive be
disallowed by the Commission on Audit, the management shall be held personally responsible for the payment
thereof."  The Resolution defined "savings,"  and provided for its apportionment as follows:  SECTION 1. Grant of Incentive. — The grant of the Collective Negotiation Agreement
SECTION 5. Total Savings, as defined in Section 3 and net of the priorities in Section 4,
generated after the signing of the CNA shall be apportioned, as follows:
Fifty percent (50%) for CNA Incentive.
Thirty percent (30%) for improvement of working conditions and other
programs and/or to be added as part of the CNA Incentive, as may be agreed
upon in the CNA.
Twenty percent (20%) to be reverted to the General Fund for the national
government agencies or to the General Fund of the constitutional
commissions, state universities and colleges, and local government units
concerned, as the case may be.
On August 31, 2004, former President Gloria Macapagal-Arroyo (President Arroyo) issued Administrative
Order No. 103, entitled Directing the Continued Adoption of Austerity Measures in the Government.CNA incentive falls
under the exceptions from the direction to suspend grants of new or additional benefits:
SECTION 3. All NGAs, SUCs, GOCCs, GFIs and OGCEs, whether exempt from Salary
Standardization Law or not, are hereby directed to:
xxx xxx xxx
(b) Suspend the grant of new or additional benefits to full-time officials and
employees and officials, except for (i) Collective Negotiation Agreement
(CNA) Incentives which are agreed to be given in strict compliance with the
provisions of the Public Sector Labor-Management Council Resolutions No.
04, s. 2002 and No. 2, s. 2003, and (ii) those expressly provided by
presidential issuance[.]
On September 28, 2004, PSLMC issued Resolution No. 2, series of 2004, entitled Approving and Adopting
the  Amended Rules and Regulations Governing the Exercise of the Right of Government Employees to
Organize. The amended rules and regulations lists CNA incentive under negotiable matters:
RULE XII
COLLECTIVE NEGOTIATIONS
SECTION 1. Subject of negotiation. — Terms and conditions of employment or
improvements thereof, except those that are fixed by law, may be the subject of negotiation.
SECTION 2. Negotiable matters. — The following concerns may be the subject of
negotiation between the management and the accredited employees' organization:
xxx xxx xxx
(m)  CNA incentive pursuant to  PSLMC Resolution No. 4, s. 2002 and
Resolution No. 2, s. 2003; and,
(n) such other concerns which are not prohibited by law and CSC rules and
regulations. (Emphasis supplied)
xxx xxx xxx
SECTION 5. Other matters. — Nothing herein shall be construed to prevent any of the
parties from submitting proposals regarding other matters to Congress and the proper authorities to
improve the terms and conditions of their employment.
On December 27, 2005, President Arroyo issued Administrative Order No. 135, authorizing the grant of CNA
incentives to government employees and mandating the Department of Budget and Management to issue its
implementing guidelines.  This reads:
NOW, THEREFORE, I, GLORIA MACAPAGAL-ARROYO, President of the
Philippines, by virtue of the powers vested in me by law, do hereby order:
(CNA) incentive to national government agencies (NGAs),local government units (LGUs),state
universities and colleges (SUCs),government-owned or controlled corporations (GOCCs),and
government financial institutions (GFIs),if provided in their respective CNAs and supplements
 thereto executed between the management and employees' organizations accredited by the Civil
Service Commission, is hereby authorized.
Furthermore, the grant of the CNA incentive pursuant to CNAs entered into on or after
the effectivity of PSLMC Resolution No. 4, series of 2002, and PSLMC Resolution No. 2, series of
2003, and in strict compliance therewith, is confirmed.
SECTION 2. Limitation. — The CNA incentive shall be granted only to rank-and-file
employees. The existing CNA incentive shall be rationalized to simplify its administration and to
preclude duplication with incentives granted through the Program on Awards and Incentives for
Service Excellence (PRAISE).
SECTION 3. Cost-Cutting Measures and Systems Improvement. — The management
and the accredited employees' organization shall identify in the CNA the cost-cutting measures and
systems improvement to be jointly undertaken by them so as to achieve effective service delivery
and agency targets at lesser costs. DHITCc
SECTION 4. Savings as Source. — The CNA Incentive shall be sourced only from the
savings generated during the life of the CNA.
SECTION 5. Release of Incentive. — The CNA Incentive may be paid every year that
savings are generated during the life of the CNA.
SECTION 6. Implementation. — The Department of Budget and Management shall
issue the policy and procedural guidelines to implement this Administrative Order.
SECTION 7. Effectivity. — This Administrative Order shall take effect immediately.
DONE in the City of Manila, this 27th day of December in the year of Our Lord, Two
Thousand Five.
Following this, on February 1, 2006, the Department of Budget and Management issued Budget Circular No.
2006-1, which provided the policy and procedural guidelines in the grant and funding of CNA incentive. Under these
guidelines, the incentive shall be paid as a one-time benefit after the end of the year; it shall be sourced solely from
savings from released Maintenance and Other Operating Expenses allotments, subject to conditions; and the amount of
CNA incentive shall not be pre-determined in the CNA. 
Arizala discussed Executive Order No. 180 on the scope of government employees' constitutional right to
self-organization:
However, the concept of the government employees' right to self-organization differs
significantly from that of employees in the private sector. The latter's right of self-
organization, i.e.,"to form, join or assist labor organizations for purposes of collective bargaining,"
admittedly includes the right to deal and negotiate with their respective employers in order to fix
the terms and conditions of employment and also, to engage in concerted activities for the
attainment of their objectives, such as strikes, picketing, boycotts. But the right of government
employees to "form, join or assist employees organizations of their own choosing" under Executive
Order No. 180 is not regarded as existing or available for "purposes of collective bargaining," but
simply "for the furtherance and protection of their interests."
In other words, the right of Government employees to deal and negotiate with their
respective employers is not quite as extensive as that of private employees. Excluded from
negotiation by government employees are the "terms and conditions of employment ...that are
fixed by law," it being only those terms and conditions not otherwise fixed by law that "may be
subject of negotiation between the duly recognized employees' organizations and appropriate
government authorities."  (Emphasis supplied)
Laws fixing employment terms and conditions include Republic Act No. 6758, or the Salary Standardization
Law.
In Social Security System v. Commission on Audit, this Court affirmed the Commission on Audit decision
disallowing the payment of P5,000.00 as signing bonus to Social Security System employees pursuant to their CNA.
This Court cited Executive Order No. 180, Republic Act No. 6758, and Philippine Ports Authority v.
Commission on Audit  for its ruling that "no financial or non-financial incentive could be awarded to employees of
government owned and controlled corporations aside from benefits which were being received by incumbent officials
and employees as of 1 July 1989."  This Court discussed:
On the basis of the foregoing pronouncement, we do not find the signing bonus to be a
truly reasonable compensation. The gratuity was of course the SSC's gesture of good will and
benevolence for the conclusion of collective negotiations between SSC and ACCESS, as the CNA
would itself state, but for what objective? Agitation and propaganda which are so commonly
practiced in private sector labor-management relations have no place in the bureaucracy and that
only a peaceful collective negotiation which is concluded within a reasonable time must be the
standard for interaction in the public sector. This desired conduct among civil servants should not
come, we must stress, with a price tag which is what the signing bonus appears to be. 
In 2012, this Court decided Manila International Airport Authority  v. Commission on Audit, which also
involved the grant of CNA "contract signing bonus" worth P30,000.00.
The grant was found to be in the nature of a signing bonus, and thus, an illegal disbursement. This Court
noted that "even assuming that the subject benefit is a CNA Incentive, [Manila International Airport Authority]'s non-
compliance with the requirements under PSLMC Resolution No. 2 and DBM Budget Circular No. 2006-1 rendered the
same illegal[.]" 117 This Court then discussed that Budget Circular No. 2006-1 is consistent with and germane to the
purpose of PSLMC Resolution No. 2 and Administrative Order No. 135:
Interestingly, MIAA claimed that the subject benefit is a CNA Incentive but refused to
comply with DBM Budget Circular No. 2006-1, raising the unconstitutionality thereof as the
reason for its non-submission of its COB for the DBM's approval and the release of the benefit
prior to the end of 2003. Allegedly, there is a conflict between DBM Budget Circular No. 2006-1
and A.O. No. 135 as there is nothing in the latter, which requires the COB to be submitted for
DBM's validation and the payment of the CNA Incentive at the end of the year. 
However, the said conflict is more imagined than real. A cursory reading of DBM
Budget Circular No. 2006-1 shows that its provisions are consistent with those of PSLMC
Resolution No. 2 and A.O. No. 135. There is no clear showing that the former secretary of DBM
transcended the demarcations fixed by A.O. No. 135 in the exercise of her rule-making power.
Particularly, the requirement that the COB should be submitted to the President through
the DBM for approval is already a pre-existing requirement under Section 4, PSLMC
Resolution No. 2. Such requirement is likewise consistent with Section 5, Presidential Decree No.
1597 and Memorandum Order No. 20 dated June 25, 2001 mentioned in the 5th and 6th Whereas
Clauses of A.O. No. 135. With respect to the requirement that the CNA Incentive be released after
the end of the year, this does not contravene any provision of A.O. No. 135 and PSLMC
Resolution No. 2. By specifying the time when the CNA Incentive may be released to the rank-
and-file employees, the former DBM Secretary was merely supplying a detail necessary for the
proper implementation of A.O. No. 135. The assailed provisions of DBM Budget Circular No.
2006-1 are germane to the purposes and objectives of  A.O. No. 135  and  PSLMC Resolution No.
2 and not much is required to appreciate its rationale: to ensure that the CNA Incentive will be
paid only if the actual operating income meets or exceeds the target fixed in COB and will be
funded by the savings generated from cost-reducing measures and  no other.Without further
extrapolation, these amounts remain to be mere approximations until the end of the
year.  (Emphasis supplied, citation omitted)
The following guidelines on the basic concept of CNA negotiations take into account the relevant provisions
of the Constitution, statutes, their implementing rules and regulations, as well as jurisprudence on the matter:
a) The right to collective negotiation in the public sector is a constitutionally protected right subject to the
conditions stated in the Constitution and as may be provided supplementarily by law;
b) All CNAs negotiated must be consistent with law and implementing regulations;
c) The flexibilities of government agencies are limited by law. Wage benefits are subject to the Salary
Standardization Law. Non-wage benefits are subject to regulations issued by the Civil Service
Commission;
 d) The grant of wage benefits is also subject to the constitutional and statutory authorizations for the use of PSLMC Resolution No. 4 clearly limited the sources of the CNA incentive such that "only savings generated
appropriations and savings; after the signing of the CNA may be used" for it.  The Resolution defined "savings" as "such balances of the agency's
released allotment for the year, free from any obligation or encumbrance and which are no longer intended for specific
e) Unlike in the private sector, negotiations in the public sector must always consider the public interest and purpose/s[.]"  It even provided for its apportionment as follows:
take the governmental role of the agency or office into primordial concern;
Section 5. Total Savings, as defined in Section 3 and net of the priorities in Section 4,
f) All employees are public officers and are thus subject to public trust and statutory limitations on matters generated after the signing of the CNA shall be apportioned, as follows:
including their conduct;
Fifty percent (50%) for CNA Incentive.
g) Incumbent heads of offices are temporary; and
Thirty percent (30%) for improvement of working conditions and other programs and/or
h) Members of Congress, representing their constituents, including union members, can change the law. to be added as part of the CNA Incentive, as may be agreed upon in the CNA.
III Twenty percent (20%) to be reverted to the General Fund for the national government
Here, petitioners assail Budget Circular No. 2011-5 for constituting legislation.  They say that respondent agencies or to the General Fund of the constitutional commissions, state universities and colleges,
Secretary Abad has no power to "issue guidelines, to disallow [or] set limit or conditions in the grant of [CNA and local government units concerned, as the case may be. 
incentives]."  PSLMC Resolution No. 4 also provides that CNA incentives "can be paid every year that savings are
Petitioners submit that Sections 3.2,  3.3,  and 3.4  of the Circular are unconstitutional for limiting the sources generated during the life of the CNA."  If the grant of CNA Incentive is disallowed, "the management shall be held
of the CNA incentive. This, they contend, makes the Circular contrary to and effectively amending Section 4 personally responsible for the payment thereof." 
of Administrative Order No. 135, which neither limits the source of the savings nor fixes a maximum amount of CNA Thus, Section 3.2 of Budget Circular No. 2011-5 — which limits the sources of CNA incentives "solely from
incentive.  agency savings from released Maintenance and Other Operating Expenses (MOOE) allotments for the year under
Respondent Secretary Abad counters that the Circular is valid and consistent with laws and jurisprudence.  review, limited to the MOOE Items in 3.3 hereof, still valid for obligation during the same year, subject to the following
conditions"  — is consistent with PSLMC Resolution No. 4.
He cites provisions of Presidential Decree No. 985, the Administrative Code, and Republic Act No. 6758 in
support of the argument that the Department of Budget and Management "has the sole power and discretion to Incidentally, Budget Circular No. 2006-1 is also consistent with PSLMC Resolution No. 4. It limited the
administer the Compensation and Position Classification System of the National Government, which includes sources of CNA incentives such that the amount "[s]hall not be pre-determined in the CNAs or in the supplements
the rules on the grant of CNA incentive."  Administrative Order No. 135 also specifically authorizes the Department to thereto since it is dependent on savings generated from cost-cutting measures and systems improvement, and also from
issue the policy and procedural guidelines on the grant of CNA incentives.  improvement of productivity and income in [government-owned and controlled corporations] and [government financial
institutions.]"  It also provided that CNA incentives "[m]ay vary every year during the term of the CNA, at rates
Respondent Secretary Abad adds that the Circular is consistent with the policy and principles depending on the savings generated after the signing and ratification of the CNA[.]"  It even included the
of Administrative Order No. 135, quoting this Court's ruling in Manila International Airport Authority. The P25,000.00 apportionments of savings in Section 5 of PSLMC Resolution No. 4. 
cap, he says, "ensure[s] that the planned targets, programs and projects are not hampered by the observed perverse
tendency of agencies of scrimping on vital expenditures or bloating their budgets just so as to accumulate savings for Notably, the P25,000.00 ceiling amount under Section 3.5 of Budget Circular No. 2011-5 cannot be found
payment of the CNA incentive."  in PSLMC Resolution No. 4. On this score, respondent Secretary Abad cites three laws as basis for the ceiling amount.
Section 17 of Presidential Decree No. 985  states:
For her part, respondent Secretary Soliman argues that the circular's issuance is a lawful exercise of executive
and administrative power.  She quotes Blaquera v. Alcala, which differentiated private from government employees in SECTION 17. Powers and Functions. — The Budget Commission, principally through
that the latter's employment terms and conditions are "effected through statutes or administrative circulars, rules and the OCPC shall, in addition to those provided under other Sections of this Decree, have the
regulations, not through collective bargaining agreements."  She adds that the Budget Secretary, as the President's alter following powers and functions:
ego, has rule-making powers to issue policies and procedural guidelines to implement Administrative Order No. 135.  a. Administer the compensation and position classification system established
To rule on this issue, we consider the relevant laws and regulations on government employees' right to herein and revise it as necessary; (as amended by Republic Act No. 6758)
organize and negotiate, specifically for CNA incentives. xxx xxx xxx
Executive Order No. 180 created the PSLMC as the body to implement and administer government g. Provide the required criteria and guidelines, in consultation with agency
employees' right to organize. Section 15 provides for its creation, stating that the PSLMC "shall promulgate the heads as may be deemed necessary and subject to the approval of the
necessary rules and regulations to implement this Executive Order."  Commissioner of the Budget, for the grant of all types of allowances and
Former President Aquino issued Executive Order No. 180 on June 1, 1987, after the 1987 Constitution had additional forms of compensation to employees in all agencies of the
been ratified but before the first Congress convened. Thus, this order is in the nature of a statute.  government;

The Department of Budget and Management recognizes that Administrative Order No. 135, issued in 2005, Meanwhile, Book IV, Title XVII, Chapter 1, Section 3 of the Administrative Code of 1987 provides the
merely "confirmed the grant of the CNA Incentive in strict compliance with the said PSLMC Resolutions[.]"  Department of Budget and Management's powers and functions: 

Pursuant to Section 15 of Executive Order No. 180, PSLMC issued several resolutions including PSLMC SECTION 3. Powers and Functions. — The Department of Budget and Management
Resolution No. 4, series of 2002. shall assist the President in the preparation of a national resources and expenditures budget,
preparation, execution and control of the National Budget, preparation and maintenance of
PSLMC Resolution No. 4 recognized this Court's ruling in Social Security System,which prohibited the grant accounting systems essential to the budgetary process, achievement of more economy and
of signing bonus by stating that, "during the negotiation, the parties may agree on some other kinds and forms of efficiency in the management of government operations, administration of compensation and
incentive to those who have contributed either in productivity or cost savings which are referred herein as CNA position classification systems, assessment of organizational effectiveness and review and
Incentive."  evaluation of legislative proposals having budgetary or organizational implications.
 Section 6 of Administrative Order No. 135, for its part, authorizes the grant of CNA incentives:
SECTION 6. Implementation. — The Department of Budget and Management shall
issue the policy and procedural guidelines to implement this Administrative Order.
Following the mandate of Administrative Order No. 135,  the Department of Budget and Management issued
Budget Circular No. 2006-1, Circular Letter No. 2011-9, and the assailed Budget Circular No. 2011-5.
Respondent Secretary Abad adds that a CNA incentive ceiling is consistent with Administrative Order No.
135 by guarding against tendencies to manipulate the budget to accumulate savings:
Indeed, a delegated authority to issue guidelines must not go beyond the limits of the
authority given. In all the issuances i.e., the pertinent PSLMC issuances and AO No. 135, the
driving force in the grant of the CNA Incentive is the recognition of the joint efforts of labor and
management to achieve all planned targets, programs and services approved in the budget of the
agency at a lesser cost. Consistent therewith, the provisions of Budget Circular No. 2011-5 were
crafted along this policy consideration, thus, the need to put a cap on the grant of CNA Incentive,
as with other forms of compensation and benefits.
To elucidate, the necessary and logical consequence of implementing this policy of
efficiency is to provide limitations such as the identification of specific MOOE items and the
P25,000 cap per entitled employee. Moreover, the funding source for the CNA Incentive is the
savings generated from cost-efficiency measures adopted by the labor and management. Unlike
basic salary which is provided in the national budget, the payment of CNA Incentive is dependent
on the amount of allowable agency savings. If there are no  limits, both as to the savings that may
be utilized as well as to the amount of incentive to be granted, public funds originally intended for
programs and projects which for one reason or the other was not implemented, would be fully
spent as payment of incentive without said funds being the byproduct of efficiency in agency
operations, the very heart and soul in the grant of CNA Incentive.Hence, the need for DBM to be
circumspect and reflect these policy considerations through the guidelines.
xxx xxx xxx
On the other hand, the provision of the P25,000 cap per employee is to ensure that the
planned targets, programs and projects are not hampered by the observed perverse tendency of
agencies of scrimping on vital expenditures or bloating their budgets just so as to accumulate
savings for payment of the CNA Incentive.These factors — scrimping on vital expenditures or
bloating of budgets — if present run counter to the policy behind the grant of CNA
Incentive i.e.,recognizing the efforts of efficient use of government resources by labor and
management of the different government agencies.  (Emphasis supplied)
This Court agrees. The P25,000.00 CNA incentive ceiling in Budget Circular No. 2011-5 is in consonance
with law and existing rules.
Indeed, Executive Order No. 180 vested PSLMC with the power to promulgate rules to implement it. This,
however, did not deprive the Department of Budget and Management of its power to issue rules on compensation as a
result of collective negotiations between government employees' organizations and their employers.
As the governmental body that administers the national government's compensation and position
classification system,  the Department of Budget and Management controls the payment of compensation to all
appointive and elective positions in government, including government-owned or controlled corporations and
government financial institutions.  In Commission on Human Rights Employees Association v. Commission on Human
Rights:
This power to "administer" is not purely ministerial in character as erroneously held by
the Court of Appeals. The word to administer means to control or regulate in behalf of others; to
direct or superintend the execution, application or conduct of; and to manage or conduct public
affairs, as to administer the government of the state.
The regulatory power of the DBM on matters of compensation is encrypted not only in
law, but in jurisprudence as well. In the recent case of Philippine Retirement Authority (PRA) v.
Jesusito L. Buñag,this Court, speaking through Mr. Justice Reynato Puno, ruled that compensation,
allowances, and other benefits received by PRA officials and employees without the requisite
approval or authority of the DBM are unauthorized and irregular. In the words of the Court —
Despite the power granted to the Board of Directors of PRA to
establish and fix a compensation and benefits scheme for its employees, the
same is subject to the review of the Department of Budget and Management.
However, in view of the express powers granted to PRA under its charter, the
extent of the review authority of the Department of Budget and Management
is limited. As stated in Intia, the task of the Department of Budget and
Management is simply to review the compensation and benefits plan of the
government agency or entity concerned and determine if the same complies
with the prescribed policies and guidelines issued in this regard. The role of
the Department of Budget and Management is supervisorial in nature, its
main duty being to ascertain that the proposed compensation, benefits and
other incentives to be given to PRA officials and employees adhere to the
policies and guidelines issued in accordance with applicable laws.
In Victorina Cruz v. Court of Appeals,we held that the DBM has the sole power and
discretion to administer the compensation and position classification system of the national
government. AHDacC
In Intia, Jr. v. Commission on Audit, the Court held that although the charter of the
Philippine Postal Corporation (PPC) grants it the power to fix the compensation and benefits of its
employees and exempts PPC from the coverage of the rules and regulations of the Compensation
and Position Classification Office, by virtue of Section 6 of P.D. No. 1597, the compensation
system established by the PPC is, nonetheless, subject to the review of the DBM. This Court
intoned:
It should be emphasized that the review by the DBM of any PPC
resolution affecting the compensation structure of its personnel should not be
interpreted to mean that the DBM can dictate upon the PPC Board of
Directors and deprive the latter of its discretion on the matter. Rather, the
DBM's function is merely to ensure that the action taken by the Board of
Directors complies with the requirements of the law, specifically, that PPC's
compensation system "conforms as closely as possible with that provided for
under R.A. No. 6758."  (Citations omitted)
Administrative Order No. 135 authorizes the grant of CNA incentives to "national government agencies
(NGAs), local government units (LGUs), state universities and colleges (SUCs), government-owned or controlled
corporations (GOCCs), and government financial institutions (GFIs), if provided in their respective CNAs and
supplements thereto executed between the management and employees' organization accredited by the Civil Service
Commission[.]"  Its Section 6 grants the power to issue the policy and procedural guidelines to the Department of
Budget and Management:
SECTION 6. Implementation. — The Department of Budget and Management shall
issue the policy and procedural guidelines to implement this Administrative Order.
In this regard, as pointed out by Associate Justice Estela Perlas-Bernabe in her Separate Concurring Opinion,
government appropriations acts have over the years included provisions that limited approved CNA incentives to
reasonable rates as determined by the Department of Budget and Management. 
Republic Act No. 10155, or the General Appropriations Act of 2012, states:
SECTION 56. Rules in the Realignment of Funds. — Realignment of funds from one
allotment class to another shall require prior approval of the DBM.
Departments, agencies and offices are authorized to augment any item of expenditure
within Personal Services and MOOE except confidential and intelligence funds which require prior
approval of the President of the Philippines. However, realignment of funds among objects of
expenditures within Capital Outlays shall require prior approval of the DBM.
 Notwithstanding the foregoing, realignment of any savings for the payment of magna
carta benefits authorized under Section 41 hereof shall require prior approval of the DBM.
Moreover, the use of savings for the payment of Collective Negotiation Agreement (CNA)
incentives by agencies with approved and successfully implemented CNAs pursuant to DBM
Budget Circular No. 2006-1 dated February 1, 2006 shall be limited to such reasonable rates as
may be determined by the DBM.
Republic Act No. 10352, or the General Appropriations Act of 2013, states:
SECTION 55. Rules in the Realignment of Savings for the Payment of Collective
Negotiation Agreement Incentives. — Savings from allowable MOOE allotments generated out of
cost-cutting measures identified in the Collective Negotiation Agreements (CNAs) and
supplements thereto may be used for the grant of CNA incentive by agencies with duly executed
CNAs: PROVIDED, That the one-time annual payment of CNA incentives must be made through
a written resolution signed by representatives of both labor and management, and approved by the
agency head: PROVIDED, FURTHER, That the funding sources and amount of CNA incentives
shall, in all cases, be limited to the allowable MOOE allotments and rates determined by the DBM,
respectively.
Implementation of this provision shall be governed by DBM Budget Circular Nos. 2006-
1 and 2011-5 and such other issuances that may be issued by the DBM for the purpose.
Republic Act No. 10633, or the General Appropriations Act for 2014, states:
SECTION 71. Rules in the Realignment of Savings for the Payment of Collective
Negotiation Agreement Incentives. — Savings from allowable MOOE allotments, generated out of
cost-cutting measures undertaken by the agencies of the government and their respective
personnel, which are identified in their respective Collective Negotiation Agreements (CNAs) and
supplements thereto may be used for the grant of CNA Incentives by agencies with duly executed
CNAs: PROVIDED, That the one-time annual payment of CNA Incentive shall be made through a
written resolution signed by agency representatives from both labor and management, and
approved by the agency head: PROVIDED, FURTHER, That the funding sources and amount of
CNA Incentive shall in all cases be limited to the allowable MOOE allotments and rates
determined by the DBM, respectively: PROVIDED, FINALLY, That the realignment of savings
from the allowable MOOE allotments shall be subject to approval by the DBM. HCaDIS
Implementation of this provision shall be subject to guidelines issued by the DBM.
Clearly, in imposing a P25,000.00 budget ceiling for CNA incentives, the Department of Budget and
Management acted within its authority granted by law and existing rules.
IV
The issues raised by the parties opened questions on the validity of Section 15 of Executive Order No. 180,
which created the PSLMC, and the effect of this issue on PSLMC's acts and issuances, such as PSLMC Resolution No.
4, series of 2002.
In their Supplemental Memorandum, respondents discussed that Executive Order No. 180 was issued when
then President Aquino could lawfully exercise legislative powers.  As such, respondents submit that "she may delegate
to the PSLMC the power to fill in the details in the execution, enforcement or administration of Executive Order No.
180, including the power to issue guidelines for the exercise of public sector unionism and to determine the
apportionment of incentives to government employees, as provided in Resolution No. 4 series of
2002."  The Administrative Code  reiterates, under the umbrella of the Civil Service Commission, PSLMC's role in the
exercise of the government employees' right to organize.  Section 1, Article IX-A of the 1987 Constitution expressly describes all the
Respondents contend that the details in PSLMC Resolution No. 4 are "guideposts germane to the objective of
the Constitution, Executive Order No. 180 and the Administrative Code of 1987 to promote and improve the terms and
conditions of employment of government employees, subject only to the limitations that are already fixed by law." 159
Respondents submit that as the government's central personnel agency, the Civil Service Commission's role
"necessarily includes the power to ensure that the statutory provisions relating to the terms and conditions of
employment of civil servants are implemented."  This means that when Executive Order No. 180 designated the Civil
Service Commission Chair as PSLMC Chair, the Civil Service Commission "was simply performing its mandate to
'perform all functions properly belonging to a central personnel agency and such other functions as may be provided by
law.'" 
Moreover, respondents note that Section 15 of Executive Order No. 180 did not subsume the Civil Service
Commission under the executive branch, but even strengthened its independence as a constitutional commission by
empowering its Chair and other PSLMC members to set the guidelines for government employees' right to
organize. Neither did Executive Order No. 180 grant the Commission powers other than those in Article IX-B of
the Constitution, considering the proviso that it "shall perform . . . such other functions as may be provided by law."
Such law includes Section 45 of the Administrative Code.  In other words, respondents argue that the PSLMC issuances
implement and detail the broad policies in the Constitution and laws on the government employees' right to self-
organization. 
This Court reiterates that for a constitutional question to be traversed, the alleged violation "must be so
demonstrably and urgently egregious that it outweighs a reasonable policy of deference in such specific
instance."  Nonetheless, Section 15 of Executive Order No. 180, which designated the Civil Service Commission Chair
as the PSLMC Chair, seemingly conflicts with the prohibitions imposed upon members of constitutional bodies
designed to protect their independence. If such designation is unconstitutional, it puts into serious doubt the legality of
PSLMC's acts.
For this reason, this Court resolves and confirms the validity of the designation of the Chair of the Civil
Service Commission as the Chair of the PSLMC for being consistent with the Constitution.
The Civil Service Commission is an independent  constitutional body governed by Article IX-B of
the Constitution. It is composed of a Chairperson and two Commissioners,  appointed by the President with the consent
of the Commission on Appointments. Section 3 provides its powers and functions:
SECTION 3. The Civil Service Commission, as the central personnel agency of the
Government, shall establish a career service and adopt measures to promote morale, efficiency,
integrity, responsiveness, progressiveness, and courtesy in the civil service. It shall strengthen the
merit and rewards system, integrate all human resources development programs for all levels and
ranks, and institutionalize a management climate conducive to public accountability. It shall submit
to the President and the Congress an annual report on its personnel programs. 
In Funa v. Chairman, Civil Service Commission, this Court held that Article IX-A, Section 2 of
the Constitution must be read in conjunction with Article IX-B, Section 7, paragraph 2: 
The underlying principle for the resolution of the present controversy rests on the correct
application of Section 1 and Section 2, Article IX-A of the 1987 Constitution, which provide:
Section 1. The Constitutional Commissions, which shall be
independent, are the Civil Service Commission, the Commission on
Elections, and the Commission on Audit.
Section 2. No Member of a Constitutional Commission shall,
during his tenure, hold any other office or employment. Neither shall he
engage in the practice of any profession or in the active management or
control of any business which in any way may be affected by the functions of
his office, nor shall he be financially interested, directly or indirectly, in any
contract with, or in any franchise or privilege granted by the Government, any
of its subdivisions, agencies, or instrumentalities, including government-
owned or controlled corporations or their subsidiaries.
Constitutional Commissions as "independent." Although their respective functions are essentially
executive in nature, they are not under the control of the President of the Philippines in the
discharge of such functions. Each of the Constitutional Commissions conducts its own proceedings
under the applicable laws and its own rules and in the exercise of its own discretion. Its decisions,
orders and rulings are subject only to review on certiorari by the Court as provided by Section 7,
Article IX-A of the 1987 Constitution. To safeguard the independence of these Commissions,
the 1987 Constitution, among others, imposes under Section 2, Article IX-A of
 the Constitution certain inhibitions and disqualifications upon the Chairmen and members to
strengthen their integrity, to wit:
(a) Holding any other office or employment during their tenure;
(b) Engaging in the practice of any profession;
(c) Engaging in the active management or control of any business
which in any way may be affected by the functions of his office; and
(d) Being financially interested, directly or indirectly, in any
contract with, or in any franchise or privilege granted by the Government, any
of its subdivisions, agencies or instrumentalities, including government-
owned or -controlled corporations or their subsidiaries.
The issue herein involves the first disqualification abovementioned, which is the
disqualification from holding any other office or employment during Duque's tenure as Chairman
of the CSC. The Court finds it imperative to interpret this disqualification in relation to Section 7,
paragraph (2), Article IX-B of the Constitution and the Court's pronouncement in Civil Liberties
Union v. Executive Secretary.
Section 7, paragraph (2),Article IX-B reads:
Section 7. ...
Unless otherwise allowed by law or the primary functions of his
position, no appointive official shall hold any other office or employment in
the Government or any subdivision, agency or instrumentality thereof,
including government-owned or controlled corporations or their subsidiaries.
In Funa  v. Ermita,where petitioner challenged the concurrent appointment of Elena H.
Bautista as Undersecretary of the Department of Transportation and Communication and as
Officer-in-Charge of the Maritime Industry Authority, the Court reiterated the pronouncement
in Civil Liberties Union v. The Executive Secretary on the intent of the Framers on the foregoing
provision of the 1987 Constitution, to wit:
Thus, while all other appointive officials in the civil service are
allowed to hold other office or employment in the government during their
tenure when such is allowed by law or by the primary functions of their
positions, members of the Cabinet, their deputies and assistants may do so
only when expressly authorized by the Constitution itself. In other words,
Section 7, Article IX-B is meant to lay down the general rule applicable to all
elective and appointive public officials and employees, while Section 13,
Article VII is meant to be the exception applicable only to the President, the
Vice-President, Members of the Cabinet, their deputies and assistants.
xxx xxx xxx
Since the evident purpose of the framers of the 1987 Constitution is
to impose a stricter prohibition on the President, Vice-President, members of
the Cabinet, their deputies and assistants with respect to holding multiple
offices or employment in the government during their tenure, the exception to
this prohibition must be read with equal severity. On its face, the language of
Section 13, Article VII is prohibitory so that it must be understood as
intended to be a positive and unequivocal negation of the privilege of holding
multiple government offices or employment. Verily, wherever the language
used in the constitution is prohibitory, it is to be understood as intended to be
a positive and unequivocal negation. The phrase "unless otherwise provided
in this Constitution" must be given a literal interpretation to refer only to
those particular instances cited in the Constitution itself, to wit: the Vice-
President being appointed as a member of the Cabinet under Section 3, par.
(2), Article VII; or acting as President in those instances provided under
Section 7, pars. (2) and (3), Article VII; and, the Secretary of Justice
being ex-officio member of the Judicial and Bar Council by virtue of Section
8 (1),Article VIII.
Being an appointive public official who does not occupy a Cabinet position (i.e.,
President, the Vice-President, Members of the Cabinet, their deputies and assistants), Duque was
thus covered by the general rule enunciated under Section 7, paragraph (2), Article IX-B. He can
hold any other office or employment in the Government during his tenure if such holding is
allowed by law or by the primary functions of his position.  (Citations omitted) DACcIH
Read together, the two constitutional provisions mean that the appointment of a member of a constitutional
commission to any governing body must depend on the functions of the government entity on which that member sits.
For the Civil Service Commission Chair, it must involve the career development, employment status, rights, privileges,
and welfare of government officials and employees. Funa elaborates:
Section 3, Article IX-B of the 1987 Constitution describes the CSC as the central
personnel agency of the government and is principally mandated to establish a career service and
adopt measures to promote morale, efficiency, integrity, responsiveness, progressiveness, and
courtesy in the civil service; to strengthen the merit and rewards system; to integrate all human
resources development programs for all levels and ranks; and to institutionalize a management
climate conducive to public accountability. Its specific powers and functions are as follows:
(1) Administer and enforce the constitutional and statutory
provisions on the merit system for all levels and ranks in the Civil Service;
(2) Prescribe, amend and enforce rules and regulations for carrying
into effect the provisions of the Civil Service Law and other pertinent laws;
(3) Promulgate policies, standards and guidelines for the Civil
Service and adopt plans and programs to promote economical, efficient and
effective personnel administration in the government;
(4) Formulate policies and regulations for the administration,
maintenance and implementation of position classification and compensation
and set standards for the establishment, allocation and reallocation of pay
scales, classes and positions;
(5) Render opinion and rulings on all personnel and other Civil
Service matters which shall be binding on all heads of departments, offices
and agencies and which may be brought to the Supreme Court on certiorari;
(6) Appoint and discipline its officials and employees in
accordance with law and exercise control and supervision over the activities
of the Commission;
(7) Control, supervise and coordinate Civil Service examinations.
Any entity or official in government may be called upon by the Commission
to assist in the preparation and conduct of said examinations including
security, use of buildings and facilities as well as personnel and transportation
of examination materials which shall be exempt from inspection regulations;
(8) Prescribe all forms for Civil Service examinations,
appointments, reports and such other forms as may be required by
law, rules and regulations;
(9) Declare positions in the Civil Service as may properly be
primarily confidential, highly technical or policy determining;
(10) Formulate, administer and evaluate programs relative to the
development and retention of qualified and competent work force in the
public service;
 (11) Hear and decide administrative cases instituted by or brought
before it directly or on appeal, including contested appointments, and review
decisions and actions of its offices and of the agencies attached to it. Officials
and employees who fail to comply with such decisions, orders, or rulings
shall be liable for contempt of the Commission. Its decisions, orders, or
rulings shall be final and executory. Such decisions, orders, or rulings may be
brought to the Supreme Court on certiorari by the aggrieved party within
thirty (30) days from receipt of a copy thereof;
(12) Issue subpoena and subpoena duces tecum for the production
of documents and records pertinent to investigation and inquiries conducted
by it in accordance with its authority conferred by the Constitution and
pertinent laws;
(13) Advise the President on all matters involving personnel
management in the government service and submit to the President an annual
report on the personnel programs;
(14) Take appropriate action on all appointments and other
personnel matters in the Civil Service including extension of Service beyond
retirement age;
(15) Inspect and audit the personnel actions and programs of the
departments, agencies, bureaus, offices, local government units and other
instrumentalities of the government including government-owned or
controlled corporations; conduct periodic review of the decisions and actions
of offices or officials to whom authority has been delegated by the
Commission as well as the conduct of the officials and the employees in these
offices and apply appropriate sanctions when necessary;
(16) Delegate authority for the performance of any functions to
departments, agencies and offices where such functions may be effectively
performed;
(17) Administer the retirement program for government officials
and employees, and accredit government services and evaluate qualifications
for retirement;
(18) Keep and maintain personnel records of all officials and
employees in the Civil Service; and
(19) Perform all functions properly belonging to a central personnel
agency and such other functions as may be provided by law.
On the other hand, enumerated below are the specific duties and responsibilities of the
CSC Chairman, namely:
(1) Direct all operations of the Commission;
(2) Establish procedures for the effective operations of the
Commission;
(3) Transmit to the President rules and regulations, and other
guidelines adopted by the Chairman which require Presidential attention
including annual and other periodic reports;
(4) Issue appointments to, and enforce decisions on administrative
discipline involving officials and employees of the Commission;
(5) Delegate authority for the performance of any function to
officials and employees of the Commission;
(6) Approve and submit the annual supplemental budget of the
Commission; and
(7) Perform such other functions as may be provided by law.
Section 14, Chapter 3, Title I-A, Book V of EO 292 is clear that the CSC Chairman's
membership in a governing body is dependent on the condition that the functions of the
government entity where he will sit as its Board member must affect the career development,
employment status, rights, privileges, and welfare of government officials and employees. Based
on this, the Court finds no irregularity in Section 14, Chapter 3, Title I-A, Book V of EO
292 because matters affecting the career development, rights and welfare of government
employees are among the primary functions of the CSC and are consequently exercised through its
Chairman. The CSC Chairman's membership therein must, therefore, be considered to be derived
from his position as such. Accordingly, the constitutionality of Section 14, Chapter 3, Title I-A,
Book V of EO 292 is upheld.  (Citations omitted)
Executive Order No. 180, which creates the PSLMC, and is reiterated in Book V, Title I, Chapter 6, Section
45 of the Administrative Code of 1987, is a law within the contemplation of the phrase "otherwise allowed by law or the
primary functions of his position" in Article IX-B, Section 7, paragraph 2 of the Constitution. Book V, Title I-A,
Chapter 3, Section 14 of the Administrative Code of 1987, as upheld in Funa,states that the Civil Service Commission
Chair may be appointed to "governing bodies of government entities whose functions affect the career development,
employment status, rights, privileges, and welfare of government officials and employees, ...and such other similar
boards as may be created by law."
Section 15 of Executive Order No. 180 envisioned a coordination body, considering its composition of Civil
Service Commission Chair, along with the Secretaries of the Department of Labor and Employment, Department of
Finance, Department of Justice, and Department of Budget and Management.  Coordination between a constitutional
commission and departments of the executive branch, so long as the coordination is not controlled by the executive
branch, is not proscribed. With the Civil Service Commission Chair as PSLMC Chair, the PSLMC is not subordinated
to the executive branch, and the independence of the Civil Service Commission is not undermined.
Moreover, the work of the PSLMC, through guidelines and other resolutions that implement Executive
Order No. 180, enhances the protection of government employees' right to self-organize. Its mandate is well within the
Civil Service Commission's primary functions, which encompass "the career development, employment status, rights,
privileges, and welfare of government officials and employees" 174 as contemplated in Funa. Since these primary
functions are exercised through the Civil Service Commission Chair, the designation as PSLMC Chair, to oversee the
implementation of Executive Order No. 180, does not violate Article IX-A, Section 2 in relation to Article IX-B,
Section 7 of the Constitution.
V
This case also raised the question of whether Section 5 of PSLMC Resolution No. 4 violated Article VI,
Section 25 (5) of the Constitution, which proscribes the transfer of appropriations. Respondents claim: 
The apportionment of government savings is not included in said proscription
because this money has not been "realigned" from its intended use, as envisioned under Article VI,
Section 25 (5) of the  1987 Constitution, but had already been set apart from the public treasury by
Congress as unutilized funds, through the General Appropriations Act (GAA). To be
sure, Republic Act No. 10352 or the General Appropriations Act of 2012 allows the utilization of
savings, including payment of CNA incentives, subject only to compliance with certain conditions.
The pertinent provisions of Republic Act No. 10352 states:
xxx xxx xxx
Considering that the savings is a particular fund that was already set apart from the
public treasury as unutilized funds, the President, in the performance of the mandate to faithfully
execute the laws, had sufficient discretion to fill in the details as regards its execution, enforcement
or administration. Specifically, in issuing Executive Order No. 180 authorizing the PSLMC the
power to determine where savings should be allocated (which is now under Administrative Code of
1987), the President was not just exercising legislative power but her executive power to ensure
that the laws are faithfully executed. This power necessarily includes the power to administer laws,
which means carrying them into practical operation and enforcing their due observance. It is a
power borne by the President's duty to preserve and defend the Constitution and execute the laws.
Stated otherwise, under the Faithful Execution Clause, the President has the power to take
 "necessary and proper steps" to carry into execution the law. Truly, once the appropriations bill is
signed into law, its implementation becomes the exclusive function of the President.  (Emphasis
supplied, citations omitted)
Article VI, Section 25 (5) of the Constitution reads:
(5) No law shall be passed authorizing any transfer of appropriations; however, the President, the
President of the Senate, the Speaker of the House of Representatives, the Chief Justice of the
Supreme Court, and the heads of Constitutional Commissions may, by law, be authorized to
augment any item in the general appropriations law for their respective offices from savings in
other items of their respective appropriations. (Emphasis supplied)
The proviso that the enumerated persons "may, by law, be authorized to augment" means that their discretion
to augment appropriations may be limited by law. Thus, Section 55 of the General Appropriations Act of 2012, on the
"Rules in the Realignment of Savings for the Payment of Collective Negotiation Agreement Incentives," validly limits
the President's discretion:
SECTION 53. Meaning of Savings and Augmentation. — Savings refer to portions or
balances of any programmed appropriation in this Act free from any obligation or encumbrance
which are: (i) still available after the completion or final discontinuance or abandonment of the
work, activity or purpose for which the appropriation is authorized; (ii) from appropriation
balances arising from unpaid compensation and related costs pertaining to vacant positions and
leaves of absence without pay; and (iii) from appropriation balances realized from the
implementation of measures resulting in improved systems and efficiencies and thus enabled
agencies to meet and deliver the required or planned targets, programs and services approved in
this Act at a lesser cost.
Augmentation implies the existence in this Act of a program, activity, or project with an
appropriation, which upon implementation or subsequent evaluation of needed resources, is
determined to be deficient. In no case shall a non-existent program, activity, or project, be funded
by augmentation from savings or by the use of appropriations otherwise authorized in this Act.
SECTION 54. Rules  in the Realignment of Savings.— Realignment of Savings from one
allotment class to another shall require prior approval of the DBM.
Departments, bureaus and offices, including SUCs, are authorized to augment any item
of expenditure within Personal Services and MOOE, except intelligence funds which require prior
approval from the President of the Philippines. However, realignment of savings among objects of
expenditures within Capital Outlays shall require prior approval of the DBM.
Notwithstanding the foregoing, realignment of any savings for the payment of magna
carta benefits authorized under Section 41 hereof shall require prior approval of the DBM.
SECTION 55. Rules  in the Realignment of Savings for the Payment of Collective
Negotiation Agreement Incentives.— Savings from allowable MOOE allotments generated out of
cost-cutting measures identified in the Collective Negotiation Agreements (CNAs) and
supplements thereto may be used for the grant of CNA incentive by agencies with duly executed
CNAs: PROVIDED, That the one-time annual payment  of CNA incentives must be made through
a written resolution signed by representatives of both labor and management, and approved by the
agency head: PROVIDED, FURTHER, That the funding sources and amount of CNA incentives
shall, in all cases, be limited to the allowable MOOE allotments and rates determined by the
DBM,respectively.
Implementation of this provision shall be governed by DBM Budget Circular  Nos.
2006-1 and 2011-5 and such other issuances that may be issued by the DBM for the
purpose. (Emphasis supplied)
However, those with political functions, such as the President, should be distinguished from those with fiscal
autonomy  and governed by separate constitutional provisions.
Article VI, Section 25 (5) must be interpreted in light of the provisions for those that enjoy fiscal autonomy.
Article VIII, Section 3 of the Constitution, for example, provides for the Judiciary's fiscal autonomy in that its
appropriations "may not be reduced by the legislature below the amount appropriated for the previous year and, after
approval, shall be automatically and regularly released."  This provision is unique to the Judiciary, and creates a
different scenario for its budget and any consequent savings.
VI
Petitioners argue that Budget Circular No. 2011-5 modifies and altogether nullifies specific provisions of
validly executed CNAs in violation of the constitutional provision on non-impairment of obligations.  They discuss that
the Constitution guarantees the right of government employees to collective bargaining and negotiation, and that these
government employees have vested rights in validly consummated CNAs. 
Respondents counter that no vested rights to CNA incentives exist. For respondent Secretary Abad, these
incentives depend on several conditions such as the generation of savings,  and are different from collective bargaining
agreements in that government employees have no right to bargain collectively.  Respondent Secretary Soliman submits
that a CNA grant "is not a contract within the purview of the non-impairment clause"; instead, it depends on compliance
with budget policies and guidelines. 
This Court rules that petitioners have no vested rights to CNA incentives. Nonetheless, under the
circumstances of this case, the order to return the excess P5,000.00 received by the affected employees was erroneous.
As early as 1928, Balboa v. Farrales  defined "vested right" as "some right or interest in property which has
become fixed and established and is no longer open to doubt or controversy."
In 1956, Benguet Consolidated Mining Company v. Pineda  discussed that "[t]he right must be absolute,
complete, and unconditional, independent of a contingency, and a mere expectancy of future benefit, or a contingent
interest in property founded on anticipated continuance of existing laws, does not constitute a vested right." 
Several factors may be considered in determining when rights "vest." We consider the source of the right —
the Constitution, a statute, or a regulation. The right must have a legal basis. The nature of the prestation must also be
examined. The right must be absolute; otherwise, conditional rights vest once compliance with all conditions is shown.
The prestation should also be clear; it cannot be broad, or subject to further implementation or clarification. As to the
effect of the right, public good outweighs private interest. In any event, laws generally only create expectations.
The concept of "vested right" has been used in cases on employee benefits. In Boncodin v. NAPOCOR
Employees Consolidated Union which involved salary step increments, this Court discussed:
A vested right is one that is absolute, complete and unconditional; to its
exercise, no obstacle exists; and it is immediate and perfect in itself and not dependent upon any
contingency. To be vested, a right must have become a title — legal or equitable — to the present
of future enjoyment of property.  (Citations omitted)
Labor cases have held that "where there is an established employer practice of regularly, knowingly and
voluntarily granting benefits to employees over a significant period of time, despite the lack of a legal or contractual
obligation on the part of the employer to do so, the grant of such benefits ripens into a vested right of the employees and
can no longer be unilaterally reduced or withdrawn by the employer." 
Government Service Insurance System v. Montesclaro  discussed:
In a pension plan where employee participation is mandatory, the prevailing view is that
employees have contractual or vested rights in the pension where the pension is part of the terms of
employment. ...
Thus, where the employee retires and meets the eligibility requirements, he acquires a
vested right to benefits that is protected by the due process clause. 
Employees in the private sector have the right to self-organize for purposes of collective bargaining, among
others.  The Labor Code governs collective bargaining for private employees. Collective bargaining agreements include
grants of employee benefits
Employees in the public sector also have the right to self-organize.  Executive Order No. 180 governs their
right to organize "for the furtherance and protection of their interests."  However, collective negotiation agreements
include employment terms and conditions not fixed by law:
 SECTION 13. Terms and conditions of employment or improvements thereof, except
those that are fixed by law,may be the subject of negotiations between duly recognized employees'
organizations and appropriate government authorities. (Emphasis supplied)
Thus, it is "the legislative and — when properly given delegated power — the administrative heads of
government that fix the terms and conditions of employment through statutes or administrative circulars, rules and
regulations." Also, "the process of collective negotiations in the public sector does not encompass terms and conditions
of employment requiring the appropriation of public funds."  home pay to an amount lower than Three Thousand Pesos (P3,000),after all authorized deductions:
Petitioners now invoke their CNA, raising the non-impairment clause under the Constitution.  pay to less than Three Thousand Pesos (P3,000),authorized deductions under item (a) shall enjoy
As contracts create the law between the parties,  they produce binding juridical rights and obligations. The
power of private individuals to enter into contracts is protected by their autonomy implicit in the constitutional
guarantee of due process,  among others, but subject to reasonable limitations by valid law.
This case involves the CNA incentive. CNA incentive is not compensation since Congress passed Republic
Act No. 6758.  It is not a signing bonus, since Social Security System v. Commission on Audit  disallowed the grant of
signing bonuses for government employees. It is not an award for service excellence since Civil Service Commission
Memorandum No. 01, series of 2001, established the Program on Awards and Incentives for Service Excellence
(PRAISE).
PSLMC Resolution No. 4 provides that "CNA Incentive is linked with agency performance and
productivity,"  "intended to be charged against free unencumbered savings of the agency, which are no longer intended
for any specific purpose."  It is an incentive to produce efficiently by meeting targets and generating savings.
Thus, a CNA incentive is not per se vested. Its grant is conditioned on the applicable laws, rules and
regulations that govern it, including the assailed Budget Circular No. 2011-5 insofar as its provisions are consistent with
PSLMC resolutions implementing Executive Order No. 180. For one, PSLMC Resolution No. 4 requires the existence
of "savings generated after the signing of the CNA."  Savings also depend on constitutional prerogatives.
However, we agree with petitioners' position against the retroactive application of Budget Circular No. 2011-
5 to CNA incentives already released to the employees.  Traditional classifications distinguish between governmental functions and proprietary functions.  The
While the Department of Budget and Management can generally impose conditions for the grant of CNA
incentives, in this case, the conditions were imposed after the benefits had already been released and received by the
employees. The Department had not put in place a ceiling on CNA incentives when the P30,000.00 CNA incentive —
the total amount from the October 26, 2011 and December 3, 2011 memoranda issued by respondent Secretary Soliman
— was granted. Budget Circular No. 2011-5, which contains the P25,000.00 ceiling, was issued only on December 26,
2011 and published only on February 25, 2012.  Thus, the benefits had already been vested in the employees' behalf.
Likewise, we confirm petitioners' argument that the January 20, 2012 Memorandum directing the refund of
CNA incentives paid violated Section 43 of the General Appropriations Act of 2011.  positions such as faculty members have different interests and opportunities from those holding non-academic positions.
Section 43 enumerates the authorized deductions from employees' salaries as follows:
SECTION 43. Authorized Deductions. — Deductions from salaries, emoluments or
other benefits accruing to any government employee chargeable against the appropriations for
Personal Services may be allowed for the payment of individual employee's contributions or
obligations due the following:
(a) The BIR, GSIS, HDMF and PHILHEALTH;
(b) Mutual benefits associations, thrift banks and non-stock savings and loan
associations duly operating under existing laws which are managed by and/or
for the benefit of government employees;
(c) Associations/cooperatives/provident funds organized and managed by
government employees for their benefit and welfare;
(d) Duly licensed insurance companies accredited by national government
agencies; and
(e) Organizations or companies such as banks, non-bank financial institutions,
financing companies and other similar entities that have authority to engage in
lending and mutual benefits or mutual aid system as stated in their
respective constitutions and by-laws approved by government regulating
bodies such as the Securities and Exchange Commission (SEC), Insurance
Commission (IC), Bangko Sentral ng Pilipinas (BSP) and Cooperative
Development Authority (CDA).
PROVIDED, That such deductions shall not reduce the employee's monthly net take
PROVIDED, FURTHER, That in the event total authorized deductions shall reduce net take home
first preference, those under item (b) shall enjoy second preference, and so forth.
As petitioners had argued, the list of allowable salary deductions in the General Appropriations Act does not
include excess CNA incentives. We also note that the Memorandum should not have been authorized only by the
Assistant Secretary, but must also bear the signature of approval and conforme of respondent Secretary Soliman.
Thus, the January 20, 2012 Memorandum, which required employees of the Department of Social Welfare
and Development to refund the P5,000.00 excess through deductions from their salaries, is void.
VII
Unlike private sector employees whose employment terms and conditions are governed by collective
bargaining agreements entered by labor federations through collective bargaining,  the employment terms and
conditions of public sector employees are fixed through statutes, rules and regulations.  The right of government
employees to organize is only "for the furtherance and protection of their interests." 
It is true that Republic Act No. 6758, or the Salary Standardization Law, applies to "all positions, appointive
or elective, on full or part-time basis, now existing or hereafter created in the government, including government-owned
or controlled corporations and government financial institutions."  Nevertheless, not all government employees are
similarly situated or share the same interest.
Philippine Charity Sweepstakes Office, for example, can engage in profit-oriented activities as "the principal
government agency for raising and providing for funds for health programs, medical assistance and services, and
charities of national character[.]"  Government-owned and controlled corporations perform both governmental and
proprietary functions.  Developments in modern society later rendered such distinctions outdated. 
Even within a government body, its employees are not necessarily similarly situated. The University of the
Philippines Charter grants its Board of Regents the power "to receive and appropriate all sums as may be provided by
law for the support of the national university to the ends specified by law, and all other sums in the manner it may, in its
discretion, determine to carry out the purposes and functions of the national university[.]" 220Those holding academic
There are also those that enjoy fiscal autonomy, such as the constitutional commissions. 
Perhaps, lobbying before Congress and the proper authorities for more benefits, such as compensation
increase, may be the better course for those in the public sector.  For other labor matters not fixed by law, government
employees can course their concerns through their labor organization with members sharing similar interests.
WHEREFORE,the Petition is PARTIALLY GRANTED.The January 20, 2012 Memorandum requiring
employees of the Department of Social Welfare and Development to refund the P5,000.00 excess through deductions
from their salaries is VOID.
 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.

8. Wage Fixing; Arts. 218 (b); 278 (g)

ART. 218. [211] Declaration of Policy. – A. It is the policy of the State:

B. To encourage a truly democratic method of regulating the relations between the employers and employees by
means of agreements freely entered into through collective bargaining, no court or administrative agency or official shall
have the power to set or fix wages, rates of pay, hours of work or other terms and conditions of employment, except as
otherwise provided under this Code.

ART. 278. [263] Strikes, Picketing, and Lockouts.

(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.

9. Labor Injunction; Arts. 266; 225(e); 281
ART. 266. [254] Injunction Prohibited.– No temporary or permanent injunction or restraining order in any
case involving or growing out of labor disputes shall be issued by any court or other entity, except as otherwise provided in
Articles 218 and 264 of this Code.
ART. 225. [218] Powers of the Commission. – The Commission shall have the power and authority:
(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.
ART. 281. [266] Requirement for Arrest and Detention. – Except on grounds of national security and public peace or in case
of commission of a crime, no union members or union organizers may be arrested or detained for union activities without
previous consultations with the Secretary of Labor.
G.R. Nos. L-30632-33 April 11, 1972
CALTEX FILIPINO MANAGERS AND SUPERVISORS ASSOCIATION petitioner, vs. COURT OF INDUSTRIAL
RELATIONS, CALTEX (PHILIPPINES), INC., W.E. MENEFEE and B.F. EDWARDS, respondents.
VILLAMOR, J.:p
This is an appeal by the Caltex Filipino Managers and Supervisors' Association from the resolution en banc dated May 16,
1969 of the Court of Industrial Relations affirming the decision dated February 26, 1969 of Associate Judge Emiliano C.
Tabigne, Associate Judge Ansberto P. Paredes dissented from the resolution of the majority on the ground that the Industrial
Court in a representation case cannot take cognizance of the issue of illegality of a strike and proceed to declare the loss of
the employee status of employees inasmuch as that matter ought to be processed as an unfair labor practice case. Judge
Tabigne's decision covers two cases, namely, Case No. 1484-MC (1) in which he declared the strike staged on April 22, 1965
by the Association as illegal with the consequent forfeiture of the employee status of three employees (Jose J. Mapa,
President of the Association; Dominador Mangalino, Vice-President and Herminigildo Mandanas) and Case No. 4344-ULP
against Caltex (Philippines), Inc., Ben F. Edwards W.E. Menefee which Judge Tabigne dismissed for lack of merit and
substantial evidence.
The following proceedings gave rise to the present appeal:
The Caltex Filipino Managers and Supervisors' Association is a labor organization of Filipino managers supervisors in Caltex
(Philippines), Inc., respondent Company in this proceeding. After the Association was registered as a labor organization it
sent a letter to the Company on January 21, 1965 informing the latter of the former's registration; the Company replied
inquiring on the position titles of the employees which the Association sought to represent. On February 8, 1965 the
Association sent a set of proposals to the Company wherein one of the demands was the recognition of the Association as the
duly authorized bargaining agency for managers and supervisors in the Company. To this the Company countered stating that
a distinction exists between representatives of management and individuals employed as supervisors and that it is Company's
belief that managerial employees are not qualified for membership in a labor organization; hence, it is digested that the
Association institute a certification proceeding so as to remove any question with regard to position titles that should be
included in the bargaining unit. The Association felt disinclined to follow the suggestion of the Company1 and so on February
22, 1965 the Company initiated a certification proceeding docketed as Case 1484-MC.
On March 8, 1965 the Association filed notice to strike giving the following reasons:
Refusal to bargain in good faith and to act on demands, a copy of which is enclosed; resort to union-
busting tactics in order to discourage the activities of the undersigned association and its members,
including discrimination and intimidation of officers and members of the association and circulation of
promises of immediate benefits to be given by the company to its employees, officers and members of
this association or those intending to join the same, if the employees concerned in due course will vote
against the selection of this association as the exclusive collective bargaining unit for managers and
supervisors of the Company in the petition for certification the latter filed. (Annex "A" of Annex "A",
Petition).
On March 29, 1965, during the hearing of the certification proceedings, Judge Tabigne cautioned the parties to maintain
the status quo; he specifically advised the employees not to go on strike, making it clear, however, that in the presence of
unfair labor practices they could go on strike even without any notice.2
On the basis of the strike notice filed on March 8, 1965 and in view of acts committed by the Company which the Association
considered as constituting unfair labor practice, the Association struck on April 22, 1965, after the efforts exerted by the
Bureau of Labor Relations to settle the differences between the parties failed. Then, through an "Urgent Petition" dated April
26, 1965 filed as Case No. 1484-MC(1), or as an incident of the certification election proceedings (Case No. 1484-MC), the
Company prayed as follows:
WHEREFORE, petitioner respectfully prays this Honorable Court that:
1. The strike of respondent Caltex Filipino Managers and Supervisors Association be declared illegal;
2. The officers and members of respondent association who have instigated, declared, encouraged and/or
participated in the illegal strike be held and punished for contempt of this Honorable Court and be
declared to have lost their employee status;
3. Pending hearing on the merits and upon the filing of a bond in an amount to be fixed by this
Honorable Court, a temporary injunction be issued restraining respondent association, its officers,
members and representatives acting for and on their behalf from committing, causing or directing the
commission of the unlawful acts complained of, particularly obstructing and preventing petitioner, its
customers, officers and non-striking employees from entering and going out of its various offices, in its
refinery, installations, depots and terminals and the use or threat of violence and intimidation;
4. After trial, said injunction be made permanent;
5. The damages that petitioner has suffered and will suffer up to the trial of this action be ascertained
and judgment be rendered against respondent association, its officers, members and representatives
jointly and severally for the amount thereof.
Petitioner prays for such other and further relief as this Honorable Court may deem just and equitable in
the premises. (Annex "D", Petition)
Such urgent petition was frontally met by the Association with a motion to dismiss questioning the jurisdiction of the
industrial court. The motion to dismiss was opposed by the Company and on May 17, 1965 the trial court denied the same.
Not satisfied with the order of May 17, 1965, the Association moved for its reconsideration before respondent court en banc.
Because of the settlement between the parties on May 30, 1965 of some of their disputes, the Association filed with
respondent court under date of June 3, 1965 a manifestation (to which was attached a copy of the return-to-work agreement
signed by the parties on May 30, 1965), to the effect that the issues in Case No. 1484-MC (1) had become moot and
academic. Under date of June 15, 1965 the Company filed a counter-manifestation disputing the representations of the
Association on the effect of the return-to-work agreement. On the basis of the manifestation and counter-manifestation,
respondent court en banc issued a resolution on August 24, 1965 allowing the withdrawal of the Association's motion for
reconsideration against the order of May 17, 1965, on the theory that there was justification for such withdrawal.
Relative to the resolution of August 24, 1965 the Company filed a motion for clarification which the Association opposed on
September 22, 1965, for it contended that such motion was in reality a motion for reconsideration and as such filed out of
time. But respondent court brushed aside the Association's opposition and proceeded to clarify the resolution of August 24,
1965 to mean that the Company was not barred from continuing with Case No. 1484-MC(1).
At the hearing on September 1, 1965 of Case No. 1484-MC(1) the Association insisted that the incident had become moot
and academic and must be considered dismissed and, at the same time, it offered to present evidence, if still necessary, in
order to support its contention. Respondent court thereupon decided to secure evidence from the parties to enlighten it on the
interpretation of the provisions of the return-to-work agreement relied upon by the Association as rendering the issues raised
in Case No. 1484-MC(1) already moot and academic. Evidence having been received, the trial court ruled in its order of
February 15, 1966 that under the return-to-work agreement the Company had reserved its rights to prosecute Case No. 1484-
MC(1) and, accordingly, directed that the case be set for hearing covering the alleged illegality of the strike. Within the
prescribed period the Association filed a motion for reconsideration of the February 15, 1966 order to which motion the
Company filed its opposition and, in due course, respondent court en banc issued its resolution dated March 28, 1966
affirming the order. Appeal from the interlocutory order was elevated by the Association to this Court in G.R. No. L-25955,
but the corresponding petition for review was summarily "DISMISSED for being premature" under this court's resolution of
May 13, 1966.
After a protracted preliminary investigation, the Association's charge for unfair labor practices against the Company and its
officials docketed in a separate proceeding was given due course through the filing by the prosecution division of respondent
court of the corresponding complaint dated September 10, 1965, in Case No. 4344-ULP against Caltex (Philippines), Inc., W.
E. Menefee and B.F. Edwards. As noted by respondent court in its decision under review, Case No. 4344-ULP was filed by
the Association because, according to the latter, the Company and some of its officials, including B.F. Edwards, inquired into
the organization of the Association and he manifested his antagonism to it and its President; that another Company official,
W.E. Menefee issued a statement of policy designed to discourage employees and supervisors from joining labor
organizations; that the Company refused to bargain although the Association commands majority representation; that due to
the steps taken by the Company to destroy the Association or discourage its members from continuing their union
membership, the Association was forced to file a strike notice; that on April 22, 1965 it declared a strike; and that during the
strike the Company and its officers continued their efforts to weaken the Association as well as its picket lines. The Company
in its answer filed with respondent court denied the charges of unfair labor practice.
Considering the interrelation of the issues involved in the two cases and by agreement of the parties, the two cases were heard
jointly. This explains why only one decision was rendered by respondent court covering both Case No. 1484-MC(1), relating
to the illegality of the strike as contended by the Company, and Case No. 4344-ULP, referring to the unfair labor practice
case filed by the Association against the Company, W.E. Menefee and B.F. Edwards.
The Association assigned the following errors allegedly committed by respondent court:
I
RESPONDENT COURT ERRED IN ASSUMING JURISDICTION OVER CASE NO. 1484-MC(1).
II
ASSUMING THAT RESPONDENT COURT HAS JURISDICTION OVER CASE NO. 1484-MC(1),
IT ERRED IN NOT HOLDING THAT THE SAME ALREADY BECAME MOOT WITH THE
SIGNING OF THE RETURN TO WORK AGREEMENT ON MAY 30, 1965.
III
ASSUMING LIKEWISE THAT RESPONDENT COURT HAS JURISDICTION OVER CASE NO.
1484-MC(1), IT ERRED IN HOLDING THAT CAFIMSA'S STRIKE WAS STAGED FOR NO
OTHER REASON THAN TO COERCE THE COMPANY INTO RECOGNIZING THE CAFIMSA
AND THAT SUCH STRIKE WAS UNJUSTIFIED, UNLAWFUL AND UNWARRANTED.
IV
RESPONDENT COURT ERRED IN AFFIRMING THE TRIAL COURT'S CONCLUSION THAT
CAFIMSA'S STRIKE WAS DECLARED IN OPEN DEFIANCE OF THE MARCH 29, 1965 ORDER
IN CERTIFICATION CASE NO. 1484-MC.
V reprimanded and admonished the other officers of the Association; and
RESPONDENT COURT ERRED IN AFFIRMING THE TRIAL COURT'S FINDING, DESPITE THE
SUBSTANTIAL CONTRARY EVIDENCE ON RECORD, THAT THE STRIKERS RESORTED TO
MEANS BEYOND THE PALE OF THE LAW IN THE PROSECUTION OF THE STRIKE AND IN
DISREGARDING THE CONSIDERATION THAT THE STRIKERS MERELY EMPLOYED
LAWFUL ACTS OF SELF-PRESERVATION AND SELF-DEFENSE.
VI
RESPONDENT COURT ERRED IN AFFIRMING THE DISMISSAL BY THE TRIAL COURT OF
J.J. MAPA, CAFIMSA'S PRESIDENT, AND OTHERS, OR IN OTHERWISE PENALIZING THE
STRIKERS.
VII
ASSUMING ARGUENDO THAT THE FACTS FOUND BY THE TRIAL COURT SHOULD BE
ACCEPTED, IN DISREGARD OF THE EVIDENCE PRESENTED BY THE COMPANY
DAMAGING TO ITS CAUSE, OR ALTHOUGH THE TRIAL COURT DISREGARDED THE
SUBSTANTIAL INCRIMINATORY EVIDENCE AGAINST THE COMPANY, RESPONDENT
COURT ERRED IN NOT APPLYING THE PRINCIPLE OF IN PARI DELICTO.
VIII
RESPONDENT COURT ERRED IN FAILING TO HOLD THAT THE COMPANY IS BARRED
UNDER SECTION 9(e) OF THE REPUBLIC ACT NO. 875 FROM SEEKING THE RELIEF
PRAYED FOR IN CASE NO. 1484-MC(1).
IX
RESPONDENT COURT ERRED IN ENTIRELY ABSOLVING THE COMPANY FROM THE
UNFAIR LABOR PRACTICE CHARGE AND IN DISREGARDING THE SUBSTANTIAL
INCRIMINATORY EVIDENCE RELATIVE THERETO AGAINST THE COMPANY.
X of a contempt proceeding. For, in our opinion, what Judge Tabigne statement during said hearing should be construed what
RESPONDENT COURT ERRED IN RENDERING JUDGEMENT FOR THE CAFIMSA IN CASE
NO. 4344-ULP AND IN NOT ORDERING THE COMPANY TO PAY BACK WAGE AND
ATTORNEY'S FEES.
XI
RESPONDENT COURT ERRED IN PREMATURELY IMPLEMENTING THE TRIAL COURT'S
DISMISSAL OF J.J. MAPA AND DOMINADOR MANGALINO (Brief for the Petitioner, pp. 1-4).
To our mind the issues raised in this appeal may be narrowed down to the following:
1. whether or not the Court of Industrial Relations has jurisdiction over Case No. 1484-MC(1);
2. Whether or not the strike staged by the Association on April 22, 1965 is illegal and, incident thereto, whether respondent
court correctly terminated the employee status of Jose Mapa, Dominador Mangalino and Herminigildo Mandanas and
3. Whether or not respondent court correctly absolved the respondents in Case No. 4344-ULP from the unfair labor practice
charge.
Respondent's court's jurisdiction over Case No. 1484-MC(1) has to be tested by the allegations of the "Urgent Petition" dated
April 26, 1965 filed by the Company in relation to the applicable provisions of law. A reading of said pleading shows that the
same is for injunctive relief under Section 9(d) of Republic Act No. 875 (Magna Carta of Labor); for contempt, obviously
pursuant to See, 6 of Commonwealth Act No. 103 in conjunction with Sec. 3 (b) of Rule 71 of the Rules of Court; and for
forfeiture of the employee status of the strikers by virtue of their participation in what the Company considered as an "illegal
strike."
It is well known that the scheme in Republic Act No. 875 for achieving industrial peace rests essentially on a free and private
agreement between the employer and his employees as to the terms and conditions under which the employer is to give work
and the employees are to furnish labor, unhampered as far as possible by judicial or administrative intervention. On this
premise the lawmaking body has virtually prohibited the issuance of injunctive relief involving or growing out of labor
disputes.
The prohibition to issue labor injunctions is designed to give labor a comparable bargaining power with capital and must be
liberally construed to that end (U.S. vs. Brotherhood of Locomotive Engineers, 79 F. Supp. 485, Certiorari denied, 69 S. Ct.
137, 335 U.S. 867, cause remanded on other grounds, 174 F. 2nd 160, 85 U.S. App. D.C., certiorari denied 70 S. Ct. 140,
338 U.S. 872, 94 L. Ed. 535). It is said that the prohibition creates substantive and not purely procedural law. (Oregon
Shipbuilding Corporation vs. National Labor Relations Board, 49 F. Supp. 886). Within the purview of our ruling, speaking
through Justice Labrador, in Social Security Employees Association (PAFLU), et al. vs. The Hon. Edilberto Soriano, et al.
(G.R. No. L-20100, July 16, 1964, 11 SCRA 518, 520), there can be no injunction issued against any strike except in only
one instance, that is, when a labor dispute arises in an industry indispensable to the national interest and such dispute is
certified by the President of the Philippines to the Court of Industrial Relations in compliance with Sec. 10 of Republic Act
No. 875. As a corollary to this, an injunction in an uncertified case must be based on the strict requirement See. 9 (d) of
Republic Act No. 875; the purpose of such injunction is not to enjoin the strike itself, but only unlawful activities. To the
extent, then, that the Company sought injunctive relief under Sec. 9(d) of Republic Act No.875, respondent court had
jurisdiction over the Company's "Urgent Petition" dated April 26, 1965.
As to the "contempt aspect" of Case No. 1484-MC(1), the jurisdiction of respondent court over it cannot be seriously
questioned it appearing that Judge Tabigne in good faith thought that his "advice" to the Association during the hearing on
March 29, 1965 not to strike amounted a valid order. This is not to say, however, that respond court did not err in finding that
the advice given by Judgre Tabigne during the hearing on March 29, 1965 really constituted an order which can be the basis
actually was — an advice. To say that it was an order would be to concede that respondent court could validly enjoin strike,
especially one which is not certified in accord with Sec. 10 of Republic Act No. 875. To adopt the view of respondent court
would not only set at naught the policy of the law as embodied in the said statute against issuance of injunctions, but also
remove from the hands of labor unions and aggrieved employees an effective lawful weapon to either secure favorable action
on their economic demand or to stop unfair labor practices on the part of their employer.
With respect to the alleged "illegality of the strike," as claimed by the Company, and the consequent forfeiture of the
employee status of the strikers, we believe these matters which are neither pertinent to nor connected with a certification case
as opined by Judge Paredes, to which we agree. Respondent court, therefore, initially erred in entertaining this issue in Case
No. 1484-MC(1). No prejudice, however, has resulted since, as correctly pointed out by respondent court, the illegality for
the strike was squarely raised by the Company as a defense in Case No. 4344-ULP and, in any event, we observe that the
Association was given all the opportunity to put forward its evidence.
We now come to the important issue as to whether the strike staged by the Association on April 22, 1965 is illegal. From an
examination of the records, we believe that the lower court erred in its findings in this regard.
To begin with, we view the return-to-work agreement of May 30, 1965 as in the nature of a partial compromise between the
parties and, more important, a labor contract; consequently, in the latter aspect the same "must yield to the common good"
(Art. 1700, Civil Code of the Philippines) and "(I)n case of doubt ... shall be construed in favor of the safety and decent living
for the laborer" (Art. 1702, ibid). To our mind when the Company unqualifiedly bound itself in the return-to-work agreement
that all employees will be taken back "with the same employee status prior to April 22, 1965," the Company thereby made
manifest its intention and conformity not to proceed with Case No. 1484-MC, (c) relating the illegality of the strike incident.
For while it is true that there is a reservation in the return-to-work agreement as follows:
6. The parties agree that all Court cases now pending shall continue, including CIR Case No. 1484-MC.
we think the same is to be construed bearing in mind the conduct and intention of the parties. The failure to mention Case No.
1484-MC(1) while specifically mentioning Case No. 1484-MC, in our opinion, bars the Company from proceeding with the
former especially in the light of the additional specific stipulation that the strikers would be taken back with the same
employee status prior to the strike on April 22, 1965. The records disclose further that, according to Atty. Domingo E. de
Lara when he testified on October 9, 1965, and this is not seriously disputed by private respondents, the purpose of Paragraph
10 of the return-to-work agreement was, to quote in part from this witness, "to secure the tenure of employees after the
return-to-work agreement considering that as I understand there were demotions and suspensions of one or two employees
during the strike and, moreover, there was this incident Case No. 1484-MC(1)" (see Brief for the Petition pp. 41-42). To
borrow the language of Justice J.B.L. Reyes in Citizens Labor Union Pandacan Chapter vs. Standard Vacuum Oil
Company (G.R. No. L-7478, May 6, 1955), in so far as the illegality of the strike is concerned in this proceeding and in the
light of the records.
... the matter had become moot. The parties had both abandoned their original positions and come to a
virtual compromise and agreed to resume unconditionally their former relations. To proceed with the
declaration of illegality would not only breach this understanding, freely arrived at, but to
unnecessarily revive animosities to the prejudice of industrial peace. (Emphasis supplied)
Conceding arguendo that the illegality incident had not become moot and academic, we find ourselves unable to agree with
respondent court to the effect that the strike staged by the Association on April 22, 1965 was unjustified, unreasonable and
unwarranted that it was declared in open defiance of an order in Case No. 1484-MC not to strike; and that the Association
resorted to means beyond the pale of the law in the prosecution of the strike. As adverted to above, the Association filed its
notice to strike on March 8, 1965, giving reasons therefor any one of which is a valid ground for a strike.
In addition, from the voluminous evidence presented by the Association, it is clear that the strike of the Association was
declared not just for the purpose of gaining recognition as concluded by respondent court, but also for bargaining in bad faith
on the part of the Company and by reason of unfair labor practices committed by its officials. But even if the strike were
really declared for the purpose of recognition, the concerted activities of the officers and members of the Association in this
regard cannot be said to be unlawful nor the purpose thereof be regarded as trivial. Significantly, in the voluntary return-to-
work agreement entered into between the Company and the Association, thereby ending the strike, the Company agreed to
recognize for membership in the Association the position titles mentioned in Annex "B" of said agreement. 3 This goes to
show that striking for recognition is productive of good result in so far as a union is concerned.
Besides, one of the important rights recognized by the Magna Carta of Labor is the right to self-organization and we do not
hesitate to say that is the cornerstone of this monumental piece of labor legislation. Indeed, because of occasional delays
incident to a certification proceeding usually attributable to dilatory tactics employed by the employer, to a certain extent a
union may be justified in resorting to a strike. We should not be understood here as advocating a strike in order to secure
recognition of a union by the employer. On the whole we are satisfied from the records that it is incorrect to say that the strike
of the Association was mainly for the purpose of securing recognition as bargaining agent.
As will be discussed hereinbelow, the charge of unfair labor practice against the Company is well-taken. It is, therefore, clear
error on the part of the Association is unjust, unreasonable and unwarranted.
We said earlier that the advice of Judge Tabigne to maintain the status quo cannot be considered as a lawful order within the
contemplation of the Magna Carta of Labor, particularly Section 10 thereof; to so regard it as an order would be to grant
respondent court authority to forbid a strike in an uncertified case which it is not empowered to do. The fact that the strike
was not staged until April 22, 1965 is eloquent proof enough of the desire of the Association and its officers and members to
respect the advice of Judge Tabigne. However, as shown in this case during the pendency of the certification proceedings
unfair labor practices were committed by the Company; hence, the Association was justified in staging a strike and certainly
this is not in violation of the advice of Judge Tabigne on March 29, 1965.
Respondent court picked out a number of incidents, taking place during the strike, to support its conclusion that the strikers
resorted to means beyond the pale of the law in the prosecution of a strike. Thus, it made mention of the blocking by a banca
manned by two striking supervisors by the name of Dominador Mangalino and one Bonecillo of the Caltex M/V Estrella
when it was about to depart; the blocking at the refinery of the Company in Bauan, Batangas of the LSCO WARA, the Hills
Bros Pinatubo, and the Mobil Visayas so that they could not dock; the blocking by the strikers of incoming vehicles, non-
striking supervisors, and rank-and-file workers to prevent them from entering the refinery gate in Bauan, Batangas, at the
Poro Terminal, at the Company's Padre Faura office in Manila, and at the Pandacan Terminal; that at the Legaspi and
Mambulao Bulk Depots the striking supervisors refused to surrender to their superiors the keys to the depots and storage
tanks; and that also at the Legaspi Depot the truck ignition keys were mixed up or thrown at the seats of the trucks in
violation of the Company regulations in order to create confusion and thus prevent the trucks from being used. 4 To refute
these and similar findings of respondent court the Association, drawing chiefly and abundantly from the Company's own
evidence,5 called attention to the exculpatory declarations of the Company's own witnesses 6 either establishing or tending to
establish that the picketing the strikers was generally peaceful and orderly. We find that such, indeed, was the real situation
during the strike and it would be the height of injustice to rule otherwise in the face of the records before us.
In ignoring strong evidence coming from the witnesses of the Company damaging to its case as well as that adduced by the
Association also damaging to the Company's case, we believe that respondent court clearly and gravely abused its discretion
thereby justifying us to review or alter its factual findings (see Philippine Educational Institution vs. MLQSEA Faculty
Association, 26 SCRA 272, 278).7 There is thus here, to employ the language of Justice J.B.L. Reyes in Lakas ng Pagkakaisa
sa Peter Paul vs. Court of Industrial Relations, 96 Phil., 63, "an infringement of cardinal primary rights of petitioner, and
justified the interposition of the corrective powers of this Court (Ang Tibay vs. Court of Industrial Relations and National
Labor Union, 69 Phil., 635):
(2) Not only must the party be given an opportunity to present his case and to adduce evidence tending
to establish the rights which he asserts but the tribunal must consider the evidence presented. (Chief
Justice Hughes in Morgan vs. U.S., 298 U.S. 468, 56 S. Ct. 906, 80 Law Ed. 1288.) In the language of
this Court in Edwards vs. McCoy, 22 Phil., 598, "the right to adduce evidence, without the
corresponding duty on the part of the board to consider it, is vain. Such right is conspicuously futile if
the person or persons to whom the evidence is presented can thrust it aside without notice or
consideration." (Ibid., p. 67)8
We are convinced from the records that on the whole the means employed by the strikers during the strike, taking into
account the activities of the Company and the non-striking employees on the same occasion, cannot be labeled as unlawful; in
other words, the Company itself through the provocative, if not unlawful, acts of the non-striking employees9 is not entirely
blameless for the isolated incidents relied upon by respondent court as tainting the picketing of the strikers with illegality. As
we said through Justice Fernando in Shell Oil Workers' Union vs. Shell Company of the Philippines, Ltd.,
L-28607, May 31, 1971, 39 SCRA 276:
 6. Respondent court was likewise impelled to consider the strike illegal because of the violence that
attended it. What is clearly within the law is the concerted activity of cessation of work in order that a
union's economic demands may be granted or that an employer cease and desist from the unfair labor
practice. That the law recognizes as a right. There is though a disapproval of the utilization of force to
attain such an objective. For implicit in the very concept of a legal order is the maintenance of peaceful
ways. A strike otherwise valid, if violent, in character, be placed beyond the pale. Care is to be taken,
however, especially where an unfair labor practice is involved, to avoid stamping it with illegality just
because it is tainted by such acts. To avoid rendering illusory the recognition of the right to strike,
responsibility in such a case should be individual not collective. A different conclusion would be called
for, of course, if the existence of force while the strike lasts is pervasive and widespread, consistently
and deliberately resorted to as a matter of policy. It could be reasonably concluded then that even if
justified as to end, it becomes illegal because of means employed. (Ibid., p. 292; emphasis supplied).
In the same case we further observed:
... Barely four months ago, in Insular Life Assurance Co., Ltd. Employees' Association vs. Insular Life
Assurance Co., Ltd., there is the recognition by this Court, speaking through Justice Castro, of picketing
as such being "inherently explosive". It is thus clear that not every form of violence suffices to affix the
seal of illegality on a strike or to cause the loss of employment of the guilty party . (Ibid., pp. 293-294;
emphasis supplied)
In the cited case of Insular Life Assurance Co., Employees' Association-NATO, FGU Insurance Group Workers &
Employees Association-NATU and Insular Life Building Employees Association-NATU vs. The Insular Life insurance Co.,
Ltd., FGU Insurance Group, et al., L-25291, January 30, 1971, 37 SCRA 244, we held through Justice Castro, and this is
here applicable to the contention of theAssociation, as follows:
... Besides, under the circumstances the picketers not legally bound to yield their grounds and withdraw
from the picket lines. Being where the law expects them to be in the legitimate exercise of their rights,
they had every reason to defend themselves and their rights from any assault or unlawful
transgression. ... (Ibid., p. 271)
In this cited case, by the way, we reversed and set aside the decision of the Court of Industrial Relations and ordered the
Company to reinstate the dismissed workers backwages.
Let us now examine the charge of unfair labor practice which respondent court dismissed for lack of merit and substantial
evidence.
Under Sec. 14(c) of Republic Act No. 875, the parties themselves are required "to participate fully and promptly in such
meetings and conferences as the (Conciliation) Service may undertake." In this case, the parties agreed to meet on April 21,
1965 and yet, notwithstanding this definite agreement, the Company sent no representatives. The Company's claim to
bargaining in good faith cannot be given credence in the face of the fact that W.E. Menefee the Company's Managing
Director, conveniently left Manila for Davao on April 17 or 18, 1965, as admitted by W.E. Wilmarth. 10
Nowhere is there serious claim on the part of the Company that it entertains real doubt as to the majority representation of the
Association. Consider further that admittedly the certification election proceeding for the Cebu Supervisors Union in the
Company had been pending for six (6) years already. From all appearances, therefore, and bearing in mind the deliberate
failure of the Company to attend the conciliation meetings on April 19 and 21, 1965, it is clear that the Company employed
dilatory tactics doubtless to discredit CAFIMSA before the eyes of its own members and prospective members as an effective
bargaining agent, postpone eventual recognition of the Association, and frustrate its efforts towards securing favorable action
on its economic demands.
It is likewise not disputed that on March 4, 1965, the Company issued its statement of policy (Exh. B). At that time the
Association was seeking recognition as bargaining agent and has presented economic demands for the improvement of the
terms and conditions of employment of supervisors. The statement of policy conveyed in unequivocal terms to all employees
the following message:
We sincerely believe that good employee relations can be maintained and essential employee needs
fulfilled through sound management administration without the necessity of employee organization and
representations. We respect an employee's right to present his grievances, regardless of whether or not
he is represented by a labor organization. (Emphasis supplied)
An employee reading the foregoing would at once gain impression that there was no need to join the Association. For he is
free to present his grievances regardless of whether or not he is represented by a labor organization.
The guilty conduct of the Company before, during after the strike of April 22, 1965 cannot escape the Court's attention. It
will suffice to mention typical instances by way of illustration. Long prior to the strike, the Company had interferred with the
Cebu Supervisors' Union by enticing Mapa into leaving the Union under the guise of promotion in Manila; shortly before the
strike, B.R. Edwards, Manager-Operations, had inquired into the formation and organization of the petitioner Association in
this case. During the strike, in addition to the culpable acts of the Company already narrated above, due significance must be
given to the inclusion initially of J.J. Mapa and A. Buenaventura, the Association's President and Vice-President respectively,
in 1965, in two coercion cases filed at that time and their subsequent elimination from the charges the initiative of the
Company after the settlement of strike; 11 the cutting off of telephone facilities extended Association members in the refinery;
and the use of a member of the Association to spy for the company. 12 The discriminatory acts practiced by the Company
against active unionists after the strike furnish further evidence that Company committed unfair labor practices as
charged. 13 Victims of discrimination are J.J. Mapa, A.E. Buenaventura, E.F. Grey, Eulogio Manaay,14 Pete Beltran, Jose
Dizon, Cipriano Cruz, F.S. Miranda and many others. The discrimination consisted in the Company's preferring non-
members of the Association in promotions to higher positions and humiliating active unionists by either promoting junior
supervisors over them or by reduction of their authority compared to that assigned to them before the strike, or otherwise
downgrading their positions. 15
Then, effective July 1, 1969, the Company terminated the employment of J.J. Mapa and Dominador Mangalino, President
and Vice-President, respectively, of the Association at that time. And this the Company did not hesitate to do notwithstanding
the Association's seasonable appeal from respondent court's decision. We perceive in this particular action of the Company its
anti-union posture and attitude. In this connection, we find merit in the claim of petitioner that the dismissal of Mapa and
Mangalino was premature considering that respondent court did not expressly provide that such dismissal might be effected
immediately despite the pendency of the appeal timely taken by the Association. The situation would have been different had
respondent court ordered the dismissal of Mapa and Mangalino immediately. As the decision is silent on this matter the
dismissal of said officers of the Association ought to have been done only upon the finality of the judgment. Because appeal
was timely taken, the Company's action is patently premature and is furthermore evidence of its desire to punish said active
unionists.
Verily, substantial, credible and convincing evidence appear on record establishing beyond doubt the charge of unfair labor
practices in violation of Sec. 4 (a), Nos. (1), (3), (4), (5) and (6), of Republic Act No. 875. And pursuant to the mandate of
Art. 24 of the Civil Code of the Philippines that courts must be vigilant for the protection of one at a disadvantage — and
here the Association appears to be at a disadvantage in its relations with the Company as the records show — adequate
affirmative relief, including backwages, must be awarded to the strikers. It is high-time and imperative that in order to attain
the laudable objectives of Republic Act 875 calculated to safeguard the rights of employees, the provisions thereof should be
liberally construed in favor of employees and strictly against employer, unless otherwise intended by or patent from language
of the statute itself.
The Court takes judicial notice of the considerable efforts exerted by both parties in the prosecution of respective cases and
the incidents thereof both before lower court and this Court since 1965 to date. Under the circumstances and in conformity
with Art. 2208, No. 11, the Civil Code of the Philippines, it is but just, fair and equitable that the Association be permitted to
recover attorney's fees as claimed in its tenth assignment of error.
WHEREFORE, respondent court's resolution en banc dated May 16, 1969, together with the decision dated February 26,
1969, is reversed and judgment is hereby rendered as follows:
1. In Case No. 1484-MC(1), the Court declares the strike of the Caltex Filipino Managers and Supervisors' Association as
legal in all respects and, consequently, the forfeit of the employee status of J.J. Mapa, Dominador Mangalino and
Herminigildo Mandanas is set aside. The Company is hereby ordered to reinstate J.J. Mapa and Dominador Mangalino to
their former positions without loss of seniority and privileges, with backwages from the time of dismissal on July 1, 1969.
Since Herminigildo Mandanas appears to have voluntarily left the Company, no reinstatement is ordered as to him.
2. In Case No. 4344-ULP, the Court finds the Company B.F. Edwards and W.E. Menefee guilty of unfair labor practices and
they are therefore ordered to cease and desist from the same. In this connection, the Company is furthermore directed to pay
backwages to the striking employees from April 22, 1965 to May 30, 1965 and to pay attorney's fees which are hereby fixed
at P20,000.00.
Costs against private respondents.
G.R. No. 75736 September 29, 1988
ASSOCIATED LABOR UNIONS (ALU-TUCP), (For And In Behalf Of Its Direct Members, Namely, WARREN
MAPUTI, RODRIGO CATIPAY, GILBERTO REDOBLADO ROBERTO RONOLO and 134 Others), petitioners, vs.
HONORABLE ANTONIO V. BORROMEO AND BELYCA CORPORATION, Represented By BELLO M.
CASANOVA, SR., President & General Manager, respondents.
SARMIENTO, J.:
The Court issues the writs prayed for in this petition for certiorari and prohibition filed by the petitioner, the Associated
Labor Unions.
It appears that on June 24, 1986, as a consequence of a controversy arising from charges of unfair labor practices against the
respondent, BELYCA Corporation, a firm engaged in livestock farming, the petitioner filed a notice of strike with the then
Ministry of Labor and Employment, Region X, at Cagayan de Oro City. On July 2, 1986, it filed a complaint for various
offenses against the private respondent ranging from unfair labor practice to non-payment of the minimum wages. On July
24, 1986, it struck.
On the same date, the private respondent commenced suit for injunction with the respondent Regional Trial Court. It alleged
that the petitioner had obstructed free ingress to the firm's premises, "preventing workers of Belyca farms from entering the
business establishments ... preventing said workers from giving feeds and/or food to the hogs and fowls which would kill all
of said hogs and fowls if not attended to this very day ..." 1 (The private respondent maintains "about 7,500 hogs and with
8,000 fowls with a total value of about P10,000.00." 2) On the same day, the respondent judge issued a temporary restraining
order (TRO) "commanding herein defendants [the striking workers], their agents and/or representatives to allow plaintiff [the
private-respondent) or workers or authorized representatives free passage to and from Belyca Farms, located at Kalasungay
Malaybalay, Bukidnon to feed plaintiffs seven thousand five hundred (7,500) hogs and eight thousand (8,000) fowls." 3
On August 4, 1986, the petitioner filed a motion for reconsideration (to lift TRO as well as for the dismissal of the case on the
ground of lack of jurisdiction. On August 14, 1986, the respondent judge denied the motion.
Also on August 14, 1986, Belyca Corporation filed an urgent motion "for extension of the life of the restraining order
previously issued to another twenty days." The petitioner opposed the motion. On August 19, 1986, however, the respondent
judge granted it stating:
WHEREFORE, for the sake of justice and fairness, the temporary mandatory order dated July 24, 1986
which expired on August 13, 1986 is hereby extended to another period of twenty (20) days to be
counted from August 13, 1986. It will expire on October 2, 1986 which is the date of the hearing of the
main petition.
Done this 19th day of August, 1986 at Malaybalay, Bukidnon.
[Please note the erroneous reckoning of the expiration date of the TRO which should be September 2, 1 986, after the twenty-
day extension (from August 13), and not October 2, 1986 as stated in the Order of August 19, 1986 the decretal portion of
which is quoted above. It is self-evident that twenty (20) days from August 13, 1986 would be September 2, 1986 and not
October 2, 1 986.]
The petitioner then came to this Court.
As the Court has indicated at the outset, the petition is granted.
The courts of law have no jurisdiction to act on labor cases or various incidents arising therefrom. That is basic and
elementary. Jurisdiction to try and adjudicate such cases pertains exclusively to the proper labor officials of the Department
of Labor, thus:
ART. 217. Jurisdiction of Labor Arbiters and the Commission. (a) The Labor Arbiters shall have the
original and exclusive jurisdiction to hear and decide within thirty (30) working days after submission of
the case by the parties for decision, the following cases involving all workers, whether agricultural or
non-agricultural:
1. Unfair labor practice cases;
2. Those that workers may file involving wages, hours of work and other terms and conditions of
employment;
3. All money claims of workers, including those based on non- payment or underpayment of wages,
overtime compensation, separation pay and other benefits provided by law or appropriate agreement,
except
claims for employees' compensation, social security, medicare and maternity benefits.
4. Cases involving household services; and
5. Cases arising from any violation of Article 265 of this Code, including questions involving the
legality of strikes and lockouts.
(b) The Commission shall have exclusive appellate jurisdiction over all cases decided by Labor
Arbiters. 4
xxx xxx xxx
ART. 128 ...
 (b) The Minister of Labor or his duly authorized representatives shall have the power to order and
administer, after due notice and hearing, compliance with the labor standards provisions of this Code
based on the findings of labor regulation officers or industrial safety engineers made in the course of
inspection, and to issue writs of execution to the appropriate authority for the enforcement of their order,
except in cases where the employer contests the findings of the labor regulations officer and raise issues
which cannot be resolved without co considering evidentiary matters that are not verifiable in the normal
course of inspection. 5
It was only very recently that the Court promulgated Silva Pipe Workers Union NATU v. Filipino Pipe & Foundry
Corporation, 6 where it was held:
The contention of the Company that the CFI had jurisdiction over the civil case inasmuch as it was
brought principally to prevent the further commission of unlawful acts, is not well-taken. The ruling laid
down in National Garments and Textile Workers' Union-PAFLU, etc., vs. Hon. Hermogenes Caluag, et
al., L-9104, 99 Phil. 1067 (1956), is in point:
It appearing that the issue involved in the main case is interwoven with the unfair
labor case pending before the CIR as to which its jurisdiction is exclusive, it is
evident that it does not come under the jurisdiction of the trial court even if it
involves acts of violence, intimidation and coercion as averred in the complaint.
These acts come within the purview of Section 9 (d) of RA 875 which may be
enjoined by CIR.
In a long line of decided cases, this Court has also invariably held that the Court of Industrial Relations
has exclusive jurisdiction over labor disputes involving unfair labor practice, with the exclusive power
to issue a temporary restraining order to enjoin acts in connection therewith. Thus:
Cases involving unfair labor practices fall within the exclusive jurisdiction of the
CIR, and in the exercise of its jurisdiction said court has the exclusive power to
issue a temporary restraining order to enjoin any acts committed in connection with
said labor dispute. (PAFLU, et al., vs. Tan, 99 Phil. 854; Phil. Communications,
Electronic and Electricity Workers Federation vs. Nolasco, L-24984, July 29,1968;
National Garment and Textile Workers' Union vs. Hon. H. Caluag, No. I,9104, 99
Phil. 1067, and Erlanger and Galinger, Inc. vs. Erlanger and Galinger Employees
Association-NATU G.R. No. 1,11907,104 Phil. 17 [19581).
The reason for such exclusive jurisdiction is that since picketing and strikes may be mere incidents or
consequences of an unfair labor practice, it is but proper that a Writ of Injunction prayed for in
connection with that labor dispute originate from the Court having jurisdiction over the main case
inasmuch as it is that Court that has cognizance of all relevant facts (Erlanger & Galinger, Inc. vs.
Erlanger & Galinger Employees Association-NATU 104 Phil. 21 [19581).
It is clear then that the Court a quo acted without jurisdiction in the case before it. 7
That the case in question involves a labor dispute is patent from the records. In rendering his ruling, the respondent judge
himself was aware that the dispute was the result of an impasse between employer and employees, an impasse cognizable
alone by the National Labor Relations:
... This Court agrees  in toto with the defendants that it has no jurisdiction to decide on the question of
legality or illegality of strikes and lockouts, inasmuch as the power to decide on said legal question
properly belongs to the National Labor Relations Commission, Ministry of Labor. There is no shadow of
a doubt that defendants are workers or employees of plaintiff Belyca Corporation and likewise it is
undisputed that their demands for increase of wages, reinstatement and other demands fall within the
exclusive original jurisdiction of the National Labor Relations Commission or Labor Arbiters of the
Ministry of Labor. ... 8
The respondent judge can not enjoin acts carried out as a consequence of the strike without unavoidably ruling on the legality
of the strike itself. ("The strike can continue. It does not mean that this Court has ruled on the legality or illegality of the said
strike." 9) To say indeed that the workers had obstructed free passage to the strike-bound firm, is, by necessity, to say that the
strike was illegal, notwithstanding the judge's own words of caution (that he was not ruling on the legality or illegality of the
strike). For under the Labor Code:
(E) No person engaged in picketing shall commit any act of violence, coercion, or intimidation or
obstruct the free ingress to or egress from the employer's premises for lawful purposes, or obstruct
public thoroughfares. 10
This is clear from his very order:
This provision of law is cited in order to guide the defendants that their demands from their employer
should be made in lawful, friendly and diplomatic manner and they should never resort to force,
violence and intimidation or they should not apply the law of jungle, and should instead apply the law of
the land. Defendants are hereby advised to ventilate their demands for increase of wages, reinstatement
and the like, in a lawful and diplomatic manner in the proper forum which is the National Labor
Relations Commission, Ministry of Labor. The defendants are likewise advised to have a diplomatic
conference with the management of plaintiff- corporation in order that their demands can be ventilated
and heard in a lawful, friendly and diplomatic manner. The philosophy of this step is to avoid trouble,
disorder, chaos and bloodshed which are unwarranted and unnecessary among educated and civilized
people like the defendants and officers of plaintiff-corporation. 11
What is even clearer is the fact that in labor cases, injunction itself stands as an exceptional remedy. It does not lie save in
those cases as the Labor Code provides. Thus:
ART. 255. Injunction prohibited.—No temporary or permanent injunction or restraining order in any
case involving or growing out of labor disputes shall be issued by any court or other entity, except as
otherwise providede in Article 218 and 264 of this Code. 12
The provisions referred to are as follows:
(e) To enjoin or restrain any actual or threatened commission of any or all Prohibited or unlawful acts in
any labor dispute which, if not restrained forthwith, may cause grave or irreparable damage to any patty
or render ineffectual any decision in favor of such party. Provided, That no temporary injunction against
the commission of acts Prohibited under Article 265 of this Code shall be issued by the Commission,
except after due notice and hearing and in accordance with its rules: Provided, further, That any ex parte
restraining order issued by the Commission, or its Chairman or Vice Chairman when the Commission is
not in session and as may be prescribed by its rules, shall be valid for a period not exceeding twenty (20)
days Provided, finally, That the receipt of evidence for the application of a writ of injunction may be
delegated by the Commission to any of its Labor Arbiters who shall, in cases where the parties are not
residents of Metro Manila, conduct such hearings in such places as he may determine to be accessible to
the parties and its witnesses and shall submit thereafter his recommendation to the Commission. 13
xxx xxx xxx
(g) When in his opinion there exists a labor dispute causing or likely to cause strikes or lockouts
adversely affecting the national interest, such as may occur in but not limited to public utilities,
companies engaged in the generation or distribution of energy, banks, hospitals, and export-oriented
industries, including those within export processing zones, the Minister of Labor and Employment shall
 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 artifical 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 Minister 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.
Secretary of Labor to determine which strikes are subject to injunction and State intervention. 20 The courts, to reiterate, have
no business interposing their intruding finger.
What has become increasingly apparent is the fact that the respondent judge had allowed himself to be the private respondent
's intrument, witting or unwitting, in its (the private respondent's) effort to counter the impact of the strike. This is evident
from the orders now complained of. Res ipsa loquitur. 21 But let, likewise, the counsels for the respondent firm be
reprimanded for what would appear as an attempt on their paret to mainpuate the courts and the court processes.

The foregoing notwithstanding, the President of the Philippines shall not be precluded from determining
the industries where in his opinion labor disputes may adversely affect the national interest, and from
intervening at any time and assuming jurisdiction over any labor dispute adversely affecting the national
interest in order to settle or terminate the same. 14
WHEREFORE, the petition is GRANTED. The orders, dated July 24, 1986, August 14, 1986, and August 19, 1986 are
hereby declared NULL AND VOID. Costs against the private responent.
SO ORDERED.

The fact that the poultry and piggery maintained by the private respondent required close care and attention does not warrant
the respondent judge's assumption of jurisdiction. It did not confer on him the competence he did not have. Jurisdiction is
vested by law and not by the demands of emergency. 15

This is not, of course, to say that the strike in question was, ergo, legal. As we said, concerted acts of labor are the do of the
labor officials, not the judiciary. Assuming, then, that the private respondent had cause for complaint and that the strike was
illegal or had become illegal as a result of the strikers' resort to illegal acts the courts are not the proper forum for it.

The gross haste, furthermore, with which the challenged TRO was issued (it was issued on the same day the complaint was
filed)—and based on the bare word alone of Belyca (that the strikers had behaved unlawfully in the course of the strike)—has
not eluded this Court. This is a grave abuse of discretion. Plainly, it denied the workers due process of law.

It is likewise a serious abuse of discretion on the part of the respondent judge to extend such a TRO. Under the Rules of
Court as amended 16 a TRO has a non-extendible lifetime of twenty days (that is, assuming that the TRO itself was valid)
upon the expiration of which, it dies a natural death. (In this case, the respondent judge extended the life of the TRO to fifty
(50)—days from August 13, 1986 to October 2, 1986—as stated in the order itself.) If a writ of preliminary injunction is
granted, the writ then takes its place. But it cannot substitute for the writ (if one is not granted within the twenty-day period)
by the simple expedient of "extending" its life. The issuance of "perpetual" TROs was precisely the motivating factor behind
the amendment of the Rules. In Dionisio v. Court of first Instance of South Cotabato, Branch II, 17 we thus said:

The above-quoted amendatory provision (BP 224) was adopted as a reaction against the indiscriminate
issuance of ex parte preliminary injunctions which, not infrequently, converted the writ from an
instrument in furtherance of justice to a shield for injustice. Thereunder, in no case may a preliminary
injunction be issued without notice. The rule is absolute. Nevertheless, if it appears that great or
irreparable injury would result to the applicant before his application for preliminary injunction could be
heard on notice, the judge could issue a temporary restraining order with a limited life of 20 days from
date of issue. If before the expiration of the 20-day period, the application for preliminary injunction is
denied, the temporary restraining order would thereby be deemed automatically vacated. But if no action
is taken by the judge on the application for preliminary injunction within the said 20 days, the temporary
restraining order would automatically expire on the 20th day by the sheer force of law, no judicial
declaration to that effect being necessary. Thus, by the terms of Batas Pambansa Blg. 224, a temporary
restraining order can no longer exist indefinitely; it has become truly temporary. 18

Neither can we countenance the respondent judge's resort to military assistance in order to implement his order. It diminishes
in no small measure the rights of the workingman enshrined in the Constitution. 19

To permit, furthermore, the issuance of a TRO founded on management's concern for animals (or other properties of the firm)
is to open posterns behind the ban (or regulation) of injunction under the Labor Code, and to frustrate the right to strike itself,
since a strike is designed precisely to stop the wheels of the factory. In any event, the Code has left the discretion to the

REPUBLIC ACT No. 10395
AN ACT STRENGTHENING TRIPARTISM, AMENDING FOR THE PURPOSE ARTICLE 275
OF PRESIDENTIAL DECREE NO. 442, AS AMENDED, OTHERWISE KNOWN AS THE "LABOR CODE OF
THE PHILIPPINES"
Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:
Section 1. Article 275 of the Labor Code is hereby amended to read as follows:
"ART. 275. Tripartism, Tripartite Conferences, and Tripartite Industrial Peace Councils. – (a) Tripartism in labor
relations is hereby declared a State policy. Towards this end, workers and employers shall, as far as practicable, be
represented in decision and policy-making bodies of the government.
"(b) The Secretary of Labor and Employment or his duly authorized representatives may from time to time call a
national, regional, or industrial tripartite conference of representatives of government, workers and employers, and
other interest groups as the case may be, for the consideration and adoption of voluntary codes of principles
designed to promote industrial peace based on social justice or to align labor movement relations with established
priorities in economic and social development. In calling such conference, the Secretary of Labor and Employment
may consult with accredited representatives of workers and employers.
"(c) A National Tripartite Industrial Peace Council (NTIPC) shall be established, headed by the Secretary of Labor
and Employment, with twenty (20) representatives each from the labor and employers’ sectors to be designated by
the President at regular intervals. For this purpose, a sectoral nomination, selection, and recall process shall be
established by the DOLE in consultation with the sectors observing the ‘most representative’ organization criteria
of ILO Convention No. 144.
"Tripartite Industrial Peace Councils (TIPCs) at the regional or industry level shall also be established with
representatives from government, workers and employers to serve as a continuing forum for tripartite advisement
and consultation in aid of streamlining the role of government, empowering workers’ and employers’
organizations, enhancing their respective rights, attaining industrial peace, and improving productivity.1âwphi1
"The TIPCs shall have the following functions:
"(1) Monitor the full implementation and compliance of concerned sectors with the provisions of all
tripartite instruments, including international conventions and declarations, codes of conduct, and social
accords;
"(2) Participate in national, regional or industry-specific tripartite conferences which the President or the
Secretary of Labor and Employment may call from time to time;
"(3) Review existing labor, economic and social policies and evaluate local and international
developments affecting them;
"(4) Formulate, for submission to the President or to Congress, tripartite views, recommendations and
proposals on labor, economic, and social concerns, including the presentation of tripartite positions on
relevant bills pending in Congress;
"(5) Advise the Secretary of Labor and Employment in the formulation or implementation of policies
and legislation affecting labor and employment;
"(6) Serve as a communication channel and a mechanism for undertaking joint programs among
government, workers, employers and their organizations toward enhancing labor-management relations;
and
"(7) Adopt its own program of activities and rules, consistent with development objectives.
"All TIPCs shall be an integral part of the organizational structure of the NTIPC.
"The operations of all TIPCs shall be funded from the regular budget of the DOLE."
Section 2. Implementing Rules and Regulations. – The Secretary of Labor and Employment shall promulgate the necessary
rules and regulations to implement the provisions of this Act.
Section 3. Repealing Clause.  – Presidential Decree No. 442, as amended, otherwise known as the "Labor Code of the
Philippines", and all other acts, laws, presidential issuances, rules and regulations inconsistent herewith are hereby repealed,
amended or modified accordingly.
Section 4. Effectivity Clause. – This Act shall take effect fifteen (15) days after its complete publication in the Official
Gazette or in at least two (2) newspapers of national circulation.
Approved,