Title VII – COLLECTIVE BARGAINING AND

ADMINISTRATION OF AGREEMENTS

ART. 261. [250] Procedure in Collective Bargaining. – The following procedures shall
be observed in collective bargaining:

(a) When a party desires to negotiate an agreement, it shall serve a written notice upon the other party with a
statement of its proposals. The other party shall make a reply thereto not later than ten (10) calendar days from
receipt of such notice;

(b) Should differences arise on the basis of such notice and reply, either party may request for a conference
which shall begin not later than ten (10) calendar days from the date of request;

(c) If the dispute is not settled, the Board shall intervene upon request of either or both parties or at its own
initiative and immediately call the parties to conciliation meetings. The Board shall have the power to issue
subpoenas requiring the attendance of the parties to such meetings. It shall be the duty of the parties to
participate fully and promptly in the conciliation meetings the Board may call;

Note that under Article 274 (previously Article 261), except flagrant and/or malicious refusal to comply with economic provisions, CBA violations are mere
grievances, not ULP, thus subject to grievance machinery and voluntary arbitration. As amended by Sec. 20 of R.A. No. 6715 (1989).

(d) During the conciliation proceedings in the Board, the parties are prohibited from doing any act which may
disrupt or impede the early settlement of the disputes; and

(e) The Board shall exert all efforts to settle disputes amicably and encourage the parties to submit their case
to a voluntary arbitrator.

ART. 262. [251] Duty to Bargain Collectively in the Absence of Collective Bargaining Agreements.
– In the absence of an agreement or other voluntary arrangement providing for a more expeditious manner of
collective bargaining, it shall be the duty of employer and the representatives of the employees to bargain
collectively in accordance with the provisions of this Code.

ART. 263. [252] Meaning of Duty to Bargain Collectively. – The duty to bargain collectively means the
performance of a mutual obligation to meet and convene promptly and expeditiously in good faith for the purpose
of negotiating an agreement with respect to wages, hours of work and all other terms and conditions of
employment including proposals for adjusting any grievances or questions arising under such agreement and
executing a contract incorporating such agreements if requested by either party but such duty does not compel
any party to agree to a proposal or to make any concession.

ART. 264. [253] Duty to Bargain Collectively When There Exists a Collective Bargaining Agreement.
– When there is a collective bargaining agreement, the duty to bargain collectively shall also mean that neither
party shall terminate nor modify such agreement during its lifetime. However, either party can serve a written
notice to terminate or modify the agreement at least sixty (60) days prior to its expiration date. It shall be the
duty of both parties to keep the status quo and to continue in full force and effect the terms and conditions of
the existing agreement during the 60-day period and/or until a new agreement is reached by the parties.

ART. 265. [253-A] Terms of a Collective Bargaining Agreement. – Any Collective Bargaining Agreement
that the parties may enter into shall, insofar as the representation aspect is concerned, be for a term of five (5)
years. No petition questioning the majority status of the incumbent bargaining agent shall be entertained and
no certification election shall be conducted by the Department of Labor and Employment outside of the sixty-
day period immediately before the date of expiry of such five-year term of the Collective Bargaining Agreement.
All other provisions of the Collective Bargaining Agreement shall be renegotiated not later than three (3) years
after its execution. Any agreement on such other provisions of the Collective Bargaining Agreement entered into
within six (6) months from the date of expiry of the term of such other provisions as fixed in such Collective
Bargaining Agreement, shall retroact to the day immediately following such date. If any such agreement is
entered into beyond six months, the parties shall agree on the duration of retroactivity thereof. In case of a
deadlock in the renegotiation of the Collective Bargaining Agreement, the parties may exercise their rights under
this Code.
227 Incorporated as a new article by Sec. 21 of R.A. No. 6715 (1989).

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. 267. [255] Exclusive Bargaining Representation and Workers' Participation in Policy and
Decision-Making. – The labor organization designated or selected by the majority of the employees in an
appropriate collective bargaining unit shall be the exclusive representative of the employees in such unit for the
purpose of collective bargaining. However, an individual employee or group of employees shall have the right at
any time to present grievances to their employer.

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 processes 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.

ART. 268. [256] Representation Issue in Organized Establishments. – In organized establishments,

when a verified petition questioning the majority status of the incumbent bargaining agent is filed by any
legitimate labor organization including a national union or federation which has already issued a charter
certificate to its local chapter participating in the certification election or a local chapter which has been issued
a charter certificate by the national union or federation before the Department of Labor and Employment within
the sixty (60)-day period before the expiration of the collective bargaining agreement, the Med-Arbiter shall
automatically order an election by secret ballot when the verified petition is supported by the written consent of
at least twenty-five percent (25%) of all the employees in the bargaining unit to ascertain the will of the
employees in the appropriate bargaining unit. To have a valid election, at least a majority of all eligible voters
in the unit must have cast their votes. The labor union receiving the majority of the valid votes cast shall be
certified as the exclusive bargaining agent of all the workers in the unit. When an election which provides for
three or more choices results in no choice receiving a majority of the valid votes cast, a run off election shall be
conducted between the labor unions receiving the two highest number of votes: Provided, That the total number
of votes for all contending unions is at least fifty percent (50%) of the number of votes cast. In cases where the
petition was filed by a national union or federation, it shall not be required to disclose the names of the local
chapter’s officers and members. At the expiration of the freedom period, the employer shall continue to recognize
the majority status of the incumbent bargaining agent where no petition for certification election is filed.

228 As amended by Sec. 4 of B.P. Blg. 227 (1982). 229 Renumbered as Articles 225 and 279, respectively. 230 As amended by Sec. 22 of R.A. No. 6715
(1989). 231 Sec 1, Rule I, Book V of the Omnibus Rules defines “bargaining unit” as a group of employees sharing mutual interests within a given employer
unit, comprised of all or less than all of the entire body of employees in the employer unit or any specific occupational or geographical grouping within
such employer unit. 232 As amended by Sec. 10 of R.A. No. 9481 (2007)
ART. 269. [257] Petitions in Unorganized Establishments. – In any establishment where there is no
certified bargaining agent, a certification election shall automatically be conducted by the Med-Arbiter upon the
filing of a petition by any legitimate labor organization, including a national union or federation which has already
issued a charter certificate to its local/chapter participating in the certification election or a local/chapter which
has been issued a charter certificate by the national union or federation. In cases where the petition was filed
by a national union or federation, it shall not be required to disclose the names of the local chapter’s officers
and members.

ART. 270. [258] When an Employer May File Petition. – When requested to bargain collectively, an
employer may petition the Bureau for an election. If there is no existing certified collective bargaining agreement
in the unit, the Bureau shall, after hearing, order a certification election. All certification cases shall be decided
within twenty (20) working days. The Bureau shall conduct a certification election within twenty (20) days in
accordance with the rules and regulations prescribed by the Secretary of Labor.

ART. 271. [258-A] Employer as Bystander.– In all cases, whether the petition for certification election is
filed by an employer or a legitimate labor organization, the employer shall not be considered a party thereto
with a concomitant right to oppose a petition for certification election. The employer’s participation in such
proceedings shall be limited to: (1) being notified or informed of petitions of such nature; and (2) submitting
the list of employees during the pre-election conference should the Med-Arbiter act favorably on the petition.
ART. 272. [259] Appeal from Certification Election Orders. 235 – Any party to an election may appeal the order
or results of the election as determined by the Med-Arbiter directly to the Secretary of Labor and Employment
on the ground that the rules and regulations or parts thereof established by the Secretary of Labor and
Employment for the conduct of the election have been violated. Such appeal shall be decided within fifteen (15)
calendar days.
233 As amended by Section 11 of R.A. No. 9481 (2007).
234 Inserted as a new provision by Section 12 of R.A. No. 9481 (2007).
235 As amended by Sec. 25 of R.A. No. 6715 (1989).

Title VII-A – GRIEVANCE MACHINERY AND VOLUNTARY

ARBITRATION

ART. 273. [260] Grievance Machinery and Voluntary Arbitration.– The parties to a Collective Bargaining
Agreement shall include therein provisions that will ensure the mutual observance of its terms and conditions.
They shall establish a machinery for the adjustment and resolution of grievances arising from the interpretation
or implementation of their Collective Bargaining Agreement and those arising from the interpretation or
enforcement of company personnel policies.
All grievances submitted to the grievance machinery which are not settled within seven (7) calendar days
from the date of its submission shall automatically be referred to voluntary arbitration prescribed in the Collective
Bargaining Agreement.
For this purpose, parties to a Collective Bargaining Agreement shall name and designate in advance a
Voluntary Arbitrator or panel of Voluntary Arbitrators, or include in the agreement a procedure for the selection
of such Voluntary Arbitrator or panel of Voluntary Arbitrators, preferably from the listing of qualified Voluntary
Arbitrators duly accredited by the Board. In case the parties fail to select a Voluntary Arbitrator or panel of
Voluntary Arbitrators, the Board shall designate the Voluntary Arbitrator or panel of Voluntary Arbitrators, as
may be necessary, pursuant to the selection procedure agreed upon in the Collective Bargaining Agreement,
which shall act with the same force and effect as if the Arbitrator or panel of Arbitrators have been selected by
the parties as described above.

ART. 274. [261] Jurisdiction of Voluntary Arbitrators and Panel of Voluntary Arbitrators. – The
Voluntary Arbitrator or panel of Voluntary Arbitrators shall have original and exclusive jurisdiction to hear and
decide all unresolved grievances arising from the interpretation or implementation of the Collective Bargaining
Agreement and those arising from the interpretation or enforcement of company personnel policies referred to
in the immediately preceding article. Accordingly, violations of a Collective Bargaining Agreement, except those
which are gross in character, shall no longer be treated as unfair labor practice and shall be resolved as
grievances under the Collective Bargaining Agreement. For purposes of this article, gross violations of Collective
Bargaining Agreement shall mean flagrant and/or malicious refusal to comply with the economic provisions of
such agreement.
The Commission, its Regional Offices and the Regional Directors of the Department of Labor and
Employment shall not entertain disputes, grievances or matters under the exclusive and original jurisdiction of
the Voluntary Arbitrator or panel of Voluntary Arbitrators and shall immediately dispose and refer the same to
the Grievance Machinery or Voluntary Arbitration provided in the Collective Bargaining Agreement.

236 Title VIII-A was incorporated as a new chapter after the old Article 259 by R.A. No. 6715 (1989). See also Rule XIX of D.O. 40-03, Grievance Machinery
and Voluntary Arbitration.
237 The procedure in handling grievances is detailed in Rule XIX, Book V of the Omnibus Rules. The procedure applies as well to grievance machinery
that may be set up in unionized employers.
ART. 275. [262] Jurisdiction over other Labor Disputes. – The Voluntary Arbitrator or panel of Voluntary
Arbitrators, upon agreement of the parties, shall also hear and decide all other labor disputes including unfair
labor practices and bargaining deadlocks.

ART. 276. [262-A] Procedures. – The Voluntary Arbitrator or panel of Voluntary Arbitrators shall have the
power to hold hearings, receive evidences and take whatever action is necessary to resolve the issue or issues
subject of the dispute, including efforts to effect a voluntary settlement between parties.
All parties to the dispute shall be entitled to attend the arbitration proceedings. The attendance of any
third party or the exclusion of any witness from the proceedings shall be determined by the Voluntary Arbitrator
or panel of Voluntary Arbitrators. Hearing may be adjourned for cause or upon agreement by the parties.
Unless the parties agree otherwise, it shall be mandatory for the Voluntary Arbitrator or panel of
Voluntary Arbitrators to render an award or decision within twenty (20) calendar days from the date of
submission of the dispute to voluntary arbitration.
The award or decision of the Voluntary Arbitrator or panel of Voluntary Arbitrators shall contain the facts
and the law on which it is based. It shall be final and executory after ten (10) calendar days from receipt of the
copy of the award or decision by the parties.
Upon motion of any interested party, the Voluntary Arbitrator or panel of Voluntary Arbitrators or the
Labor Arbiter in the region where the movant resides, in case of the absence or incapacity of the Voluntary
Arbitrator or panel of Voluntary Arbitrators, for any reason, may issue a writ of execution requiring either the
sheriff of the Commission or regular courts or any public official whom the parties may designate in the
submission agreement to execute the final decision, order or award.

ART. 277. [262-B] Cost of Voluntary Arbitration and Voluntary Arbitrator’s Fee. – The parties to a
Collective Bargaining Agreement shall provide therein a proportionate sharing scheme on the cost of voluntary
arbitration including the Voluntary Arbitrator’s fee. The fixing of fee of Voluntary Arbitrators, or panel of Voluntary
Arbitrators, whether shouldered wholly by the parties or subsidized by the Special Voluntary Arbitration Fund,
shall take into account the following factors:
(a) Nature of the case;
(b) Time consumed in hearing the case;
(c) Professional standing of the Voluntary Arbitrator;
(d) Capacity to pay of the parties; and
(e) Fees provided for in the Revised Rules of Court
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 164301 October 19, 2011

BANK OF THE PHILIPPINE ISLANDS, Petitioner,

vs.
BPI EMPLOYEES UNION-DAVAO CHAPTER-FEDERATION OF UNIONS IN BPI
UNIBANK, Respondent.

RESOLUTION

LEONARDO-DE CASTRO, J.:

In the present incident, petitioner Bank of the Philippine Islands (BPI) moves for reconsideration1 of our Decision
dated August 10, 2010, holding that former employees of the Far East Bank and Trust Company (FEBTC)
"absorbed" by BPI pursuant to the two banks’ merger in 2000 were covered by the Union Shop Clause in the
then existing collective bargaining agreement (CBA)2 of BPI with respondent BPI Employees Union-Davao
Chapter-Federation of Unions in BPI Unibank (the Union).

To recall, the Union Shop Clause involved in this long standing controversy provided, thus:

ARTICLE II

xxxx

Section 2. Union Shop - New employees falling within the bargaining unit as defined in Article I of this Agreement,
who may hereafter be regularly employed by the Bank shall, within thirty (30) days after they become regular
employees, join the Union as a condition of their continued employment. It is understood that membership in
good standing in the Union is a condition of their continued employment with the Bank.3 (Emphases supplied.)

The bone of contention between the parties was whether or not the "absorbed" FEBTC employees fell within the
definition of "new employees" under the Union Shop Clause, such that they may be required to join respondent
union and if they fail to do so, the Union may request BPI to terminate their employment, as the Union in fact
did in the present case. Needless to state, BPI refused to accede to the Union’s request. Although BPI won the
initial battle at the Voluntary Arbitrator level, BPI’s position was rejected by the Court of Appeals which ruled
that the Voluntary Arbitrator’s interpretation of the Union Shop Clause was at war with the spirit and rationale
why the Labor Code allows the existence of such provision. On review with this Court, we upheld the appellate
court’s ruling and disposed of the case as follows:

WHEREFORE, the petition is hereby DENIED, and the Decision dated September 30, 2003 of the Court of Appeals
is AFFIRMED, subject to the thirty (30) day notice requirement imposed herein. Former FEBTC employees who
opt not to become union members but who qualify for retirement shall receive their retirement benefits in
accordance with law, the applicable retirement plan, or the CBA, as the case may be.4

Notwithstanding our affirmation of the applicability of the Union Shop Clause to former FEBTC employees, for
reasons already extensively discussed in the August 10, 2010 Decision, even now BPI continues to protest the
inclusion of said employees in the Union Shop Clause.
In seeking the reversal of our August 10, 2010 Decision, petitioner insists that the parties to the CBA clearly
intended to limit the application of the Union Shop Clause only to new employees who were hired as non-regular
employees but later attained regular status at some point after hiring. FEBTC employees cannot be considered
new employees as BPI merely stepped into the shoes of FEBTC as an employer purely as a consequence of the
merger.5

Petitioner likewise relies heavily on the dissenting opinions of our respected colleagues, Associate Justices
Antonio T. Carpio and Arturo D. Brion. From both dissenting opinions, petitioner derives its contention that "the
situation of absorbed employees can be likened to old employees of BPI, insofar as their full tenure with FEBTC
was recognized by BPI and their salaries were maintained and safeguarded from diminution" but such absorbed
employees "cannot and should not be treated in exactly the same way as old BPI employees for there are
substantial differences between them."6 Although petitioner admits that there are similarities between absorbed
and new employees, they insist there are marked differences between them as well. Thus, adopting Justice
Brion’s stance, petitioner contends that the absorbed FEBTC employees should be considered "a sui generis
group of employees whose classification will not be duplicated until BPI has another merger where it would be
the surviving corporation."7 Apparently borrowing from Justice Carpio, petitioner propounds that the Union Shop
Clause should be strictly construed since it purportedly curtails the right of the absorbed employees to abstain
from joining labor organizations.8

Pursuant to our directive, the Union filed its Comment9 on the Motion for Reconsideration. In opposition to
petitioner’s arguments, the Union, in turn, adverts to our discussion in the August 10, 2010 Decision regarding
the voluntary nature of the merger between BPI and FEBTC, the lack of an express stipulation in the Articles of
Merger regarding the transfer of employment contracts to the surviving corporation, and the consensual nature
of employment contracts as valid bases for the conclusion that former FEBTC employees should be deemed new
employees.10 The Union argues that the creation of employment relations between former FEBTC employees
and BPI (i.e., BPI’s selection and engagement of former FEBTC employees, its payment of their wages, power
of dismissal and of control over the employees’ conduct) occurred after the merger, or to be more precise, after
the Securities and Exchange Commission’s (SEC) approval of the merger.11 The Union likewise points out that
BPI failed to offer any counterargument to the Court’s reasoning that:

The rationale for upholding the validity of union shop clauses in a CBA, even if they impinge upon the individual
employee's right or freedom of association, is not to protect the union for the union's sake. Laws and
jurisprudence promote unionism and afford certain protections to the certified bargaining agent in a unionized
company because a strong and effective union presumably benefits all employees in the bargaining unit since
such a union would be in a better position to demand improved benefits and conditions of work from the
employer. x x x.

x x x Nonetheless, settled jurisprudence has already swung the balance in favor of unionism, in recognition that
ultimately the individual employee will be benefited by that policy. In the hierarchy of constitutional values, this
Court has repeatedly held that the right to abstain from joining a labor organization is subordinate to the policy
of encouraging unionism as an instrument of social justice.12

While most of the arguments offered by BPI have already been thoroughly addressed in the August 10, 2010
Decision, we find that a qualification of our ruling is in order only with respect to the interpretation of the
provisions of the Articles of Merger and its implications on the former FEBTC employees’ security of tenure.

Taking a second look on this point, we have come to agree with Justice Brion’s view that it is more in keeping
with the dictates of social justice and the State policy of according full protection to labor to deem employment
contracts as automatically assumed by the surviving corporation in a merger, even in the absence of an express
stipulation in the articles of merger or the merger plan. In his dissenting opinion, Justice Brion reasoned that:
To my mind, due consideration of Section 80 of the Corporation Code, the constitutionally declared policies on
work, labor and employment, and the specific FEBTC-BPI situation — i.e., a merger with complete "body and
soul" transfer of all that FEBTC embodied and possessed and where both participating banks were willing (albeit
by deed, not by their written agreement) to provide for the affected human resources by recognizing continuity
of employment — should point this Court to a declaration that in a complete merger situation where there is
total takeover by one corporation over another and there is silence in the merger agreement on what the fate
of the human resource complement shall be, the latter should not be left in legal limbo and should be properly
provided for, by compelling the surviving entity to absorb these employees. This is what Section 80 of the
Corporation Code commands, as the surviving corporation has the legal obligation to assume all the obligations
and liabilities of the merged constituent corporation.

Not to be forgotten is that the affected employees managed, operated and worked on the transferred assets
and properties as their means of livelihood; they constituted a basic component of their corporation during its
existence. In a merger and consolidation situation, they cannot be treated without consideration of the applicable
constitutional declarations and directives, or, worse, be simply disregarded. If they are so treated, it is up to this
Court to read and interpret the law so that they are treated in accordance with the legal requirements of mergers
and consolidation, read in light of the social justice, economic and social provisions of our Constitution. Hence,
there is a need for the surviving corporation to take responsibility for the affected employees and to absorb
them into its workforce where no appropriate provision for the merged corporation's human resources
component is made in the Merger Plan.13

By upholding the automatic assumption of the non-surviving corporation’s existing employment contracts by the
surviving corporation in a merger, the Court strengthens judicial protection of the right to security of tenure of
employees affected by a merger and avoids confusion regarding the status of their various benefits which were
among the chief objections of our dissenting colleagues. However, nothing in this Resolution shall impair the
right of an employer to terminate the employment of the absorbed employees for a lawful or authorized cause
or the right of such an employee to resign, retire or otherwise sever his employment, whether before or after
the merger, subject to existing contractual obligations. In this manner, Justice Brion’s theory of automatic
assumption may be reconciled with the majority’s concerns with the successor employer’s prerogative to choose
its employees and the prohibition against involuntary servitude.1avvphi1

Notwithstanding this concession, we find no reason to reverse our previous pronouncement that the absorbed
FEBTC employees are covered by the Union Shop Clause.

Even in our August 10, 2010 Decision, we already observed that the legal fiction in the law on mergers (that the
surviving corporation continues the corporate existence of the non-surviving corporation) is mainly a tool to
adjudicate the rights and obligations between and among the merged corporations and the persons that deal
with them.14 Such a legal fiction cannot be unduly extended to an interpretation of a Union Shop Clause so as
to defeat its purpose under labor law. Hence, we stated in the Decision that:

In any event, it is of no moment that the former FEBTC employees retained the regular status that they
possessed while working for their former employer upon their absorption by petitioner. This fact would not
remove them from the scope of the phrase "new employees" as contemplated in the Union Shop Clause of the
CBA, contrary to petitioner's insistence that the term "new employees" only refers to those who are initially hired
as non-regular employees for possible regular employment.

The Union Shop Clause in the CBA simply states that "new employees" who during the effectivity of the CBA
"may be regularly employed" by the Bank must join the union within thirty (30) days from their regularization.
There is nothing in the said clause that limits its application to only new employees who possess non-regular
status, meaning probationary status, at the start of their employment. Petitioner likewise failed to point to any
provision in the CBA expressly excluding from the Union Shop Clause new employees who are "absorbed" as
regular employees from the beginning of their employment. What is indubitable from the Union Shop Clause is
that upon the effectivity of the CBA, petitioner's new regular employees (regardless of the manner by which
they became employees of BPI) are required to join the Union as a condition of their continued employment.15

Although by virtue of the merger BPI steps into the shoes of FEBTC as a successor employer as if the former
had been the employer of the latter’s employees from the beginning it must be emphasized that, in reality, the
legal consequences of the merger only occur at a specific date, i.e., upon its effectivity which is the date of
approval of the merger by the SEC. Thus, we observed in the Decision that BPI and FEBTC stipulated in the
Articles of Merger that they will both continue their respective business operations until the SEC issues the
certificate of merger and in the event no such certificate is issued, they shall hold each other blameless for the
non-consummation of the merger.16 We likewise previously noted that BPI made its assignments of the former
FEBTC employees effective on April 10, 2000, or after the SEC approved the merger.17 In other words, the
obligation of BPI to pay the salaries and benefits of the former FEBTC employees and its right of discipline and
control over them only arose with the effectivity of the merger. Concomitantly, the obligation of former FEBTC
employees to render service to BPI and their right to receive benefits from the latter also arose upon the
effectivity of the merger. What is material is that all of these legal consequences of the merger took place during
the life of an existing and valid CBA between BPI and the Union wherein they have mutually consented to include
a Union Shop Clause.

From the plain, ordinary meaning of the terms of the Union Shop Clause, it covers employees who (a) enter the
employ of BPI during the term of the CBA; (b) are part of the bargaining unit (defined in the CBA as comprised
of BPI’s rank and file employees); and (c) become regular employees without distinguishing as to the manner
they acquire their regular status. Consequently, the number of such employees may adversely affect the majority
status of the Union and even its existence itself, as already amply explained in the Decision.

Indeed, there are differences between (a) new employees who are hired as probationary or temporary but later
regularized, and (b) new employees who, by virtue of a merger, are absorbed from another company as regular
and permanent from the beginning of their employment with the surviving corporation. It bears reiterating here
that these differences are too insubstantial to warrant the exclusion of the absorbed employees from the
application of the Union Shop Clause. In the Decision, we noted that:

Verily, we agree with the Court of Appeals that there are no substantial differences between a newly hired non-
regular employee who was regularized weeks or months after his hiring and a new employee who was absorbed
from another bank as a regular employee pursuant to a merger, for purposes of applying the Union Shop Clause.
Both employees were hired/employed only after the CBA was signed. At the time they are being required to join
the Union, they are both already regular rank and file employees of BPI. They belong to the same bargaining
unit being represented by the Union. They both enjoy benefits that the Union was able to secure for them under
the CBA. When they both entered the employ of BPI, the CBA and the Union Shop Clause therein were already
in effect and neither of them had the opportunity to express their preference for unionism or not. We see no
cogent reason why the Union Shop Clause should not be applied equally to these two types of new employees,
for they are undeniably similarly situated.18

Again, it is worthwhile to highlight that a contrary interpretation of the Union Shop Clause would dilute its efficacy
and put the certified union that is supposedly being protected thereby at the mercy of management. For if the
former FEBTC employees had no say in the merger of its former employer with another bank, as petitioner BPI
repeatedly decries on their behalf, the Union likewise could not prevent BPI from proceeding with the merger
which undisputedly affected the number of employees in the bargaining unit that the Union represents and may
negatively impact on the Union’s majority status. In this instance, we should be guided by the principle that
courts must place a practical and realistic construction upon a CBA, giving due consideration to the context in
which it is negotiated and purpose which it is intended to serve.19
We now come to the question: Does our affirmance of our ruling that former FEBTC employees absorbed by BPI
are covered by the Union Shop Clause violate their right to security of tenure which we expressly upheld in this
Resolution? We answer in the negative.

In Rance v. National Labor Relations Commission,20 we held that:

It is the policy of the state to assure the right of workers to "security of tenure" (Article XIII, Sec. 3 of the New
Constitution, Section 9, Article II of the 1973 Constitution). The guarantee is an act of social justice. When a
person has no property, his job may possibly be his only possession or means of livelihood. Therefore, he should
be protected against any arbitrary deprivation of his job. Article 280 of the Labor Code has construed security
of tenure as meaning that "the employer shall not terminate the services of an employee except
for a just cause or when authorized by" the Code. x x x (Emphasis supplied.)

We have also previously held that the fundamental guarantee of security of tenure and due process dictates
that no worker shall be dismissed except for a just and authorized cause provided by law and after due process
is observed.21 Even as we now recognize the right to continuous, unbroken employment of workers who are
absorbed into a new company pursuant to a merger, it is but logical that their employment may be terminated
for any causes provided for under the law or in jurisprudence without violating their right to security of tenure.
As Justice Carpio discussed in his dissenting opinion, it is well-settled that termination of employment by virtue
of a union security clause embodied in a CBA is recognized in our jurisdiction.22 In Del Monte Philippines, Inc. v.
Saldivar,23 we explained the rationale for this policy in this wise:

Article 279 of the Labor Code ordains that "in cases of regular employment, the employer shall not terminate
the services of an employee except for a just cause or when authorized by [Title I, Book Six of the Labor
Code]." Admittedly, the enforcement of a closed-shop or union security provision in the CBA as a
ground for termination finds no extension within any of the provisions under Title I, Book Six of
the Labor Code. Yet jurisprudence has consistently recognized, thus: "It is State policy to promote
unionism to enable workers to negotiate with management on an even playing field and with more
persuasiveness than if they were to individually and separately bargain with the employer. For this reason, the
law has allowed stipulations for 'union shop' and 'closed shop' as means of encouraging workers to join and
support the union of their choice in the protection of their rights and interests vis-a-vis the
employer."24 (Emphasis supplied.)

Although it is accepted that non-compliance with a union security clause is a valid ground for an employee’s
dismissal, jurisprudence dictates that such a dismissal must still be done in accordance with due process. This
much we decreed in General Milling Corporation v. Casio,25 to wit:

The Court reiterated in Malayang Samahan ng mga Manggagawa sa M. Greenfield v. Ramos that:

While respondent company may validly dismiss the employees expelled by the union for disloyalty under the
union security clause of the collective bargaining agreement upon the recommendation by the union, this
dismissal should not be done hastily and summarily thereby eroding the employees' right to due process, self-
organization and security of tenure. The enforcement of union security clauses is authorized by law provided
such enforcement is not characterized by arbitrariness, and always with due process. Even on the assumption
that the federation had valid grounds to expel the union officers, due process requires that these union officers
be accorded a separate hearing by respondent company.

The twin requirements of notice and hearing constitute the essential elements of procedural due process. The
law requires the employer to furnish the employee sought to be dismissed with two written notices before
termination of employment can be legally effected: (1) a written notice apprising the employee of the particular
acts or omissions for which his dismissal is sought in order to afford him an opportunity to be heard and to
defend himself with the assistance of counsel, if he desires, and (2) a subsequent notice informing the employee
of the employer's decision to dismiss him. This procedure is mandatory and its absence taints the dismissal with
illegality.

Irrefragably, GMC cannot dispense with the requirements of notice and hearing before dismissing Casio, et al.
even when said dismissal is pursuant to the closed shop provision in the CBA. The rights of an employee to be
informed of the charges against him and to reasonable opportunity to present his side in a controversy with
either the company or his own union are not wiped away by a union security clause or a union shop clause in a
collective bargaining agreement. x x x26 (Emphases supplied.)

In light of the foregoing, we find it appropriate to state that, apart from the fresh thirty (30)-day period from
notice of finality of the Decision given to the affected FEBTC employees to join the Union before the latter can
request petitioner to terminate the former’s employment, petitioner must still accord said employees the twin
requirements of notice and hearing on the possibility that they may have other justifications for not joining the
Union. Similar to our August 10, 2010 Decision, we reiterate that our ruling presupposes there has been no
material change in the situation of the parties in the interim.

WHEREFORE, the Motion for Reconsideration is DENIED. The Decision dated August 10, 2010 is AFFIRMED,
subject to the qualifications that:

(a) Petitioner is deemed to have assumed the employment contracts of the Far East Bank and Trust Company
(FEBTC) employees upon effectivity of the merger without break in the continuity of their employment, even
without express stipulation in the Articles of Merger; and

(b) Aside from the thirty (30) days, counted from notice of finality of the August 10, 2010 Decision, given to
former FEBTC employees to join the respondent, said employees shall be accorded full procedural due process
before their employment may be terminated.
 SPECIAL FIRST DIVISION

G.R. No. 127598 February 22, 2000

MANILA ELECTRIC COMPANY, petitioner,

vs.
Hon. SECRETARY OF LABOR LEONARDO QUISUMBING and MERALCO EMPLOYEES and WORKERS
ASSOCIATION (MEWA), respondent.

RESOLUTION

YNARES-SANTIAGO, J.:

In the Decision promulgated on January 27, 1999, the Court disposed of the case as follows:

WHEREFORE, the petition is granted and the orders of public respondent Secretary of Labor dated August 19,
1996 and December 28, 1996 are set aside to the extent set forth above. The parties are directed to execute a
Collective Bargaining Agreement incorporating the terms and conditions contained in the unaffected portions of
the Secretary of Labor's orders of August 19, 1996 and December 28, 1996, and the modifications set forth
above. The retirement fund issue is remanded to the Secretary of Labor for reception of evidence and
determination of the legal personality of the MERALCO retirement fund.1

The modifications of the public respondent's resolutions include the following:

January 27, 1999 decision Secretary's resolution

Wages - P1,900.00 for 1995-96 P2,200.00

X'mas bonus - modified to one month 2 months

Retirees - remanded to the Secretary granted

Loan to coops - denied granted

GHSIP, HMP and

Housing loans - granted up to P60,000.00 granted

Signing bonus - denied granted

Union leave - 40 days (typo error) 30 days

High voltage/pole - not apply to those who are members of a team

not exposed to the risk

Collectors - no need for cash bond, no

need to reduce quota and MAPL
 CBU - exclude confidential employees include

Union security - maintenance of membership closed shop

Contracting out - no need to consult union consult first

All benefits - existing terms and conditions all terms

Retroactivity - Dec. 28, 1996-Dec. 27, 199(9) from Dec. 1, 1995

Dissatisfied with the Decision, some alleged members of private respondent union (Union for brevity) filed a
motion for intervention and a motion for reconsideration of the said Decision. A separate intervention was
likewise made by the supervisor's union (FLAMES2) of petitioner corporation alleging that it has bona fide legal
interest in the outcome of the case.3 The Court required the "proper parties" to file a comment to the three
motions for reconsideration but the Solicitor-General asked that he be excused from filing the comment because
the "petition filed in the instant case was granted" by the Court.4 Consequently, petitioner filed its own
consolidated comment. An "Appeal Seeking Immediate Reconsideration" was also filed by the alleged newly
elected president of the Union.5 Other subsequent pleadings were filed by the parties and intervenors.

The issues raised in the motions for reconsideration had already been passed upon by the Court in the January
27, 1999 decision. No new arguments were presented for consideration of the Court. Nonetheless, certain
matters will be considered herein, particularly those involving the amount of wages and the retroactivity of the
Collective Bargaining Agreement (CBA) arbitral awards.

Petitioner warns that if the wage increase of P2,200.00 per month as ordered by the Secretary is allowed, it
would simply pass the cost covering such increase to the consumers through an increase in the rate of electricity.
This is a non sequitur. The Court cannot be threatened with such a misleading argument. An increase in the
prices of electric current needs the approval of the appropriate regulatory government agency and does not
automatically result from a mere increase in the wages of petitioner's employees. Besides, this argument
presupposes that petitioner is capable of meeting a wage increase. The All Asia Capital report upon which the
Union relies to support its position regarding the wage issue cannot be an accurate basis and conclusive
determinant of the rate of wage increase. Section 45 of Rule 130 Rules of Evidence provides:

Commercial lists and the like. — Evidence of statements of matters of interest to persons engaged in an
occupation contained in a list, register, periodical, or other published compilation is admissible as tending to
prove the truth of any relevant matter so stated if that compilation is published for use by persons engaged in
that occupation and is generally used and relied upon by them therein.

Under the afore-quoted rule, statement of matters contained in a periodical, may be admitted only "if that
compilation is published for use by persons engaged in that occupation and is generally used and relied upon
by them therein." As correctly held in our Decision dated January 27, 1999, the cited report is a mere newspaper
account and not even a commercial list. At most, it is but an analysis or opinion which carries no persuasive
weight for purposes of this case as no sufficient figures to support it were presented. Neither did anybody testify
to its accuracy. It cannot be said that businessmen generally rely on news items such as this in their occupation.
Besides, no evidence was presented that the publication was regularly prepared by a person in touch with the
market and that it is generally regarded as trustworthy and reliable. Absent extrinsic proof of their accuracy,
these reports are not admissible.6 In the same manner, newspapers containing stock quotations are not
admissible in evidence when the source of the reports is available.7 With more reason, mere analyses or
projections of such reports cannot be admitted. In particular, the source of the report in this case can be easily
made available considering that the same is necessary for compliance with certain governmental requirements.

Nonetheless, by petitioner's own allegations, its actual total net income for 1996 was P5.1 billion.8 An estimate
by the All Asia financial analyst stated that petitioner's net operating income for the same year was about P5.7
billion, a figure which the Union relies on to support its claim. Assuming without admitting the truth thereof, the
figure is higher than the P4.171 billion allegedly suggested by petitioner as its projected net operating income.
The P5.7 billion which was the Secretary's basis for granting the P2,200.00 is higher than the actual net income
of P5.1 billion admitted by petitioner. It would be proper then to increase this Court's award of P1,900.00 to
P2,000.00 for the two years of the CBA award. For 1992, the agreed CBA wage increase for rank-and-file was
P1,400.00 and was reduced to P1,350.00; for 1993; further reduced to P1,150.00 for 1994. For supervisory
employees, the agreed wage increase for the years 1992-1994 are P1,742.50, P1,682.50 and P1,442.50,
respectively. Based on the foregoing figures, the P2,000.00 increase for the two-year period awarded to the
rank-and-file is much higher than the highest increase granted to supervisory employees.9 As mentioned in the
January 27, 1999 Decision, the Court does "not seek to enumerate in this decision the factors that should affect
wage determination" because collective bargaining disputes particularly those affecting the national interest and
public service "requires due consideration and proper balancing of the interests of the parties to the dispute and
of those who might be affected by the dispute."10 The Court takes judicial notice that the new amounts granted
herein are significantly higher than the weighted average salary currently enjoyed by other rank-and-file
employees within the community. It should be noted that the relations between labor and capital is impressed
with public interest which must yield to the common good.11 Neither party should act oppressively against the
other or impair the interest or convenience of the public.12 Besides, matters of salary increases are part of
management prerogative.13

On the retroactivity of the CBA arbitral award, it is well to recall that this petition had its origin in the renegotiation
of the parties' 1992-1997 CBA insofar as the last two-year period thereof is concerned. When the Secretary of
Labor assumed jurisdiction and granted the arbitral awards, there was no question that these arbitral awards
were to be given retroactive effect. However, the parties dispute the reckoning period when retroaction shall
commence. Petitioner claims that the award should retroact only from such time that the Secretary of Labor
rendered the award, invoking the 1995 decision in Pier 8 case14 where the Court, citing Union of Filipino
Employees v. NLRC,15 said:

The assailed resolution which incorporated the CBA to be signed by the parties was promulgated on June 5,
1989, the expiry date of the past CBA. Based on the provision of Section 253-A, its retroactivity should be agreed
upon by the parties. But since no agreement to that effect was made, public respondent did not abuse its
discretion in giving the said CBA a prospective effect. The action of the public respondent is within the ambit of
its authority vested by existing law.

On the other hand, the Union argues that the award should retroact to such time granted by the Secretary,
citing the 1993 decision of St. Luke's.16

Finally, the effectivity of the Order of January 28, 1991, must retroact to the date of the expiration of the
previous CBA, contrary to the position of petitioner. Under the circumstances of the case, Article 253-A cannot
be properly applied to herein case. As correctly stated by public respondent in his assailed Order of April 12,
1991 dismissing petitioner's Motion for Reconsideration —

Anent the alleged lack of basis for the retroactivity provisions awarded; we would stress that the provision of
law invoked by the Hospital, Article 253-A of the Labor Code, speaks of agreements by and between the parties,
and not arbitral awards . . .
Therefore, in the absence of a specific provision of law prohibiting retroactivity of the effectivity of arbitral awards
issued by the Secretary of Labor pursuant to Article 263(g) of the Labor Code, such as herein involved, public
respondent is deemed vested with plenary and discretionary powers to determine the effectivity thereof.

In the 1997 case of Mindanao Terminal,17 the Court applied the St. Luke's doctrine and ruled that:

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

Therefore, in the absence of a specific provision of law prohibiting retroactive of the effectivity of arbitral awards
issued by the Secretary of Labor pursuant to Article 263(g) of the Labor Code, such as herein involved, public
respondent is deemed vested with plenary and discretionary powers to determine the effectivity thereof.

The Court in the January 27, 1999 Decision, stated that the CBA shall be "effective for a period of 2 years
counted from December 28, 1996 up to December 27, 1999." Parenthetically, this actually covers a three-year
period. Labor laws are silent as to when an arbitral award in a labor dispute where the Secretary had assumed
jurisdiction by virtue of Article 263 (g) of the Labor Code shall retroact. In general, a CBA negotiated within six
months after the expiration of the existing CBA retroacts to the day immediately following such date and if
agreed thereafter, the effectivity depends on the agreement of the parties.18 On the other hand, the law is silent
as to the retroactivity of a CBA arbitral award or that granted not by virtue of the mutual agreement of the
parties but by intervention of the government. Despite the silence of the law, the Court rules herein that CBA
arbitral awards granted after six months from the expiration of the last CBA shall retroact to such time agreed
upon by both employer and the employees or their union. Absent such an agreement as to retroactivity, the
award shall retroact to the first day after the six-month period following the expiration of the last day of the CBA
should there be one. In the absence of a CBA, the Secretary's determination of the date of retroactivity as part
of his discretionary powers over arbitral awards shall control.

It is true that an arbitral award cannot per se be categorized as an agreement voluntarily entered into by the
parties because it requires the interference and imposing power of the State thru the Secretary of Labor when
he assumes jurisdiction. However, the arbitral award can be considered as an approximation of a collective
bargaining agreement which would otherwise have been entered into by the parties.19 The terms or periods set
forth in Article 253-A pertains explicitly to a CBA. But there is nothing that would prevent its application by
analogy to an arbitral award by the Secretary considering the absence of an applicable law. Under Article 253-
A: "(I)f any such agreement is entered into beyond six months, the parties shall agree on the duration of
retroactivity thereof." In other words, the law contemplates retroactivity whether the agreement be entered into
before or after the said six-month period. The agreement of the parties need not be categorically stated for their
acts may be considered in determining the duration of retroactivity. In this connection, the Court considers the
letter of petitioner's Chairman of the Board and its President addressed to their stockholders, which states that
the CBA "for the rank-and-file employees covering the period December 1, 1995 to November 30, 1997 is still
with the Supreme Court,"20 as indicative of petitioner's recognition that the CBA award covers the said period.
Earlier, petitioner's negotiating panel transmitted to the Union a copy of its proposed CBA covering the same
period inclusive.21 In addition, petitioner does not dispute the allegation that in the past CBA arbitral awards,
the Secretary granted retroactivity commencing from the period immediately following the last day of the expired
CBA. Thus, by petitioner's own actions, the Court sees no reason to retroact the subject CBA awards to a different
date. The period is herein set at two (2) years from December 1, 1995 to November 30, 1997.

On the allegation concerning the grant of loan to a cooperative, there is no merit in the union's claim that it is
no different from housing loans granted by the employer. The award of loans for housing is justified because it
pertains to a basic necessity of life. It is part of a privilege recognized by the employer and allowed by law. In
contrast, providing seed money for the establishment of the employee's cooperative is a matter in which the
employer has no business interest or legal obligation. Courts should not be utilized as a tool to compel any
person to grant loans to another nor to force parties to undertake an obligation without justification. On the
contrary, it is the government that has the obligation to render financial assistance to cooperatives and the
Cooperative Code does not make it an obligation of the employer or any private individual.22

Anent the 40-day union leave, the Court finds that the same is a typographical error. In order to avoid any
confusion, it is herein declared that the union leave is only thirty (30) days as granted by the Secretary of Labor
and affirmed in the Decision of this Court.

The added requirement of consultation imposed by the Secretary in cases of contracting out for six (6) months
or more has been rejected by the Court. Suffice it to say that the employer is allowed to contract out services
for six months or more. However, a line must be drawn between management prerogatives regarding business
operations per se and those which affect the rights of employees, and in treating the latter, the employer should
see to it that its employees are at least properly informed of its decision or modes of action in order to attain a
harmonious labor-management relationship and enlighten the workers concerning their rights.23 Hiring of
workers is within the employer's inherent freedom to regulate and is a valid exercise of its management
prerogative subject only to special laws and agreements on the matter and the fair standards of justice.24 The
management cannot be denied the faculty of promoting efficiency and attaining economy by a study of what
units are essential for its operation. It has the ultimate determination of whether services should be performed
by its personnel or contracted to outside agencies. While there should be mutual consultation, eventually
deference is to be paid to what management decides.25 Contracting out of services is an exercise of business
judgment or management prerogative.26 Absent proof that management acted in a malicious or arbitrary
manner, the Court will not interfere with the exercise of judgment by an employer.27 As mentioned in the January
27, 1999 Decision, the law already sufficiently regulates this matter.28 Jurisprudence also provides adequate
limitations, such that the employer must be motivated by good faith and the contracting out should not be
resorted to circumvent the law or must not have been the result of malicious or arbitrary actions.29 These are
matters that may be categorically determined only when an actual suit on the matter arises.

WHEREFORE, the motion for reconsideration is PARTIALLY GRANTED and the assailed Decision is MODIFIED as
follows: (1) the arbitral award shall retroact from December 1, 1995 to November 30, 1997; and (2) the award
of wage is increased from the original amount of One Thousand Nine Hundred Pesos (P1,900.00) to Two
Thousand Pesos (P2,000.00) for the years 1995 and 1996. This Resolution is subject to the monetary advances
granted by petitioner to its rank-and-file employees during the pendency of this case assuming such advances
had actually been distributed to them. The assailed Decision is AFFIRMED in all other respects.1âwphi1.nêt

SO ORDERED.

Davide, Jr., C.J., Melo, Kapunan and Pardo, JJ., concur.