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), respondents.

Ablan and Associates for petitioner.

Abdulcadir T. Ibrahim for private respondent.

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 part of this decision, sent by
the Union (Private respondent) to the respondent (petitioner herein) and 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
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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

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 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 Relations 12 wherein it was further ruled that
"while the law does not compel the parties to reach an agreement, it does contemplate that both parties will approach the
negotiation with an open mind and make a reasonable effort to reach a common ground of agreement

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
motion for further postponement.

Petitioner's aforesaid submittal failed to impress Us. Considering the various postponements granted in its behalf, the claimed
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.
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SO ORDERED.

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G.R. No. 211145

SAMAHAN NG MANGGAGAWA SA HANJIN SHIPYARD rep. by its President, ALFIE ALIPIO, Petitioner
vs.
BUREAU OF LABOR RELATIONS, HANJIN HEAVY INDUSTRIES AND CONSTRUCTION CO., LTD. (HHIC-PIDL.),,
Respondents

DECISION

mendoza, J.:

The right to self-organization is not limited to unionism. Workers may also form or join an association for mutual aid and
protection and for other legitimate purposes.

This is a petition for review on certiorari seeking to reverse and set aside the July 4, 2013 Decision1 and the January 28, 2014
Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 123397, which reversed the November 28, 2011 Resolution 3 of the
Bureau of Labor Relations (BLR) and reinstated the April 20, 2010 Decision 4 of the Department of Labor and Employment
(DOLE) Regional Director, cancelling the registration of Samahan ng Manggagawa sa Hanjin Shipyard (Samahan) as a worker's
association under Article 243 (now Article 249) of the Labor Code.

The Facts

On February 16, 2010, Samahan, through its authorized representative, Alfie F. Alipio, filed an application for registration 5 of its
name "Samahan ng Mga Manggagawa sa Hanjin Shipyard" with the DOLE. Attached to the application were the list of names of
the association's officers and members, signatures of the attendees of the February 7, 2010 meeting, copies of their Constitution
and By-laws. The application stated that the association had a total of 120 members.

On February 26, 2010, the DOLE Regional Office No. 3, City of San Fernando, Pampanga (DOLE-Pampanga), issued the
corresponding certificate of registration6 in favor of Samahan.

On March 15, 2010, respondent Hanjin Heavy Industries and Construction Co., Ltd. Philippines (Hanjin), with offices at
Greenbeach 1, Renondo Peninsula, Sitio Agustin, Barangay Cawag, Subic Bay Freeport Zone, filed a petition7 with DOLE-
Pampanga praying for the cancellation of registration of Samahan' s association on the ground that its members did not fall
under any of the types of workers enumerated in the second sentence of Article 243 (now 249).

Hanjin opined that only ambulant, intermittent, itinerant, rural workers, self-employed, and those without definite employers may
form a workers' association. It further posited that one third (1/3) of the members of the association had definite employers and
the continued existence and registration of the association would prejudice the company's goodwill.

On March 18, 2010, Hanjin filed a supplemental petition,8 adding the alternative ground that Samahan committed a
misrepresentation in connection with the list of members and/or voters who took part in the ratification of their constitution and
by-laws in its application for registration. Hanjin claimed that Samahan made it appear that its members were all qualified to
become members of the workers' association.

On March 26, 2010, DOLE-Pampanga called for a conference, wherein Samahan requested for a 10-day period to file a
responsive pleading. No pleading, however, was submitted. Instead, Samahan filed a motion to dismiss on April 14, 2010. 9

The Ruling of the DOLE Regional Director

On April 20, 2010, DOLE Regional Director Ernesto Bihis ruled in favor of Hanjin. He found that the preamble, as stated in the
Constitution and By-Laws of Samahan, was an admission on its part that all of its members were employees of Hanjin, to wit:

KAMI, ang mga Manggagawa sa HANJIN Shipyard (SAMAHAN) ay naglalayong na isulong ang pagpapabuti ng kondisyon sa
paggawa at katiyakan sa hanapbuhay sa pamamagitan ng patuloy na pagpapaunlad ng kasanayan ng para sa mga kasapi nito.
Naniniwala na sa pamamagitan ng aming mga angking lakas, kaalaman at kasanayan ay aming maitataguyod at makapag-
aambag sa kaunlaran ng isang lipunan. Na mararating at makakamit ang antas ng pagkilala, pagdakila at pagpapahalaga sa
mga tulad naming mga manggagawa.

XXX10

The same claim was made by Samahan in its motion to dismiss, but it failed to adduce evidence that the remaining 63 members
were also employees of Hanjin. Its admission bolstered Hanjin's claim that Samahan committed misrepresentation in its
application for registration as it made an express representation that all of its members were employees of the former. Having a
definite employer, these 57 members should have formed a labor union for collective bargaining. 11 The dispositive portion of the
decision of the Dole Regional Director, reads:

WHEREFORE, premises considered, the petition is hereby GRANTED. Consequently, the Certificate of Registration as
Legitimate Workers Association (LWA) issued to the SAMAHAN NG MGA MANGGAGAWA SA HANJIN SHIPYARD
(SAMAHAN) with Registration Numbers R0300-1002-WA-009 dated February 26, 2010 is hereby CANCELLED, and said
association is dropped from the roster of labor organizations of this Office.

SO DECIDED.12

The Ruling of the Bureau of Labor Relations

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Aggrieved, Samahan filed an appeal13 before the BLR, arguing that Hanjin had no right to petition for the cancellation of its
registration. Samahan pointed out that the words "Hanjin Shipyard," as used in its application for registration, referred to a
workplace and not as employer or company. It explained that when a shipyard was put up in Subic, Zambales, it became known
as Hanjin Shipyard. Further, the remaining 63 members signed the Sama-Samang Pagpapatunay which stated that they were
either working or had worked at Hanjin. Thus, the alleged misrepresentation committed by Samahan had no leg to stand on. 14

In its Comment to the Appeal,15 Hanjin averred that it was a party-ininterest. It reiterated that Samahan committed
misrepresentation in its application for registration before DOLE Pampanga. While Samahan insisted that the remaining 63
members were either working, or had at least worked in Hanjin, only 10 attested to such fact, thus, leaving its 53 members
without any workplace to claim.

On September 6, 2010, the BLR granted Samahan's appeal and reversed the ruling of the Regional Director. It stated that the
law clearly afforded the right to self-organization to all workers including those without definite employers.16 As an expression of
the right to self-organization, industrial, commercial and self-employed workers could form a workers' association if they so
desired but subject to the limitation that it was only for mutual aid and protection. 17 Nowhere could it be found that to form a
workers' association was prohibited or that the exercise of a workers' right to self-organization was limited to collective
bargaining.18

The BLR was of the opinion that there was no misrepresentation on the part of Samahan. The phrase, "KAMI, ang mga
Manggagawa sa Hanjin Shipyard," if translated, would be: "We, the workers at Hanjin Shipyard." The use of the preposition "at"
instead of "of' would indicate that "Hanjin Shipyard" was intended to describe a place.19 Should Hanjin feel that the use of its
name had affected the goodwill of the company, the remedy was not to seek the cancellation of the association's registration. At
most, the use by Samahan of the name "Hanjin Shipyard" would only warrant a change in the name of the association. 20 Thus,
the dispositive portion of the BLR decision reads:

WHEREFORE, the appeal is hereby GRANTED. The Order of DOLE Region III Director Ernesto C. Bihis dated 20 April 2010 is
REVERSED and SET ASIDE.

Accordingly, Samahan ng mga Manggagawa sa Hanjin Shipyard shall remain in the roster of legitimate workers' association.21

On October 14, 2010, Hanjin filed its motion for reconsideration.22

In its Resolution,23 dated November 28, 2011, the BLR affirmed its September 6, 2010 Decision, but directed Samahan to
remove the words "Hanjin Shipyard" from its name. The BLR explained that the Labor Code had no provision on the use of trade
or business name in the naming of a worker's association, such matters being governed by the Corporation Code. According to
the BLR, the most equitable relief that would strike a balance between the contending interests of Samahan and Hanjin was to
direct Samahan to drop the name "Hanjin Shipyard" without delisting it from the roster of legitimate labor organizations. The fallo
reads:

WHEREFORE, premises considered, our Decision dated 6 September 2010 is hereby AFFIRMED with a DIRECTIVE for
SAMAHAN to remove "HANJIN SHIPYARD" from its name.

SO RESOLVED.24

Unsatisfied, Samahan filed a petition for certiorari25 under Rule 65 before the CA, docketed as CA-G.R. SP No. 123397.

In its March 21, 2012 Resolution,26 the CA dismissed the petition because of Samahan's failure to file a motion for
reconsideration of the assailed November 28, 2011 Resolution.

On April 17, 2012, Samahan filed its motion for reconsideration 27 and on July 18, 2012, Hanjin filed its comment 28 to oppose the
same. On October 22, 2012, the CA issued a resolution granting Samahan's motion for reconsideration and reinstating the
petition. Hanjin was directed to file a comment five (5) days from receipt of notice. 29

On December 12, 2012, Hanjin filed its comment on the petition, 30 arguing that to require Samahan to change its name was not
tantamount to interfering with the workers' right to self-organization.31 Thus, it prayed, among others, for the dismissalof the
petition for Samahan's failure to file the required motion for reconsideration. 32

On January 17, 2013, Samahan filed its reply.33

On March 22, 2013, Hanjin filed its memorandum.34

The Ruling of the Court of Appeals

On July 4, 2013, the CA rendered its decision, holding that the registration of Samahan as a legitimate workers' association was
contrary to the provisions of Article 243 of the Labor Code.35 It stressed that only 57 out of the 120 members were actually
working in Hanjin while the phrase in the preamble of Samahan's Constitution and By-laws, "KAMI, ang mga Manggagawa sa
Hanjin Shipyard," created an impression that all its members were employees of HHIC. Such unqualified manifestation which
was used in its application for registration, was a clear proof of misrepresentation which warranted the cancellation of Samahan'
s registration.

It also stated that the members of Samahan could not register it as a legitimate worker's association because the place where
Hanjin's industry was located was not a rural area. Neither was there any evidence to show that the members of the association
were ambulant, intermittent or itinerant workers.36

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At any rate, the CA was of the view that dropping the words "Hanjin Shipyard" from the association name would not prejudice or
impair its rightto self-organization because it could adopt other appropriate names. The dispositive portion reads:

WHEREFORE, the petition is DISMISSED and the BLR's directive, ordering that the words "Hanjin Shipyard" be removed from
petitioner association's name, is AFFIRMED. The Decision dated April 20, 2010 of the DOLE Regional Director in Case No.
Ro300-1003-CP-001, which ordered the cancellation of petitioner association's registration is REINSTATED.

SO ORDERED.37

Hence, this petition, raising the following

ISSUES

I. THE COURT OF APPEALS SEfilOUSLY ERRED IN FINDING THAT SAMAHAN CANNOT FORM A WORKERS'
ASSOCIATION OF EMPLOYEES IN HANJIN AND INSTEAD SHOULD HA VE FORMED A UNION, HENCE THEIR
REGISTRATION AS A WORKERS' ASSOCIATION SHOULD BE CANCELLED.

II. THE COURT OF APPEALS SERIOUSLY ERRED IN ORDERING THE REMOVAL/DELETION OF THE WORD "HANJIN" IN
THE NAME OF THE UNION BY REASON OF THE COMPANY'S PROPERTY RIGHT OVER THE COMP ANY NAME
"HANJIN."38

Samahan argues that the right to form a workers' association is not exclusive to intermittent, ambulant and itinerant workers.
While the Labor Code allows the workers "to form, join or assist labor organizations of their own choosing" for the purpose of
collective bargaining, it does not prohibit them from forming a labor organization simply for purposes of mutual aid and
protection. All members of Samahan have one common place of work, Hanjin Shipyard. Thus, there is no reason why they
cannot use "Hanjin Shipyard" in their name.39

Hanjin counters that Samahan failed to adduce sufficient basis that all its members were employees of Hanjin or its legitimate
contractors, and that the use of the name "Hanjin Shipyard" would create an impression that all its members were employess of
HHIC.40

Samahan reiterates its stand that workers with a definite employer can organize any association for purposes of mutual aid and
protection. Inherent in the workers' right to self-organization is its right to name its own organization. Samahan referred "Hanjin
Shipyard" as their common place of work. Therefore, they may adopt the same in their association's name.41

The Court's Ruling

The petition is partly meritorious.

Right to self-organization includes

right to form a union, workers '
association and labor management
councils

More often than not, the right to self-organization connotes unionism. Workers, however, can also form and join a workers'
association as well as labor-management councils (LMC). Expressed in the highest law of the land is the right of all workers to
self-organization. Section 3, Article XIII of the 1987 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. xxx
[Emphasis Supplied]

And Section 8, Article III of the 1987 Constitution also states:

Section 8. The right of the people, including those employed in the public and private sectors, to form unions, associations, or
societies for purposes not contrary to law shall not be abridged.

In relation thereto, Article 3 of the Labor Code provides:

Article 3. Declaration of basic policy. 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. The State shall
assure the rights of workers to self-organization, collective bargaining, security of tenure, and just and humane
conditions of work.

[Emphasis Supplied]

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 fer 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. 42

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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.43

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 o[ 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." 44 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.45

A union refers to any labor organization in the private sector organized for collective bargaining and for other legitimate
purpose,46 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.47

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.48

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. 49 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. 50

To further strengthen employee participation, Article 255 (now 261) 51 of the Labor Code mandates that workers shall have the
right 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 LMCs.

A cursory reading of the law demonstrates that a common element between unionism and the formation of LMCs is the
existence of an employer-employee relationship. Where neither party is an employer nor an employee of the other, no duty to
bargain collectively would exist.52 In the same manner, expressed in Article 255 (now 261) is the requirement that such workers
be employed in the establishment before they can participate in policy and decision making processes.

In contrast, the existence of employer-employee relationship is not mandatory in the formation of workers' association. What the
law simply requires is that the members of the workers' association, at the very least, share the same interest. The very
definition of a workers' association speaks of "mutual aid and protection."

Right to choose whether to form or

join a union or workers' association
belongs to workers themselves

In the case at bench, the Court cannot sanction the opinion of the CA that Samahan should have formed a union for purposes of
collective bargaining instead of a workers' association because the choice belonged to it. The right to form or join a labor
organization necessarily includes the right to refuse or refrain from exercising the said right. It is self-evident that just as no one
should be denied the exercise of a right granted by law, so also, no one should be compelled to exercise such a conferred
right.53 Also inherent in the right to self-organization is the right to choose whether to form a union for purposes of collective
bargaining or a workers' association for purposes of providing mutual aid and protection.

The right to self-organization, however, is subject to certain limitations as provided by law. For instance, the Labor Code
specifically disallows managerial employees from joining, assisting or forming any labor union. Meanwhile, supervisory
employees, while eligible for membership in labor organizations, are proscribed from joining the collective bargaining unit of the
rank and file employees.54 Even government employees have the right to self-organization. It is not, however, regarded as
existing or available for purposes of collective bargaining, but simply for the furtherance and protection of their interests.55

Hanjin posits that the members of Samahan have definite employers, hence, they should have formed a union instead of a
workers' association. The Court disagrees. There is no provision in the Labor Code that states that employees with definite
employers may form, join or assist unions only.

The Court cannot subscribe either to Hanjin's position that Samahan's members cannot form the association because they are
not covered by the second sentence of Article 243 (now 249), to wit:

Article 243. Coverage and employees' right to selforganization. All persons employed in commercial, industrial and agricultural
enterprises and in religious, charitable, medical, or educational institutions, whether operating for profit or not, shall have the
right to self-organization and to form, join, or assist labor organizations of their own choosing for purposes of collective
bargaining. Ambulant, intermittent and itinerant workers, selfemployed people, rural workers and those without any definite
employers may form labor organizations for their mutual aid and protection. (As amended by Batas Pambansa Bilang 70, May 1,
1980)

[Emphasis Supplied]
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Further, Article 243 should be read together with Rule 2 of Department Order (D. 0.) No. 40-03, Series of 2003, which provides:

RULE II

COVERAGE OF THE RIGHT TO SELF-ORGANIZATION

Section 1. Policy. - It is the policy of the State to promote the free and responsible exercise of the right to self-organization
through the establishment of a simplified mechanism for the speedy registration of labor unions and workers associations,
determination of representation status and resolution of inter/intra-union and other related labor relations disputes. Only
legitimate or registered labor unions shall have the right to represent their members for collective bargaining and other purposes.
Workers' associations shall have the right to represent their members for purposes other than collective bargaining.

Section 2. Who may join labor unions and workers' associations. - All persons employed in commercial, industrial and
agricultural enterprises, including employees of government owned or controlled corporations without original charters
established under the Corporation Code, as well as employees of religious, charitable, medical or educational institutions
whether operating for profit or not, shall have the right to self-organization and to form, join or assist labor unions for purposes of
collective bargaining: provided, however, that supervisory employees shall not be eligible for membership in a labor union of the
rank-and-file employees but may form, join or assist separate labor unions of their own. Managerial employees shall not be
eligible to form, join or assist any labor unions for purposes of collective bargaining. Alien employees with valid working permits
issued by the Department may exercise the right to self-organization and join or assist labor unions for purposes of collective
bargaining if they are nationals of a country which grants the same or similar rights to Filipino workers, as certified by the
Department of Foreign Affairs.

For purposes of this section, any employee, whether employed for a definite period or not, shall beginning on the first day of
his/her service, be eligible for membership in any labor organization.

All other workers, including ambulant, intermittent and other workers, the self-employed, rural workers and those without any
definite employers may form labor organizations for their mutual aid and protection and other legitimate purposes
except collective bargaining.

[Emphases Supplied]

Clearly, there is nothing in the foregoing implementing rules which provides that workers, with definite employers, cannot form or
join a workers' association for mutual aid and protection. Section 2 thereof even broadens the coverage of workers who can form
or join a workers' association. Thus, the Court agrees with Samahan's argument that the right to form a workers' association is
not exclusive to ambulant, intermittent and itinerant workers. The option to form or join a union or a workers' association lies with
the workers themselves, and whether they have definite employers or not.

No misrepresentation on the part

of Samahan to warrant cancellation
of registration

In this case, Samahan's registration was cancelled not because its members were prohibited from forming a workers'
association but because they allegedly committed misrepresentation for using the phrase, "KAMI, ang mga Manggagawa sa
HANJIN Shipyard."

Misrepresentation, as a ground for the cancellation of registration of a labor organization, is committed "in connection with the
adoption, or ratification of the constitution and by-laws or amendments thereto, the minutes of ratification, the list of members
who took part in the ratification of the constitution and by-laws or amendments thereto, and those in connection with the election
of officers, minutes of the election of officers, and the list of voters, xxx." 56

In Takata Corporation v. Bureau of Relations,57 the DOLE Regional Director granted the petition for the cancellation of certificate
of registration of Samahang Lakas Manggagawa sa Takata (Salamat) after finding that the employees who attended the
organizational meeting fell short of the 20% union registration requirement. The BLR, however, reversed the ruling of the DOLE
Regional Director, stating that petitioner Takata Corporation (Takata) failed to prove deliberate and malicious misrepresentation
on the part of respondent Salamat. Although Takata claimed that in the list of members, there was an employee whose name
appeared twice and another was merely a project employee, such facts were not considered misrepresentations in the absence
of showing that the respondent deliberately did so for the purpose of increasing their union membership. The Court ruled in favor
of Salamat.

In S.S. Ventures International v. S.S. Ventures Labor Union,58 the petition for cancellation of certificate of registration was
denied. The Court wrote:

If the union's application is infected by falsification and like serious irregularities, especially those appearing on the face
of the application and its attachments, a union should be denied recognition as a legitimate labor organization. Prescinding
from these considerations, the issuance to the Union of Certificate of Registration No. R0300-oo-02-UR-0003 necessarily implies
that its application for registration and the supporting documents thereof are prima facie free from any vitiating irregularities.
Another factor which militates against the veracity of the allegations in the Sinumpaang Petisyon is the lack of particularities on
how, when and where respondent union perpetrated the alleged fraud on each member. Such details are crucial for in
the proceedings for cancellation of union registration on the ground of fraud or misrepresentation, what needs to be
established is that the specific act or omission of the union deprived the complaining employees-members of their right to
choose.

[Emphases Supplied]

8|Page
Based on the foregoing, the Court concludes that misrepresentation, to be a ground for the cancellation of the certificate of
registration, must be done maliciously and deliberately. Further, the mistakes appearing in the application or attachments must
be grave or refer to significant matters. The details as to how the alleged fraud was committed must also be indubitably shown.

The records of this case reveal no deliberate or malicious intent to commit misrepresentation on the part of
Samahan.1âwphi1 The use of such words "KAMI, ang mga Manggagawa sa HANJIN Shipyard" in the preamble of the
constitution and by-laws did not constitute misrepresentation so as to warrant the cancellation of Samahan's certificate of
registration. Hanjin failed to indicate how this phrase constitutes a malicious and deliberate misrepresentation. Neither was there
any showing that the alleged misrepresentation was serious in character. Misrepresentation is a devious charge that cannot
simply be entertained by mere surmises and conjectures.

Even granting arguendo that Samahan' s members misrepresented themselves as employees or workers of Hanjin, said
misrepresentation does not relate to the adoption or ratification of its constitution and by-laws or to the election of its officers.

Removal of the word "Hanjin Shipyard"

from the association 's name, however,
does not infringe on Samahan 's right to
self-organization

Nevertheless, the Court agrees with the BLR that "Hanjin Shipyard" must be removed in the name of the association. A
legitimate workers' association refers to an association of workers organized for mutual aid and protection of its members or for
any legitimate purpose other than collective bargaining registered with the DOLE. 59Having been granted a certificate of
registration, Samahan's association is now recognized by law as a legitimate workers' association.

According to Samahan, inherent in the workers' right to selforganization is its right to name its own organization. It seems to
equate the dropping of words "Hanjin Shipyard" from its name as a restraint in its exercise of the right to self-organization.
Hanjin, on the other hand, invokes that "Hanjin Shipyard" is a registered trade name and, thus, it is within their right to prohibit its
use.

As there is no provision under our labor laws which speak of the use of name by a workers' association, the Court refers to the
Corporation Code, which governs the names of juridical persons. Section 18 thereof provides:

No corporate name may be allowed by the Securities and Exchange Commission if the proposed name is identical or
deceptively or confusingly similar to that of any existing corporation or to any other name already protected by law or is
patently deceptive, confusing or contrary to existing laws. When a change in the corporate name is approved, the Commission
shall issue an amended certificate of incorporation under the amended name.

[Emphases Supplied]

The policy underlying the prohibition in Section 18 against the registration of a corporate name which is "identical or deceptively
or confusingly similar" to that of any existing corporation or which is "patently deceptive" or "patently confusing" or "contrary to
existing laws," is the avoidance of fraud upon the public which would have occasion to deal with the entity concerned, the
evasion of legal obligations and duties, and the reduction of difficulties of administration and supervision over corporations.60

For the same reason, it would be misleading for the members of Samahan to use "Hanjin Shipyard" in its name as it could give
the wrong impression that all of its members are employed by Hanjin.

Further, Section 9, Rule IV of D.O. No. 40-03, Series of 2003 explicitly states:

The change of name of a labor organization shall not affect its legal personality. All the rights and obligations of a labor
organization under its old name shall continue to be exercised by the labor organization under its new name.

Thus, in the directive of the BLR removing the words "Hanjin Shipyard," no abridgement of Samahan's right to self-organization
was committed.

WHEREFORE, the petition is PARTIALLY GRANTED. The July 4, 2013 Decision and the January 28, 2014 Resolution of the
Court of Appeals are hereby REVERSED and SET ASIDE. The September 6, 2010 Resolution of the Bureau of Labor Relations,
as modified by its November 28, 2011 Resolution, is REINSTATED. SO ORDERED.

9|Page
G.R. No. 111262 September 19, 1996

SAN MIGUEL CORPORATION EMPLOYEES UNION-PTGWO, represented by its President RAYMUNDO HIPOLITO,
JR., petitioner,
vs.
HON. MA. NIEVES D. CONFESOR, Secretary of Labor, Dept. of Labor & Employment, SAN MIGUEL CORPORATION,
MAGNOLIA CORPORATION (Formerly, Magnolia Plant) and SAN MIGUEL FOODS, INC. (Formerly, B-Meg
Plant), respondents.

KAPUNAN, J.:

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

The facts are as follows:

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

This CBA provided, among others, that:

ARTICLE XIV

DURATION OF AGREEMENT

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Subsequently, on March 30, 1995, 5 petitioner-union filed a Motion for Issuance of a Temporary Restraining Order or
Writ of Preliminary Injunction to enjoin the holding of the certification elections in the different companies, maintaining
that the employees of Magnolia and SMFI fall within the bargaining unit of SMC.

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

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

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

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

Amidst all these pleadings, the following primordial issues arise:

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

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

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

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

We agree with the Secretary of Labor.

Pertinent to the first issue is Art. 253-A of the Labor Code as amended which reads:

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

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

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

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

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

THE CHAIRMAN (SEN. HERRERA): Present practice?

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

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

THE CHAIRMAN (REP. VELOSO): Yes.

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

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

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

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

xxx xxx xxx

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

HON. CHAIRMAN HERRERA: Five years.

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

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

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

HON. CHAIRMAN HERRERA: Yes.

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

HON. CHAIRMAN HERRERA: Not later than three years.

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

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

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

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

HON. ISIDRO: Yes.

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

HON. ISIDRO: Yes.

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

HON. ISIDRO: Oo.

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

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

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

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

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

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

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

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

HON. CHAIRMAN VELOSO : Mon, for four years?

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

HON. CHAIRMAN HERRERA: Five years.

HON. ISIDRO: Puro three years.

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

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

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

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

xxx xxx xxx

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

HON. CHAIRMAN HERRERA: representation status.

HON. CHAIRMAN VELOSO: Only on —

HON. CHAIRMAN HERRERA: — the representations.

HON. CHAIRMAN VELOSO: But on the economic issues.

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

HON. CHAIRMAN VELOSO: At least on second year.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

xxx xxx xxx

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

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

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

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

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

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

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

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

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

Moreover, in determining an appropriate bargaining unit, the test of grouping is mutuality or commonality of interests.
The employees sought to be represented by the collective bargaining agent must have substantial mutual interests in
terms of employment and working conditions as evinced by the type of work they performed. 22 Considering the spin-
offs, the companies would consequently have their respective and distinctive concerns in terms of the nature of work,
wages, hours of work and other conditions of employment. Interests of employees in the different companies perforce
differ. SMC is engaged in the business of the beer manufacturing. Magnolia is involved in the manufacturing and
processing of diary products 23 while SMFI is involved in the production of feeds and the processing of chicken. 24 The
nature of their products and scales of business may require different skills which must necessarily be commensurated
by different compensation packages. The different companies may have different volumes of work and different working
conditions. For such reason, the employees of the different companies see the need to group themselves together and
organize themselves into distinctive and different groups. It would then be best to have separate bargaining units for the
different companies where the employees can bargain separately according to their needs and according to their own
working conditions.

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

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

xxx xxx xxx

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

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

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

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

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

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

SO ORDERED.

16 | P a g e
[G.R. No. 81883. September 23, 1992.]

KNITJOY MANUFACTURING, INC., Petitioner, v. PURA FERRER-CALLEJA, Director of Bureau of Labor Relations, and
KNITJOY MONTHLY EMPLOYEES UNION, Respondents.

[G.R. No. 82111. September 23, 1992.]

CONFEDERATION OF FILIPINO WORKERS (CFW), Petitioner, v. DIRECTOR PURA FERRER-CALLEJA and KNITJOY
MONTHLY EMPLOYEES UNION (KMEU), Respondents.

V.E. Del Rosario & Associates for petitioner in G.R. No. 81883.

Rogelio R. Udarbe for petitioner in G.R. No. 82111.

Banzuela, Flores, Miralles, Raneses, Sy, Taquio and Associates for Private Respondent.

SYLLABUS

1. LABOR AND SOCIAL LEGISLATION; LABOR CODE; LABOR RELATIONS; ONE COMPANY-ONE UNION POLICY;
EXCEPTION. — The suggested bias of the Labor Code in favor of the one company-one union policy, anchored on the greater
mutual benefits which the parties could derive, especially in the case of employees whose bargaining strength could undeniabl y
be enhanced by their unity and solidarity but diminished by their disunity, division and dissension, is not without exceptions. The
present Article 245 of the Labor Code expressly allows supervisory employees who are not performing managerial functions to
join, assist or form their separate union but bars them from membership in a labor organization of the rank-and-file employees.
Even Section 2(c), Rule V, Book V of the Implementing Rules and Regulations of the Labor Code, which seeks to implement the
policy, also recognizes exceptions. The usual exception, of course, is where the employer unit has to give way to the other units
like the craft unit, plant unit, or a subdivision thereof, the recognition of these exceptions takes into account the policy to assure
employees of the fullest freedom in exercising their rights. Otherwise stated, the one company-one union policy must yield to the
right of the employees to form unions or associations for purposes not contrary to law, to self-organization and to enter into
collective bargaining negotiations, among others, which the Constitution guarantees.

2. CONSTITUTIONAL LAW; BILL OF RIGHTS; RIGHT TO FROM UNION OR ASSOCIATIONS; SCOPE. — The right to form a
union or association or to self-organization comprehends two (2) broad notions, to wit: (a) the liberty or freedom, i.e., 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. (Victoriano v. Elizalde Rope
Workers’ Union, 59 SCRA 54).

3. LABOR AND SOCIAL LEGISLATION; LABOR CODE; LABOR RELATIONS; ONE COMPANY-ONE UNION POLICY; NOT
APPLICABLE WHERE EXISTING UNION COVERED ONLY ONE CLASS OF EMPLOYEES; CASE AT BAR. — in the
bargaining history of KNITJOY, the CBA has been consistently limited to the regular rank-and-file employees paid on a daily or
piece-rate basis. On the other hand, the rank-and-file employees paid on a monthly basis were never included within its scope.
Respondent KMEU’s membership is limited to the latter class of employees, KMEU does not seek to dislodge CFW as the
exclusive bargaining representative for the former. The records further disclose that in the certification solicited by TUPAS and
during the elections which followed thereafter, resulting in the certification of CFW as the exclusive bargaining representative,
the monthly-paid employees were expressly excluded. Thus, the negotiations between CFW and KNITJOY following such a
certification could only logically refer to the rank-and-file employees paid on a daily or piece-rate basis. Clearly therefore,
KNITJOY and CFW recognize that insofar as the monthly-paid employees are concerned, the latter’s constituting a separate
bargaining unit with the appropriate union as sole bargaining representative, can neither be prevented nor avoided without
infringing on these employees’ rights to form a union and to enter into collective bargaining negotiations. Stated differently,
KNITJOY and CFW recognize the fact that the existing bargaining unit in the former is not — and has never been — the
employer unit. Given this historical and factual setting, KMEU had the unquestioned and undisputed right to seek certification as
the exclusive bargaining representative for the monthly-paid rank-and-file employees; both KNITJOY and CFW cannot block the
same on the basis of this Court’s declaration in Bulletin Publishing Corp. v. Hon. Sanchez 15 and General Rubber and Footwear
Corp. v. Bureau of Labor Relations (155 SCRA 283 [1987]) regarding the one-company-one union concept.

4. ID.; ID.; ID.; CERTIFICATION ELECTION; RESULTS THEREOF CONFINED ONLY TO THE GROUP IT REPRESENTS;
CBA ENTERED DOES NOT BAR HOLDING OF ANOTHER CERTIFICATION ELECTION FOR THE OTHER GROUP; CASE
AT BAR. — Considering that (a) the TUPAS solicited certification election was strictly confined to the rank-and-file employees
who are paid on a daily or piece-rate basis, (b) the results of the election must also necessarily confine the certified union’s
representation to the group it represents and (c) the issue of the plight of the monthly-paid employees was still pending,
KNITJOY and CFW clearly acted with palpable bad faith and malice in including within the scope of the new CBA these monthly-
paid employees. Thus was effected a conspiracy to defeat and suppress the right of the KMEU and its members to bargain
collectively and negotiate for themselves, to impose upon the latter a contract the negotiation for which they were not even given
notice of, consulted or allowed to participate in, and to oust from the BLR the pending appeal on the certification issue. In the
latter case, KNITJOY and CFW are guilty of contumacious conduct. It goes without saying then that the new CBA cannot validly
include in its scope or coverage the monthly-paid rank-and-file employees of KNITJOY. It does not bar the holding of a
certification election to determine their sole bargaining agent, and the negotiation for and the execution of a subsequent CBA
between KNITJOY and the eventual winner in said election (Section 4, Rule V, Book V of the Rules Implementing the Labor
Code).

17 | P a g e
DAVIDE, JR., J.:

These petitions have a common origin and raise identical issues. They were ordered consolidated on 23 November 1988.

In G.R. No. 81883, the 1 December 1987 Decision of respondent Director of the Bureau of Labor Relations in BLR Case No. A-
10-315-87, which reversed the Order of Med-Arbiter-Designate Rolando S. dela Cruz dated 4 September 1987 and ordered the
holding of a certification election among the regular rank-and-file monthly-paid employees of Knitjoy Manufacturing, Inc.
(KNITJOY), is assailed by the latter.

The Med-Arbiter’s order dismissed the petition of private respondent Knitjoy Monthly Employees Union (KMEU) for such
certification election and directed the parties "to work out (sic) towards the formation of a single union in the company."cralaw
virtua1aw library

The antecedent material operative facts in these petitions are as follows:chanrob1es virtual 1aw library

Petitioner KNITJOY had a collective bargaining agreement (CBA) with the Federation of Filipino Workers (FFW). The bargaining
unit covered only the regular rank-and-file employees of KNITJOY paid on a daily or piece-rate basis. It did not include regular
rank-and-file office and production employees paid on a monthly basis. The CBA expired on 15 June 1987. Prior to its expiration,
the FFW was split into two (2) factions — the Johnny Tan and the Aranzamendez factions. The latter eventually became the
Confederation of Filipino Workers (CFW), herein petitioner in G.R. No. 82111.

Also prior to the expiration of the CBA, the Trade Union of the Philippines and Allied Services (TUPAS) filed a petition for the
holding of a certification election among KNITJOY’s regular rank-and-file employees paid on a daily and piece-rate basis.
Excluded were the regular rank-and-file employees paid on a monthly basis. In the certification election conducted on 10 June
1987, CFW emerged as the winner; thereafter, negotiations for a new CBA between CFW and KNITJOY
commenced.chanroblesvirtualawlibrary

On 24 June 1987, during the pendency of the said negotiations, private respondent KMEU filed a petition for certification election
among KNITJOY’s regular rank-and-file monthly-paid employees with Regional Office No. IV of the Department of Labor and
Employment (DOLE) which docketed the same as R-04-OD-M-6-75-87. The Knitjoy Monthly Employees Association and
Confederation of Citizens Labor Union (KMEA-CCLU), another union existing in the said company, and petitioner CFW
intervened therein.

The petition was dismissed in the Order of 4 September 1987 of Med-Arbiter Rolando S. de la Cruz, the dispositive portion of
which reads:jgc:chanrobles.com.ph

"WHEREFORE, premises considered, the petition is hereby Dismissed, but the parties are instructed to work out (sic) towards
the formation of a single union in the company." 1

KMEU filed a motion to reconsider this order, which was treated as an appeal by the Bureau of Labor Relations (BLR).

On 1 December 1987, public respondent Pura Ferrer-Calleja. Director of the BLR, handed down a Decision 2 reversing the order
of Med-Arbiter de la Cruz. The dispositive portion of the Decision reads:jgc:chanrobles.com.ph

"WHEREFORE, premises considered, the Appeal of Knitjoy Monthly Employees is hereby granted subject to the exclusion of the
monthly paid employees who are deemed managerial.

Let, therefore, the certification election proceed without delay, with the following as choices:chanrob1es virtual 1aw library

1. Knitjoy Monthly Employees Union (KMEU); and

2. No Union.

The company’s latest payroll shall be the basis in determining the list of eligible voters.

SO ORDERED."cralaw virtua1aw library

Respondent Director brushed aside KNITJOY’s arguments that the monthly-paid employees have the same working incentives
as their counterparts, the daily-paid workers; that the existing collective bargaining agent (CFW) is willing to include the monthly-
paid employees, and that out of the 212 monthly-paid employees, 116 qualify as managerial employees while the rest who are
holding confidential or technical positions should likewise be excluded. In finding for KMEU, said Director declared
that:jgc:chanrobles.com.ph

"As pointed out by the Supreme Court in the similar case of General Rubber and Footwear Corporation v. Bureau of Labor
Relations, Et Al., G.R. No. 74262, it is perhaps unusual for management to have to deal with two (2) collective bargaining unions
but there is no one to blame except management for creating the situation it is in. From the beginning of the existence of the
CBA, management had sought to indiscriminately suppress the members of the petitioners’ right (sic) to self-organization.
Respondents’ argument that the incumbent collective bargaining agent is willing to accommodate herein petitioner is of no
moment since the option now rests upon the petitioner as to whether or not they desire to join the existing collective bargaining
agent or remain as separate (sic) union." 3

KNITJOY and CFW separately moved to reconsider the said decision alleging, as principal underpinning therefor, the conclusion

18 | P a g e
and signing between them, allegedly on 27 November 1987 — before the rendition of the challenged decision — of a CBA which
includes in its coverage the monthly-paid rank-and-file employees. It is averred that said CBA has rendered the case moot and
academic; moreover, to remove the monthly-paid employees from their present bargaining unit would lead to the fragmentation
thereof, contrary to existing labor policies favoring larger units.chanrobles virtual lawlibrary

In her Decision of 8 February 1988, respondent Director denied for lack of merit the motion for reconsideration on the principal
ground that although the monthly-paid rank-and-file employees were allegedly included within the scope of the new CBA, they
are not barred from forming a separate bargaining unit considering that: (a) since the petition for certification election was filed
as early as 24 June 1987, there already existed a pending. representation issue when KNITJOY and CFW commenced
negotiations for a new CBA; nevertheless, KMEU was not brought into the said negotiations and was therefore not a privy to the
CBA; (b) members of KMEU did not participate in the ratification of the CBA; contrary to KNITJOY s claim that the same was
unanimously ratified by the members of the bargaining unit, the CBA failed to mention even one monthly-paid employee who
participated in the ratification process, and (c) while it is true that the policy of the DOLE is to favor a one company-one union
scenario which finds basis in Section 2, Rule V, Book V of the Rules Implementing the Labor Code, there are, nonetheless,
some exceptions thereto, as where the bargaining history requires the formation of another bargaining unit. Besides, such a
policy must yield to an employee’s Constitutional right to form unions which includes the freedom to join a union of one’s choice.
4

The new CBA, which KMEU claims to have been signed on 12 December 1987, and not on 27 November 1987 as both
KNITJOY and CFW boldly assert, defines the bargaining unit covered as follows:jgc:chanrobles.com.ph

"SECTION 2. The bargaining unit covered by this Agreement consists of all regular and permanent rank-and-file employees of
the COMPANY employed in its production plants and paid on a daily or piece-rate basis and regular, rank-and-file monthly paid
office employees, excluding managerial, supervisory, casual, temporary and probationary employees, and security guards." 5

Unfazed by their defeat before the BLR, KNITJOY and CFW separately filed the instant petitions. The former imputes upon
respondent Director grave abuse of discretion in holding that (a) the scope of the bargaining unit agreed upon in the new CBA
does not bind KMEU because it is not a party thereto, (b) the acceptance by all the members of KMEU of all benefits of the CBA
did not constitute an overt act of ratification and (c) the CBA was concluded on 12 December 1987 and not on 27 November
1987. It further contends that respondent Director contumaciously violated the one company-one union policy of the Labor Code
and disregarded the ruling of this Court in Bulletin Publishing Corp. v. Hon. Sanchez, 6 reiterated in part in General Rubber and
Footwear Corp. v. Bureau of Labor Relations. 7 Upon the other hand, CFW contends that respondent Director committed grave
abuse of discretion in (a) allowing the creation of a unit separate from the existing bargaining unit defined in the new CBA thus
abetting the proliferation of unions, (b) disregarding the CBA provisions which consider the CFW as the sole and exclusive
bargaining agent of all rank-and-file employees and (c) excluding CFW from the choices of unions to be voted upon. 8

On 24 August 1988, 9 this Court gave due course to the petition in G.R. No. 81883 after both the public and private respondents
filed their separate comments and the petitioner filed its consolidated reply thereto. 10

On 23 November 1988, G.R. No. 82111 was consolidated with G.R. No. 81883 and the petitioner in the former was ordered to
file a consolidated reply to the separate comments of both respondents. 11

The principal issues raised in these petitions are:chanrob1es virtual 1aw library

1. Whether or not petitioner KNITJOY’s monthly-paid regular rank-and-file employees can constitute an appropriate bargaining
unit separate and distinct from the existing unit composed of daily or piece-rate paid regular rank-and-file employees, and

2. Whether or not the inclusion in the coverage of the new CBA between KNITJOY and CFW of the monthly-paid rank-and-file
employees bars the holding of a certification election among the said monthly paid employees.

We decide for the respondents.

1. The suggested bias of the Labor Code in favor of the one company-one union policy, anchored on the greater mutual benefits
which the parties could derive, especially in the case of employees whose bargaining strength could undeniably be enhanced by
their unity and solidarity but diminished by their disunity, division and dissension, is not without exceptions.

The present Article 245 of the Labor Code expressly allows supervisory employees who are not performing managerial functions
to join, assist or form their separate union but bars them from membership in a labor organization of the rank-and-file
employees. It reads:jgc:chanrobles.com.ph

"ARTICLE 245. Ineligibility of managerial employees to join any labor organization; right of supervisory employees. —
Managerial employees are not eligible to join, assist or form any labor organization. Supervisory employees shall not be eligible
for membership in a labor organization of the rank-and-file employees but may join, assist or form separate labor organizations
of their own."cralaw virtua1aw library

This provision obviously allows more than one union in a company.

Even Section 2(c), Rule V, Book V of the Implementing Rules and Regulations of the Labor Code, which seeks to implement the
policy, also recognizes exceptions. It reads:chanrobles virtual lawlibrary

"SECTION 2. Who may file. — Any legitimate labor organization or the employer, when requested to bargain collectively, may
file the petition.

The petition, when filed by a legitimate labor organization shall contain, among others:chanrob1es virtual 1aw library

19 | P a g e
x x x

(c) description of the bargaining unit which shall be the employer unit unless circumstances otherwise require; . . . ." (Emphasis
supplied)

The usual exception, of course, is where the employer unit has to give way to the other units like the craft unit, plant unit, or a
subdivision thereof, the recognition of these exceptions takes into account the policy to assure employees of the fullest freedom
in exercising their rights. 12 Otherwise stated, the one company-one union policy must yield to the right of the employees to form
unions or associations for purposes not contrary to law, to self-organization and to enter into collective bargaining negotiations,
among others, which the Constitution guarantees. 13

The right to form a union or association or to self-organization comprehends two (2) broad notions, to wit: (a) the liberty or
freedom, i.e., 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 Victoriano v.
Elizalde Rope Workers’ Union, 14 this Court stated:jgc:chanrobles.com.ph

". . . Notwithstanding the different theories propounded by the different schools of jurisprudence regarding the nature and
contents of a ‘right’, it can be safely said that whatever theory one subscribes to, a right comprehends at least two broad notions,
namely: first, liberty or freedom, i.e., the absence of legal restraint, whereby an employee may act for himself without being
prevented by law; and second, power, whereby an employee may, as he pleases, join or refrain from joining an association. It is,
therefore, the employee who should decide for himself whether he should join or not an association, and should he choose to
join, he himself makes up his mind as to which association he would join; and even after he has joined, he still retains the liberty
and the power to leave and cancel his membership with said organization at any time [Pagkakaisa Samahang Manggagawa ng
San Miguel Brewery v. Enriquez, Et Al., 108 Phil., 1010, 1019]. It is clear, therefore, that the right to join a union includes the
right to abstain from joining any union [Abo, Et. Al. v. PHILAME (KG) Employees Union, Et Al., L-19912, January 30, 1965, 13
SCRA 120, 123, quoting Rothenberg, Labor Relations]. Inasmuch as what both the Constitution and the Industrial Peace Act
have recognized, and guaranteed to the employee, is the ‘right’ to join associations of his choice, it would be absurd to say that
the law also imposes, in the same breath, upon the employee the duty to join associations. The law does not enjoin an employee
to sign up with any association."cralaw virtua1aw library

Furthermore, it is not denied that in the bargaining history of KNITJOY, the CBA has been consistently limited to the regular
rank-and-file employees paid on a daily or piece-rate basis. On the other hand, the rank-and-file employees paid on a monthly
basis were never included within its scope. Respondent KMEU’s membership is limited to the latter class of employees, KMEU
does not seek to dislodge CFW as the exclusive bargaining representative for the former. The records further disclose that in the
certification solicited by TUPAS and during the elections which followed thereafter, resulting in the certification of CFW as the
exclusive bargaining representative, the monthly-paid employees were expressly excluded. Thus, the negotiations between
CFW and KNITJOY following such a certification could only logically refer to the rank-and-file employees paid on a daily or
piece-rate basis. Clearly therefore, KNITJOY and CFW recognize that insofar as the monthly-paid employees are concerned, the
latter’s constituting a separate bargaining unit with the appropriate union as sole bargaining representative, can neither be
prevented nor avoided without infringing on these employees’ rights to form a union and to enter into collective bargaining
negotiations. Stated differently, KNITJOY and CFW recognize the fact that the existing bargaining unit in the former is not — and
has never been — the employer unit. Given this historical and factual setting, KMEU had the unquestioned and undisputed right
to seek certification as the exclusive bargaining representative for the monthly-paid rank-and-file employees; both KNITJOY and
CFW cannot block the same on the basis of this Court’s declaration in Bulletin Publishing Corp. v. Hon. Sanchez 15 and General
Rubber and Footwear Corp. v. Bureau of Labor Relations 16 regarding the one company-one union concept. Petitioners have
obviously misread these cases. In the first, We stated that" [t]he crux of the dispute . . . is whether or not supervisors in petitioner
company therein may, for purposes of collective bargaining, form a union separate and distinct from the existing union organized
by the rank-and-file employees of the same company," 17 and ruled that the members of the Bulletin Supervisory Union, wholly
composed of supervisors, are not qualified to form a union of their own under the law and rules then existing, considering that"
[a] perusal of the job descriptions corresponding to the private respondents as outlined in the petition, clearly reveals the private
respondents to be managers, purchasing officers, personnel officers, property officers, supervisors, cashiers, heads of various
sections and the like. The nature of their duties gives rise to the irresistible conclusion that most of the herein private
respondents are performing managerial functions;" 18 hence, under Article 246 19 of the Labor Code, they cannot form, join and
assist labor organizations. It should be stressed that the statement therein that supervisors "who do not assume any managerial
function may join or assist an existing rank-and-file union or if none exists, to join or assist in the formation of such rank-and-file
organization" 20 is no longer legally feasible under existing laws. As earlier noted, the present Article 245 of the Labor Code
allows supervisory employees who are not exercising managerial functions to join, assist or form separate labor organizations of
their own but prohibits them from joining a labor organization composed of the rank-and-file employees.chanrobles lawlibrary :
rednad

The second case on the other hand, demolishes the stand of KNITJOY and CFW for, as correctly contended by the
respondents, it in fact recognizes an exception to the one company-one union concept. Thus:jgc:chanrobles.com.ph

"Perhaps it is unusual for the petitioner to have to deal with two (2) collective bargaining unions but there is no one to blame
except petitioner itself for creating the situation it is in. From the beginning of the existence in 1963 of a bargaining unit for the
employees up to the present, petitioner had sought to indiscriminately suppress the members of the private respondent’s right
(sic) to self-organization provided for by law. Petitioner, in justification of its action, maintained that the exclusion of the members
of the private respondent from the bargaining union of the rank-and-file or from forming their own union was agreed upon by
petitioner corporation with the previous bargaining representatives . . . Such posture has no leg to stand on. It has not been
shown that private respondent was privy to this agreement. And even if it were so, it can never bind subsequent federations and
unions particularly private respondent-union because it is a curtailment of the right to self-organization guaranteed by the labor
laws. However, to prevent any difficulty and to avoid confusion to all concerned and, more importantly, to fulfill the policy of the
New Labor Code as well as to be consistent with Our ruling in the Bulletin case, supra, the monthly-paid rank-and-file employees

20 | P a g e
should be allowed to join the union of the daily-paid-rank-and-file employees of petitioner so that they can also avail of the CBA
benefits or to form their own rank-and-file union, without prejudice to the certification election that has been ordered." 21
(Emphasis supplied)

2. Regardless of the date when the new CBA was executed - whether on 27 November 1987 as contended by KNITJOY and
CFW or 12 December 1967 as claimed by the respondents — the fact remains that it was executed before the resolution of
KMEU’s petition for certification election among the monthly paid employees became final. This Court, however, sustains the
respondents’ claim for indeed if it was executed by the parties on 27 November 1987, both KNITJOY and CFW would have
immediately filed the appropriate pleading with the BLR informing it of such execution and moving for the dismissal of the appeal
on the ground that it has been rendered moot and academic. Moreover, public respondent’s finding on this point is supported by
substantial evidence, thus:jgc:chanrobles.com.ph

"The parties could not have signed the said CBA on 27 November 1987, contrary to their allegation, because from 4:00 - 10:00
p.m. on the same day, 27 November 1987, the parties still attended a conciliation conference before Assistant Director Maximo
L. Lim of the NCR (see Annex "F" of respondent’s Supplemental Motion for Reconsideration) and agreed in principle on nine (9)
items or provisions to be included in said CBA. Said minutes do not state that these nine items are the remaining unresolved
issues in the negotiation of the CBA." 22 It was only in their motion for the reconsideration of public respondent’s decision of 1
December 1987 that the existence of the new CBA was made known.chanrobles virtualawlibrary
chanrobles.com:chanrobles.com.ph

Considering that (a) the TUPAS solicited certification election was strictly confined to the rank-and-file employees who are paid
on a daily or piece-rate basis, (b) the results of the election must also necessarily confine the certified union’s representation to
the group it represents and (c) the issue of the plight of the monthly-paid employees was still pending, KNITJOY and CFW
clearly acted with palpable bad faith and malice in including within the scope of the new CBA these monthly-paid employees.
Thus was effected a conspiracy to defeat and suppress the right of the KMEU and its members to bargain collectively and
negotiate for themselves, to impose upon the latter a contract the negotiation for which they were not even given notice of,
consulted or allowed to participate in, and to oust from the BLR the pending appeal on the certification issue. In the latter case,
KNITJOY and CFW are guilty of contumacious conduct. It goes without saying then that the new CBA cannot validly include in
its scope or coverage the monthly-paid rank-and-file employees of KNITJOY. It does not bar the holding of a certification election
to determine their sole bargaining agent, and the negotiation for and the execution of a subsequent CBA between KNITJOY and
the eventual winner in said election. Section 4, Rule V, Book V of the Rules Implementing the Labor Code expressly
provides:jgc:chanrobles.com.ph

"SECTION 4. Effects of early agreements. — The representation case shall not, however, be adversely affected by a collective
bargaining agreement registered before or during the last 60 days of a subsisting agreement or during the pendency of the
representation case." (Emphasis supplied)

The public respondent then committed no abuse of discretion ordering a certification election among the monthly-paid rank-and-
file employees, except managerial employees, of KNITJOY. The choice however, should not be, as correctly contended by
CFW, limited to merely (a) KMEU and (b) no union. The records disclose that the intervenors in the petition for certification are
the KMEA-CCLU and CFW. They should be included as among the choices in the certification election.cralawnad

WHEREFORE, the instant petitions are DISMISSED. However, the challenged decision of public respondent of 1 December
1987 is modified to include in the choices for the certification election petitioner Confederation of Filipino Workers (CFW) and the
Knitjoy Monthly Employees Association and Confederation of Citizens Labor Unions (KMEU-CCLU).

Costs against petitioners.

SO ORDERED.

21 | P a g e
G.R. No. 160352 July 23, 2008

REPUBLIC OF THE PHILIPPINES, represented by Department of Labor and Employment (DOLE), Petitioner,
vs.
KAWASHIMA TEXTILE MFG., PHILIPPINES, INC., Respondent.

DECISION

AUSTRIA-MARTINEZ, J.:

The Republic of the Philippines assails by way of Petition for Review on Certiorari under Rule 45 of the Rules of Court, the
December 13, 2002 Decision1 of the Court of Appeals (CA), which reversed the August 18, 2000 Decision 2 of the Department of
Labor and Employment (DOLE), and reinstated the May 17, 2000 Order 3 of Med-Arbiter Anastacio L. Bactin, dismissing the
petition of Kawashima Free Workers Union-PTGWO Local Chapter No. 803 (KFWU) for the conduct of a certification election in
Kawashima Textile Mfg. Phils., Inc. (respondent); and the October 7, 2003 CA Resolution4 which denied the motion for
reconsideration.

The relevant facts are of record.

On January 24, 2000, KFWU filed with DOLE Regional Office No. IV, a Petition for Certification Election to be conducted in the
bargaining unit composed of 145 rank-and-file employees of respondent.5 Attached to its petition are a Certificate of Creation of
Local/Chapter6 issued on January 19, 2000 by DOLE Regional Office No. IV, stating that it [KFWU] submitted to said office a
Charter Certificate issued to it by the national federation Phil. Transport & General Workers Organization (PTGWO), and a
Report of Creation of Local/Chapter.7

Respondent filed a Motion to Dismiss 8 the petition on the ground that KFWU did not acquire any legal personality because its
membership of mixed rank-and-file and supervisory employees violated Article 245 of the Labor Code, and its failure to submit
its books of account contravened the ruling of the Court in Progressive Development Corporation v. Secretary, Department of
Labor and Employment.9

In an Order dated May 17, 2000, Med-Arbiter Bactin found KFWU’s legal personality defective and dismissed its petition for
certification election, thus:

We scrutinize the facts and evidences presented by the parties and arrived at a decision that at least two (2) members of
[KFWU], namely: Dany I. Fernandez and Jesus R. Quinto, Jr. are supervisory employees, having a number of personnel under
them. Being supervisory employees, they are prohibited under Article 245 of the Labor Code, as amended, to join the union of
the rank and file employees. Dany I. Fernandez and Jesus R. Quinto, Jr., Chief Engineers of the Maintenance and
Manufacturing Department, respectively, act as foremen to the line engineers, mechanics and other non-skilled workers and
responsible [for] the preparation and organization of maintenance shop fabrication and schedules, inventory and control of
materials and supplies and tasked to implement training plans on line engineers and evaluate the performance of their
subordinates. The above-stated actual functions of Dany I. Fernandez and Jesus R. Quinto, Jr. are clear manifestation that they
are supervisory employees.

xxxx

Since petitioner’s members are mixture of rank and file and supervisory employees, petitioner union, at this point [in]
time, has not attained the status of a legitimate labor organization. Petitioner should first exclude the supervisory
employees from it membership before it can attain the status of a legitimate labor organization. The above judgment is
supported by the decision of the Supreme Court in the Toyota Case 10 wherein the High Tribunal ruled:

"As respondent union’s membership list contains the names of at least twenty seven (27) supervisory employees in Level Five
Positions, the union could not prior to purging itself of its supervisory employee members, attain the status of a legitimate labor
organization. Not being one, it cannot possess the requisite personality to file a petition for certification election." (Underscoring
omitted.)

xxxx

Furthermore, the commingling of rank and file and supervisory employees in one (1) bargaining unit cannot be cured in the
exclusion-inclusion proceedings [at] the pre-election conference. The above ruling is supported by the Decision of the Supreme
Court in Dunlop Slazenger (Phils.), Inc. vs. Honorable Secretary of Labor and Employment, et al., G.R. No. 131248 dated
December 11, 199811 x x x.

xxxx

WHEREFORE, premises considered, the petition for certification election is hereby dismissed for lack of requisite legal status of
petitioner to file this instant petition.

SO ORDERED.12 (Emphasis supplied)

On the basis of the aforecited decision, respondent filed with DOLE Regional Office No. IV a Petition for Cancellation of
Charter/Union Registration of KFWU,13 the final outcome of which, unfortunately, cannot be ascertained from the records.

Meanwhile, KFWU appealed14 to the DOLE which issued a Decision on August 18, 2000, the dispositive portion of which reads:

22 | P a g e
WHEREFORE, the appeal is GRANTED. The Order dated 17 May 2000 of the Med-Arbiter is REVERSED and SET ASIDE.
Accordingly, let the entire records of the case be remanded to the office of origin for the immediate conduct of certification
election, subject to the usual pre-election conference, among the rank-and-file employees of Kawashima Textile Manufacturing
Philippines, Inc. with the following choices:

1. Kawashima Free Workers Union-PTGWO Local Chapter No. 803; and

2. No union.

Pursuant to Rule XI, Section 11.1 of the New Implementing Rules, the employer is hereby directed to submit to the office of
origin the certified list of current employees in the bargaining unit for the last three months prior to the issuance of this decision.

SO DECIDED.15

The DOLE held that Med-Arbiter Bactin's reliance on the decisions of the Court in Toyota Motor Philippines Corporation v.
Toyota Motor Philippines Corporation Labor Union 16 and Dunlop Slazenger, Inc. v. Secretary of Labor and Employment 17 was
misplaced, for while Article 245 declares supervisory employees ineligible for membership in a labor organization for rank-and-
file employees, the provision did not state the effect of such prohibited membership on the legitimacy of the labor organization
and its right to file for certification election. Neither was such mixed membership a ground for cancellation of its registration.
Section 11, Paragraph II, Rule XI of Department Order No. 9 "provides for the dismissal of a petition for certification election
based on lack of legal personality of a labor organization only on the following grounds: (1) [KFWU] is not listed by the Regional
Office or the Bureau of Labor Relations in its registry of legitimate labor organizations; or (2) [KFWU's] legal personality has
been revoked or canceled with finality."18 The DOLE noted that neither ground existed; on the contrary, KFWU's legal personality
was well-established, for it held a certificate of creation and had been listed in the registry of legitimate labor organizations.

As to the failure of KFWU to file its books of account, the DOLE held that such omission was not a ground for revocation of union
registration or dismissal of petition for certification election, for under Section 1, Rule VI of Department Order No. 9, a local or
chapter like KFWU was no longer required to file its books of account. 19

Respondent filed a Motion for Reconsideration20 but the DOLE denied the same in its September 28, 2000 Resolution.21

However, on appeal by respondent, the CA rendered the December 13, 2002 Decision assailed herein, reversing the August 18,
2000 DOLE Decision, thus:

Since respondent union clearly consists of both rank and file and supervisory employees, it cannot qualify as a
legitimate labor organization imbued with the requisite personality to file a petition for certification election. This
infirmity in union membership cannot be corrected in the inclusion-exclusion proceedings during the pre-election
conference.

Finally, contrary to the pronouncement of public respondent, the application of the doctrine enunciated in Toyota Motor
Philippines Corporation vs. Toyota Motor Philippines Corporation Labor Union was not construed in a way that effectively denies
the fundamental right of respondent union to organize and seek bargaining representation x x x.

For ignoring jurisprudential precepts on the matter, the Court finds that the Undersecretary of Labor, acting under the authority of
the Secretary of Labor, acted with grave abuse of discretion amounting to lack or excess of jurisdiction.

WHEREFORE, premises considered, the Petition is hereby GRANTED. The Decision dated 18 August 2000 of the
Undersecretary of Labor, acting under the authority of the Secretary, is hereby REVERSED and SET ASIDE. The Order dated
17 May 2000 of the Med-Arbiter dismissing the petition for certification election filed by Kawashima Free Workers Union-
PTGWO Local Chapter No. 803 is REINSTATED.

SO ORDERED.22 (Emphasis supplied)

KFWU filed a Motion for Reconsideration23 but the CA denied it.

The Republic of the Philippines (petitioner) filed the present petition to seek closure on two issues:

First, whether a mixed membership of rank-and-file and supervisory employees in a union is a ground for the dismissal of a
petition for certification election in view of the amendment brought about by D.O. 9, series of 1997, which deleted the
phraseology in the old rule that "[t]he appropriate bargaining unit of the rank-and-file employee shall not include the supervisory
employees and/or security guards;" and

Second, whether the legitimacy of a duly registered labor organization can be collaterally attacked in a petition for a certification
election through a motion to dismiss filed by an employer such as Kawashima Textile Manufacturing Phils., Inc. 24

The petition is imbued with merit.

The key to the closure that petitioner seeks could have been Republic Act (R.A.) No. 9481.25 Sections 8 and 9 thereof provide:

Section 8. Article 245 of the Labor Code is hereby amended to read as follows:

"Art. 245. Ineligibility of Managerial Employees to Join any Labor Organization; Right of Supervisory Employees. - Managerial
employees are not eligible to join, assist or form any labor organization. Supervisory employees shall not be eligible for
membership in the collective bargaining unit of the rank-and-file employees but may join, assist or form separate collective

23 | P a g e
bargaining units and/or legitimate labor organizations of their own. The rank and file union and the supervisors' union operating
within the same establishment may join the same federation or national union."

Section 9. A new provision, Article 245-A is inserted into the Labor Code to read as follows:

"Art. 245-A. Effect of Inclusion as Members of Employees Outside the Bargaining Unit. - The inclusion as union members of
employees outside the bargaining unit shall not be a ground for the cancellation of the registration of the union. Said
employees are automatically deemed removed from the list of membership of said union." (Emphasis supplied)

Moreover, under Section 4, a pending petition for cancellation of registration

will not hinder a legitimate labor organization from initiating a certification election, viz:

Sec. 4. A new provision is hereby inserted into the Labor Code as Article 238-A to read as follows:

"Art. 238-A. Effect of a Petition for Cancellation of Registration. - A petition for cancellation of union registration shall not
suspend the proceedings for certification election nor shall it prevent the filing of a petition for certification election.

In case of cancellation, nothing herein shall restrict the right of the union to seek just and equitable remedies in the appropriate
courts." (Emphasis supplied)

Furthermore, under Section 12 of R.A. No. 9481, employers have no personality to interfere with or thwart a petition for
certification election filed by a legitimate labor organization, to wit:

Sec. 12. A new provision, Article 258-A is hereby inserted into the Labor Code to read as follows:

"Art. 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." (Emphasis supplied)

However, R.A. No. 9481 took effect only on June 14, 2007;26 hence, it applies only to labor representation cases filed on or after
said date.27 As the petition for certification election subject matter of the present petition was filed by KFWU on January 24,
2000,28 R.A. No. 9481 cannot apply to it. There may have been curative labor legislations 29that were given retrospective
effect,30 but not the aforecited provisions of R.A. No. 9481, for otherwise, substantive rights and interests already vested would
be impaired in the process.31

Instead, the law and rules in force at the time of the filing by KFWU of the petition for certification election on January 24, 2000
are R.A. No. 6715,32 amending Book V of Presidential Decree (P.D.) No. 442 (Labor Code), 33 as amended, and the Rules and
Regulations Implementing R.A. No. 6715,34 as amended by Department Order No. 9, series of 1997.35

It is within the parameters of R.A. No. 6715 and the Implementing Rules that the Court will now resolve the two issues raised by
petitioner.

If there is one constant precept in our labor laws – be it Commonwealth Act No. 213 (1936),36 R.A. No. 875 (1953),37 P.D. No.
442 (1974), Executive Order (E.O.) No. 111 (1986) 38 or R.A. No. 6715 (1989) - it is that only a legitimate labor organization may
exercise the right to be certified as the exclusive representative of all the employees in an appropriate collective bargaining unit
for purposes of collective bargaining.39 What has varied over the years has been the degree of enforcement of this precept, as
reflected in the shifting scope of administrative and judicial scrutiny of the composition of a labor organization before it is allowed
to exercise the right of representation.

One area of contention has been the composition of the membership of a labor organization, specifically whether there is a
mingling of supervisory and rank-and-file employees and how such questioned mingling affects its legitimacy.

It was in R.A. No. 875, under Section 3, that such questioned mingling was first prohibited, 40 to wit:

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

Nothing in R.A. No. 875, however, tells of how the questioned mingling can affect the legitimacy of the labor organization. Under
Section 15, the only instance when a labor organization loses its legitimacy is when it violates its duty to bargain collectively; but
there is no word on whether such mingling would also result in loss of legitimacy. Thus, when the issue of whether the
membership of two supervisory employees impairs the legitimacy of a rank-and-file labor organization came before the Court En
Banc in Lopez v. Chronicle Publication Employees Association, 41 the majority pronounced:

It may be observed that nothing is said of the effect of such ineligibility upon the union itself or on the status of the other qualified
members thereof should such prohibition be disregarded. Considering that the law is specific where it intends to divest a
legitimate labor union of any of the rights and privileges granted to it by law, the absence of any provision on the effect of the
disqualification of one of its organizers upon the legality of the union, may be construed to confine the effect of such ineligibility
only upon the membership of the supervisor. In other words, the invalidity of membership of one of the organizers does not

24 | P a g e
make the union illegal, where the requirements of the law for the organization thereof are, nevertheless, satisfied and
met.42 (Emphasis supplied)

Then the Labor Code was enacted in 1974 without reproducing Sec. 3 of R.A. No. 875. The provision in the Labor Code closest
to Sec. 3 is Article 290,43 which is deafeningly silent on the prohibition against supervisory employees mingling with rank-and-file
employees in one labor organization. Even the Omnibus Rules Implementing Book V of the Labor Code44 (Omnibus Rules)
merely provides in Section 11, Rule II, thus:

Sec. 11. Supervisory unions and unions of security guards to cease operation. – All existing supervisory unions and unions of
security guards shall, upon the effectivity of the Code, cease to operate as such and their registration certificates shall be
deemed automatically cancelled. However, existing collective agreements with such unions, the life of which extends beyond the
date of effectivity of the Code shall be respected until their expiry date insofar as the economic benefits granted therein are
concerned.

Members of supervisory unions who do not fall within the definition of managerial employees shall become eligible to join or
assist the rank and file organization. The determination of who are managerial employees and who are not shall be the subject
of negotiation between representatives of supervisory union and the employer. If no agreement s reached between the parties,
either or both of them ma bring the issue to the nearest Regional Office for determination. (Emphasis supplied)

The obvious repeal of the last clause of Sec. 3, R.A. No. 875 prompted the Court to declare in Bulletin v. Sanchez45that
supervisory employees who do not fall under the category of managerial employees may join or assist in the formation of a labor
organization for rank-and-file employees, but they may not form their own labor organization.

While amending certain provisions of Book V of the Labor Code, E.O. No. 111 and its implementing rules 46continued to
recognize the right of supervisory employees, who do not fall under the category of managerial employees, to join a rank-and-file
labor organization.47

Effective 1989, R.A. No. 6715 restored the prohibition against the questioned mingling in one labor organization, viz:

Sec. 18. Article 245 of the same Code, as amended, is hereby further amended to read as follows

"Art. 245. Ineligibility of managerial employees to join any labor organization; right of supervisory
employees. Managerial employees are not eligible to join, assist or form any labor organization. Supervisory employees shall
not be eligible for membership in a labor organization of the rank-and-file employees but may join, assist or form separate labor
organizations of their own." (Emphasis supplied)

Unfortunately, just like R.A. No. 875, R.A. No. 6715 omitted specifying the exact effect any violation of the prohibition would
bring about on the legitimacy of a labor organization.

It was the Rules and Regulations Implementing R.A. No. 6715 (1989 Amended Omnibus Rules) which supplied the deficiency by
introducing the following amendment to Rule II (Registration of Unions):

Sec. 1. Who may join unions. – x x x Supervisory employees and security guards shall not be eligible for membership in a labor
organization of the rank-and-file employees but may join, assist or form separate labor organizations of their own; Provided, that
those supervisory employees who are included in an existing rank-and-file bargaining unit, upon the effectivity of Republic Act
No. 6715, shall remain in that unit x x x. (Emphasis supplied)

and Rule V (Representation Cases and Internal-Union Conflicts) of the Omnibus Rules, viz:

Sec. 1. Where to file. – A petition for certification election may be filed with the Regional Office which has jurisdiction over the
principal office of the employer. The petition shall be in writing and under oath.

Sec. 2. Who may file. – Any legitimate labor organization or the employer, when requested to bargain collectively, may file the
petition.

The petition, when filed by a legitimate labor organization, shall contain, among others:

xxxx

(c) description of the bargaining unit which shall be the employer unit unless circumstances otherwise require; and provided
further, that the appropriate bargaining unit of the rank-and-file employees shall not include supervisory employees and/or
security guards. (Emphasis supplied)

By that provision, any questioned mingling will prevent an otherwise legitimate and duly registered labor organization from
exercising its right to file a petition for certification election.

Thus, when the issue of the effect of mingling was brought to the fore in Toyota,48 the Court, citing Article 245 of the Labor Code,
as amended by R.A. No. 6715, held:

Clearly, based on this provision, a labor organization composed of both rank-and-file and supervisory employees is no labor
organization at all. It cannot, for any guise or purpose, be a legitimate labor organization. Not being one, an organization which
carries a mixture of rank-and-file and supervisory employees cannot possess any of the rights of a legitimate labor
organization, including the right to file a petition for certification election for the purpose of collective bargaining. It
becomes necessary, therefore, anterior to the granting of an order allowing a certification election, to inquire into the composition

25 | P a g e
of any labor organization whenever the status of the labor organization is challenged on the basis of Article 245 of the Labor
Code.

xxxx

In the case at bar, as respondent union's membership list contains the names of at least twenty-seven (27) supervisory
employees in Level Five positions, the union could not, prior to purging itself of its supervisory employee members, attain the
status of a legitimate labor organization. Not being one, it cannot possess the requisite personality to file a petition for
certification election.49 (Emphasis supplied)

In Dunlop,50 in which the labor organization that filed a petition for certification election was one for supervisory employees, but
in which the membership included rank-and-file employees, the Court reiterated that such labor organization had no legal right to
file a certification election to represent a bargaining unit composed of supervisors for as long as it counted rank-and-file
employees among its members.51

It should be emphasized that the petitions for certification election involved in Toyota and Dunlop were filed on November 26,
1992 and September 15, 1995, respectively; hence, the 1989 Rules was applied in both cases.

But then, on June 21, 1997, the 1989 Amended Omnibus Rules was further amended by Department Order No. 9, series of
1997 (1997 Amended Omnibus Rules). Specifically, the requirement under Sec. 2(c) of the 1989 Amended Omnibus Rules - that
the petition for certification election indicate that the bargaining unit of rank-and-file employees has not been mingled with
supervisory employees - was removed. Instead, what the 1997 Amended Omnibus Rules requires is a plain description of the
bargaining unit, thus:

Rule XI
Certification Elections

xxxx

Sec. 4. Forms and contents of petition. - The petition shall be in writing and under oath and shall contain, among others, the
following: x x x (c) The description of the bargaining unit.52

In Pagpalain Haulers, Inc. v. Trajano,53 the Court had occasion to uphold the validity of the 1997 Amended Omnibus Rules,
although the specific provision involved therein was only Sec. 1, Rule VI, to wit:

Sec. 1. Chartering and creation of a local/chapter.- A duly registered federation or national union may directly create a
local/chapter by submitting to the Regional Office or to the Bureau two (2) copies of the following: a) a charter certificate issued
by the federation or national union indicating the creation or establishment of the local/chapter; (b) the names of the
local/chapter’s officers, their addresses, and the principal office of the local/chapter; and (c) the local/ chapter’s constitution and
by-laws; provided that where the local/chapter’s constitution and by-laws is the same as that of the federation or national union,
this fact shall be indicated accordingly.

All the foregoing supporting requirements shall be certified under oath by the Secretary or the Treasurer of the local/chapter and
attested to by its President.

which does not require that, for its creation and registration, a local or chapter submit a list of its members.

Then came Tagaytay Highlands Int’l. Golf Club, Inc. v. Tagaytay Highlands Employees Union-PGTWO54 in which the core issue
was whether mingling affects the legitimacy of a labor organization and its right to file a petition for certification election. This
time, given the altered legal milieu, the Court abandoned the view in Toyota and Dunlop and reverted to its pronouncement in
Lopez that while there is a prohibition against the mingling of supervisory and rank-and-file employees in one labor organization,
the Labor Code does not provide for the effects thereof. 55 Thus, the Court held that after a labor organization has been
registered, it may exercise all the rights and privileges of a legitimate labor organization. Any mingling between supervisory and
rank-and-file employees in its membership cannot affect its legitimacy for that is not among the grounds for cancellation of its
registration, unless such mingling was brought about by misrepresentation, false statement or fraud under Article 239 of the
Labor Code.56

In San Miguel Corp. (Mandaue Packaging Products Plants) v. Mandaue Packing Products Plants-San Miguel Packaging
Products-San Miguel Corp. Monthlies Rank-and-File Union-FFW,57 the Court explained that since the 1997 Amended Omnibus
Rules does not require a local or chapter to provide a list of its members, it would be improper for the DOLE to deny recognition
to said local or chapter on account of any question pertaining to its individual members. 58

More to the point is Air Philippines Corporation v. Bureau of Labor Relations, 59 which involved a petition for cancellation of union
registration filed by the employer in 1999 against a rank-and-file labor organization on the ground of mixed membership: 60 the
Court therein reiterated its ruling in Tagaytay Highlands that the inclusion in a union of disqualified employees is not among the
grounds for cancellation, unless such inclusion is due to misrepresentation, false statement or fraud under the circumstances
enumerated in Sections (a) and (c) of Article 239 of the Labor Code.61lavvphil

All said, while the latest issuance is R.A. No. 9481, the 1997 Amended Omnibus Rules, as interpreted by the Court in Tagaytay
Highlands, San Miguel and Air Philippines, had already set the tone for it. Toyota and Dunlop no longer hold sway in the present
altered state of the law and the rules.

Consequently, the Court reverses the ruling of the CA and reinstates that of the DOLE granting the petition for certification
election of KFWU.

26 | P a g e
Now to the second issue of whether an employer like respondent may collaterally attack the legitimacy of a labor organization by
filing a motion to dismiss the latter’s petition for certification election.

Except when it is requested to bargain collectively, 62 an employer is a mere bystander to any petition for certification election;
such proceeding is non-adversarial and merely investigative, for the purpose thereof is to determine which organization will
represent the employees in their collective bargaining with the employer. 63 The choice of their representative is the exclusive
concern of the employees; the employer cannot have any partisan interest therein; it cannot interfere with, much less oppose,
the process by filing a motion to dismiss or an appeal from it;64 not even a mere allegation that some employees participating in
a petition for certification election are actually managerial employees will lend an employer legal personality to block the
certification election.65 The employer's only

right in the proceeding is to be notified or informed thereof.66

The amendments to the Labor Code and its implementing rules have buttressed that policy even more.

WHEREFORE, the petition is GRANTED. The December 13, 2002 Decision and October 7, 2003 Resolution of the Court of
Appeals and the May 17, 2000 Order of Med-Arbiter Anastacio L. Bactin are REVERSED and SET ASIDE,while the August 18,
2000 Decision and September 28, 2000 Resolution of the Department of Labor and Employment are REINSTATED.

No costs.

SO ORDERED.

27 | P a g e
G.R. No. 77395 November 29, 1988

BELYCA CORPORATION, petitioner,

vs.
DIR. PURA FERRER CALLEJA, LABOR RELATIONS, MANILA, MINISTRY OF LABOR AND EMPLOYMENT; MED-
ARBITER, RODOLFO S. MILADO, MINISTRY OF LABOR AND EMPLOYMENT, REGIONAL OFFICE NO. 10 AND
ASSOCIATED LABOR UNION (ALU-TUCP), MINDANAO REGIONAL OFFICE, CAGAYAN DE ORO CITY, respondents.

Soriano and Arana Law Offices for petitioner.

The Solicitor General for public respondent.

Francisco D. Alas for respondent Associated Labor Unions-TUCP.

PARAS, J.:

This is a petition for certiorari and prohibition with preliminary injunction seeking to annul or to set aside the resolution of the
Bureau of Labor Relations dated November 24, 1986 and denying the appeal, and the Bureau's resolution dated January 13,
1987 denying petitioner's motion for reconsideration.

The dispositive portion of the questioned resolution dated November 24, 1986 (Rollo, p. 4) reads as follows:

WHEREFORE, in view of all the foregoing considerations, the Order is affirmed and the appeal therefrom
denied.

Let, therefore, the pertinent records of the case be remanded to the office of origin for the immediate conduct of
the certification election.

The dispositive portion of the resolution dated January 13, 1987 (Rollo, p. 92) reads, as follows:

WHEREFORE, the Motion for Reconsideration filed by respondent Belyca Corporation (Livestock Agro-Division)
is hereby dismissed for lack of merit and the Bureau's Resolution dated 24 November 1986 is affirmed.
Accordingly, let the records of this case be immediately forwarded to the Office of origin for the holding of the
certification elections.

No further motion shall hereafter be entertained.

The antecedents of the case are as follows:

On June 3, 1986, private respondent Associated Labor Union (ALU)-TUCP, a legitimate labor organization duly registered with
the Ministry of Labor and Employment under Registration Certificate No. 783-IP, filed with the Regional Office No. 10, Ministry of
Labor and Employment at Cagayan de Oro City, a petition for direct certification as the sole and exclusive bargaining agent of all
the rank and file employees/workers of Belyca Corporation (Livestock and Agro-Division), a duly organized, registered and
existing corporation engaged in the business of poultry raising, piggery and planting of agricultural crops such as corn, coffee
and various vegetables, employing approximately 205 rank and file employees/workers, the collective bargaining unit sought in
the petition, or in case of doubt of the union's majority representation, for the issuance of an order authorizing the immediate
holding of a certification election (Rollo, p. 18). Although the case was scheduled for hearing at least three times, no amicable
settlement was reached by the parties. During the scheduled hearing of July 31, 1986 they, however, agreed to submit
simultaneously their respective position papers on or before August 11, 1986 (rollo. p. 62).

Petitioner ALU-TUCP, private respondent herein, in its petition and position paper alleged, among others, (1) that there is no
existing collective bargaining agreement between the respondent employer, petitioner herein, and any other existing legitimate
labor unions; (2) that there had neither been a certification election conducted in the proposed bargaining unit within the last
twelve (12) months prior to the filing of the petition nor a contending union requesting for certification as the. sole and exclusive
bargaining representative in the proposed bargaining unit; (3) that more than a majority of respondent employer's rank-and-file
employees/workers in the proposed bargaining unit or one hundred thirty-eight (138) as of the date of the filing of the petition,
have signed membership with the ALU-TUCP and have expressed their written consent and authorization to the filing of the
petition; (4) that in response to petitioner union's two letters to the proprietor/ General Manager of respondent employer, dated
April 21, 1986 and May 8, 1 986, requesting for direct recognition as the sole and exclusive bargaining agent of the rank-and-file
workers, respondent employer has locked out 119 of its rank-and-file employees in the said bargaining unit and had dismissed
earlier the local union president, vice-president and three other active members of the local unions for which an unfair labor
practice case was filed by petitioner union against respondent employer last July 2, 1986 before the NLRC in Cagayan de Oro
City (Rollo, pp. 18; 263).<äre||anº•1àw>

Respondent employer, on the other hand, alleged in its position paper, among others, (1) that due to the nature of its business,
very few of its employees are permanent, the overwhelming majority of which are seasonal and casual and regular employees;
(2) that of the total 138 rank-and-file employees who authorized, signed and supported the filing of the petition (a) 14 were no
longer working as of June 3, 1986 (b) 4 resigned after June, 1986 (c) 6 withdrew their membership from petitioner union (d) 5
were retrenched on June 23, 1986 (e) 12 were dismissed due to malicious insubordination and destruction of property and (f)
100 simply abandoned their work or stopped working; (3) that the 128 incumbent employees or workers of the livestock section
were merely transferred from the agricultural section as replacement for those who have either been dismissed, retrenched or
resigned; and (4) that the statutory requirement for holding a certification election has not been complied with by the union
(Rollo, p. 26).
28 | P a g e
The Labor Arbiter granted the certification election sought for by petitioner union in his order dated August 18, 1986 (Rollo, p.
62).

On February 4, 1987, respondent employer Belyca Corporation, appealed the order of the Labor Arbiter to the Bureau of Labor
Relations in Manila (Rollo, p. 67) which denied the appeal (Rollo, p. 80) and the motion for reconsideration (Rollo, p. 92). Thus,
the instant petition received in this Court by mail on February 20, 1987 (Rollo, p. 3).

In the resolution of March 4, 1987, the Second Division of this Court required respondent Union to comment on the petition and
issued a temporary restraining order (,Rollo, p. 95).

Respondent union filed its comment on March 30, 1987 (Rollo, p. 190); public respondents filed its comment on April 8, 1987
(Rollo, p. 218).

On May 4, 1987, the Court resolved to give due course to the petition and to require the parties to submit their respective
memoranda within twenty (20) days from notice (Rollo, p. 225).

The Office of the Solicitor General manifested on June 11, 1987 that it is adopting the comment for public respondents as its
memorandum (Rollo, p. 226); memorandum for respondent ALU was filed on June 30, 1987 (Rollo, p. 231); and memorandum
for petitioner, on July 30, 1987 (Rollo, p. 435).

The issues raised in this petition are:

WHETHER OR NOT THE PROPOSED BARGAINING UNIT IS AN APPROPRIATE BARGAINING UNIT.

II

WHETHER OR NOT THE STATUTORY REQUIREMENT OF 30% (NOW 20%) OF THE EMPLOYEES IN THE
PROPOSED BARGAINING UNIT, ASKING FOR A CERTIFICATION ELECTION HAD BEEN STRICTLY
COMPLIED WITH.

In the instant case, respondent ALU seeks direct certification as the sole and exclusive bargaining agent of all the rank-and-file
workers of the livestock and agro division of petitioner BELYCA Corporation (Rollo, p. 232), engaged in piggery, poultry raising
and the planting of agricultural crops such as corn, coffee and various vegetables (Rollo, p. 26). But petitioner contends that the
bargaining unit must include all the workers in its integrated business concerns ranging from piggery, poultry, to supermarts and
cinemas so as not to split an otherwise single bargaining unit into fragmented bargaining units (Rollo, p. 435).<äre||anº•1àw>

The Labor Code does not specifically define what constitutes an appropriate collective bargaining unit. Article 256 of the Code
provides:

Art. 256. Exclusive bargaining representative.—The labor organization designated or selected

by the majority of the employees in an appropriate collective bargaining unit shall be exclusive
representative of the employees in such unit for the purpose of collective bargaining. However,
an individual employee or group of employee shall have the right at any time to present
grievances to their employer.

According to Rothenberg, a proper bargaining unit maybe said to be a group of employees of a given employer, comprised of all
or less than all of the entire body of employees, which the collective interests of all the employees, consistent with equity to the
employer, indicate to be best suited to serve reciprocal rights and duties of the parties under the collective bargaining provisions
of the law (Rothenberg in Labor Relations, p. 482).

This Court has already taken cognizance of the crucial issue of determining the proper constituency of a collective bargaining
unit.

Among the factors considered in Democratic Labor Association v. Cebu Stevedoring Co. Inc. (103 Phil 1103 [1958]) are: "(1) will
of employees (Glove Doctrine); (2) affinity and unity of employee's interest, such as substantial similarity of work and duties or
similarity of compensation and working conditions; (3) prior collective bargaining history; and (4) employment status, such as
temporary, seasonal and probationary employees".

Under the circumstances of that case, the Court stressed the importance of the fourth factor and sustained the trial court's
conclusion that two separate bargaining units should be formed in dealing with respondent company, one consisting of regular
and permanent employees and another consisting of casual laborers or stevedores. Otherwise stated, temporary employees
should be treated separately from permanent employees. But more importantly, this Court laid down the test of proper grouping,
which is community and mutuality of interest.

Thus, in a later case, (Alhambra Cigar and Cigarette Manufacturing Co. et al. v. Alhambra Employees' Association 107 Phil. 28
[1960]) where the employment status was not at issue but the nature of work of the employees concerned; the Court stressed
the importance of the second factor otherwise known as the substantial-mutual-interest test and found no reason to disturb the
finding of the lower Court that the employees in the administrative, sales and dispensary departments perform work which has
nothing to do with production and maintenance, unlike those in the raw leaf, cigar, cigarette and packing and engineering and
garage departments and therefore community of interest which justifies the format or existence as a separate appropriate
collective bargaining unit.

29 | P a g e
Still later in PLASLU v. CIR et al. (110 Phil. 180 [1960]) where the employment status of the employees concerned was again
challenged, the Court reiterating the rulings, both in Democratic Labor Association v. Cebu Stevedoring Co. Inc.
supra and Alhambra Cigar and Cigarette Co. et al. v. Alhambra Employees' Association (supra) held that among the factors to
be considered are: employment status of the employees to be affected, that is the positions and categories of work to which they
belong, and the unity of employees' interest such as substantial similarity of work and duties.

In any event, whether importance is focused on the employment status or the mutuality of interest of the employees concerned
"the basic test of an asserted bargaining unit's acceptability is whether or not it is fundamentally the combination which will best
assure to all employees the exercise of their collective bargaining rights (Democratic Labor Association v. Cebu Stevedoring Co.
Inc. supra)

Hence, still later following the substantial-mutual interest test, the Court ruled that there is a substantial difference between the
work performed by musicians and that of other persons who participate in the production of a film which suffice to show that they
constitute a proper bargaining unit. (LVN Pictures, Inc. v. Philippine Musicians Guild, 1 SCRA 132 [1961]).

Coming back to the case at bar, it is beyond question that the employees of the livestock and agro division of petitioner
corporation perform work entirely different from those performed by employees in the supermarts and cinema. Among others,
the noted difference are: their working conditions, hours of work, rates of pay, including the categories of their positions and
employment status. As stated by petitioner corporation in its position paper, due to the nature of the business in which its
livestock-agro division is engaged very few of its employees in the division are permanent, the overwhelming majority of which
are seasonal and casual and not regular employees (Rollo, p. 26). Definitely, they have very little in common with the employees
of the supermarts and cinemas. To lump all the employees of petitioner in its integrated business concerns cannot result in an
efficacious bargaining unit comprised of constituents enjoying a community or mutuality of interest. Undeniably, the rank and file
employees of the livestock-agro division fully constitute a bargaining unit that satisfies both requirements of classification
according to employment status and of the substantial similarity of work and duties which will ultimately assure its members the
exercise of their collective bargaining rights.

II

It is undisputed that petitioner BELYCA Corporation (Livestock and Agro Division) employs more or less two hundred five (205)
rank-and-file employees and workers. It has no existing duly certified collective bargaining agreement with any legitimate labor
organization. There has not been any certification election conducted in the proposed bargaining unit within the last twelve (12)
months prior to the filing of the petition for direct certification and/or certification election with the Ministry of Labor and
Employment, and there is no contending union requesting for certification as the sole and exclusive bargaining representative in
the proposed bargaining unit.

The records show that on the filing of the petition for certification and/or certification election on June 3, 1986; 124 employees or
workers which are more than a majority of the rank-and-file employees or workers in the proposed bargaining unit had signed
membership with respondent ALU-TUCP and had expressed their written consent and authorization to the filing of the petition.
Thus, the Labor Arbiter ordered the certification election on August 18, 1986 on a finding that 30% of the statutory requirement
under Art. 258 of the Labor Code has been met.

But, petitioner corporation contends that after June 3, 1986 four (4) employees resigned; six (6) subsequently withdrew their
membership; five (5) were retrenched; twelve (12) were dismissed for illegally and unlawfully barricading the entrance to
petitioner's farm; and one hundred (100) simply abandoned their work.

Petitioner's claim was however belied by the Memorandum of its personnel officer to the 119 employees dated July 28, 1986
showing that the employees were on strike, which was confirmed by the finding of the Bureau of Labor Relations to the effect
that they went on strike on July 24, 1986 (Rollo, p. 419). Earlier the local union president, Warrencio Maputi; the Vice-president,
Gilbert Redoblado and three other active members of the union Carmen Saguing, Roberto Romolo and Iluminada Bonio were
dismissed and a complaint for unfair labor practice, illegal dismissal etc. was filed by the Union in their behalf on July 2, 1986
before the NLRC of Cagayan de Oro City (Rollo, p. 415).<äre||anº•1àw> The complaint was amended on August 20, 1986 for
respondent Union to represent Warrencio Maputi and 137 others against petitioner corporation and Bello Casanova President
and General Manager for unfair labor practice, illegal dismissal, illegal lockout, etc. (Rollo, p. 416).

Under Art. 257 of the Labor Code once the statutory requirement is met, the Director of Labor Relations has no choice but to call
a certification election (Atlas Free Workers Union AFWU PSSLU Local v. Noriel, 104 SCRA 565 [1981]; Vismico Industrial
Workers Association (VIWA) v. Noriel, 131 SCRA 569 [1984]) It becomes in the language of the New Labor Code "Mandatory for
the Bureau to conduct a certification election for the purpose of determining the representative of the employees in the
appropriate bargaining unit and certify the winner as the exclusive bargaining representative of all employees in the unit."
(Federacion Obrera de la Industria Tabaquera y Otros Trabajadores de Filipinas v. Noriel, 72 SCRA 24 [1976]; Kapisanan Ng
Mga Manggagawa v. Noriel, 77 SCRA 414 [1977]); more so when there is no existing collective bargaining agreement.
(Samahang Manggagawa Ng Pacific Mills, Inc. v. Noriel, 134 SCRA 152 [1985]); and there has not been a certification election
in the company for the past three years (PLUM Federation of Industrial and Agrarian Workers v. Noriel, 119 SCRA 299 [1982])
as in the instant case.

It is significant to note that 124 employees out of the 205 employees of the Belyca Corporation have expressed their written
consent to the certification election or more than a majority of the rank and file employees and workers; much more than the
required 30% and over and above the present requirement of 20% by Executive Order No. 111 issued on December 24, 1980
and applicable only to unorganized establishments under Art. 257, of the Labor Code, to which the BELYCA Corporation belong
(Ass. Trade Unions (ATU) v. Trajano, G.R. No. 75321, June 20, 1988).) More than that, any doubt cast on the authenticity of
signatures to the petition for holding a certification election cannot be a bar to its being granted (Filipino Metals Corp. v. Ople 107
SCRA 211 [1981]). Even doubts as to the required 30% being met warrant holding of the certification election (PLUM Federation
of Industrial and Agrarian Workers v. Noriel, 119 SCRA 299 [1982]). In fact, once the required percentage requirement has been
reached, the employees' withdrawal from union membership taking place after the filing of the petition for certification election
30 | P a g e
will not affect said petition. On the contrary, the presumption arises that the withdrawal was not free but was procured through
duress, coercion or for a valuable consideration (La Suerte Cigar and Cigarette Factory v. Director of the Bureau of Labor
Relations, 123 SCRA 679 [1983]). Hence, the subsequent disaffiliation of the six (6) employees from the union will not be
counted against or deducted from the previous number who had signed up for certification elections Vismico Industrial Workers
Association (VIWA) v. Noriel 131 SCRA 569 [1984]).<äre||anº•1àw> Similarly, until a decision, final in character, has been
issued declaring the strike illegal and the mass dismissal or retrenchment valid, the strikers cannot be denied participation in the
certification election notwithstanding, the vigorous condemnation of the strike and the fact that the picketing were attended by
violence. Under the foregoing circumstances, it does not necessarily follow that the strikers in question are no longer entitled to
participate in the certification election on the theory that they have automatically lost their jobs. (Barrera v. CIR, 107 SCRA 596
[1981]). For obvious reasons, the duty of the employer to bargain collectively is nullified if the purpose of the dismissal of the
union members is to defeat the union in the consent requirement for certification election. (Samahang Manggagawa Ng Via
Mare v. Noriel, 98 SCRA 507 [1980]). As stressed by this Court, the holding of a certification election is a statutory policy that
should not be circumvented. (George and Peter Lines Inc. v. Associated Labor Unions (ALU), 134 SCRA 82 [1986]).

Finally, as a general rule, a certification election is the sole concern of the workers. The only exception is where the employer
has to file a petition for certification election pursuant to Art. 259 of the Labor Code because the latter was requested to bargain
collectively. But thereafter the role of the employer in the certification process ceases. The employer becomes merely a
bystander (Trade Union of the Phil. and Allied Services (TUPAS) v. Trajano, 120 SCRA 64 [1983]).

There is no showing that the instant case falls under the above mentioned exception. However, it will be noted that petitioner
corporation from the outset has actively participated and consistently taken the position of adversary in the petition for direct
certification as the sole and exclusive bargaining representative and/or certification election filed by respondent Associated
Labor Unions (ALU)-TUCP to the extent of filing this petition for certiorari in this Court. Considering that a petition for certification
election is not a litigation but a mere investigation of a non-adversary character to determining the bargaining unit to represent
the employees (LVN Pictures, Inc. v. Philippine Musicians Guild, supra; Bulakena Restaurant & Caterer v. Court of Industrial
Relations, 45 SCRA 88 [1972]; George Peter Lines, Inc. v. Associated Labor Union, 134 SCRA 82 [1986]; Tanduay Distillery
Labor Union v. NLRC, 149 SCRA 470 [1987]), and its only purpose is to give the employees true representation in their
collective bargaining with an employer (Confederation of Citizens Labor Unions CCLU v. Noriel, 116 SCRA 694 [1982]), there
appears to be no reason for the employer's objection to the formation of subject union, much less for the filing of the petition for
a certification election.

PREMISES CONSIDERED, (a) the petition is DISMISSED for lack of merit (b) resolution of the Bureau of Labor Relations dated
Nov. 24, 1986 is AFFIRMED; and the temporary restraining order issued by the Court on March 4, 1987 is LIFTED permanently.

SO ORDERED.

31 | P a g e
G.R. No. 164301 August 10, 2010

BANK OF THE PHILIPPINE ISLANDS, Petitioner,

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

DECISION

LEONARDO-DE CASTRO, J.:

May a corporation invoke its merger with another corporation as a valid ground to exempt its "absorbed employees" from the
coverage of a union shop clause contained in its existing Collective Bargaining Agreement (CBA) with its own certified labor
union? That is the question we shall endeavor to answer in this petition for review filed by an employer after the Court of Appeals
decided in favor of respondent union, which is the employees’ recognized collective bargaining representative.

At the outset, we should call to mind the spirit and the letter of the Labor Code provisions on union security clauses, specifically
Article 248 (e), which states, "x x x Nothing in this Code or in any other law shall stop the parties from requiring membership in a
recognized collective bargaining agent as a condition for employment, except those employees who are already members of
another union at the time of the signing of the collective bargaining agreement." 1 This case which involves the application of a
collective bargaining agreement with a union shop clause should be resolved principally from the standpoint of the clear
provisions of our labor laws, and the express terms of the CBA in question, and not by inference from the general consequence
of the merger of corporations under the Corporation Code, which obviously does not deal with and, therefore, is silent on the
terms and conditions of employment in corporations or juridical entities.

This issue must be resolved NOW, instead of postponing it to a future time when the CBA is renegotiated as suggested by the
Honorable Justice Arturo D. Brion because the same issue may still be resurrected in the renegotiation if the absorbed
employees insist on their privileged status of being exempt from any union shop clause or any variant thereof.

We find it significant to note that it is only the employer, Bank of the Philippine Islands (BPI), that brought the case up to this
Court via the instant petition for review; while the employees actually involved in the case did not pursue the same relief, but had
instead chosen in effect to acquiesce to the decision of the Court of Appeals which effectively required them to comply with the
union shop clause under the existing CBA at the time of the merger of BPI with Far East Bank and Trust Company (FEBTC),
which decision had already become final and executory as to the aforesaid employees. By not appealing the decision of the
Court of Appeals, the aforesaid employees are bound by the said Court of Appeals’ decision to join BPI’s duly certified labor
union. In view of the apparent acquiescence of the affected FEBTC employees in the Court of Appeals’ decision, BPI should not
have pursued this petition for review. However, even assuming that BPI may do so, the same still cannot prosper.

What is before us now is a petition for review under Rule 45 of the Rules of Court of the Decision 2 dated September 30, 2003 of
the Court of Appeals, as reiterated in its Resolution3 of June 9, 2004, reversing and setting aside the Decision 4 dated November
23, 2001 of Voluntary Arbitrator Rosalina Letrondo-Montejo, in CA-G.R. SP No. 70445, entitled BPI Employees Union-Davao
Chapter-Federation of Unions in BPI Unibank v. Bank of the Philippine Islands, et al.

The antecedent facts are as follows:

On March 23, 2000, the Bangko Sentral ng Pilipinas approved the Articles of Merger executed on January 20, 2000 by and
between BPI, herein petitioner, and FEBTC.5 This Article and Plan of Merger was approved by the Securities and Exchange
Commission on April 7, 2000.6

Pursuant to the Article and Plan of Merger, all the assets and liabilities of FEBTC were transferred to and absorbed by BPI as
the surviving corporation. FEBTC employees, including those in its different branches across the country, were hired by
petitioner as its own employees, with their status and tenure recognized and salaries and benefits maintained.

Respondent BPI Employees Union-Davao Chapter - Federation of Unions in BPI Unibank (hereinafter the "Union," for brevity) is
the exclusive bargaining agent of BPI’s rank and file employees in Davao City. The former FEBTC rank-and-file employees in
Davao City did not belong to any labor union at the time of the merger. Prior to the effectivity of the merger, or on March 31,
2000, respondent Union invited said FEBTC employees to a meeting regarding the Union Shop Clause (Article II, Section 2) of
the existing CBA between petitioner BPI and respondent Union.7

The parties both advert to certain provisions of the existing CBA, which are quoted below:

ARTICLE I

Section 1. Recognition and Bargaining Unit – The BANK recognizes the UNION as the sole and exclusive collective bargaining
representative of all the regular rank and file employees of the Bank offices in Davao City.

Section 2. Exclusions

Section 3. Additional Exclusions

Section 4. Copy of Contract

ARTICLE II

32 | P a g e
Section 1. Maintenance of Membership – All employees within the bargaining unit who are members of the Union on the date of
the effectivity of this Agreement as well as employees within the bargaining unit who subsequently join or become members of
the Union during the lifetime of this Agreement shall as a condition of their continued employment with the Bank, maintain their
membership in the Union in good standing.

Section 2. Union Shop - New employees falling within the bargaining unit as defined in Article I of this Agreement, who may
hereafter be regularly employed by the Bank shall, within thirty (30) days after they become regular employees, join the Union
as a condition of their continued employment. It is understood that membership in good standing in the Union is a condition of
their continued employment with the Bank.8 (Emphases supplied.)

After the meeting called by the Union, some of the former FEBTC employees joined the Union, while others refused. Later,
however, some of those who initially joined retracted their membership. 9

Respondent Union then sent notices to the former FEBTC employees who refused to join, as well as those who retracted their
membership, and called them to a hearing regarding the matter. When these former FEBTC employees refused to attend the
hearing, the president of the Union requested BPI to implement the Union Shop Clause of the CBA and to terminate their
employment pursuant thereto.10

After two months of management inaction on the request, respondent Union informed petitioner BPI of its decision to refer the
issue of the implementation of the Union Shop Clause of the CBA to the Grievance Committee. However, the issue remained
unresolved at this level and so it was subsequently submitted for voluntary arbitration by the parties. 11

Voluntary Arbitrator Rosalina Letrondo-Montejo, in a Decision12 dated November 23, 2001, ruled in favor of petitioner BPI’s
interpretation that the former FEBTC employees were not covered by the Union Security Clause of the CBA between the Union
and the Bank on the ground that the said employees were not new employees who were hired and subsequently regularized, but
were absorbed employees "by operation of law" because the "former employees of FEBTC can be considered assets and
liabilities of the absorbed corporation." The Voluntary Arbitrator concluded that the former FEBTC employees could not be
compelled to join the Union, as it was their constitutional right to join or not to join any organization.

Respondent Union filed a Motion for Reconsideration, but the Voluntary Arbitrator denied the same in an Order dated March 25,
2002.13

Dissatisfied, respondent then appealed the Voluntary Arbitrator’s decision to the Court of Appeals. In the herein assailed
Decision dated September 30, 2003, the Court of Appeals reversed and set aside the Decision of the Voluntary
Arbitrator.14 Likewise, the Court of Appeals denied herein petitioner’s Motion for Reconsideration in a Resolution dated June 9,
2004.

The Court of Appeals pertinently ruled in its Decision:

A union-shop clause has been defined as a form of union security provision wherein non-members may be hired, but to retain
employment must become union members after a certain period.

There is no question as to the existence of the union-shop clause in the CBA between the petitioner-union and the company.
The controversy lies in its application to the "absorbed" employees.

This Court agrees with the voluntary arbitrator that the ABSORBED employees are distinct and different from NEW employees
BUT only in so far as their employment service is concerned. The distinction ends there. In the case at bar, the absorbed
employees’ length of service from its former employer is tacked with their employment with BPI. Otherwise stated, the absorbed
employees service is continuous and there is no gap in their service record.

This Court is persuaded that the similarities of "new" and "absorbed" employees far outweighs the distinction between them. The
similarities lies on the following, to wit: (a) they have a new employer; (b) new working conditions; (c) new terms of employment
and; (d) new company policy to follow. As such, they should be considered as "new" employees for purposes of applying the
provisions of the CBA regarding the "union-shop" clause.

To rule otherwise would definitely result to a very awkward and unfair situation wherein the "absorbed" employees shall be in a
different if not, better situation than the existing BPI employees. The existing BPI employees by virtue of the "union-shop" clause
are required to pay the monthly union dues, remain as members in good standing of the union otherwise, they shall be
terminated from the company, and other union-related obligations. On the other hand, the "absorbed" employees shall enjoy the
"fruits of labor" of the petitioner-union and its members for nothing in exchange. Certainly, this would disturb industrial peace in
the company which is the paramount reason for the existence of the CBA and the union.

The voluntary arbitrator’s interpretation of the provisions of the CBA concerning the coverage of the "union-shop" clause is at
war with the spirit and the rationale why the Labor Code itself allows the existence of such provision.

The Supreme Court in the case of Manila Mandarin Employees Union vs. NLRC (G.R. No. 76989, September 29, 1987) rule, to
quote:

"This Court has held that a valid form of union security, and such a provision in a collective bargaining agreement is not a
restriction of the right of freedom of association guaranteed by the Constitution.

A closed-shop agreement is an agreement whereby an employer binds himself to hire only members of the contracting union
who must continue to remain members in good standing to keep their jobs. It is "THE MOST PRIZED ACHIEVEMENT OF
UNIONISM." IT ADDS MEMBERSHIP AND COMPULSORY DUES. By holding out to loyal members a promise of employment
in the closed-shop, it wields group solidarity." (Emphasis supplied)
33 | P a g e
Hence, the voluntary arbitrator erred in construing the CBA literally at the expense of industrial peace in the company.

With the foregoing ruling from this Court, necessarily, the alternative prayer of the petitioner to require the individual respondents
to become members or if they refuse, for this Court to direct respondent BPI to dismiss them, follows. 15

Hence, petitioner’s present recourse, raising the following issues:

WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT THE FORMER FEBTC
EMPLOYEES SHOULD BE CONSIDERED ‘NEW’ EMPLOYEES OF BPI FOR PURPOSES OF APPLYING THE UNION
SHOP CLAUSE OF THE CBA

II

WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT THE VOLUNTARY
ARBITRATOR’S INTERPRETATION OF THE COVERAGE OF THE UNION SHOP CLAUSE IS "AT WAR WITH THE
SPIRIT AND THE RATIONALE WHY THE LABOR CODE ITSELF ALLOWS THE EXISTENCE OF SUCH
PROVISION"16

In essence, the sole issue in this case is whether or not the former FEBTC employees that were absorbed by petitioner upon the
merger between FEBTC and BPI should be covered by the Union Shop Clause found in the existing CBA between petitioner and
respondent Union.

Petitioner is of the position that the former FEBTC employees are not new employees of BPI for purposes of applying the Union
Shop Clause of the CBA, on this note, petitioner points to Section 2, Article II of the CBA, which provides:

New employees falling within the bargaining unit as defined in Article I of this Agreement, who may hereafter be regularly
employed by the Bank shall, within thirty (30) days after they become regular employees, join the Union as a condition of their
continued employment. It is understood that membership in good standing in the Union is a condition of their continued
employment with the Bank.17 (Emphases supplied.)

Petitioner argues that the term "new employees" in the Union Shop Clause of the CBA is qualified by the phrases "who may
hereafter be regularly employed" and "after they become regular employees" which led petitioner to conclude that the "new
employees" referred to in, and contemplated by, the Union Shop Clause of the CBA were only those employees who were "new"
to BPI, on account of having been hired initially on a temporary or probationary status for possible regular employment at some
future date. BPI argues that the FEBTC employees absorbed by BPI cannot be considered as "new employees" of BPI for
purposes of applying the Union Shop Clause of the CBA.18

According to petitioner, the contrary interpretation made by the Court of Appeals of this particular CBA provision ignores, or even
defies, what petitioner assumes as its clear meaning and scope which allegedly contradicts the Court’s strict and restrictive
enforcement of union security agreements.

We do not agree.

Section 2, Article II of the CBA is silent as to how one becomes a "regular employee" of the BPI for the first time. There is
nothing in the said provision which requires that a "new" regular employee first undergo a temporary or probationary status
before being deemed as such under the union shop clause of the CBA.

"Union security" is a generic term which is applied to and comprehends "closed shop," "union shop," "maintenance of
membership" or any other form of agreement which imposes upon employees the obligation to acquire or retain union
membership as a condition affecting employment. There is union shop when all new regular employees are required to join the
union within a certain period for their continued employment. There is maintenance of membership shop when employees, who
are union members as of the effective date of the agreement, or who thereafter become members, must maintain union
membership as a condition for continued employment until they are promoted or transferred out of the bargaining unit or the
agreement is terminated. A closed-shop, on the other hand, may be defined as an enterprise in which, by agreement between
the employer and his employees or their representatives, no person may be employed in any or certain agreed departments of
the enterprise unless he or she is, becomes, and, for the duration of the agreement, remains a member in good standing of a
union entirely comprised of or of which the employees in interest are a part.19

In the case of Liberty Flour Mills Employees v. Liberty Flour Mills, Inc.,20 we ruled that:

It is the policy of the State to promote unionism to enable the workers to negotiate with management on the same level
and with more persuasiveness than if they were to individually and independently bargain for the improvement of their
respective conditions. To this end, the Constitution guarantees to them the rights "to self-organization, collective bargaining
and negotiations and peaceful concerted actions including the right to strike in accordance with law." There is no question that
these purposes could be thwarted if every worker were to choose to go his own separate way instead of joining his co-
employees in planning collective action and presenting a united front when they sit down to bargain with their employers. It is for
this reason that the law has sanctioned stipulations for the union shop and the closed shop as a means of encouraging the
workers to join and support the labor union of their own choice as their representative in the negotiation of their demands and
the protection of their interest vis-à-vis the employer. (Emphasis ours.)

In other words, the purpose of a union shop or other union security arrangement is to guarantee the continued existence of the
union through enforced membership for the benefit of the workers.

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All employees in the bargaining unit covered by a Union Shop Clause in their CBA with management are subject to its
terms. However, under law and jurisprudence, the following kinds of employees are exempted from its coverage,
namely, employees who at the time the union shop agreement takes effect are bona fide members of a religious organization
which prohibits its members from joining labor unions on religious grounds; 21 employees already in the service and already
members of a union other than the majority at the time the union shop agreement took effect;22 confidential employees
who are excluded from the rank and file bargaining unit; 23 and employees excluded from the union shop by express terms
of the agreement.

When certain employees are obliged to join a particular union as a requisite for continued employment, as in the case of Union
Security Clauses, this condition is a valid restriction of the freedom or right not to join any labor organization because it is in
favor of unionism. This Court, on occasion, has even held that a union security clause in a CBA is not a restriction of the right of
freedom of association guaranteed by the Constitution.24

Moreover, a closed shop agreement is an agreement whereby an employer binds himself to hire only members of the
contracting union who must continue to remain members in good standing to keep their jobs. It is "the most prized
achievement of unionism." It adds membership and compulsory dues. By holding out to loyal members a promise of
employment in the closed shop, it wields group solidarity.25

Indeed, the situation of the former FEBTC employees in this case clearly does not fall within the first three exceptions to the
application of the Union Shop Clause discussed earlier. No allegation or evidence of religious exemption or prior membership in
another union or engagement as a confidential employee was presented by both parties. The sole category therefore in which
petitioner may prove its claim is the fourth recognized exception or whether the former FEBTC employees are excluded by the
express terms of the existing CBA between petitioner and respondent.

To reiterate, petitioner insists that the term "new employees," as the same is used in the Union Shop Clause of the CBA at issue,
refers only to employees hired by BPI as non-regular employees who later qualify for regular employment and become regular
employees, and not those who, as a legal consequence of a merger, are allegedly automatically deemed regular employees of
BPI. However, the CBA does not make a distinction as to how a regular employee attains such a status. Moreover, there is
nothing in the Corporation Law and the merger agreement mandating the automatic employment as regular employees by the
surviving corporation in the merger.

It is apparent that petitioner hinges its argument that the former FEBTC employees were absorbed by BPI merely as a legal
consequence of a merger based on the characterization by the Voluntary Arbiter of these absorbed employees as included in
the "assets and liabilities" of the dissolved corporation - assets because they help the Bank in its operation and liabilities
because redundant employees may be terminated and company benefits will be paid to them, thus reducing the Bank’s financial
status. Based on this ratiocination, she ruled that the same are not new employees of BPI as contemplated by the CBA at issue,
noting that the Certificate of Filing of the Articles of Merger and Plan of Merger between FEBTC and BPI stated that "x x x the
entire assets and liabilities of FAR EASTERN BANK & TRUST COMPANY will be transferred to and absorbed by the BANK OF
THE PHILIPPINE ISLANDS x x x (underlining supplied)."26 In sum, the Voluntary Arbiter upheld the reasoning of petitioner that
the FEBTC employees became BPI employees by "operation of law" because they are included in the term "assets and
liabilities."

Absorbed FEBTC Employees are Neither Assets nor Liabilities

In legal parlance, however, human beings are never embraced in the term "assets and liabilities." Moreover, BPI’s absorption of
former FEBTC employees was neither by operation of law nor by legal consequence of contract. There was no government
regulation or law that compelled the merger of the two banks or the absorption of the employees of the dissolved corporation by
the surviving corporation. Had there been such law or regulation, the absorption of employees of the non-surviving entities of the
merger would have been mandatory on the surviving corporation.27 In the present case, the merger was voluntarily entered into
by both banks presumably for some mutually acceptable consideration. In fact, the Corporation Code does not also mandate the
absorption of the employees of the non-surviving corporation by the surviving corporation in the case of a merger. Section 80 of
the Corporation Code provides:

SEC. 80. Effects of merger or consolidation. – The merger or consolidation, as provided in the preceding sections shall have the
following effects:

1. The constituent corporations shall become a single corporation which, in case of merger, shall be the surviving
corporation designated in the plan of merger; and, in case of consolidation, shall be the consolidated corporation
designated in the plan of consolidation;

2. The separate existence of the constituent corporations shall cease, except that of the surviving or the consolidated
corporation;

3. The surviving or the consolidated corporation shall possess all the rights, privileges, immunities and powers and shall
be subject to all the duties and liabilities of a corporation organized under this Code;

4. The surviving or the consolidated corporation shall thereupon and thereafter possess all the rights, privileges,
immunities and franchises of each of the constituent corporations; and all property, real or personal, and all receivables
due on whatever account, including subscriptions to shares and other choses in action, and all and every other interest
of, or belonging to, or due to each constituent corporation, shall be taken and deemed to be transferred to and vested in
such surviving or consolidated corporation without further act or deed; and

5. The surviving or the consolidated corporation shall be responsible and liable for all the liabilities and obligations of
each of the constituent corporations in the same manner as if such surviving or consolidated corporation had itself
incurred such liabilities or obligations; and any claim, action or proceeding pending by or against any of such constituent
35 | P a g e
 corporations may be prosecuted by or against the surviving or consolidated corporation, as the case may be. Neither the
rights of creditors nor any lien upon the property of any of such constituent corporations shall be impaired by such
merger or consolidated.

Significantly, too, the Articles of Merger and Plan of Merger dated April 7, 2000 did not contain any specific stipulation with
respect to the employment contracts of existing personnel of the non-surviving entity which is FEBTC. Unlike the Voluntary
Arbitrator, this Court cannot uphold the reasoning that the general stipulation regarding transfer of FEBTC assets and liabilities
to BPI as set forth in the Articles of Merger necessarily includes the transfer of all FEBTC employees into the employ of BPI and
neither BPI nor the FEBTC employees allegedly could do anything about it. Even if it is so, it does not follow that the
absorbed employees should not be subject to the terms and conditions of employment obtaining in the surviving
corporation.

The rule is that unless expressly assumed, labor contracts such as employment contracts and collective bargaining agreements
are not enforceable against a transferee of an enterprise, labor contracts being in personam, thus binding only between the
parties. A labor contract merely creates an action in personam and does not create any real right which should be respected by
third parties. This conclusion draws its force from the right of an employer to select his employees and to decide when to engage
them as protected under our Constitution, and the same can only be restricted by law through the exercise of the police power.28

Furthermore, this Court believes that it is contrary to public policy to declare the former FEBTC employees as forming part of the
assets or liabilities of FEBTC that were transferred and absorbed by BPI in the Articles of Merger. Assets and liabilities, in this
instance, should be deemed to refer only to property rights and obligations of FEBTC and do not include the employment
contracts of its personnel. A corporation cannot unilaterally transfer its employees to another employer like chattel. Certainly, if
BPI as an employer had the right to choose who to retain among FEBTC’s employees, FEBTC employees had the concomitant
right to choose not to be absorbed by BPI. Even though FEBTC employees had no choice or control over the merger of their
employer with BPI, they had a choice whether or not they would allow themselves to be absorbed by BPI. Certainly nothing
prevented the FEBTC’s employees from resigning or retiring and seeking employment elsewhere instead of going along with the
proposed absorption.

Employment is a personal consensual contract and absorption by BPI of a former FEBTC employee without the consent of the
employee is in violation of an individual’s freedom to contract. It would have been a different matter if there was an express
provision in the articles of merger that as a condition for the merger, BPI was being required to assume all the employment
contracts of all existing FEBTC employees with the conformity of the employees. In the absence of such a provision in the
articles of merger, then BPI clearly had the business management decision as to whether or not employ FEBTC’s employees.
FEBTC employees likewise retained the prerogative to allow themselves to be absorbed or not; otherwise, that would be
tantamount to involuntary servitude.

There appears to be no dispute that with respect to FEBTC employees that BPI chose not to employ or FEBTC employees who
chose to retire or be separated from employment instead of "being absorbed," BPI’s assumed liability to these employees
pursuant to the merger is FEBTC’s liability to them in terms of separation pay, 29retirement pay30 or other benefits that may be
due them depending on the circumstances.

Legal Consequences of Mergers

Although not binding on this Court, American jurisprudence on the consequences of voluntary mergers on the right to
employment and seniority rights is persuasive and illuminating. We quote the following pertinent discussion from the American
Law Reports:

Several cases have involved the situation where as a result of mergers, consolidations, or shutdowns, one group of employees,
who had accumulated seniority at one plant or for one employer, finds that their jobs have been discontinued except to the
extent that they are offered employment at the place or by the employer where the work is to be carried on in the future. Such
cases have involved the question whether such transferring employees should be entitled to carry with them their accumulated
seniority or whether they are to be compelled to start over at the bottom of the seniority list in the "new" job. It has been
recognized in some cases that the accumulated seniority does not survive and cannot be transferred to the "new" job.

In Carver v Brien (1942) 315 Ill App 643, 43 NE2d 597, the shop work of three formerly separate railroad corporations, which
had previously operated separate facilities, was consolidated in the shops of one of the roads. Displaced employees of the other
two roads were given preference for the new jobs created in the shops of the railroad which took over the work. A controversy
arose between the employees as to whether the displaced employees were entitled to carry with them to the new jobs the
seniority rights they had accumulated with their prior employers, that is, whether the rosters of the three corporations, for
seniority purposes, should be "dovetailed" or whether the transferring employees should go to the bottom of the roster of their
new employer. Labor representatives of the various systems involved attempted to work out an agreement which, in effect,
preserved the seniority status obtained in the prior employment on other roads, and the action was for specific performance of
this agreement against a demurring group of the original employees of the railroad which was operating the consolidated shops.
The relief sought was denied, the court saying that, absent some specific contract provision otherwise, seniority rights were
ordinarily limited to the employment in which they were earned, and concluding that the contract for which specific performance
was sought was not such a completed and binding agreement as would support such equitable relief, since the railroad, whose
concurrence in the arrangements made was essential to their effectuation, was not a party to the agreement.

Where the provisions of a labor contract provided that in the event that a trucker absorbed the business of another private
contractor or common carrier, or was a party to a merger of lines, the seniority of the employees absorbedor affected thereby
should be determined by mutual agreement between the trucker and the unions involved, it was held in Moore v International
Brotherhood of Teamsters, etc. (1962, Ky) 356 SW2d 241, that the trucker was not required to absorb the affected employees as
well as the business, the court saying that they could find no such meaning in the above clause, stating that it dealt only with
seniority, and not with initial employment. Unless and until the absorbing company agreed to take the employees of the company
whose business was being absorbed, no seniority problem was created, said the court, hence the provision of the contract
36 | P a g e
could have no application. Furthermore, said the court, it did not require that the absorbing company take these employees, but
only that if it did take them the question of seniority between the old and new employees would be worked out by agreement or
else be submitted to the grievance procedure.31 (Emphasis ours.)

Indeed, from the tenor of local and foreign authorities, in voluntary mergers, absorption of the dissolved corporation’s employees
or the recognition of the absorbed employees’ service with their previous employer may be demanded from the surviving
corporation if required by provision of law or contract. The dissent of Justice Arturo D. Brion tries to make a distinction as to the
terms and conditions of employment of the absorbed employees in the case of a corporate merger or consolidation which will, in
effect, take away from corporate management the prerogative to make purely business decisions on the hiring of employees or
will give it an excuse not to apply the CBA in force to the prejudice of its own employees and their recognized collective
bargaining agent. In this regard, we disagree with Justice Brion.

Justice Brion takes the position that because the surviving corporation continues the personality of the dissolved corporation and
acquires all the latter’s rights and obligations, it is duty-bound to absorb the dissolved corporation’s employees, even in the
absence of a stipulation in the plan of merger. He proposes that this interpretation would provide the necessary protection to
labor as it spares workers from being "left in legal limbo."

However, there are instances where an employer can validly discontinue or terminate the employment of an employee without
violating his right to security of tenure. Among others, in case of redundancy, for example, superfluous employees may be
terminated and such termination would be authorized under Article 283 of the Labor Code. 32

Moreover, assuming for the sake of argument that there is an obligation to hire or absorb all employees of the non-surviving
corporation, there is still no basis to conclude that the terms and conditions of employment under a valid collective bargaining
agreement in force in the surviving corporation should not be made to apply to the absorbed employees.

The Corporation Code and the Subject Merger Agreement are Silent on Efficacy, Terms and Conditions of Employment
Contracts

The lack of a provision in the plan of merger regarding the transfer of employment contracts to the surviving corporation could
have very well been deliberate on the part of the parties to the merger, in order to grant the surviving corporation the freedom to
choose who among the dissolved corporation’s employees to retain, in accordance with the surviving corporation’s business
needs. If terminations, for instance due to redundancy or labor-saving devices or to prevent losses, are done in good faith, they
would be valid. The surviving corporation too is duty-bound to protect the rights of its own employees who may be affected by
the merger in terms of seniority and other conditions of their employment due to the merger. Thus, we are not convinced that in
the absence of a stipulation in the merger plan the surviving corporation was compelled, or may be judicially compelled, to
absorb all employees under the same terms and conditions obtaining in the dissolved corporation as the surviving corporation
should also take into consideration the state of its business and its obligations to its own employees, and to their certified
collective bargaining agent or labor union.

Even assuming we accept Justice Brion’s theory that in a merger situation the surviving corporation should be compelled to
absorb the dissolved corporation’s employees as a legal consequence of the merger and as a social justice consideration, it
bears to emphasize his dissent also recognizes that the employee may choose to end his employment at any time by voluntarily
resigning. For the employee to be "absorbed" by BPI, it requires the employees’ implied or express consent. It is because of this
human element in employment contracts and the personal, consensual nature thereof that we cannot agree that, in a merger
situation, employment contracts are automatically transferable from one entity to another in the same manner that a contract
pertaining to purely proprietary rights – such as a promissory note or a deed of sale of property – is perfectly and automatically
transferable to the surviving corporation.

That BPI is the same entity as FEBTC after the merger is but a legal fiction intended as a tool to adjudicate rights and obligations
between and among the merged corporations and the persons that deal with them. Although in a merger it is as if there is no
change in the personality of the employer, there is in reality a change in the situation of the employee. Once an FEBTC
employee is absorbed, there are presumably changes in his condition of employment even if his previous tenure and salary rate
is recognized by BPI. It is reasonable to assume that BPI would have different rules and regulations and company practices than
FEBTC and it is incumbent upon the former FEBTC employees to obey these new rules and adapt to their new environment. Not
the least of the changes in employment condition that the absorbed FEBTC employees must face is the fact that prior to the
merger they were employees of an unorganized establishment and after the merger they became employees of a unionized
company that had an existing collective bargaining agreement with the certified union. This presupposes that the union who is
party to the collective bargaining agreement is the certified union that has, in the appropriate certification election, been shown to
represent a majority of the members of the bargaining unit.

Likewise, with respect to FEBTC employees that BPI chose to employ and who also chose to be absorbed, then due to BPI’s
blanket assumption of liabilities and obligations under the articles of merger, BPI was bound to respect the years of service of
these FEBTC employees and to pay the same, or commensurate salaries and other benefits that these employees previously
enjoyed with FEBTC.

As the Union likewise pointed out in its pleadings, there were benefits under the CBA that the former FEBTC employees did
not enjoy with their previous employer. As BPI employees, they will enjoy all these CBA benefits upon their "absorption."
Thus, although in a sense BPI is continuing FEBTC’s employment of these absorbed employees, BPI’s employment of these
absorbed employees was not under exactly the same terms and conditions as stated in the latter’s employment contracts with
FEBTC. This further strengthens the view that BPI and the former FEBTC employees voluntarily contracted with each other for
their employment in the surviving corporation.

Proper Appreciation of the Term "New Employees" Under the CBA

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

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

The dissenting opinion of Justice Brion dovetails with Justice Carpio’s view only in their restrictive interpretation of who are "new
employees" under the CBA. To our dissenting colleagues, the phrase "new employees" (who are covered by the union shop
clause) should only include new employees who were hired as probationary during the life of the CBA and were later granted
regular status. They propose that the former FEBTC employees who were deemed regular employees from the beginning of
their employment with BPI should be treated as a special class of employees and be excluded from the union shop clause.

Justice Brion himself points out that there is no clear, categorical definition of "new employee" in the CBA. In other words, the
term "new employee" as used in the union shop clause is used broadly without any qualification or distinction. However, the
Court should not uphold an interpretation of the term "new employee" based on the general and extraneous provisions of the
Corporation Code on merger that would defeat, rather than fulfill, the purpose of the union shop clause. To reiterate, the
provision of the Article 248(e) of the Labor Code in point mandates that nothing in the said Code or any other law should stop
the parties from requiring membership in a recognized collective bargaining agent as a condition of employment.

Significantly, petitioner BPI never stretches its arguments so far as to state that the absorbed employees should be deemed "old
employees" who are not covered by the Union Shop Clause. This is not surprising.

By law and jurisprudence, a merger only becomes effective upon approval by the Securities and Exchange Commission (SEC)
of the articles of merger. In Associated Bank v. Court of Appeals,33 we held:

The procedure to be followed is prescribed under the Corporation Code. Section 79 of said Code requires the approval by the
Securities and Exchange Commission (SEC) of the articles of merger which, in turn, must have been duly approved by a
majority of the respective stockholders of the constituent corporations. The same provision further states that the merger shall be
effective only upon the issuance by the SEC of a certificate of merger. The effectivity date of the merger is crucial for
determining when the merged or absorbed corporation ceases to exist; and when its rights, privileges, properties as well as
liabilities pass on to the surviving corporation. (Emphasis ours.)

In other words, even though BPI steps into the shoes of FEBTC as the surviving corporation, BPI does so at a particular point in
time, i.e., the effectivity of the merger upon the SEC’s issuance of a certificate of merger. In fact, the articles of merger
themselves provided that both BPI and FEBTC will continue their respective business operations until the SEC issues the
certificate of merger and in the event SEC does not issue such a certificate, they agree to hold each other blameless for the non-
consummation of the merger.

Considering the foregoing principle, BPI could have only become the employer of the FEBTC employees it absorbed after the
approval by the SEC of the merger. If the SEC did not approve the merger, BPI would not be in the position to absorb the
employees of FEBTC at all. Indeed, there is evidence on record that BPI made the assignments of its absorbed employees in
BPI effective April 10, 2000, or after the SEC’s approval of the merger. 34 In other words, BPI became the employer of the
absorbed employees only at some point after the effectivity of the merger, notwithstanding the fact that the absorbed
employees’ years of service with FEBTC were voluntarily recognized by BPI.

Even assuming for the sake of argument that we consider the absorbed FEBTC employees as "old employees" of BPI who are
not members of any union (i.e., it is their date of hiring by FEBTC and not the date of their absorption that is considered), this
does not necessarily exclude them from the union security clause in the CBA. The CBA subject of this case was effective from
April 1, 1996 until March 31, 2001. Based on the allegations of the former FEBTC employees themselves, there were former
FEBTC employees who were hired by FEBTC after April 1, 1996 and if their date of hiring by FEBTC is considered as their
date of hiring by BPI, they would undeniably be considered "new employees" of BPI within the contemplation of the Union Shop
Clause of the said CBA. Otherwise, it would lead to the absurd situation that we would discriminate not only between new BPI
employees (hired during the life of the CBA) and former FEBTC employees (absorbed during the life of the CBA) but also among
the former FEBTC employees themselves. In other words, we would be treating employees who are exactly similarly situated
(i.e., the group of absorbed FEBTC employees) differently. This hardly satisfies the demands of equality and justice.

Petitioner limited itself to the argument that its absorbed employees do not fall within the term "new employees" contemplated
under the Union Shop Clause with the apparent objective of excluding all, and not just some, of the former FEBTC employees
from the application of the Union Shop Clause.

However, in law or even under the express terms of the CBA, there is no special class of employees called "absorbed
employees." In order for the Court to apply or not apply the Union Shop Clause, we can only classify the former FEBTC
employees as either "old" or "new." If they are not "old" employees, they are necessarily "new" employees. If they are new
employees, the Union Shop Clause did not distinguish between new employees who are non-regular at their hiring but who
subsequently become regular and new employees who are "absorbed" as regular and permanent from the beginning of their
employment. The Union Shop Clause did not so distinguish, and so neither must we.

38 | P a g e
No Substantial Distinction Under the CBA Between Regular Employees Hired After Probationary Status and Regular
Employees Hired After the Merger

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

The effect or consequence of BPI’s so-called "absorption" of former FEBTC employees should be limited to what they actually
agreed to, i.e. recognition of the FEBTC employees’ years of service, salary rate and other benefits with their previous employer.
The effect should not be stretched so far as to exempt former FEBTC employees from the existing CBA terms, company policies
and rules which apply to employees similarly situated. If the Union Shop Clause is valid as to other new regular BPI employees,
there is no reason why the same clause would be a violation of the "absorbed" employees’ freedom of association.

Non-Application of Union Shop Clause Contrary to the Policy of the Labor Code and Inimical to Industrial Peace

It is but fair that similarly situated employees who enjoy the same privileges of a CBA should be likewise subject to the sam e
obligations the CBA imposes upon them. A contrary interpretation of the Union Shop Clause will be inimical to industrial peace
and workers’ solidarity. This unfavorable situation will not be sufficiently addressed by asking the former FEBTC employees to
simply pay agency fees to the Union in lieu of union membership, as the dissent of Justice Carpio suggests. The fact remains
that other new regular employees, to whom the "absorbed employees" should be compared, do not have the option to simply
pay the agency fees and they must join the Union or face termination.

Petitioner’s restrictive reading of the Union Shop Clause could also inadvertently open an avenue, which an employer could
readily use, in order to dilute the membership base of the certified union in the collective bargaining unit (CBU). By entering into
a voluntary merger with a non-unionized company that employs more workers, an employer could get rid of its existing union by
the simple expedient of arguing that the "absorbed employees" are not new employees, as are commonly understood to be
covered by a CBA’s union security clause. This could then lead to a new majority within the CBU that could potentially threaten
the majority status of the existing union and, ultimately, spell its demise as the CBU’s bargaining representative. Such a dreaded
but not entirely far-fetched scenario is no different from the ingenious and creative "union-busting" schemes that corporations
have fomented throughout the years, which this Court has foiled time and again in order to preserve and protect the valued
place of labor in this jurisdiction consistent with the Constitution’s mandate of insuring social justice.

There is nothing in the Labor Code and other applicable laws or the CBA provision at issue that requires that a new employee
has to be of probationary or non-regular status at the beginning of the employment relationship. An employer may confer upon a
new employee the status of regular employment even at the onset of his engagement. Moreover, no law prohibits an employer
from voluntarily recognizing the length of service of a new employee with a previous employer in relation to computation of
benefits or seniority but it should not unduly be interpreted to exclude them from the coverage of the CBA which is a binding
contractual obligation of the employer and employees.

Indeed, a union security clause in a CBA should be interpreted to give meaning and effect to its purpose, which is to afford
protection to the certified bargaining agent and ensure that the employer is dealing with a union that represents the interests of
the legally mandated percentage of the members of the bargaining unit.

The union shop clause offers protection to the certified bargaining agent by ensuring that future regular employees who (a) enter
the employ of the company during the life of the CBA; (b) are deemed part of the collective bargaining unit; and (c) whose
number will affect the number of members of the collective bargaining unit will be compelled to join the union. Such compulsion
has legal effect, precisely because the employer by voluntarily entering in to a union shop clause in a CBA with the certified
bargaining agent takes on the responsibility of dismissing the new regular employee who does not join the union.

Without the union shop clause or with the restrictive interpretation thereof as proposed in the dissenting opinions, the company
can jeopardize the majority status of the certified union by excluding from union membership all new regular employees whom
the Company will "absorb" in future mergers and all new regular employees whom the Company hires as regular from the
beginning of their employment without undergoing a probationary period. In this manner, the Company can increase the number
of members of the collective bargaining unit and if this increase is not accompanied by a corresponding increase in union
membership, the certified union may lose its majority status and render it vulnerable to attack by another union who wishes to
represent the same bargaining unit.35

Or worse, a certified union whose membership falls below twenty percent (20%) of the total members of the collective bargaining
unit may lose its status as a legitimate labor organization altogether, even in a situation where there is no competing union.36 In
such a case, an interested party may file for the cancellation of the union’s certificate of registration with the Bureau of Labor
Relations.37

Plainly, the restrictive interpretation of the union shop clause would place the certified union’s very existence at the mercy and
control of the employer. Relevantly, only BPI, the employer appears to be interested in pursuing this case. The former
FEBTC employees have not joined BPI in this appeal.

For the foregoing reasons, Justice Carpio’s proposal to simply require the former FEBTC to pay agency fees is wholly
inadequate to compensate the certified union for the loss of additional membership supposedly guaranteed by compliance with
the union shop clause. This is apart from the fact that treating these "absorbed employees" as a special class of new employe es
39 | P a g e
does not encourage worker solidarity in the company since another class of new employees (i.e. those whose were hired as
probationary and later regularized during the life of the CBA) would not have the option of substituting union membership with
payment of agency fees.

Justice Brion, on the other hand, appears to recognize the inherent unfairness of perpetually excluding the "absorbed"
employees from the ambit of the union shop clause. He proposes that this matter be left to negotiation by the parties in the next
CBA. To our mind, however, this proposal does not sufficiently address the issue. With BPI already taking the position that
employees "absorbed" pursuant to its voluntary mergers with other banks are exempt from the union shop clause, the chances
of the said bank ever agreeing to the inclusion of such employees in a future CBA is next to nil – more so, if BPI’s narrow
interpretation of the union shop clause is sustained by this Court.

Right of an Employee not to Join a Union is not Absolute and Must Give Way to the Collective Good of All Members of the
Bargaining Unit

The dissenting opinions place a premium on the fact that even if the former FEBTC employees are not old employees, they
nonetheless were employed as regular and permanent employees without a gap in their service. However, an employee’s
permanent and regular employment status in itself does not necessarily exempt him from the coverage of a union shop clause.

In the past this Court has upheld even the more stringent type of union security clause, i.e., the closed shop provision, and held
that it can be made applicable to old employees who are already regular and permanent but have chosen not to join a union. In
the early case of Juat v. Court of Industrial Relations,38 the Court held that an old employee who had no union may be compelled
to join the union even if the collective bargaining agreement (CBA) imposing the closed shop provision was only entered
into seven years after of the hiring of the said employee. To quote from that decision:

A closed-shop agreement has been considered as one form of union security whereby only union members can be hired and
workers must remain union members as a condition of continued employment. The requirement for employees or workers to
become members of a union as a condition for employment redounds to the benefit and advantage of said employees because
by holding out to loyal members a promise of employment in the closed-shop the union wields group solidarity. In fact, it is said
that "the closed-shop contract is the most prized achievement of unionism."

xxxx

This Court had categorically held in the case of Freeman Shirt Manufacturing Co., Inc., et al. vs. Court of Industrial Relations, et
al., G.R. No. L-16561, Jan. 28, 1961, that the closed-shop proviso of a collective bargaining agreement entered into between an
employer and a duly authorized labor union is applicable not only to the employees or laborers that are employed after the
collective bargaining agreement had been entered into but also to old employees who are not members of any labor union at the
time the said collective bargaining agreement was entered into. In other words, if an employee or laborer is already a member of
a labor union different from the union that entered into a collective bargaining agreement with the employer providing for a
closed-shop, said employee or worker cannot be obliged to become a member of that union which had entered into a collective
bargaining agreement with the employer as a condition for his continued employment. (Emphasis and underscoring supplied.)

Although the present case does not involve a closed shop provision that included even old employees, the Juat example is but
one of the cases that laid down the doctrine that the right not to join a union is not absolute. Theoretically, there is nothing in law
or jurisprudence to prevent an employer and a union from stipulating that existing employees (who already attained regular and
permanent status but who are not members of any union) are to be included in the coverage of a union security clause. Even
Article 248(e) of the Labor Code only expressly exempts old employees who already have a union from inclusion in a union
security clause.39

Contrary to the assertion in the dissent of Justice Carpio, Juat has not been overturned by Victoriano v. Elizalde Rope Workers’
Union40 nor by Reyes v. Trajano.41 The factual milieus of these three cases are vastly different.

In Victoriano, the issue that confronted the Court was whether or not employees who were members of the Iglesia ni Kristo (INK)
sect could be compelled to join the union under a closed shop provision, despite the fact that their religious beliefs prohibited
them from joining a union. In that case, the Court was asked to balance the constitutional right to religious freedom against a
host of other constitutional provisions including the freedom of association, the non-establishment clause, the non-impairment of
contracts clause, the equal protection clause, and the social justice provision. In the end, the Court held that "religious freedom,
although not unlimited, is a fundamental personal right and liberty, and has a preferred position in the hierarchy of values."42

However, Victoriano is consistent with Juat since they both affirm that the right to refrain from joining a union is not absolute. The
relevant portion of Victoriano is quoted below:

The right to refrain from joining labor organizations recognized by Section 3 of the Industrial Peace Act is, however, limited. The
legal protection granted to such right to refrain from joining is withdrawn by operation of law, where a labor union and an
employer have agreed on a closed shop, by virtue of which the employer may employ only member of the collective bargaining
union, and the employees must continue to be members of the union for the duration of the contract in order to keep their jobs.
Thus Section 4 (a) (4) of the Industrial Peace Act, before its amendment by Republic Act No. 3350, provides that although it
would be an unfair labor practice for an employer "to discriminate in regard to hire or tenure of employment or any term or
condition of employment to encourage or discourage membership in any labor organization" the employer is, however, not
precluded "from making an agreement with a labor organization to require as a condition of employment membership therein, if
such labor organization is the representative of the employees." By virtue, therefore, of a closed shop agreement, before the
enactment of Republic Act No. 3350, if any person, regardless of his religious beliefs, wishes to be employed or to keep his
employment, he must become a member of the collective bargaining union. Hence, the right of said employee not to join the
labor union is curtailed and withdrawn.43 (Emphases supplied.)

40 | P a g e
If Juat exemplified an exception to the rule that a person has the right not to join a union, Victoriano merely created an exception
to the exception on the ground of religious freedom.

Reyes, on the other hand, did not involve the interpretation of any union security clause. In that case, there was no certified
bargaining agent yet since the controversy arose during a certification election. In Reyes, the Court highlighted the idea that the
freedom of association included the right not to associate or join a union in resolving the issue whether or not the votes of
members of the INK sect who were part of the bargaining unit could be excluded in the results of a certification election, simply
because they were not members of the two contesting unions and were expected to have voted for "NO UNION" in view of their
religious affiliation. The Court upheld the inclusion of the votes of the INK members since in the previous case of Victoriano we
held that INK members may not be compelled to join a union on the ground of religious freedom and even without Victoriano
every employee has the right to vote "no union" in a certification election as part of his freedom of association. However, Reyes
is not authority for Justice Carpio’s proposition that an employee who is not a member of any union may claim an exemption
from an existing union security clause because he already has regular and permanent status but simply prefers not to join a
union.

The other cases cited in Justice Carpio’s dissent on this point are likewise inapplicable. Basa v. Federacion Obrera de la
Industria Tabaquera y Otros Trabajadores de Filipinas, 44 Anucension v. National Labor Union,45 and Gonzales v. Central
Azucarera de Tarlac Labor Union46 all involved members of the INK. In line with Victoriano, these cases upheld the INK
members’ claimed exemption from the union security clause on religious grounds. In the present case, the former FEBTC
employees never claimed any religious grounds for their exemption from the Union Shop Clause. As for Philips Industrial
Development, Inc. v. National Labor Relations Corporation 47 and Knitjoy Manufacturing, Inc. v. Ferrer-Calleja,48 the employees
who were exempted from joining the respondent union or who were excluded from participating in the certification election were
found to be not members of the bargaining unit represented by respondent union and were free to form/join their own union. In
the case at bar, it is undisputed that the former FEBTC employees were part of the bargaining unit that the Union represented.
Thus, the rulings in Philips and Knitjoy have no relevance to the issues at hand.

Time and again, this Court has ruled that the individual employee’s right not to join a union may be validly restricted by a union
security clause in a CBA49 and such union security clause is not a violation of the employee’s constitutional right to freedom of
association.50

It is unsurprising that significant provisions on labor protection of the 1987 Constitution are found in Article XIII on Social Justice.
The constitutional guarantee given the right to form unions 51 and the State policy to promote unionism 52 have social justice
considerations. In People’s Industrial and Commercial Employees and Workers Organization v. People’s Industrial and
Commercial Corporation,53 we recognized that "[l]abor, being the weaker in economic power and resources than capital, deserve
protection that is actually substantial and material."

The rationale for upholding the validity of union shop clauses in a CBA, even if they impinge upon the individual employee’s right
or freedom of association, is not to protect the union for the union’s sake. Laws and jurisprudence promote unionism and afford
certain protections to the certified bargaining agent in a unionized company because a strong and effective union presumably
benefits all employees in the bargaining unit since such a union would be in a better position to demand improved benefits and
conditions of work from the employer. This is the rationale behind the State policy to promote unionism declared in the
Constitution, which was elucidated in the above-cited case of Liberty Flour Mills Employees v. Liberty Flour Mills, Inc.54

In the case at bar, since the former FEBTC employees are deemed covered by the Union Shop Clause, they are required to join
the certified bargaining agent, which supposedly has gathered the support of the majority of workers within the bargaining unit in
the appropriate certification proceeding. Their joining the certified union would, in fact, be in the best interests of the former
FEBTC employees for it unites their interests with the majority of employees in the bargaining unit. It encourages employee
solidarity and affords sufficient protection to the majority status of the union during the life of the CBA which are the precisely the
objectives of union security clauses, such as the Union Shop Clause involved herein. We are indeed not being called to balance
the interests of individual employees as against the State policy of promoting unionism, since the employees, who were parties
in the court below, no longer contested the adverse Court of Appeals’ decision. Nonetheless, settled jurisprudence has already
swung the balance in favor of unionism, in recognition that ultimately the individual employee will be benefited by that policy. In
the hierarchy of constitutional values, this Court has repeatedly held that the right to abstain from joining a labor organization is
subordinate to the policy of encouraging unionism as an instrument of social justice.

Also in the dissenting opinion of Justice Carpio, he maintains that one of the dire consequences to the former FEBTC employees
who refuse to join the union is the forfeiture of their retirement benefits. This is clearly not the case precisely because BPI
expressly recognized under the merger the length of service of the absorbed employees with FEBTC. Should some refuse to
become members of the union, they may still opt to retire if they are qualified under the law, the applicable retirement plan, or
the CBA, based on their combined length of service with FEBTC and BPI. Certainly, there is nothing in the union shop clause
that should be read as to curtail an employee’s eligibility to apply for retirement if qualified under the law, the existing retirement
plan, or the CBA as the case may be.

In sum, this Court finds it reasonable and just to conclude that the Union Shop Clause of the CBA covers the former FEBTC
employees who were hired/employed by BPI during the effectivity of the CBA in a manner which petitioner describes as
"absorption." A contrary appreciation of the facts of this case would, undoubtedly, lead to an inequitable and very volatile labor
situation which this Court has consistently ruled against.1avvphi1

In the case of former FEBTC employees who initially joined the union but later withdrew their membership, there is even greater
reason for the union to request their dismissal from the employer since the CBA also contained a Maintenance of Membership
Clause.

A final point in relation to procedural due process, the Court is not unmindful that the former FEBTC employees’ refusal to join
the union and BPI’s refusal to enforce the Union Shop Clause in this instance may have been based on the honest belief that the
former FEBTC employees were not covered by said clause. In the interest of fairness, we believe the former FEBTC employees
41 | P a g e
should be given a fresh thirty (30) days from notice of finality of this decision to join the union before the union demands BPI to
terminate their employment under the Union Shop Clause, assuming said clause has been carried over in the present CBA and
there has been no material change in the situation of the parties.

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

SO ORDERED.

42 | P a g e
G.R. No. 84433 June 2, 1992

ALEXANDER REYES, ALBERTO M. NERA, EDGARDO M. GECA, and 138 others, petitioners,
vs.
CRESENCIANO B. TRAJANO, as Officer-in-Charge, Bureau of Labor Relations, Med. Arbiter PATERNO ADAP, and TRI-
UNION EMPLOYEES UNION, et al., respondent.

NARVASA, C.J.:

The officer-in-charge of the Bureau of Labor Relations (Hon. Cresenciano Trajano) sustained the denial by the Med Arbiter of
the right to vote of one hundred forty-one (141) members of the "Iglesia ni Kristo" (INK), all employed in the same company, at a
certification election at which two (2) labor organizations were contesting the right to be the exclusive representative of the
employees in the bargaining unit. That denial is assailed as having been done with grave abuse of discretion in the special civil
action of certiorari at bar, commenced by the INK members adversely affected thereby.

The certification election was authorized to be conducted by the Bureau of Labor Relations among the employees of Tri-Union
Industries Corporation on October 20, 1987. The competing unions were Tri-Union Employees Union-Organized Labor
Association in Line Industries and Agriculture (TUEU-OLALIA), and Trade Union of the Philippines and Allied Services (TUPAS).
Of the 348 workers initially deemed to be qualified voters, only 240 actually took part in the election, conducted under the
provision of the Bureau of Labor Relations. Among the 240 employees who cast their votes were 141 members of the INK.

The ballots provided for three (3) choices. They provided for votes to be cast, of course, for either of the two (2) contending labor
organizations, (a) TUPAS and (b) TUEU-OLALIA; and, conformably with established rule and practice, 1 for (c) a third
choice: "NO UNION."

The final tally of the votes showed the following results:

TUPAS 1

TUEU-OLALIA 95

NO UNION 1

SPOILED 1

CHALLENGED 141

The challenged votes were those cast by the 141 INK members. They were segregated and excluded from the final
count in virtue of an agreement between the competing unions, reached at the pre-election conference, that the INK
members should not be allowed to vote "because they are not members of any union and refused to participate in the
previous certification elections."

The INK employees promptly made known their protest to the exclusion of their votes. They filed f a petition to cancel the
election alleging that it "was not fair" and the result thereof did "not reflect the true sentiments of the majority of the employees."
TUEU-OLALIA opposed the petition. It contended that the petitioners "do not have legal personality to protest the results of the
election," because "they are not members of either contending unit, but . . . of the INK" which prohibits its followers, on religious
grounds, from joining or forming any labor organization . . . ."

The Med-Arbiter saw no merit in the INK employees 1 petition. By Order dated December 21, 1987, he certified the TUEU-
OLALIA as the sole and exclusive bargaining agent of the rank-and-file employees. In that Order he decided the fact that
"religious belief was (being) utilized to render meaningless the rights of the non-members of the Iglesia ni Kristo to exercise the
rights to be represented by a labor organization as the bargaining agent," and declared the petitioners as "not possessed of any
legal personality to institute this present cause of action" since they were not parties to the petition for certification election.

The petitioners brought the matter up on appeal to the Bureau of Labor Relations. There they argued that the Med-Arbiter had
"practically disenfranchised petitioners who had an overwhelming majority," and "the TUEU-OLALIA certified union cannot be
legally said to have been the result of a valid election where at least fifty-one percent of all eligible voters in the appropriate
bargaining unit shall have cast their votes." Assistant Labor Secretary Cresenciano B. Trajano, then Officer-in-Charge of the
Bureau of Labor Relations, denied the appeal in his Decision of July 22, 1988. He opined that the petitioners are "bereft of legal
personality to protest their alleged disenfrachisement" since they "are not constituted into a duly organized labor union, hence,
not one of the unions which vied for certification as sole and exclusive bargaining representative." He also pointed out that the
petitioners "did not participate in previous certification elections in the company for the reason that their religious beliefs do not
allow them to form, join or assist labor organizations."

It is this Decision of July 22, 1988 that the petitioners would have this Court annul and set aside in the present special civil action
of certiorari.

The Solicitor General having expressed concurrence with the position taken by the petitioners, public respondent NLRC was
consequently required to file, and did thereafter file, its own comment on the petition. In that comment it insists that "if the
workers who are members of the Iglesia ni Kristo in the exercise of their religious belief opted not to join any labor organization
as a consequence of which they themselves can not have a bargaining representative, then the right to be representative by a
bargaining agent should not be denied to other members of the bargaining unit."

43 | P a g e
Guaranteed to all employees or workers is the "right to self-organization and to form, join, or assist labor organizations of their
own choosing for purposes of collective bargaining." This is made plain by no less than three provisions of the Labor Code of the
Philippines. 2 Article 243 of the Code provides as follows: 3

ART. 243. Coverage and employees right to self-organization. — All persons employed in commercial, industrial
and agricultural enterprises and in religious, charitable, medical, or educational institutions whether operating for
profit or not, shall have the right to self-organization and to form, join, or assist labor organizations of their own
choosing for purposes or collective bargaining. Ambulant, intermittent and itinerant workers, self-employed
people, rural workers and those without any definite employers may form labor organizations for their mutual aid
and protection.

Article 248 (a) declares it to be an unfair labor practice for an employer, among others, to "interfere with, restrain or coerce
employees in the exercise of their right to self-organization." Similarly, Article 249 (a) makes it an unfair labor practice for a labor
organization to "restrain or coerce employees in the exercise of their rights to self-organization . . . "

The same legal proposition is set out in the Omnibus Rules Implementing the Labor Code, as amended, as might be expected
Section 1, Rule II (Registration of Unions), Book V (Labor Relations) of the Omnibus Rules provides as follows; 4

Sec. 1. Who may join unions; exception. — All persons employed in commercial, industrial and agricultural
enterprises, including employees of government corporations established under the Corporation Code as well
as employees of religious, medical or educational institutions, whether operating for profit or not, except
managerial employees, shall have the right to self-organization and to form, join or assist labor organizations for
purposes of collective bargaining. Ambulant, intermittent and without any definite employers people, rural
workers and those without any definite employers may form labor organizations for their mutual aid and
protection.

xxx xxx xxx

The right of self-organization includes the right to organize or affiliate with a labor union or determine which of two or more
unions in an establishment to join, and to engage in concerted activities with co-workers for purposes of collective bargaining
through representatives of their own choosing, or for their mutual aid and protection, i.e., the protection, promotion, or
enhancement of their rights and interests. 5

Logically, the right NOT to join, affiliate with, or assist any union, and to disaffiliate or resign from a labor organization, is
subsumed in the right to join, affiliate with, or assist any union, and to maintain membership therein. The right to form or join a
labor organization necessarily includes the right to refuse or refrain from exercising said right. It is self-evident that just as no one
should be denied the exercise of a right granted by law, so also, no one should be compelled to exercise such a conferred right.
The fact that a person has opted to acquire membership in a labor union does not preclude his subsequently opting to renounce
such membership. 6

As early as 1974 this Court had occasion to expatiate on these self-evident propositions in Victoriano v. Elizalde Rope Workers'
Union, et al., 7 viz.:

. . .What the Constitution and Industrial Peace Act recognize and guarantee is the "right" to form or join
associations. Notwithstanding the different theories propounded by the different schools of jurisprudence
regarding the nature and contents of a "right," it can be safely said that whatever theory one subscribes to, a
right comprehends at least two broad notions, namely: first, liberty or freedom, i.e., the absence of legal
restraint, whereby an employee may act for himself being prevented by law; second, power, whereby an
employee may, as he pleases, join or refrain from joining an association. It is therefore the employee who
should decide for himself whether he should join or not an association; and should he choose to join; and even
after he has joined, he still retains the liberty and the power to leave and cancel his membership with said
organization at any time (Pagkakaisa Samahang Manggagawa ng San Miguel Brewery vs. Enriquez, et al., 108
Phil. 1010, 1019). It is clear, therefore, that the right to join a union includes the right to abstain from joining any
union (Abo, et al. vs. PHILAME [KG] Employees Union, et al., L-19912, January 20, 1965, 13 SCRA 120, 123,
quoting Rothenberg, Labor Relations). Inasmuch as what both the Constitution and the Industrial Peace Act
have recognized, the guaranteed to the employee, is the "right" to join associations of his choice, it would be
absurd to say that the law also imposes, in the same breath, upon the employee the duty to join associations.
The law does not enjoin an employee to sign up with any association.

The right to refuse to join or be represented by any labor organization is recognized not only by law but also in the rules drawn
up for implementation thereof. The original Rules on Certification promulgated by the defunct Court of Industrial Relations
required that the ballots to be used at a certification election to determine which of two or more competing labor unions would
represent the employees in the appropriate bargaining unit should contain, aside from the names of each union, an alternative
choice of the employee voting, to the effect that he desires not to which of two or more competing labor unions would represent
the employees in the appropriate bargaining unit should contain, aside from the names of each union, an alternative choice of
the employee voting, to the effect that he desires not to be represented by any union. 8 And where only one union was involved,
the ballots were required to state the question — "Do you desire to be represented by said union?" — as regards which the
employees voting would mark an appropriate square, one indicating the answer, "Yes" the other, "No."

To be sure, the present implementing rules no longer explicitly impose the requirement that the ballots at a certification election
include a choice for "NO UNION" Section 8 (rule VI, Book V of the Omnibus Rules) entitled "Marketing and canvassing of
votes," pertinently provides that:

. . . (a) The voter must write a cross (X) or a check (/) in the square opposite the union of his choice. If only one
union is involved, the voter shall make his cross or check in the square indicating "YES" or "NO."
44 | P a g e
 xxx xxx xxx

Withal, neither the quoted provision nor any other in the Omnibus Implementing Rules expressly bars the inclusion of the choice
of "NO UNION" in the ballots. Indeed it is doubtful if the employee's alternative right NOT to form, join or assist any labor
organization or withdraw or resign from one may be validly eliminated and he be consequently coerced to vote for one or
another of the competing unions and be represented by one of them. Besides, the statement in the quoted provision that "(i)f
only one union is involved, the voter shall make his cross or check in the square indicating "YES" or "NO," is quite clear
acknowledgment of the alternative possibility that the "NO" votes may outnumber the "YES" votes — indicating that the majority
of the employees in the company do not wish to be represented by any union — in which case, no union can represent the
employees in collective bargaining. And whether the prevailing "NO" votes are inspired by considerations of religious belief or
discipline or not is beside the point, and may not be inquired into at all.

The purpose of a certification election is precisely the ascertainment of the wishes of the majority of the employees in the
appropriate bargaining unit: to be or not to be represented by a labor organization, and in the affirmative case, by which
particular labor organization. If the results of the election should disclose that the majority of the workers do not wish to be
represented by any union, then their wishes must be respected, and no union may properly be certified as the exclusive
representative of the workers in the bargaining unit in dealing with the employer regarding wages, hours and other terms and
conditions of employment. The minority employees — who wish to have a union represent them in collective bargaining — can
do nothing but wait for another suitable occasion to petition for a certification election and hope that the results will be different.
They may not and should not be permitted, however, to impose their will on the majority — who do not desire to have a union
certified as the exclusive workers' benefit in the bargaining unit — upon the plea that they, the minority workers, are being
denied the right of self-organization and collective bargaining. As repeatedly stated, the right of self-organization embraces not
only the right to form, join or assist labor organizations, but the concomitant, converse right NOT to form, join or assist any labor
union.

That the INK employees, as employees in the same bargaining unit in the true sense of the term, do have the right of self-
organization, is also in truth beyond question, as well as the fact that when they voted that the employees in their bargaining unit
should be represented by "NO UNION," they were simply exercising that right of self-organization, albeit in its negative aspect.

The respondents' argument that the petitioners are disqualified to vote because they "are not constituted into a duly organized
labor union" — "but members of the INK which prohibits its followers, on religious grounds, from joining or forming any labor
organization" — and "hence, not one of the unions which vied for certification as sole and exclusive bargaining representative,"
is specious. Neither law, administrative rule nor jurisprudence requires that only employees affiliated with any labor organization
may take part in a certification election. On the contrary, the plainly discernible intendment of the law is to grant the right to vote
to all bona fide employees in the bargaining unit, whether they are members of a labor organization or not. As held in Airtime
Specialists, Inc. v. Ferrer-Calleja: 9

In a certification election all rank-and-file employees in the appropriate bargaining unit are entitled to vote. This
principle is clearly stated in Art. 255 of the Labor Code which states that the "labor organization designated or
selected by the majority of the employees in an appropriate bargaining unit shall be the exclusive representative
of the employees in such unit for the purpose of collective bargaining." Collective bargaining covers all aspects
of the employment relation and the resultant CBA negotiated by the certified union binds all employees in the
bargaining unit. Hence, all rank-and-file employees, probationary or permanent, have a substantial interest in
the selection of the bargaining representative. The Code makes no distinction as to their employment for
certification election. The law refers to "all" the employees in the bargaining unit. All they need to be eligible to
support the petition is to belong to the "bargaining unit".

Neither does the contention that petitioners should be denied the right to vote because they "did not participate in previous
certification elections in the company for the reason that their religious beliefs do not allow them to form, join or assist labor
organizations," persuade acceptance. No law, administrative rule or precedent prescribes forfeiture of the right to vote by reason
of neglect to exercise the right in past certification elections. In denying the petitioners' right to vote upon these egregiously
fallacious grounds, the public respondents exercised their discretion whimsically, capriciously and oppressively and gravely
abused the same.

WHEREFORE, the petition for certiorari is GRANTED; the Decision of the then Officer-in-Charge of the Bureau of Labor
Relations dated December 21, 1987 (affirming the Order of the Med-Arbiter dated July 22, 1988) is ANNULLED and SET
ASIDE; and the petitioners are DECLARED to have legally exercised their right to vote, and their ballots should be canvassed
and, if validly and properly made out, counted and tallied for the choices written therein. Costs against private respondents.

SO ORDERED.

45 | P a g e
G.R. No. 181531 July 31, 2009

NATIONAL UNION OF WORKERS IN HOTELS, RESTAURANTS AND ALLIED INDUSTRIES- MANILA PAVILION HOTEL
CHAPTER, Petitioner,
vs.
SECRETARY OF LABOR AND EMPLOYMENT, BUREAU OF LABOR RELATIONS, HOLIDAY INN MANILA PAVILION
HOTEL LABOR UNION AND ACESITE PHILIPPINES HOTEL CORPORATION, Respondents.

DECISION

CARPIO MORALES, J.:

National Union of Workers in Hotels, Restaurants and Allied Industries – Manila Pavilion Hotel Chapter (NUWHRAIN-MPHC),
herein petitioner, seeks the reversal of the Court of Appeals November 8, 2007 Decision 1 and of the Secretary of Labor and
Employment’s January 25, 2008 Resolution2 in OS-A-9-52-05 which affirmed the Med-Arbiter’s Resolutions dated January 22,
20073 and March 22, 2007.4

A certification election was conducted on June 16, 2006 among the rank-and-file employees of respondent Holiday Inn Manila
Pavilion Hotel (the Hotel) with the following results:

EMPLOYEES IN VOTERS’ LIST = 353

TOTAL VOTES CAST = 346

NUWHRAIN-MPHC = 151

HIMPHLU = 169

NO UNION = 1

SPOILED = 3

SEGREGATED = 22

In view of the significant number of segregated votes, contending unions, petitioner, NUHWHRAIN-MPHC, and respondent
Holiday Inn Manila Pavillion Hotel Labor Union (HIMPHLU), referred the case back to Med-Arbiter Ma. Simonette Calabocal to
decide which among those votes would be opened and tallied. Eleven (11) votes were initially segregated because they were
cast by dismissed employees, albeit the legality of their dismissal was still pending before the Court of Appeals. Six other votes
were segregated because the employees who cast them were already occupying supervisory positions at the time of the
election. Still five other votes were segregated on the ground that they were cast by probationary employees and, pursuant to
the existing Collective Bargaining Agreement (CBA), such employees cannot vote. It bears noting early on, however, that the
vote of one Jose Gatbonton (Gatbonton), a probationary employee, was counted.

By Order of August 22, 2006, Med-Arbiter Calabocal ruled for the opening of 17 out of the 22 segregated votes, specially those
cast by the 11 dismissed employees and those cast by the six supposedly supervisory employees of the Hotel.

Petitioner, which garnered 151 votes, appealed to the Secretary of Labor and Employment (SOLE), arguing that the votes of the
probationary employees should have been opened considering that probationary employee Gatbonton’s vote was tallied. And
petitioner averred that respondent HIMPHLU, which garnered 169 votes, should not be immediately certified as the bargaining
agent, as the opening of the 17 segregated ballots would push the number of valid votes cast to 338 (151 + 169 + 1 + 17),
hence, the 169 votes which HIMPHLU garnered would be one vote short of the majority which would then become 169.

By the assailed Resolution of January 22, 2007, the Secretary of Labor and Employment (SOLE), through then Acting Secretary
Luzviminda Padilla, affirmed the Med-Arbiter’s Order. It held that pursuant to Section 5, Rule IX of the Omnibus Rules
Implementing the Labor Code on exclusion and inclusion of voters in a certification election, the probationary employees cannot
vote, as at the time the Med-Arbiter issued on August 9, 2005 the Order granting the petition for the conduct of the certification
election, the six probationary employees were not yet hired, hence, they could not vote.

The SOLE further held that, with respect to the votes cast by the 11 dismissed employees, they could be considered since their
dismissal was still pending appeal.

As to the votes cast by the six alleged supervisory employees, the SOLE held that their votes should be counted since their
promotion took effect months after the issuance of the above-said August 9, 2005 Order of the Med-Arbiter, hence, they were
still considered as rank-and-file.

Respecting Gatbonton’s vote, the SOLE ruled that the same could be the basis to include the votes of the other probationary
employees, as the records show that during the pre-election conferences, there was no disagreement as to his inclusion in the
voters’ list, and neither was it timely challenged when he voted on election day, hence, the Election Officer could not then
segregate his vote.
46 | P a g e
The SOLE further ruled that even if the 17 votes of the dismissed and supervisory employees were to be counted and presumed
to be in favor of petitioner, still, the same would not suffice to overturn the 169 votes garnered by HIMPHLU.

In fine, the SOLE concluded that the certification of HIMPHLU as the exclusive bargaining agent was proper.

Petitioner’s motion for reconsideration having been denied by the SOLE by Resolution of March 22, 2007, it appealed to the
Court of Appeals.

By the assailed Decision promulgated on November 8, 2007, the appellate court affirmed the ruling of the SOLE. It held that,
contrary to petitioner’s assertion, the ruling in Airtime Specialist, Inc. v. Ferrer Calleja 5 stating that in a certification election, all
rank-and-file employees in the appropriate bargaining unit, whether probationary or permanent, are entitled to vote, is
inapplicable to the case at bar. For, the appellate court continued, the six probationary employees were not yet employed by the
Hotel at the time the August 9, 2005 Order granting the certification election was issued. It thus held that Airtime Specialist
applies only to situations wherein the probationary employees were already employed as of the date of filing of the petition for
certification election.

Respecting Gatbonton’s vote, the appellate court upheld the SOLE’s finding that since it was not properly challenged, its
inclusion could no longer be questioned, nor could it be made the basis to include the votes of the six probationary employees.

The appellate court brushed aside petitioner’s contention that the opening of the 17 segregated votes would materially affect the
results of the election as there would be the likelihood of a run-off election in the event none of the contending unions receive a
majority of the valid votes cast. It held that the "majority" contemplated in deciding which of the unions in a certification election
is the winner refers to the majority of valid votes cast, not the simple majority of votes cast, hence, the SOLE was correct in
ruling that even if the 17 votes were in favor of petitioner, it would still be insufficient to overturn the results of the certification
election.

Petitioner’s motion for reconsideration having been denied by Resolution of January 25, 2008, the present recourse was filed.

Petitioner’s contentions may be summarized as follows:

1. Inclusion of Jose Gatbonton’s vote but excluding the vote of the six other probationary employees violated the
principle of equal protection and is not in accord with the ruling in Airtime Specialists, Inc. v. Ferrer-Calleja;

2. The time of reckoning for purposes of determining when the probationary employees can be allowed to vote is not
August 9, 2005 – the date of issuance by Med-Arbiter Calabocal of the Order granting the conduct of certification
elections, but March 10, 2006 – the date the SOLE Order affirmed the Med-Arbiter’s Order.

3. Even if the votes of the six probationary employees were included, still, HIMPHLU could not be considered as having
obtained a majority of the valid votes cast as the opening of the 17 ballots would increase the number of valid votes from
321 to 338, hence, for HIMPHLU to be certified as the exclusive bargaining agent, it should have garnered at least 170,
not 169, votes.

Petitioner justifies its not challenging Gatbonton’s vote because it was precisely its position that probationary employees should
be allowed to vote. It thus avers that justice and equity dictate that since Gatbonton’s vote was counted, then the votes of the 6
other probationary employees should likewise be included in the tally.

Petitioner goes on to posit that the word "order" in Section 5, Rule 9 of Department Order No. 40-03 reading "[A]ll employees
who are members of the appropriate bargaining unit sought to be represented by the petitioner at the time of the issuance of
the order granting the conduct of certification election shall be allowed to vote" refers to an order which has already become final
and executory, in this case the March 10, 2002 Order of the SOLE.

Petitioner thus concludes that if March 10, 2006 is the reckoning date for the determination of the eligibility of workers, then all
the segregated votes cast by the probationary employees should be opened and counted, they having already been working at
the Hotel on such date.

Respecting the certification of HIMPHLU as the exclusive bargaining agent, petitioner argues that the same was not proper for if
the 17 votes would be counted as valid, then the total number of votes cast would have been 338, not 321, hence, the majority
would be 170; as such, the votes garnered by HIMPHLU is one vote short of the majority for it to be certified as the exclusive
bargaining agent.

The relevant issues for resolution then are first, whether employees on probationary status at the time of the certification
elections should be allowed to vote, and second, whether HIMPHLU was able to obtain the required majority for it to be certified
as the exclusive bargaining agent.

On the first issue, the Court rules in the affirmative.

The inclusion of Gatbonton’s vote was proper not because it was not questioned but because probationary employees have the
right to vote in a certification election. The votes of the six other probationary employees should thus also have been counted.
As Airtime Specialists, Inc. v. Ferrer-Calleja holds:

In a certification election, all rank and file employees in the appropriate bargaining unit, whether probationary or permanent are
entitled to vote. This principle is clearly stated in Art. 255 of the Labor Code which states that the "labor organization designated
or selected by the majority of the employees in an appropriate bargaining unit shall be the exclusive representative of the
employees in such unit for purposes of collective bargaining." Collective bargaining covers all aspects of the employment
relation and the resultant CBA negotiated by the certified union binds all employees in the bargaining unit. Hence, all rank and
47 | P a g e
file employees, probationary or permanent, have a substantial interest in the selection of the bargaining representative. The
Code makes no distinction as to their employment status as basis for eligibility in supporting the petition for certification election.
The law refers to "all" the employees in the bargaining unit. All they need to be eligible to support the petition is to belong to the
"bargaining unit." (Emphasis supplied)

Rule II, Sec. 2 of Department Order No. 40-03, series of 2003, which amended Rule XI of the Omnibus Rules Implementing the
Labor Code, provides:

Rule II

Section 2. Who may join labor unions and workers' associations. - All persons employed in commercial, industrial and
agricultural enterprises, including employees of government owned or controlled corporations without original charters
established under the Corporation Code, as well as employees of religious, charitable, medical or educational institutions
whether operating for profit or not, shall have the right to self-organization and to form, join or assist labor unions for purposes of
collective bargaining: provided, however, that supervisory employees shall not be eligible for membership in a labor union of the
rank-and-file employees but may form, join or assist separate labor unions of their own. Managerial employees shall not be
eligible to form, join or assist any labor unions for purposes of collective bargaining. Alien employees with valid working permits
issued by the Department may exercise the right to self-organization and join or assist labor unions for purposes of collective
bargaining if they are nationals of a country which grants the same or similar rights to Filipino workers, as certified by the
Department of Foreign Affairs.

For purposes of this section, any employee, whether employed for a definite period or not, shall beginning on the first day of
his/her service, be eligible for membership in any labor organization.

All other workers, including ambulant, intermittent and other workers, the self-employed, rural workers and those without any
definite employers may form labor organizations for their mutual aid and protection and other legitimate purposes except
collective bargaining. (Emphasis supplied)

The provision in the CBA disqualifying probationary employees from voting cannot override the Constitutionally-protected right of
workers to self-organization, as well as the provisions of the Labor Code and its Implementing Rules on certification elections
and jurisprudence thereon.

A law is read into, and forms part of, a contract. Provisions in a contract are valid only if they are not contrary to law, morals,
good customs, public order or public policy. 6

Rule XI, Sec. 5 of D.O. 40-03, on which the SOLE and the appellate court rely to support their position that probationary
employees hired after the issuance of the Order granting the petition for the conduct of certification election must be excluded,
should not be read in isolation and must be harmonized with the other provisions of D.O. Rule XI, Sec. 5 of D.O. 40-03, viz:

Rule XI

xxxx

Section 5. Qualification of voters; inclusion-exclusion. - All employees who are members of the appropriate bargaining unit
sought to be represented by the petitioner at the time of the issuance of the order granting the conduct of a certification election
shall be eligible to vote. An employee who has been dismissed from work but has contested the legality of the dismissal in a
forum of appropriate jurisdiction at the time of the issuance of the order for the conduct of a certification election shall be
considered a qualified voter, unless his/her dismissal was declared valid in a final judgment at the time of the conduct of the
certification election. (Emphasis supplied)

xxxx

Section 13. Order/Decision on the petition. - Within ten (10) days from the date of the last hearing, the Med-Arbiter shall issue a
formal order granting the petition or a decision denying the same. In organized establishments, however, no order or decision
shall be issued by the Med-Arbiter during the freedom period.

The order granting the conduct of a certification election shall state the following:

(a) the name of the employer or establishment;

(b) the description of the bargaining unit;

(c) a statement that none of the grounds for dismissal enumerated in the succeeding paragraph exists;

(d) the names of contending labor unions which shall appear as follows: petitioner union/s in the order in which their
petitions were filed, forced intervenor, and no union; and

(e) a directive upon the employer and the contending union(s) to submit within ten (10) days from receipt of the order,
the certified list of employees in the bargaining unit, or where necessary, the payrolls covering the members of the
bargaining unit for the last three (3) months prior to the issuance of the order. (Emphasis supplied)

xxxx

48 | P a g e
Section 21. Decision of the Secretary. - The Secretary shall have fifteen (15) days from receipt of the entire records of the
petition within which to decide the appeal. The filing of the memorandum of appeal from the order or decision of the Med-
Arbiter stays the holding of any certification election.

The decision of the Secretary shall become final and executory after ten (10) days from receipt thereof by the parties. No motion
for reconsideration of the decision shall be entertained. (Emphasis supplied)

In light of the immediately-quoted provisions, and prescinding from the principle that all employees are, from the first day of their
employment, eligible for membership in a labor organization, it is evident that the period of reckoning indetermining who shall be
included in the list of eligible voters is, in cases where a timely appeal has been filed fromthe Order of the Med-
Arbiter, the date when the Order of the Secretary of Labor and Employment,
whether affirmingor denying the appeal, becomes final and executory.

The filing of an appeal to the SOLE from the Med-Arbiter’s Order stays its execution, in accordance with Sec. 21, and rationally,
the Med-Arbiter cannot direct the employer to furnish him/her with the list of eligible voters pending the resolution of the appeal.

During the pendency of the appeal, the employer may hire additional employees. To exclude the employees hired after the
issuance of the Med-Arbiter’s Order but before the appeal has been resolved would violate the guarantee that every employee
has the right to be part of a labor organization from the first day of their service.

In the present case, records show that the probationary employees, including Gatbonton, were included in the list of employees
in the bargaining unit submitted by the Hotel on May 25, 2006 in compliance with the directive of the Med-Arbiter after the appeal
and subsequent motion for reconsideration have been denied by the SOLE, rendering the Med-Arbiter’s August 22, 2005 Order
final and executory 10 days after the March 22, 2007 Resolution (denying the motion for reconsideration of the January 22 Order
denying the appeal), and rightly so. Because, for purposes of self-organization, those employees are, in light of the discussion
above, deemed eligible to vote.

A certification election is the process of determining the sole and exclusive bargaining agent of the employees in an appropriate
bargaining unit for purposes of collective bargaining. Collective bargaining, refers to the negotiated contract between a legitimate
labor organization and the employer concerning wages, hours of work and all other terms and conditions of employment in a
bargaining unit.7

The significance of an employee’s right to vote in a certification election cannot thus be overemphasized. For he has
considerable interest in the determination of who shall represent him in negotiating the terms and conditions of his employment.

Even if the Implementing Rules gives the SOLE 20 days to decide the appeal from the Order of the Med-Arbiter, experience
shows that it sometimes takes months to be resolved. To rule then that only those employees hired as of the date of the
issuance of the Med-Arbiter’s Order are qualified to vote would effectively disenfranchise employees hired during the pendency
of the appeal. More importantly, reckoning the date of the issuance of the Med-Arbiter’s Order as the cut-off date would render
inutile the remedy of appeal to the SOLE.1avvph!1

But while the Court rules that the votes of all the probationary employees should be included, under the particular circumstances
of this case and the period of time which it took for the appeal to be decided, the votes of the six supervisory employees must be
excluded because at the time the certification elections was conducted, they had ceased to be part of the rank and file, their
promotion having taken effect two months before the election.

As to whether HIMPHLU should be certified as the exclusive bargaining agent, the Court rules in the negative. It is well-settled
that under the so-called "double majority rule," for there to be a valid certification election, majority of the bargaining unit must
have voted AND the winning union must have garnered majority of the valid votes cast.

Prescinding from the Court’s ruling that all the probationary employees’ votes should be deemed valid votes while that of the
supervisory employees should be excluded, it follows that the number of valid votes cast would increase – from 321 to 337.
Under Art. 256 of the Labor Code, the union obtaining the majority of the valid votes cast by the eligible voters shall be certified
as the sole and exclusive bargaining agent of all the workers in the appropriate bargaining unit. This majority is 50% + 1. Hence,
50% of 337 is 168.5 + 1 or at least 170.

HIMPHLU obtained 169 while petitioner received 151 votes. Clearly, HIMPHLU was not able to obtain a majority vote. The
position of both the SOLE and the appellate court that the opening of the 17 segregated ballots will not materially affect the
outcome of the certification election as for, so they contend, even if such member were all in favor of petitioner, still, HIMPHLU
would win, is thus untenable.

It bears reiteration that the true importance of ascertaining the number of valid votes cast is for it to serve as basis for computing
the required majority, and not just to determine which union won the elections. The opening of the segregated but valid votes
has thus become material. To be sure, the conduct of a certification election has a two-fold objective: to determine the
appropriate bargaining unit and to ascertain the majority representation of the bargaining representative, if the employees desire
to be represented at all by anyone. It is not simply the determination of who between two or more contending unions won, but
whether it effectively ascertains the will of the members of the bargaining unit as to whether they want to be represented and
which union they want to represent them.

Having declared that no choice in the certification election conducted obtained the required majority, it follows that a run-off
election must be held to determine which between HIMPHLU and petitioner should represent the rank-and-file employees.

A run-off election refers to an election between the labor unions receiving the two (2) highest number of votes in a certification or
consent election with three (3) or more choices, where such a certified or consent election results in none of the three (3) or
more choices receiving the majority of the valid votes cast; provided that the total number of votes for all contending unions is at
49 | P a g e
least fifty percent (50%) of the number of votes cast. 8 With 346 votes cast, 337 of which are now deemed valid and HIMPHLU
having only garnered 169 and petitioner having obtained 151 and the choice "NO UNION" receiving 1 vote, then the holding of a
run-off election between HIMPHLU and petitioner is in order.

WHEREFORE, the petition is GRANTED. The Decision dated November 8, 2007 and Resolution dated January 25, 2008 of the
Court of Appeals affirming the Resolutions dated January 22, 2007 and March 22, 2007, respectively, of the Secretary of Labor
and Employment in OS-A-9-52-05 are ANNULLED and SET ASIDE.

The Department of Labor and Employment-Bureau of Labor Relations is DIRECTED to cause the holding of a run-off election
between petitioner, National Union of Workers in Hotels, Restaurants and Allied Industries-Manila Pavilion Hotel Chapter
(NUWHRAIN-MPC), and respondent Holiday Inn Manila Pavilion Hotel Labor Union (HIMPHLU).

SO ORDERED.

50 | P a g e
G.R. No. 161305 February 9, 2007

MILAGROS PANUNCILLO, Petitioner,

vs.
CAP PHILIPPINES, INC., Respondent.

DECISION

CARPIO MORALES, J.:

Assailed via Petition for Review1 are the Decision dated May 16, 20032 and Resolution dated November 17, 20033of the Court of
Appeals in CA-G.R. SP No. 74665 which declared valid the dismissal of Milagros Panuncillo (petitioner) by CAP Philippines, Inc.
(respondent).

Petitioner was hired on August 28, 1980 as Office Senior Clerk by respondent. At the time of her questioned separation from
respondent on April 23, 1999, she was receiving a monthly salary of ₱16,180.60.

In order to secure the education of her son, petitioner procured an educational plan (the plan) from respondent which she had
fully paid but which she later sold to Josefina Pernes (Josefina) for ₱37,000. Before the actual transfer of the plan could be
effected, however, petitioner pledged it for ₱50,000 to John Chua who, however, sold it to Benito Bonghanoy. Bonghanoy in turn
sold the plan to Gaudioso R. Uy for ₱60,000.

Having gotten wind of the transactions subsequent to her purchase of the plan, Josefina, by letter of February 10,
1999,4 informed respondent that petitioner had "swindled" her but that she was willing to settle the case amicably as long as
petitioner pay the amount involved and the interest. She expressed her appreciation "if [respondent] could help her in anyway."

Acting on Josefina’s letter, the Integrated Internal Audit Operations (IIAO) of respondent required petitioner to explain in writing
why the plan had not been transferred to Josefina and was instead sold to another. Complying, petitioner proffered the following
explanation:

Because of extreme need of money, I was constrained to sell my CAP plan of my son to J. Pernes last July, 1996, in the amount
of Thirty Seven Thousand Pesos (P37,000.) The plan was not transferred right away because of lacking requirement on the part
of the buyer (birth certificate). The birth certificate came a month later. While waiting for the birth certificate, again because of
extreme need of money, I was tempted to pawned [sic] the plan, believing I can redeemed [sic] it later when the birth certificate
will come.

Last year, I was already pressured by J. Pernes for the transfer of the plan. But before hand, she already knew the present
situation. I was trying to find means to redeemed [sic] the plan but to no avail. I cannot borrow anymore from my creditors
because of outstanding loans which remains unpaid. As of the present, I am heavily debtladen and I don’t know where to run.

I can’t blame the person whom I pawned the plan if he had sold it. I can’t redeemed [sic] it anymore. Everybody needs money
and besides, I have given them my papers.

I admit, I had defrauded Ms. J. Pernes, but I didn’t do it intentionally. At first, I believe I can redeem the plan hoping I can
still borrow from somebody.

With my more than 18 years stay with the company, I don’t have the intention of ruining my image as well as the company’s. I
think I am just a victim of circumstances.5 (Emphasis and underscoring supplied)

A show-cause memorandum6 dated February 23, 1999 was thereupon sent to petitioner, giving her 48 hours from receipt thereof
to explain why she should not be disciplinarily dealt with. Petitioner did not comply, however.

The IIAO of respondent thus conducted an investigation on the matter. By Memorandum of April 5, 1999, 7 the IIAO
recommended that, among other things, administrative action should be taken against petitioner for violating Section 8.4 of
respondent’s Code of Discipline reading:

Committing or dealing any act or conniving with co-employees or anybody to defraud the company or customer/sales
associates.

In the same memorandum, the IIAO reported other matters bearing on petitioner’s duties as an employee, to wit:

OTHERS:

We also received a copy of demand letter of a certain Evelia Casquejo addressed to Ms. Panuncillo requiring the latter to pay
the amount of P54,870.00 for the supposed transfer of the lapsed plan of Subscriber Corazon Lintag with SFA # 25-67-40-01-
00392. Ms. Panuncillo received the payment of P25,000.00 and P29,870.00 on July 17, 1997 and July 18, 1997
respectively (Exhibits L&M).

Ms. Panuncillo verbally admitted that she was the one who sold the plan to Ms. Casquejo but with the authorization from Ms.
Lintag. However, the transfer was not effected because she had misappropriated a portion of the moneyuntil the plan was
terminated. Ms. Casquejo, however, did not file a complaint because Ms. Panuncillo executed a Special Power of Attorney
authorizing the former to receive P68,000 of Ms. Panuncillo’s retirement pay (Exhibit N).8(Emphasis in the original; underscoring
supplied))

51 | P a g e
On April 7, 1999, another show-cause memorandum was sent to petitioner by Renato M. Daquiz (Daquiz), First Vice President
of respondent, giving her another 48 hours to explain why she should not be disciplinarily dealt with in connection with the
complaints of Josefina and Evelia Casquejo (Evelia). Complying with the directive, petitioner, by letter of April 10, 1999, on top of
reiterating her admission of having "defrauded" Josefina, admitted having received from Evelia the payment for a lapsed plan,
thus:

With regards to [Evelia’s] case, yes its [sic] true I had received the payment but it was accordingly given to the owner or
Subscriber Ms. C. Lintag. The plan was not transferred because it was already forfeited and we, Ms. Lintag, [Evelia] and I
already made settlement of the case.

I think I have violated Sec. 8.4 of the company’s Code of Discipline. I admit it is my wrongdoing. I was only forced to do
this because of extreme needs to pay for my debts. I am open for whatever disciplinary action that will be sanctioned
againts [sic] me. I hope it is not termination from my job. How can I pay for obligations if that will happen to me.

As for [Josefina], I have the greatest desire to pay for my indebtedness but my capability at the moment is nil. (space) I have
been planning to retire early just to pay my obligations. That is why I had written to you last year inquiring tax exemption when
retiring. I have been with the company for almost 19 years already and I never intend [sic] to smear its name as well as mine. I
was only forced by circumstances. Although it hurts to leave CAP, I will be retiring on April 30, 1999.

x x x x9 (Emphasis and underscoring supplied)

Respondent thereupon terminated the services of petitioner by Memorandum dated April 20, 1999. 10

Petitioner sought reconsideration of her dismissal, by letter of April 23, 1999 addressed to Daquiz, imploring as follows:

. . . Please consider my retirement letter I sent to you. I would like to avail [of] the retirement benefit of the company. The
proceeds of my retirement could help me pay some of my obligations as well as the needs of my family. My husband is jobless
and I am the breadwinner of the family. If I will be terminated, I don’t know what will happen to us.

Sir, I am enclosing the affidavit of Ms. Evelia Casquejo proving that we have already settled the case.

x x x x11 (Underscoring supplied)1awphi1.net

Pending resolution of petitioner’s motion for reconsideration, respondent received a letter dated April 28, 1999 12from one
Gwendolyn N. Dinoro (Gwendolyn) who informed that she had been paying her "quarterly dues" through petitioner but found out
that none had been remitted to respondent, on account of which she (Gwendolyn) was being penalized with interest charges.

Acting on petitioner’s motion for reconsideration, Daquiz, by letter-memorandum of May 5, 1999, denied the same in this wise:

A review of your case was made per your request, and we note that it was not just a single case but multiple cases, that of
Ms. Casquejo, Ms. Pernes, and newly reported Ms. Dinoro. Furthermore, the cases happened way back in July 1996 and 1997,
and were just discovered recently. In addition, the misappropriation of money/or act to defraud the company or customer was
deliberate and intentional. There were several payments received – over a period of time. While you plead for your retirement
benefit to help you pay some of your obligations, as well as the need of your family (your husband being jobless and being the
breadwinner), these thoughts should have crossed your mind before you committed the violations rather than now. To allow you
to retire with benefits, is to tolerate and encourage others to do the same in the future, as it will be a precedent that will surely be
invoked in similar situations in the future, as it will be a precedent that will surely be invoked in similar situations in the future. It is
also unfair to others who do their jobs faithfully and honestly. If we let you have your way, it will appear that we let you scot-
free and even reward you with retirement – someone who deliberately violated trust and confidence of the company
and customers.

Premises considered, the decision to terminate your services for cause stays and the request for reconsideration is denied.

x x x x13 (Emphasis and underscoring supplied)

Petitioner thus filed a complaint14 for illegal dismissal, 13th month pay, service incentive leave pay, damages and attorney’s fees
against respondent.

The Labor Arbiter, while finding that the dismissal was for a valid cause, found the same too harsh. He thus ordered the
reinstatement of petitioner to a position one rank lower than her previous position, and disposed as follows:

WHEREFORE, the foregoing considered, judgement [sic] is hereby rendered directing the respondent to pay complainant’s 13th
Month pay and Service Incentive Leave Pay for 1999 in proportionate amount computed as follows:

13th Month Pay

January 1, 1999 to April 1, 1999

= 3 months

= P16,180.60/12 mos. x 3 mos. P4,045.14

Service Incentive Leave

52 | P a g e
 = P16,180.60/26 days

=P622.30 per day x 5 days/12 months. 777.87

TOTAL --------------------------------P4,823.01

Plus P482.30 ten (10%) Attorney’s Fees or a total aggregate amount of PESOS: FIVE THOUSAND THREE HUNDRED FIVE &
31/100 (P5,305.31).

Respondent is likewise, directed to reinstate the complainant to a position one rank lower without backwages.15(Underscoring
supplied)

On appeal, the National Labor Relations Commission (NLRC), by Decision of October 29, 2001, reversed that of the Labor
Arbiter, it finding that petitioner’s dismissal was illegal and accordingly ordering her reinstatement to her former position. Thus it
disposed:

WHEREFORE, the Decision in the main case dated February 18, 2000 of the Labor Arbiter declaring the dismissal of the
complainant valid, and his Order dated June 26, 2000 declaring the Motion to Declare Respondent-appellant in Contempt as
prematurely filed and ordering the issuance of an alias writ of execution are hereby SET ASIDE, and a new one is rendered
DECLARING the dismissal of the complainant illegal, and ORDERING the respondent, CAP PHILIPPINES, INCORPORATED,
the following:

1. to reinstate the complainant MILAGROS B. PANUNCILLO to her former position without loss of seniority rights and
with full backwages from the date her compensation was withheld from her on April 20, 1999 until her actual
reinstatement;

2. to pay to the same complainant P4,045.14 as 13th month pay, and P777.89 as service incentive leave pay;

3. to pay to the same complainant moral damages of FIFTY THOUSAND PESOS (P50,000.00), and exemplary
damages of another FIFTY THOUSAND PESOS (P50,000.00);

4. to pay attorney’s fees equivalent to ten percent (10%) of the total award exclusive of moral and exemplary damages.

Further, the complainant’s Motion to Declare Respondent in Contempt dated May 3, 2000 is denied and rendered moot by virtue
of this Decision.

All other claims are dismissed for lack of merit.16 (Underscoring supplied)

In so deciding, the NLRC held that the transaction between petitioner and Josefina was private in character and, therefore,
respondent did not suffer any damage, hence, it was error to apply Section 8.4 of respondent’s Code of Discipline.

Respondent challenged the NLRC Decision before the appellate court via Petition for Certiorari. 17 By Decision of May 16,
2003,18 the appellate court reversed the NLRC Decision and held that the dismissal was valid and that respondent complied with
the procedural requirements of due process before petitioner’s services were terminated.

Hence, the present petition, petitioner faulting the appellate court

x x x IN REVIEWING THE FINDINGS OF FACT OF THE LABOR ARBITER AND THE NATIONAL LABOR RELATIONS
COMMISSION THAT RESPONDENT CAP PHILIPPINES, INC., HAS NOT BEEN DEFRAUDED NOR DAMAGED IN THE
TRANSACTION/S ENTERED INTO BY PETITIONER RELATING TO HER FULLY PAID EDUCATIONAL PLAN.

II

x x x IN HOLDING THAT RESPONDENT CAP PHILIPPINES, INC. IS THE INSURER OF PETITIONER’S FULLY PAID
EDUCATIONAL PLAN UNDER THE INSURANCE CODE.

III

x x x IN HOLDING THAT PETITIONER WAS DULY AFFORDED DUE PROCESS BEFORE DISMISSAL[,]

and maintaining that she

IV

x x x IS ENTITLED TO HER FULL BACKWAGES FROM THE DATE HER COMPENSATION WAS WITHHELD FROM HER ON
APRIL 20, 1999 PURSUANT TO THE DECISION OF THE NLRC REINSTATING HER TO HER PREVIOUS POSITION WITH
FULL BACKWAGES AND SETTING ASIDE THE DECISION OF THE LABOR ARBITER REINSTATING HER TO A POSITION
NEXT LOWER IN RANK, UNTIL THE REVERSAL OF THE NLRC DECISION BY THE HONORABLE COURT OF
APPEALS.19 (Emphasis and underscoring supplied)

The petition is not meritorious.

53 | P a g e
Whether respondent did not suffer any damage resulting from the transactions entered into by petitioner, particularly that with
Josefina, is immaterial. As Lopez v. National Labor Relations Commission instructs:

That the [employer] suffered no damage resulting from the acts of [the employee] is inconsequential. In Glaxo Wellcome
Philippines, Inc. v. Nagkakaisang Empleyado ng Wellcome-DFA (NEW-DFA), we held that deliberate disregard or disobedience
of company rules could not be countenanced, and any justification that the disobedient employee might put forth would be
deemed inconsequential. The lack of resulting damage was unimportant, because "the heart of the charge is the crooked and
anarchic attitude of the employee towards his employer. Damage aggravates the charge but its absence does not mitigate nor
negate the employee’s liability." x x x20 (Italics in the original; underscoring supplied)

The transaction with Josefina aside, there was this case of misappropriation by petitioner of the amounts given to her by Evelia
representing payment for the lapsed plan of Corazon Lintag. While a settlement of the case between the two may have
eventually been forged, that did not obliterate the misappropriation committed by petitioner against a client of respondent.

Additionally, there was still another complaint lodged before respondent by Gwendolyn against petitioner for failure to remit the
cash payments she had made to her, a complaint she was apprised of but on which she was silent.

In fine, by petitioner’s repeated violation of Section 8.4 of respondent’s Code of Discipline, she violated the trust and confidence
of respondent and its customers. To allow her to continue with her employment puts respondent under the risk of being
embroiled in unnecessary lawsuits from customers similarly situated as Josefina, et al. Clearly, respondent exercised its
management prerogative when it dismissed petitioner.

. . . [T]ime and again, this Court has upheld a company’s management prerogatives so long as they are exercised in good faith
for the advancement of the employer’s interest and not for the purpose of defeating or circumventing the rights of the employees
under special laws or under valid agreements.

Deliberate disregard or disobedience of rules by the employees cannot be countenanced. Whatever maybe the justification
behind the violations is immaterial at this point, because the fact still remains that an infraction of the company rules has been
committed.

Under the Labor Code, the employer may terminate an employment on the ground of serious misconduct or willful disobedience
by the employee of the lawful orders of his employer or representative in connection with his work. Infractions of company rules
and regulations have been declared to belong to this category and thus are valid causes for termination of employment by the
employer.

xxxx

The employer cannot be compelled to continue the employment of a person who was found guilty of maliciously committing acts
which are detrimental to his interests. It will be highly prejudicial to the interests of the employer to impose on him the charges
that warranted his dismissal from employment. Indeed, it will demoralize the rank and file if the undeserving, if not undesirable,
remain in the service. It may encourage him to do even worse and will render a mockery of the rules of discipline that employees
are required to observe. This Court was more emphatic in holding that in protecting the rights of the laborer, it cannot authorize
the oppression or self-destruction of the employer.21 x x x (Underscoring supplied)

Petitioner nevertheless argues that she was not afforded due process before her dismissal as she was merely required to
answer a show-cause memorandum dated April 7, 1999 and there was no actual investigation conducted in which she could
have been heard.

Before terminating the services of an employee, the law requires two written notices: (1) one to apprise him of the particular acts
or omissions for which his dismissal is sought; and (2) the other to inform him of his employer’s decision to dismiss him. As to
the requirement of a hearing, the essence of due process lies in an opportunity to be heard, and not always and indispensably in
an actual hearing.22

When respondent received the letter-complaint of Josefina, petitioner was directed to comment and explain her side thereon.
She did comply, by letter of February 22, 1999 wherein she admitted that she "had defrauded Ms. J. Pernes, but [that she] didn’t
do it intentionally."

Respondent subsequently sent petitioner a show-cause memorandum giving her 48 hours from receipt why she should not be
disciplinarily sanctioned. Despite the 48-hour deadline, nothing was heard from her until April 10, 1999 when she complied with
the second show-cause memorandum dated April 7, 1999.

On April 20, 1999, petitioner was informed of the termination of her services to which she filed a motion for reconsideration.

There can thus be no doubt that petitioner was given ample opportunity to explain her side. Parenthetically, when an employee
admits the acts complained of, as in petitioner’s case, no formal hearing is even necessary.23

Finally, petitioner argues that even if the order of reinstatement of the NLRC was reversed on appeal, it is still obligatory on the
part of an employer to reinstate and pay the wages of a dismissed employee during the period of appeal, citing Roquero v.
Philippine Airlines,24 the third paragraph of Article 22325 of the Labor Code, and the last paragraph of Section 16, 26 Rule V of the
then 1990 New Rules of Procedure of the NLRC.

Petitioner adds that respondent made "clever moves to frustrate [her] from enjoying the reinstatement aspect of the decision
starting from that of the Labor Arbiter (although to a next lower rank), [to that] of the NLRC to her previous position without loss
of seniority rights until it was caught up by the decision of the Honorable Court of Appeals reversing the decision of the NLRC
and declaring the dismissal of petitioner as based on valid grounds."
54 | P a g e
Respondent, on the other hand, maintains that Roquero and the legal provisions cited by petitioner are not applicable as they
speak of reinstatement on order of the Labor Arbiter and not of the NLRC.

The Labor Arbiter ordered the reinstatement of petitioner to a lower position. The third paragraph of Article 223 of the Labor
Code is clear, however – the employee, who is ordered reinstated, must be accepted back to work under the same terms and
conditions prevailing prior to his dismissal or separation.

Petitioner’s being demoted to a position one rank lower than her original position is certainly not in accordance with the said third
paragraph provision of Article 223. Besides, the provision contemplates a finding that the employee was illegally dismissed or
there was no just cause for her dismissal. As priorly stated, in petitioner’s case, the Labor Arbiter found that there was just cause
for her dismissal, but that dismissal was too harsh, hence, his order for her reinstatement to a lower position.

The order to reinstate is incompatible with a finding that the dismissal is for a valid cause. Thus this Court declared in Colgate
Palmolive Philippines, Inc. v. Ople:

The order of the respondent Minister to reinstate the employees despite a clear finding of guilt on their part is not in conformity
with law. Reinstatement is simply incompatible with a finding of guilt. Where the totality of the evidence was sufficient to
warrant the dismissal of the employees the law warrants their dismissal without making any distinction between a first offender
and a habitual delinquent. Under the law, respondent Minister is duly mandated to equally protect and respect not only the labor
or workers’ side but also the management and/or employers’ side. The law, in protecting the rights of the laborer, authorizes
neither oppression nor self-destruction of the employer. x x x As stated by Us in the case of San Miguel Brewery vs. National
Labor Union, "an employer cannot legally be compelled to continue with the employment of a person who admittedly was guilty
of misfeasance or malfeasance towards his employer, and whose continuance in the service of the latter is patently inimical to
his interest."27 (Emphasis and underscoring supplied)

The NLRC was thus correct when it ruled that it was erroneous for the Labor Arbiter to order the reinstatement of petitioner,
even to a position one rank lower than that which she formerly held.28

Now, on petitioner’s argument that, following the third paragraph of Article 223 of the Labor Code, the order of the NLRC to
reinstate her and to pay her wages was immediately executory even while the case was on appeal before the higher courts: The
third paragraph of Article 223 of the Labor Code directs that – "the decision of the LaborArbiter reinstating a dismissed or
separated employee, insofar as the reinstatement aspect is concerned, shall immediately be executory, even pending appeal."

In Roquero, the Labor Arbiter upheld the dismissal of Roquero, along with another employee, albeit he found both the two and
employer Philippine Airlines (PAL) at fault. The Labor Arbiter thus ordered the payment of separation pay and attorney’s fees to
the complainant. No order for reinstatement was issued by the Labor Arbiter, precisely because the dismissal was upheld.

On appeal, the NLRC ruled in favor of Roquero and his co-complainant as it also found PAL guilty of instigation. The NLRC thus
ordered the reinstatement of Roquero and his co-complainant to their former positions, but without backwages.

PAL appealed the NLRC decision via Petition for Review before this Court. Roquero and his co-complainant did not. They
instead filed before the Labor Arbiter a Motion for Execution of the NLRC order for their reinstatement which the Labor Arbiter
granted.

Acting on PAL’s Petition for Review, this Court referred it to the Court of Appeals pursuant to St. Martin Funeral Home v.
NLRC.29

The appellate court reversed the NLRC decision and ordered the reinstatement of the decision of the Labor Arbiter but only
insofar as it upheld the dismissal of Roquero.

Back to this Court on Roquero’s Petition for Review, the following material issues were raised:

xxxx

2. Can the executory nature of the decision, more so the reinstatement aspect of a labor tribunal’s order be halted by a
petition having been filed in higher courts without any restraining order or preliminary injunction having been ordered in
the meantime?

3. Would the employer who refused to reinstate an employee despite a writ duly issued be held liable to pay the salary
of the subject employee from the time that he was ordered reinstated up to the time that the reversed decision was
handed down?30

Resolving these issues, this Court held in Roquero:

Article 223 (3rd paragraph) of the Labor Code as amended by Section 12 of Republic Act No. 6715, and Section 2 of the NLRC
Interim Rules on Appeals under RA No. 6715, Amending the Labor Code, provide that an order of reinstatement by the Labor
Arbiter is immediately executory even pending appeal. The rationale of the law has been explained in Aris (Phil.) Inc. vs. NLRC:

"In authorizing execution pending appeal of the reinstatement aspect of a decision of the Labor Arbiter reinstating a dismissed or
separated employee, the law itself has laid down a compassionate policy which, once more, vivifies and enhances the provisions
of the 1987 Constitution on labor and the working man.

xxxx

55 | P a g e
These duties and responsibilities of the State are imposed not so much to express sympathy for the workingman as to forcefully
and meaningfully underscore labor as a primary social and economic force, which the Constitution also expressly affirms with
equal intensity. Labor is an indispensable partner for the nation’s progress and stability.

xxxx

The order of reinstatement is immediately executory. The unjustified refusal of the employer to reinstate a dismissed employee
entitles him to payment of his salaries effective from the time the employer failed to reinstate him despite the issuance of a writ
of execution. Unless there is a restraining order issued, it is ministerial upon the Labor Arbiter to implement the order of
reinstatement. In the case at bar, no restraining order was granted. Thus, it was mandatory on PAL to actually reinstate Roquero
or reinstate him in the payroll. Having failed to do so, PAL must pay Roquero the salary he is entitled to, as if he was reinstated,
from the time of the decision of the NLRC until the finality of the decision of this Court.

We reiterate the rule that technicalities have no room in labor cases where the Rules of Court are applied only in a suppletory
manner and only to effectuate the objectives of the Labor Code and not to defeat them. Hence, even if the order of reinstatement
of the Labor Arbiter is reversed on appeal, it is obligatory on the part of the employer to reinstate and pay the wages of the
dismissed employee during the period of appeal until reversal by the higher court. On the other hand, if the employee has been
reinstated during the appeal period and such reinstatement order is reversed with finality, the employee is not required to
reimburse whatever salary he received for he is entitled to such, more so if he actually rendered services during the
period.31 (Italics in the original, emphasis and underscoring supplied)

In the present case, since the NLRC found petitioner’s dismissal illegal and ordered her reinstatement, following the provision of
the sixth paragraph of Article 223, viz:

The [National Labor Relations] Commission shall decide all cases within twenty (20) calendar days from receipt of the answer of
the appellee. The decision of the Commission shall be final and executory after ten (10) calendar days from receipt thereof by
the parties. (Emphasis and underscoring supplied),

the NLRC decision became "final and executory after ten calendar days from receipt of the decision by the parties" for
reinstatement.

In view, however, of Article 224 of the Labor Code which provides:

ART. 224. Execution of decisions, orders or awards. – (a) The Secretary of Labor and Employment or any Regional Director, the
Commission or any Labor Arbiter, or med-arbiter or voluntary arbitrator may, motu proprio or on motion of any
interested party, issue a writ of execution on a judgment within five (5) years from the date it becomes final and executory,
requiring a sheriff or a duly deputized officer to execute or enforce final decisions, orders or awards of the Secretary of Labor
and Employment or regional director, the Commission, the Labor Arbiter or med-arbiter, or voluntary arbitrators. In any case, it
shall be the duty of the responsible officer to separately furnish immediately the counsels of record and the parties with copies of
said decisions, orders or awards. Failure to comply with the duty prescribed herein shall subject such responsible officer to
appropriate administrative sanctions.

x x x x (Emphasis and underscoring supplied),

there was still a need for the issuance of a writ of execution of the NLRC decision.

Unlike then the order for reinstatement of a Labor Arbiter which is self-executory, that of the NLRC is not. There is still a need for
the issuance of a writ of execution. Thus this Court held in Pioneer Texturizing Corp. v. NLRC:32

x x x The provision of Article 223 is clear that an award [by the Labor Arbiter] for reinstatement shall be immediately executory
even pending appeal and the posting of a bond by the employer shall not stay the execution for reinstatement. The legislative
intent is quite obvious, i.e., to make an award of reinstatement immediately enforceable, even pending appeal. To require the
application for and issuance of a writ of execution as prerequisites for the execution of a reinstatement award would certainly
betray and run counter to the very object and intent of Article 223, i.e., the immediate execution of a reinstatement order. The
reason is simple. An application for a writ of execution and its issuance could be delayed for numerous reasons. A mere
continuance or postponement of a scheduled hearing, for instance, or an inaction on the part of the Labor Arbiter or the NLRC
could easily delay the issuance of the writ thereby setting at naught the strict mandate and noble purpose envisioned by Article
223. In other words, if the requirements of Article 224 [including the issuance of a writ of execution] were to govern, as we so
declared in Maranaw, then the executory nature of a reinstatement order or award contemplated by Article 223 will be unduly
circumscribed and rendered ineffectual. In enacting the law, the legislature is presumed to have ordained a valid and sensible
law, one which operates no further than may be necessary to achieve its specific purpose. Statutes, as a rule, are to be
construed in the light of the purpose to be achieved and the evil sought to be remedied. x x x In introducing a new rule on the
reinstatement aspect of a labor decision under Republic Act No. 6715, Congress should not be considered to be indulging in
mere semantic exercise. On appeal, however, the appellate tribunal concerned may enjoin or suspend the reinstatement order in
the exercise of its sound discretion.33(Italics in the original, emphasis and underscoring supplied)

If a Labor Arbiter does not issue a writ of execution of the NLRC order for the reinstatement of an employee even if there is no
restraining order, he could probably be merely observing judicial courtesy, which is advisable "if there is a strong probability that
the issues before the higher court would be rendered moot and moribund as a result of the continuation of the proceedings in the
lower court."34 In such a case, it is as if a temporary restraining order was issued, the effect of which Zamboanga City Water
District v. Buhat explains:

The issuance of the temporary restraining order … did not nullify the rights of private respondents to their reinstatement and to
collect their wages during the period of the effectivity of the order but merely suspended the implementation thereof pending the
determination of the validity of the NLRC resolutions subject of the petition. Naturally, a finding of this Court that private
56 | P a g e
respondents were not entitled to reinstatement would mean that they had no right to collect any back wages. On the other
hand, where the Court affirmed the decision of the NLRC and recognized the right of private respondents to reinstatement,…
private respondents are entitled to the wages accruing during the effectivity of the temporary restraining order.35 (Emphasis
and underscoring supplied)

While Zamboanga was decided prior to St. Martin Funeral and, therefore, the NLRC decisions were at the time passed upon by
this Court to the exclusion of the appellate court, it is still applicable.

Since this Court is now affirming the challenged decision of the Court of Appeals finding that petitioner was validly dismissed and
accordingly reversing the NLRC Decision that petitioner was illegally dismissed and should be reinstated, petitioner is not
entitled to collect any backwages from the time the NLRC decision became final and executory up to the time the Court of
Appeals reversed said decision.

It does not appear that a writ of execution was issued for the implementation of the NLRC order for reinstatement. Had one been
issued, respondent would have been obliged to reinstate petitioner and pay her salary until the said order of the NLRC for her
reinstatement was reversed by the Court of Appeals, and following Roquero, petitioner would not have been obliged to
reimburse respondent for whatever salary she received in the interim.

In sum, while under the sixth paragraph of Article 223 of the Labor Code, the decision of the NLRC becomes final and
executory after the lapse of ten calendar days from receipt thereof by the parties, the adverse party is not precluded from
assailing it via Petition for Certiorari under Rule 65 before the Court of Appeals and then to this Court via a Petition for Review
under Rule 45. If during the pendency of the review no order is issued by the courts enjoining the execution of a decision of the
Labor Arbiter or NLRC which is favorable to an employee, the Labor Arbiter or the NLRC must exercise extreme prudence and
observe judicial courtesy when the circumstances so warrant if we are to heed the injunction of the Court in Philippine
Geothermal, Inc v. NLRC:

While it is true that compassion and human consideration should guide the disposition of cases involving termination of
employment since it affects one’s source or means of livelihood, it should not be overlooked that the benefits accorded to labor
do not include compelling an employer to retain the services of an employee who has been shown to be a gross liability to the
employer. The law in protecting the rights of the employees authorizes neither oppression nor self-destruction of the employer. It
should be made clear that when the law tilts the scale of justice in favor of labor, it is but a recognition of the inherent economic
inequality between labor and management. The intent is to balance the scale of justice; to put the two parties on relatively equal
positions. There may be cases where the circumstances warrant favoring labor over the interests of management but never
should the scale be so tilted if the result is an injustice to the employer. Justitia nemini neganda est (Justice is to be denied to
none).36 (Italics in the original; emphasis and underscoring supplied)

WHEREFORE, the petition is DENIED. The assailed Court of Appeals Decision dated May 16, 2003 and Resolution dated
November 17, 2003 are AFFIRMED.

SO ORDERED.

57 | P a g e
G.R. No. 160828 August 9, 2010

PICOP RESOURCES, INCORPORATED (PRI), Petitioner,

vs.
ANACLETO L. TAÑECA, GEREMIAS S. TATO, JAIME N. CAMPOS, MARTINIANO A. MAGAYON, JOSEPH B. BALGOA,
MANUEL G. ABUCAY, MOISES M. ALBARAN, MARGARITO G. ALICANTE, JERRY ROMEO T. AVILA, LORENZO D.
CANON, RAUL P. DUERO, DANILO Y. ILAN, MANUEL M. MATURAN, JR., LUISITO R. POPERA, CLEMENTINO C.
QUIMAN, ROBERTO Q. SILOT, CHARLITO D. SINDAY, REMBERT B. SUZON ALLAN J. TRIMIDAL, and NAMAPRI-
SPFL, Respondents.

DECISION

PERALTA, J.:

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking the reversal of the Decision1dated July 25,
2003 and Resolution2 dated October 23, 2003 of the Court of Appeals in CA-G.R. SP No. 71760, setting aside the Resolutions
dated October 8, 20013 and April 29, 20024 of the National Labor Relations Commission in NLRC CA No. M-006309-2001 and
reinstating the Decision5 dated March 16, 2001 of the Labor Arbiter.

The facts, as culled from the records, are as follows:

On February 13, 2001, respondents Anacleto Tañeca, Loreto Uriarte, Joseph Balgoa, Jaime Campos, Geremias Tato,
Martiniano Magayon, Manuel Abucay and fourteen (14) others filed a Complaint for unfair labor practice, illegal dismissal and
money claims against petitioner PICOP Resources, Incorporated (PRI), Wilfredo Fuentes (in his capacity as PRI's Vice
President/Resident Manager), Atty. Romero Boniel (in his capacity as PRI's Manager of Legal/Labor), Southern Philippines
Federation of Labor (SPFL), Atty. Wilbur T. Fuentes (in his capacity as Secretary General of SPFL), Pascasio Trugillo (in his
capacity as Local President of Nagkahiusang Mamumuo sa PICOP Resources, Inc.- SPFL [NAMAPRI-SPFL]) and Atty. Proculo
Fuentes, Jr.6 (in his capacity as National President of SPFL).

Respondents were regular rank-and-file employees of PRI and bona fide members of Nagkahiusang Mamumuo saPRI Southern
Philippines Federation of Labor (NAMAPRI-SPFL), which is the collective bargaining agent for the rank-and-file employees of
petitioner PRI.

PRI has a collective bargaining agreement (CBA) with NAMAPRI-SPFL for a period of five (5) years from May 22, 1995 until
May 22, 2000.

The CBA contained the following union security provisions:

Article II- Union Security and Check-Off

Section 6. Maintenance of membership.

6.1 All employees within the appropriate bargaining unit who are members of the UNION at the time of the
signing of this AGREEMENT shall, as a condition of continued employment by the COMPANY, maintain their
membership in the UNION in good standing during the effectivity of this AGREEMENT.

6.2 Any employee who may hereinafter be employed to occupy a position covered by the bargaining unit shall be
advised by the COMPANY that they are required to file an application for membership with the UNION within thirty (30)
days from the date his appointment shall have been made regular.

6.3 The COMPANY, upon the written request of the UNION and after compliance with the requirements of the
New Labor Code, shall give notice of termination of services of any employee who shall fail to fulfill the
condition provided in Section 6.1 and 6.2 of this Article, but it assumes no obligation to discharge any employee if it
has reasonable grounds to believe either that membership in the UNION was not available to the employee on the same
terms and conditions generally applicable to other members, or that membership was denied or terminated for reasons
other than voluntary resignation or non-payment of regular union dues. Separation under the Section is understood to be
for cause, consequently, the dismissed employee is not entitled to separation benefits provided under the New Labor
Code and in this AGREEMENT."7

On May 16, 2000, Atty. Proculo P. Fuentes (Atty. Fuentes) sent a letter to the management of PRI demanding the termination of
employees who allegedly campaigned for, supported and signed the Petition for Certification Election of the Federation of Free
Workers Union (FFW) during the effectivity of the CBA. NAMAPRI-SPFL considered said act of campaigning for and signing the
petition for certification election of FFW as an act of disloyalty and a valid basis for termination for a cause in accordance with its
Constitution and By-Laws, and the terms and conditions of the CBA, specifically Article II, Sections 6.1 and 6.2 on Union
Security Clause.

In a letter dated May 23, 2000, Mr. Pascasio Trugillo requested the management of PRI to investigate those union members
who signed the Petition for Certification Election of FFW during the existence of their CBA. NAMAPRI-SPFL, likewise, furnished
PRI with machine copy of the authorization letters dated March 19, 20 and 21, 2000, which contained the names and signatures
of employees.

Acting on the May 16 and May 23, 2000 letters of the NAMAPRI-SPFL, Atty. Romero A. Boniel issued a memorandum
addressed to the concerned employees to explain in writing within 72 hours why their employment should not be terminated due
to acts of disloyalty as alleged by their Union.

58 | P a g e
Within the period from May 26 to June 2, 2000, a number of employees who were served "explanation memorandum" submitted
their explanation, while some did not.

In a letter dated June 2, 2000, Atty. Boniel endorsed the explanation letters of the employees to Atty. Fuentes for evaluation and
final disposition in accordance with the CBA.

After evaluation, in a letter dated July 12, 2000, Atty. Fuentes advised the management of PRI that the Union found the
member's explanations to be unsatisfactory. He reiterated the demand for termination, but only of 46 member-employees,
including respondents.

On October 16, 2000, PRI served notices of termination for causes to the 31 out of the 46 employees whom NAMAPRIL-SPFL
sought to be terminated on the ground of "acts of disloyalty" committed against it when respondents allegedly supported and
signed the Petition for Certification Election of FFW before the "freedom period" during the effectivity of the CBA. A Notice dated
October 21, 2000 was also served on the Department of Labor and Employment Office (DOLE), Caraga Region.

Respondents then accused PRI of Unfair Labor Practice punishable under Article 248 (a), (b), (c), (d) and (e) of the Labor Code,
while Atty. Fuentes and Wilbur T. Fuentes and Pascasio Trujillo were accused of violating Article 248 (a) and (b) of the Labor
Code.

Respondents alleged that none of them ever withdrew their membership from NAMAPRI-SPFL or submitted to PRI any union
dues and check-off disauthorizations against NAMAPRI-SPFL. They claimed that they continue to remain on record as bona
fide members of NAMAPRI-SPFL. They pointed out that a patent manifestation of one’s disloyalty would have been the explicit
resignation or withdrawal of membership from the Union accompanied by an advice to management to discontinue union dues
and check-off deductions. They insisted that mere affixation of signature on such authorization to file a petition for certification
election was not per se an act of disloyalty. They claimed that while it may be true that they signed the said authorization before
the start of the freedom period, the petition of FFW was only filed with the DOLE on May 18, 2000, or 58 days after the start of
the freedom period.

Respondents maintained that their acts of signing the authorization signifying support to the filing of a Petition for Certification
Election of FFW was merely prompted by their desire to have a certification election among the rank-and-file employees of PRI
with hopes of a CBA negotiation in due time; and not to cause the downfall of NAMAPRI-SPFL.

Furthermore, respondents contended that there was lack of procedural due process. Both the letter dated May 16, 2000 of Atty.
Fuentes and the follow-up letter dated May 23, 2000 of Trujillo addressed to PRI did not mention their names. Respondents
stressed that NAMAPRI-SPFL merely requested PRI to investigate union members who supported the Petition for Certification
Election of FFW. Respondents claimed that they should have been summoned individually, confronted with the accusation and
investigated accordingly and from where the Union may base its findings of disloyalty and, thereafter, recommend to
management the termination for causes.1avvphi1

Respondents, likewise, argued that at the time NAMAPRI-SPFL demanded their termination, it was no longer the bargaining
representative of the rank-and-file workers of PRI, because the CBA had already expired on May 22, 2000. Hence, there could
be no justification in PRI’s act of dismissing respondents due to acts of disloyalty.

Respondents asserted that the act of PRI, Wilfredo Fuentes and Atty. Boniel in giving in to the wishes of the Union in
discharging them on the ground of disloyalty to the Union amounted to interference with, restraint or coercion of respondents’
exercise of their right to self-organization. The act indirectly required petitioners to support and maintain their membership with
NAMAPRI-SPFL as a condition for their continued employment. The acts of NAMAPRI-SPFL, Atty. Fuentes and Trujillo
amounted to actual restraint and coercion of the petitioners in the exercise of their rights to self-organization and constituted acts
of unfair labor practice.

In a Decision8 dated March 16, 2001, the Labor Arbiter declared the respondents’ dismissal to be illegal and ordered PRI to
reinstate respondents to their former or equivalent positions without loss of seniority rights and to jointly and solidarily pay their
backwages. The dispositive portion of which reads:

WHEREFORE, premises considered, judgment is hereby entered:

1. Declaring complainants’ dismissal illegal; and

2. Ordering respondents Picop Resources Inc. (PRI) and NAMAPRI-SPFL to reinstate complainants to their former or
equivalent positions without loss of seniority rights and to jointly and solidarily pay their backwages in the total amount of
₱420,339.30 as shown in the said Annex "A" plus damages in the amount of ₱10,000.00 each, or a total of ₱210,000.00
and attorney’s fees equivalent to 10% of the total monetary award.

SO ORDERED.9

PRI and NAMAPRI-SPFL appealed to the National Labor Relations Commission (NLRC), which reversed the decision of the
Labor Arbiter; thus, declaring the dismissal of respondents from employment as legal.

Respondents filed a motion for reconsideration, but it was denied on April 29, 2001 for lack of merit.

Unsatisfied, respondents filed a petition for certiorari under Rule 65 before the Court of Appeals and sought the nullification of
the Resolution of the NLRC dated October 8, 2001 which reversed the Decision dated March 16. 2001 of Labor Arbiter and the
Resolution dated April 29, 2002, which denied respondent’s motion for reconsideration.

59 | P a g e
On July 25, 2003, the Court of Appeals reversed and set aside the assailed Resolutions of the NLRC and reinstated the
Decision dated March 16, 2001 of the Labor Arbiter.

Thus, before this Court, PRI, as petitioner, raised the following issues:

WHETHER AN EXISTING COLLECTIVELY (sic) BARGAINING AGREEMENT (CBA) CAN BE GIVEN ITS FULL FORCE AND
EFFECT IN ALL ITS TERMS AND CONDITION INCLUDING ITS UNION SECURITY CLAUSE, EVEN BEYOND THE 5-YEAR
PERIOD WHEN NO NEW CBA HAS YET BEEN ENTERED INTO.

II

WHETHER OR NOT AN HONEST ERROR IN THE INTERPRETATION AND/OR CONCLUSION OF LAW FALL WITHIN THE
AMBIT OF THE EXTRAORDINARY REMEDY OF CERTIORARI UNDER RULE 65, REVISED RULES OF COURT. 10

We will first delve on the technical issue raised.

PRI perceived a patent error in the mode of appeal elected by respondents for the purpose of assailing the decision of the
NLRC. It claimed that assuming that the NLRC erred in its judgment on the legal issues, its error, if any, is not tantamount to
abuse of discretion falling within the ambit of Rule 65.

Petitioner is mistaken.

The power of the Court of Appeals to review NLRC decisions via Rule 65 or Petition for Certiorari has been settled as early as in
our decision in St. Martin Funeral Home v. National Labor Relations Commission.11 This Court held that the proper vehicle for
such review was a Special Civil Action for Certiorari under Rule 65 of the Rules of Court, and that this action should be filed in
the Court of Appeals in strict observance of the doctrine of the hierarchy of courts. 12 Moreover, it is already settled that under
Section 9 of Batas Pambansa Blg. 129, as amended by Republic Act No. 7902[10] (An Act Expanding the Jurisdiction of the
Court of Appeals, amending for the purpose of Section Nine of Batas Pambansa Blg. 129 as amended, known as the Judiciary
Reorganization Act of 1980), the Court of Appeals – pursuant to the exercise of its original jurisdiction over Petitions
for Certiorari – is specifically given the power to pass upon the evidence, if and when necessary, to resolve factual issues. 13

We now come to the main issue of whether there was just cause to terminate the employment of respondents.

PRI argued that the dismissal of the respondents was valid and legal. It claimed to have acted in good faith at the instance of the
incumbent union pursuant to the Union Security Clause of the CBA.

Citing Article 253 of the Labor Code, 14 PRI contends that as parties to the CBA, they are enjoined to keep the status quo and
continue in full force and effect the terms and conditions of the existing CBA during the 60-day period and/or until a new
agreement is reached by the parties.

Petitioner's argument is untenable.

"Union security" is a generic term, which is applied to and comprehends "closed shop," "union shop," "maintenance of
membership," or any other form of agreement which imposes upon employees the obligation to acquire or retain union
membership as a condition affecting employment. There is union shop when all new regular employees are required to join the
union within a certain period as a condition for their continued employment. There is maintenance of membership shop when
employees, who are union members as of the effective date of the agreement, or who thereafter become members, must
maintain union membership as a condition for continued employment until they are promoted or transferred out of the bargaining
unit, or the agreement is terminated. A closed shop, on the other hand, may be defined as an enterprise in which, by agreement
between the employer and his employees or their representatives, no person may be employed in any or certain agreed
departments of the enterprise unless he or she is, becomes, and, for the duration of the agreement, remains a member in good
standing of a union entirely comprised of or of which the employees in interest are a part. 15

However, in terminating the employment of an employee by enforcing the union security clause, the employer needs to
determine and prove that: (1) the union security clause is applicable; (2) the union is requesting for the enforcement of the union
security provision in the CBA; and (3) there is sufficient evidence to support the decision of the union to expel the employee from
the union. These requisites constitute just cause for terminating an employee based on the union security provision of the
CBA.16

As to the first requisite, there is no question that the CBA between PRI and respondents included a union security clause,
specifically, a maintenance of membership as stipulated in Sections 6 of Article II, Union Security and Check-Off. Following the
same provision, PRI, upon written request from the Union, can indeed terminate the employment of the employee who failed to
maintain its good standing as a union member.

Secondly, it is likewise undisputed that NAMAPRI-SPFL, in two (2) occasions demanded from PRI, in their letters dated May 16
and 23, 2000, to terminate the employment of respondents due to their acts of disloyalty to the Union.

However, as to the third requisite, we find that there is no sufficient evidence to support the decision of PRI to terminate the
employment of the respondents.

PRI alleged that respondents were terminated from employment based on the alleged acts of disloyalty they committed when
they signed an authorization for the Federation of Free Workers (FFW) to file a Petition for Certification Election among all rank-

60 | P a g e
and-file employees of PRI. It contends that the acts of respondents are a violation of the Union Security Clause, as provided in
their Collective Bargaining Agreement.

We are unconvinced.

We are in consonance with the Court of Appeals when it held that the mere signing of the authorization in support of the Petition
for Certification Election of FFW on March 19, 20 and 21, or before the "freedom period," is not sufficient ground to terminate the
employment of respondents inasmuch as the petition itself was actually filed during the freedom period. Nothing in the records
would show that respondents failed to maintain their membership in good standing in the Union. Respondents did not resign or
withdraw their membership from the Union to which they belong. Respondents continued to pay their union dues and never
joined the FFW.

Significantly, petitioner's act of dismissing respondents stemmed from the latter's act of signing an authorization letter to file a
petition for certification election as they signed it outside the freedom period. However, we are constrained to believe that an
"authorization letter to file a petition for certification election" is different from an actual "Petition for Certification Election."
Likewise, as per records, it was clear that the actual Petition for Certification Election of FFW was filed only on May 18,
2000.17 Thus, it was within the ambit of the freedom period which commenced from March 21, 2000 until May 21, 2000. Strictly
speaking, what is prohibited is the filing of a petition for certification election outside the 60-day freedom period.18 This is not the
situation in this case. If at all, the signing of the authorization to file a certification election was merely preparatory to the filing of
the petition for certification election, or an exercise of respondents’ right to self-organization.

Moreover, PRI anchored their decision to terminate respondents’ employment on Article 253 of the Labor Code which states that
"it shall be the duty of both parties to keep the status quo and to continue in full force and effect the terms and
conditions of the existing agreement during the 60-day period and/or until a new agreement is reached by the
parties." It claimed that they are still bound by the Union Security Clause of the CBA even after the expiration of the CBA;
hence, the need to terminate the employment of respondents.

Petitioner's reliance on Article 253 is misplaced.

The provision of Article 256 of the Labor Code is particularly enlightening. It reads:

Article 256. Representation issue in organized establishments. - In organized establishments, when a verified petition
questioning the majority status of the incumbent bargaining agent is filed before the Department of Labor and Employment within
the sixty-day period before the expiration of a collective bargaining agreement, the Med-Arbiter shall automatically order an
election by secret ballot when the verified petition is supported by the written consent of at least twenty-five percent (25%) of all
the employees in the bargaining unit to ascertain the will of the employees in the appropriate bargaining unit. To have a valid
election, at least a majority of all eligible voters in the unit must have cast their votes. The labor union receiving the majority of
the valid votes cast shall be certified as the exclusive bargaining agent of all the workers in the unit. When an election which
provides for three or more choices results in no choice receiving a majority of the valid votes cast, a run-off election shall be
conducted between the labor unions receiving the two highest number of votes: Provided, That the total number of votes for all
contending unions is at least fifty per cent (50%) of the number of votes cast.

At the expiration of the freedom period, the employer shall continue to recognize the majority status of the incumbent
bargaining agent where no petition for certification election is filed. 19

Applying the same provision, it can be said that while it is incumbent for the employer to continue to recognize the majority
status of the incumbent bargaining agent even after the expiration of the freedom period, they could only do so when no petition
for certification election was filed. The reason is, with a pending petition for certification, any such agreement entered into by
management with a labor organization is fraught with the risk that such a labor union may not be chosen thereafter as the
collective bargaining representative.20 The provision for status quo is conditioned on the fact that no certification election was
filed during the freedom period. Any other view would render nugatory the clear statutory policy to favor certification election as
the means of ascertaining the true expression of the will of the workers as to which labor organization would represent them. 21

In the instant case, four (4) petitions were filed as early as May 12, 2000. In fact, a petition for certification election was already
ordered by the Med-Arbiter of DOLE Caraga Region on August 23, 2000.22 Therefore, following Article 256, at the expiration of
the freedom period, PRI's obligation to recognize NAMAPRI-SPFL as the incumbent bargaining agent does not hold true when
petitions for certification election were filed, as in this case.

Moreover, the last sentence of Article 253 which provides for automatic renewal pertains only to the economic provisions of the
CBA, and does not include representational aspect of the CBA. An existing CBA cannot constitute a bar to a filing of a petition
for certification election. When there is a representational issue, the status quo provision in so far as the need to await the
creation of a new agreement will not apply. Otherwise, it will create an absurd situation where the union members will be forced
to maintain membership by virtue of the union security clause existing under the CBA and, thereafter, support another union
when filing a petition for certification election. If we apply it, there will always be an issue of disloyalty whenever the employees
exercise their right to self-organization. The holding of a certification election is a statutory policy that should not be
circumvented,23 or compromised.1avvphi

Time and again, we have ruled that we adhere to the policy of enhancing the welfare of the workers. Their freedom to choose
who should be their bargaining representative is of paramount importance. The fact that there already exists a bargaining
representative in the unit concerned is of no moment as long as the petition for certification election was filed within the freedom
period. What is imperative is that by such a petition for certification election the employees are given the opportunity to make
known of who shall have the right to represent them thereafter. Not only some, but all of them should have the right to do so.
What is equally important is that everyone be given a democratic space in the bargaining unit concerned. 24

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We will emphasize anew that the power to dismiss is a normal prerogative of the employer. This, however, is not without
limitations. The employer is bound to exercise caution in terminating the services of his employees especially so when it is made
upon the request of a labor union pursuant to the Collective Bargaining Agreement. Dismissals must not be arbitrary and
capricious. Due process must be observed in dismissing an employee, because it affects not only his position but also his
means of livelihood. Employers should, therefore, respect and protect the rights of their employees, which include the right to
labor.25

An employee who is illegally dismissed is entitled to the twin reliefs of full backwages and reinstatement. If reinstatement is not
viable, separation pay is awarded to the employee. In awarding separation pay to an illegally dismissed employee, in lieu of
reinstatement, the amount to be awarded shall be equivalent to one month salary for every year of service. Under Republic Act
No. 6715, employees who are illegally dismissed are entitled to full backwages, inclusive of allowances and other benefits, or
their monetary equivalent, computed from the time their actual compensation was withheld from them up to the time of their
actual reinstatement. But if reinstatement is no longer possible, the backwages shall be computed from the time of their illegal
termination up to the finality of the decision. Moreover, respondents, having been compelled to litigate in order to seek redress
for their illegal dismissal, are entitled to the award of attorney’s fees equivalent to 10% of the total monetary award. 26

WHEREFORE, the petition is DENIED. The Decision dated July 25, 2003 and the Resolution dated October 23, 2003 of the
Court of Appeals in CA-G.R. SP No. 71760, which set aside the Resolutions dated October 8, 2001 and April 29, 2002 of the
National Labor Relations Commission in NLRC CA No. M-006309-2001, are AFFIRMED accordingly. Respondents are hereby
awarded full backwages and other allowances, without qualifications and diminutions, computed from the time they were illegally
dismissed up to the time they are actually reinstated. Let this case be remanded to the Labor Arbiter for proper computation of
the full backwages due respondents, in accordance with Article 279 of the Labor Code, as expeditiously as possible.

SO ORDERED.

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G.R. No. 169717 March 16, 2011

SAMAHANG MANGGAGAWA SA CHARTER CHEMICAL SOLIDARITY OF UNIONS IN THE PHILIPPINES FOR

EMPOWERMENT AND REFORMS (SMCC-SUPER), ZACARRIAS JERRY VICTORIO-Union President,Petitioner,
vs.
CHARTER CHEMICAL and COATING CORPORATION, Respondent.

DECISION

DEL CASTILLO, J.:

The right to file a petition for certification election is accorded to a labor organization provided that it complies with the
requirements of law for proper registration. The inclusion of supervisory employees in a labor organization seeking to represent
the bargaining unit of rank-and-file employees does not divest it of its status as a legitimate labor organization. We apply these
principles to this case.

This Petition for Review on Certiorari seeks to reverse and set aside the Court of Appeal’s March 15, 2005 Decision1 in CA-G.R.
SP No. 58203, which annulled and set aside the January 13, 2000 Decision 2 of the Department of Labor and Employment
(DOLE) in OS-A-6-53-99 (NCR-OD-M-9902-019) and the September 16, 2005 Resolution3 denying petitioner union’s motion for
reconsideration.

Factual Antecedents

On February 19, 1999, Samahang Manggagawa sa Charter Chemical Solidarity of Unions in the Philippines for Empowerment
and Reforms (petitioner union) filed a petition for certification election among the regular rank-and-file employees of Charter
Chemical and Coating Corporation (respondent company) with the Mediation Arbitration Unit of the DOLE, National Capital
Region.

On April 14, 1999, respondent company filed an Answer with Motion to Dismiss4 on the ground that petitioner union is not a
legitimate labor organization because of (1) failure to comply with the documentation requirements set by law, and (2) the
inclusion of supervisory employees within petitioner union.5

Med-Arbiter’s Ruling

On April 30, 1999, Med-Arbiter Tomas F. Falconitin issued a Decision6 dismissing the petition for certification election. The Med-
Arbiter ruled that petitioner union is not a legitimate labor organization because the Charter Certificate, "Sama-samang Pahayag
ng Pagsapi at Authorization," and "Listahan ng mga Dumalo sa Pangkalahatang Pulong at mga Sumang-ayon at Nagratipika sa
Saligang Batas" were not executed under oath and certified by the union secretary and attested to by the union president as
required by Section 235 of the Labor Code 7 in relation to Section 1, Rule VI of Department Order (D.O.) No. 9, series of 1997.
The union registration was, thus, fatally defective.

The Med-Arbiter further held that the list of membership of petitioner union consisted of 12 batchman, mill operator and leadman
who performed supervisory functions. Under Article 245 of the Labor Code, said supervisory employees are prohibited from
joining petitioner union which seeks to represent the rank-and-file employees of respondent company.

As a result, not being a legitimate labor organization, petitioner union has no right to file a petition for certification election for the
purpose of collective bargaining.

Department of Labor and Employment’s Ruling

On July 16, 1999, the DOLE initially issued a Decision 8 in favor of respondent company dismissing petitioner union’s appeal on
the ground that the latter’s petition for certification election was filed out of time. Although the DOLE ruled, contrary to the
findings of the Med-Arbiter, that the charter certificate need not be verified and that there was no independent evidence
presented to establish respondent company’s claim that some members of petitioner union were holding supervisory positions,
the DOLE sustained the dismissal of the petition for certification after it took judicial notice that another union, i.e., Pinag-isang
Lakas Manggagawa sa Charter Chemical and Coating Corporation, previously filed a petition for certification election on January
16, 1998. The Decision granting the said petition became final and executory on September 16, 1998 and was remanded for
immediate implementation. Under Section 7, Rule XI of D.O. No. 9, series of 1997, a motion for intervention involving a
certification election in an unorganized establishment should be filed prior to the finality of the decision calling for a certification
election. Considering that petitioner union filed its petition only on February 14, 1999, the same was filed out of time.

On motion for reconsideration, however, the DOLE reversed its earlier ruling. In its January 13, 2000 Decision, the DOLE found
that a review of the records indicates that no certification election was previously conducted in respondent company. On the
contrary, the prior certification election filed by Pinag-isang Lakas Manggagawa sa Charter Chemical and Coating Corporation
was, likewise, denied by the Med-Arbiter and, on appeal, was dismissed by the DOLE for being filed out of time. Hence, there
was no obstacle to the grant of petitioner union’s petition for certification election, viz:

WHEREFORE, the motion for reconsideration is hereby GRANTED and the decision of this Office dated 16 July 1999
is MODIFIED to allow the certification election among the regular rank-and-file employees of Charter Chemical and Coating
Corporation with the following choices:

1. Samahang Manggagawa sa Charter Chemical-Solidarity of Unions in the Philippines for Empowerment and Reform
(SMCC-SUPER); and

2. No Union.
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Let the records of this case be remanded to the Regional Office of origin for the immediate conduct of a certification election,
subject to the usual pre-election conference.

SO DECIDED.9

Court of Appeal’s Ruling

On March 15, 2005, the CA promulgated the assailed Decision, viz:

WHEREFORE, the petition is hereby GRANTED. The assailed Decision and Resolution dated January 13, 2000 and February
17, 2000 are hereby [ANNULLED] and SET ASIDE.

SO ORDERED.10

In nullifying the decision of the DOLE, the appellate court gave credence to the findings of the Med-Arbiter that petitioner union
failed to comply with the documentation requirements under the Labor Code. It, likewise, upheld the Med-Arbiter’s finding that
petitioner union consisted of both rank-and-file and supervisory employees. Moreover, the CA held that the issues as to the
legitimacy of petitioner union may be attacked collaterally in a petition for certification election and the infirmity in the
membership of petitioner union cannot be remedied through the exclusion-inclusion proceedings in a pre-election conference
pursuant to the ruling in Toyota Motor Philippines v. Toyota Motor Philippines Corporation Labor Union.11 Thus, considering that
petitioner union is not a legitimate labor organization, it has no legal right to file a petition for certification election.

Issues

Whether x x x the Honorable Court of Appeals committed grave abuse of discretion tantamount to lack of jurisdiction in granting
the respondent [company’s] petition for certiorari (CA G.R. No. SP No. 58203) in spite of the fact that the issues subject of the
respondent company[’s] petition was already settled with finality and barred from being re-litigated.

II

Whether x x x the Honorable Court of Appeals committed grave abuse of discretion tantamount to lack of jurisdiction in holding
that the alleged mixture of rank-and-file and supervisory employee[s] of petitioner [union’s] membership is [a] ground for the
cancellation of petitioner [union’s] legal personality and dismissal of [the] petition for certification election.

III

Whether x x x the Honorable Court of Appeals committed grave abuse of discretion tantamount to lack of jurisdiction in holding
that the alleged failure to certify under oath the local charter certificate issued by its mother federation and list of the union
membership attending the organizational meeting [is a ground] for the cancellation of petitioner [union’s] legal personality as a
labor organization and for the dismissal of the petition for certification election. 12

Petitioner Union’s Arguments

Petitioner union claims that the litigation of the issue as to its legal personality to file the subject petition for certification election
is barred by the July 16, 1999 Decision of the DOLE. In this decision, the DOLE ruled that petitioner union complied with all the
documentation requirements and that there was no independent evidence presented to prove an illegal mixture of supervisory
and rank-and-file employees in petitioner union. After the promulgation of this Decision, respondent company did not move for
reconsideration, thus, this issue must be deemed settled.

Petitioner union further argues that the lack of verification of its charter certificate and the alleged illegal composition of its
membership are not grounds for the dismissal of a petition for certification election under Section 11, Rule XI of D.O. No. 9,
series of 1997, as amended, nor are they grounds for the cancellation of a union’s registration under Section 3, Rule VIII of said
issuance. It contends that what is required to be certified under oath by the local union’s secretary or treasurer and attested to by
the local union’s president are limited to the union’s constitution and by-laws, statement of the set of officers, and the books of
accounts.

Finally, the legal personality of petitioner union cannot be collaterally attacked but may be questioned only in an independent
petition for cancellation pursuant to Section 5, Rule V, Book IV of the Rules to Implement the Labor Code and the doctrine
enunciated in Tagaytay Highlands International Golf Club Incoprorated v. Tagaytay Highlands Empoyees Union-PTGWO.13

Respondent Company’s Arguments

Respondent company asserts that it cannot be precluded from challenging the July 16, 1999 Decision of the DOLE. The said
decision did not attain finality because the DOLE subsequently reversed its earlier ruling and, from this decision, respondent
company timely filed its motion for reconsideration.

On the issue of lack of verification of the charter certificate, respondent company notes that Article 235 of the Labor Code and
Section 1, Rule VI of the Implementing Rules of Book V, as amended by D.O. No. 9, series of 1997, expressly requires that the
charter certificate be certified under oath.

It also contends that petitioner union is not a legitimate labor organization because its composition is a mixture of supervisory
and rank-and-file employees in violation of Article 245 of the Labor Code. Respondent company maintains that the ruling

64 | P a g e
in Toyota Motor Philippines vs. Toyota Motor Philippines Labor Union 14 continues to be good case law. Thus, the illegal
composition of petitioner union nullifies its legal personality to file the subject petition for certification election and its legal
personality may be collaterally attacked in the proceedings for a petition for certification election as was done here.

Our Ruling

The petition is meritorious.

The issue as to the legal personality of petitioner union is not barred by the July 16, 1999 Decision of the DOLE.

A review of the records indicates that the issue as to petitioner union’s legal personality has been timely and consistently raised
by respondent company before the Med-Arbiter, DOLE, CA and now this Court. In its July 16, 1999 Decision, the DOLE found
that petitioner union complied with the documentation requirements of the Labor Code and that the evidence was insufficient to
establish that there was an illegal mixture of supervisory and rank-and-file employees in its membership. Nonetheless, the
petition for certification election was dismissed on the ground that another union had previously filed a petition for certification
election seeking to represent the same bargaining unit in respondent company.

Upon motion for reconsideration by petitioner union on January 13, 2000, the DOLE reversed its previous ruling. It upheld the
right of petitioner union to file the subject petition for certification election because its previous decision was based on a mistaken
appreciation of facts.15 From this adverse decision, respondent company timely moved for reconsideration by reiterating its
previous arguments before the Med-Arbiter that petitioner union has no legal personality to file the subject petition for
certification election.

The July 16, 1999 Decision of the DOLE, therefore, never attained finality because the parties timely moved for reconsideration.
The issue then as to the legal personality of petitioner union to file the certification election was properly raised before the DOLE,
the appellate court and now this Court.

The charter certificate need not be certified under oath by the local union’s secretary or treasurer and attested to by its president.

Preliminarily, we must note that Congress enacted Republic Act (R.A.) No. 948116 which took effect on June 14, 2007.17 This law
introduced substantial amendments to the Labor Code. However, since the operative facts in this case occurred in 1999, we
shall decide the issues under the pertinent legal provisions then in force (i.e., R.A. No. 6715,18 amending Book V of the Labor
Code, and the rules and regulations19 implementing R.A. No. 6715, as amended by D.O. No. 9,20

series of 1997) pursuant to our ruling in Republic v. Kawashima Textile Mfg., Philippines, Inc.21

In the main, the CA ruled that petitioner union failed to comply with the requisite documents for registration under Article 235 of
the Labor Code and its implementing rules. It agreed with the Med-Arbiter that the Charter Certificate, Sama-samang Pahayag
ng Pagsapi at Authorization, and Listahan ng mga Dumalo sa Pangkalahatang Pulong at mga Sumang-ayon at Nagratipika sa
Saligang Batas were not executed under oath. Thus, petitioner union cannot be accorded the status of a legitimate labor
organization.

We disagree.

The then prevailing Section 1, Rule VI of the Implementing Rules of Book V, as amended by D.O. No. 9, series of 1997,
provides:

Section 1. Chartering and creation of a local chapter — A duly registered federation or national union may directly create a
local/chapter by submitting to the Regional Office or to the Bureau two (2) copies of the following:

(a) A charter certificate issued by the federation or national union indicating the creation or establishment of the
local/chapter;

(b) The names of the local/chapter’s officers, their addresses, and the principal office of the local/chapter; and

(c) The local/chapter’s constitution and by-laws provided that where the local/chapter’s constitution and by-laws [are] the
same as [those] of the federation or national union, this fact shall be indicated accordingly.

All the foregoing supporting requirements shall be certified under oath by the Secretary or the Treasurer of the local/chapter and
attested to by its President.

As readily seen, the Sama-samang Pahayag ng Pagsapi at Authorization and Listahan ng mga Dumalo sa Pangkalahatang
Pulong at mga Sumang-ayon at Nagratipika sa Saligang Batas are not among the documents that need to be submitted to the
Regional Office or Bureau of Labor Relations in order to register a labor organization. As to the charter certificate, the above-
quoted rule indicates that it should be executed under oath. Petitioner union concedes and the records confirm that its charter
certificate was not executed under oath. However, in San Miguel Corporation (Mandaue Packaging Products Plants) v. Mandaue
Packing Products Plants-San Miguel Corporation Monthlies Rank-and-File Union-FFW (MPPP-SMPP-SMAMRFU-FFW),22 which
was decided under the auspices of D.O. No. 9, Series of 1997, we ruled –

In San Miguel Foods-Cebu B-Meg Feed Plant v. Hon. Laguesma, 331 Phil. 356 (1996), the Court ruled that it was not
necessary for the charter certificate to be certified and attested by the local/chapter officers. Id. While this ruling was based
on the interpretation of the previous Implementing Rules provisions which were supplanted by the 1997 amendments,
we believe that the same doctrine obtains in this case. Considering that the charter certificate is prepared and issued by the

65 | P a g e
national union and not the local/chapter, it does not make sense to have the local/chapter’s officers x x x certify or attest to
a document which they had no hand in the preparation of.23 (Emphasis supplied)

In accordance with this ruling, petitioner union’s charter certificate need not be executed under oath. Consequently, it validly
acquired the status of a legitimate labor organization upon submission of (1) its charter certificate, 24 (2) the names of its officers,
their addresses, and its principal office,25 and (3) its constitution and by-laws26— the last two requirements having been
executed under oath by the proper union officials as borne out by the records.

The mixture of rank-and-file and supervisory employees in petitioner union does not nullify its legal personality as a legitimate
labor organization.

The CA found that petitioner union has for its membership both rank-and-file and supervisory employees. However, petitioner
union sought to represent the bargaining unit consisting of rank-and-file employees. Under Article 24527 of the Labor Code,
supervisory employees are not eligible for membership in a labor organization of rank-and-file employees. Thus, the appellate
court ruled that petitioner union cannot be considered a legitimate labor organization pursuant to Toyota Motor Philippines v.
Toyota Motor Philippines Corporation Labor Union 28 (hereinafter Toyota).

Preliminarily, we note that petitioner union questions the factual findings of the Med-Arbiter, as upheld by the appellate court,
that 12 of its members, consisting of batchman, mill operator and leadman, are supervisory employees. However, petitioner
union failed to present any rebuttal evidence in the proceedings below after respondent company submitted in evidence the job
descriptions29 of the aforesaid employees. The job descriptions indicate that the aforesaid employees exercise recommendatory
managerial actions which are not merely routinary but require the use of independent judgment, hence, falling within the
definition of supervisory employees under Article 212(m) 30 of the Labor Code. For this reason, we are constrained to agree with
the Med-Arbiter, as upheld by the appellate court, that petitioner union consisted of both rank-and-file and supervisory
employees.

Nonetheless, the inclusion of the aforesaid supervisory employees in petitioner union does not divest it of its status as a
legitimate labor organization. The appellate court’s reliance on Toyota is misplaced in view of this Court’s subsequent ruling
in Republic v. Kawashima Textile Mfg., Philippines, Inc. 31 (hereinafter Kawashima). In Kawashima, we explained at length how
and why the Toyota doctrine no longer holds sway under the altered state of the law and rules applicable to this case, viz:

R.A. No. 6715 omitted specifying the exact effect any violation of the prohibition [on the co-mingling of supervisory and
rank-and-file employees] would bring about on the legitimacy of a labor organization.

It was the Rules and Regulations Implementing R.A. No. 6715 (1989 Amended Omnibus Rules) which supplied the deficiency by
introducing the following amendment to Rule II (Registration of Unions):

"Sec. 1. Who may join unions. - x x x Supervisory employees and security guards shall not be eligible for membership in
a labor organization of the rank-and-file employees but may join, assist or form separate labor organizations of their
own; Provided, that those supervisory employees who are included in an existing rank-and-file bargaining unit, upon the
effectivity of Republic Act No. 6715, shall remain in that unit x x x. (Emphasis supplied) and Rule V (Representation Cases and
Internal-Union Conflicts) of the Omnibus Rules, viz:

"Sec. 1. Where to file. - A petition for certification election may be filed with the Regional Office which has jurisdiction over the
principal office of the employer. The petition shall be in writing and under oath.

Sec. 2. Who may file. - Any legitimate labor organization or the employer, when requested to bargain collectively, may file the
petition.

The petition, when filed by a legitimate labor organization, shall contain, among others:

xxxx

(c) description of the bargaining unit which shall be the employer unit unless circumstances otherwise require; and
provided further, that the appropriate bargaining unit of the rank-and-file employees shall not include supervisory
employees and/or security guards. (Emphasis supplied)

By that provision, any questioned mingling will prevent an otherwise legitimate and duly registered labor organization from
exercising its right to file a petition for certification election.

Thus, when the issue of the effect of mingling was brought to the fore in Toyota, the Court, citing Article 245 of the Labor Code,
as amended by R.A. No. 6715, held:

"Clearly, based on this provision, a labor organization composed of both rank-and-file and supervisory employees is no labor
organization at all. It cannot, for any guise or purpose, be a legitimate labor organization. Not being one, an organization which
carries a mixture of rank-and-file and supervisory employees cannot possess any of the rights of a legitimate labor
organization, including the right to file a petition for certification election for the purpose of collective bargaining. It
becomes necessary, therefore, anterior to the granting of an order allowing a certification election, to inquire into the
composition of any labor organization whenever the status of the labor organization is challenged on the basis of
Article 245 of the Labor Code.

xxxx

In the case at bar, as respondent union's membership list contains the names of at least twenty-seven (27) supervisory
employees in Level Five positions, the union could not, prior to purging itself of its supervisory employee members, attain the
66 | P a g e
status of a legitimate labor organization. Not being one, it cannot possess the requisite personality to file a petition for
certification election." (Emphasis supplied)

In Dunlop, in which the labor organization that filed a petition for certification election was one for supervisory employees, but in
which the membership included rank-and-file employees, the Court reiterated that such labor organization had no legal right to
file a certification election to represent a bargaining unit composed of supervisors for as long as it counted rank-and-file
employees among its members.

It should be emphasized that the petitions for certification election involved in Toyota and Dunlop were filed on November 26,
1992 and September 15, 1995, respectively; hence, the 1989 Rules was applied in both cases.

But then, on June 21, 1997, the 1989 Amended Omnibus Rules was further amended by Department Order No. 9, series of
1997 (1997 Amended Omnibus Rules). Specifically, the requirement under Sec. 2(c) of the 1989 Amended Omnibus Rules –
that the petition for certification election indicate that the bargaining unit of rank-and-file employees has not been mingled with
supervisory employees – was removed. Instead, what the 1997 Amended Omnibus Rules requires is a plain description of the
bargaining unit, thus:

Rule XI
Certification Elections

xxxx

Sec. 4. Forms and contents of petition. - The petition shall be in writing and under oath and shall contain, among others, the
following: x x x (c) The description of the bargaining unit.

In Pagpalain Haulers, Inc. v. Trajano, the Court had occasion to uphold the validity of the 1997 Amended Omnibus Rules,
although the specific provision involved therein was only Sec. 1, Rule VI, to wit:

"Section. 1. Chartering and creation of a local/chapter.- A duly registered federation or national union may directly create a
local/chapter by submitting to the Regional Office or to the Bureau two (2) copies of the following: a) a charter certificate issued
by the federation or national union indicating the creation or establishment of the local/chapter; (b) the names of the
local/chapter's officers, their addresses, and the principal office of the local/chapter; and (c) the local/ chapter's constitution and
by-laws; provided that where the local/chapter's constitution and by-laws is the same as that of the federation or national union,
this fact shall be indicated accordingly.

All the foregoing supporting requirements shall be certified under oath by the Secretary or the Treasurer of the local/chapter and
attested to by its President."

which does not require that, for its creation and registration, a local or chapter submit a list of its members.

Then came Tagaytay Highlands Int'l. Golf Club, Inc. v. Tagaytay Highlands Employees Union-PGTWO in which the core issue
was whether mingling affects the legitimacy of a labor organization and its right to file a petition for certification election. This
time, given the altered legal milieu, the Court abandoned the view in Toyota and Dunlopand reverted to its pronouncement
in Lopez that while there is a prohibition against the mingling of supervisory and rank-and-file employees in one labor
organization, the Labor Code does not provide for the effects thereof. Thus, the Court held that after a labor organization has
been registered, it may exercise all the rights and privileges of a legitimate labor organization. Any mingling between supervisory
and rank-and-file employees in its membership cannot affect its legitimacy for that is not among the grounds for cancellation of
its registration, unless such mingling was brought about by misrepresentation, false statement or fraud under Article 239 of the
Labor Code.

In San Miguel Corp. (Mandaue Packaging Products Plants) v. Mandaue Packing Products Plants-San Miguel Packaging
Products-San Miguel Corp. Monthlies Rank-and-File Union-FFW, the Court explained that since the 1997 Amended Omnibus
Rules does not require a local or chapter to provide a list of its members, it would be improper for the DOLE to deny recognition
to said local or chapter on account of any question pertaining to its individual members.

More to the point is Air Philippines Corporation v. Bureau of Labor Relations, which involved a petition for cancellation of union
registration filed by the employer in 1999 against a rank-and-file labor organization on the ground of mixed membership: the
Court therein reiterated its ruling in Tagaytay Highlands that the inclusion in a union of disqualified employees is not among the
grounds for cancellation, unless such inclusion is due to misrepresentation, false statement or fraud under the circumstances
enumerated in Sections (a) and (c) of Article 239 of the Labor Code.

All said, while the latest issuance is R.A. No. 9481, the 1997 Amended Omnibus Rules, as interpreted by the Court in Tagaytay
Highlands, San Miguel and Air Philippines, had already set the tone for it. Toyota and Dunlop no longer hold sway in the present
altered state of the law and the rules.32 [Underline supplied]

The applicable law and rules in the instant case are the same as those in Kawashima because the present petition for
certification election was filed in 1999 when D.O. No. 9, series of 1997, was still in effect. Hence, Kawashimaapplies with equal
force here. As a result, petitioner union was not divested of its status as a legitimate labor organization even if some of its
members were supervisory employees; it had the right to file the subject petition for certification election.

The legal personality of petitioner union cannot be collaterally attacked by respondent company in the certification election
proceedings.

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

The amendments to the Labor Code and its implementing rules have buttressed that policy even more. 33

WHEREFORE, the petition is GRANTED. The March 15, 2005 Decision and September 16, 2005 Resolution of the Court of
Appeals in CA-G.R. SP No. 58203 are REVERSED and SET ASIDE. The January 13, 2000 Decision of the Department of Labor
and Employment in OS-A-6-53-99 (NCR-OD-M-9902-019) is REINSTATED.

No pronouncement as to costs.

SO ORDERED.

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G.R. No. 165381 February 9, 2011

NELSON A. CULILI, Petitioner,

vs.
EASTERN TELECOMMUNICATIONS PHILIPPINES, INC., SALVADOR HIZON (President and Chief Executive Officer),
EMILIANO JURADO (Chairman of the Board), VIRGILIO GARCIA (Vice President) and STELLA GARCIA (Assistant Vice
President), Respondents.

DECISION

LEONARDO-DE CASTRO, J.:

Before Us is a petition for review on certiorari1 of the February 5, 2004 Decision2 and September 13, 2004 Resolution3 of the
Court of Appeals in CA-G.R. SP No. 75001, wherein the Court of Appeals set aside the March 1, 2002 Decision 4 and September
24, 2002 Resolution5 of the National Labor Relations Commission (NLRC), which affirmed the Labor Arbiter’s Decision 6 dated
April 30, 2001.

Respondent Eastern Telecommunications Philippines, Inc. (ETPI) is a telecommunications company engaged mainly in the
business of establishing commercial telecommunications systems and leasing of international datalines or circuits that pass
through the international gateway facility (IGF).7 The other respondents are ETPI’s officers: Salvador Hizon, President and Chief
Executive Officer; Emiliano Jurado, Chairman of the Board; Virgilio Garcia, Vice President; and Stella Garcia, Assistant Vice
President.

Petitioner Nelson A. Culili (Culili) was employed by ETPI as a Technician in its Field Operations Department on January 27,
1981. On December 12, 1996, Culili was promoted to Senior Technician in the Customer Premises Equipment Management Unit
of the Service Quality Department and his basic salary was increased. 8

As a telecommunications company and an authorized IGF operator, ETPI was required, under Republic Act. No. 7925 and
Executive Order No. 109, to establish landlines in Metro Manila and certain provinces. 9 However, due to interconnection
problems with the Philippine Long Distance Telephone Company (PLDT), poor subscription and cancellation of subscriptions,
and other business difficulties, ETPI was forced to halt its roll out of one hundred twenty-nine thousand (129,000) landlines
already allocated to a number of its employees.10

In 1998, due to business troubles and losses, ETPI was compelled to implement a Right-Sizing Program which consisted of two
phases: the first phase involved the reduction of ETPI’s workforce to only those employees that were necessary and which ETPI
could sustain; the second phase entailed a company-wide reorganization which would result in the transfer, merger, absorption
or abolition of certain departments of ETPI.11

As part of the first phase, ETPI, on December 10, 1998, offered to its employees who had rendered at least fifteen years of
service, the Special Retirement Program, which consisted of the option to voluntarily retire at an earlier age and a retirement
package equivalent to two and a half (2½) months’ salary for every year of service.12 This offer was initially rejected by the
Eastern Telecommunications Employees’ Union (ETEU), ETPI’s duly recognized bargaining agent, which threatened to stage a
strike. ETPI explained to ETEU the exact details of the Right-Sizing Program and the Special Retirement Program and after
consultations with ETEU’s members, ETEU agreed to the implementation of both programs.13 Thus, on February 8, 1999, ETPI
re-offered the Special Retirement Program and the corresponding retirement package to the one hundred two (102) employees
who qualified for the program.14 Of all the employees who qualified to avail of the program, only Culili rejected the offer. 15

After the successful implementation of the first phase of the Right-Sizing Program, ETPI, on March 1, 1999 proceeded with the
second phase which necessitated the abolition, transfer and merger of a number of ETPI’s departments.16

Among the departments abolished was the Service Quality Department. The functions of the Customer Premises Equipment
Management Unit, Culili’s unit, were absorbed by the Business and Consumer Accounts Department. The abolition of the
Service Quality Department rendered the specialized functions of a Senior Technician unnecessary. As a result, Culili’s position
was abolished due to redundancy and his functions were absorbed by Andre Andrada, another employee already with the
Business and Consumer Accounts Department.17

On March 5, 1999, Culili discovered that his name was omitted in ETPI’s New Table of Organization. Culili, along with three of
his co-employees who were similarly situated, wrote their union president to protest such omission. 18

In a letter dated March 8, 1999, ETPI, through its Assistant Vice President Stella Garcia, informed Culili of his termination from
employment effective April 8, 1999. The letter reads:

March 8, 1999

To: N. Culili

Thru: S. Dobbin/G. Ebue

From: AVP-HRD

------------------------------------------------------------------------------------------

As you are aware, the current economic crisis has adversely affected our operations and undermined our earlier plans to put in
place major work programs and activities. Because of this, we have to implement a Rightsizing Program in order to cut

69 | P a g e
administrative/operating costs and to avoid losses. In line with this program, your employment with the company shall terminate
effective at the close of business hours on April 08, 1999. However, to give you ample time to look for other employment,
provided you have amply turned over your pending work and settled your accountabilities, you are no longer required to report to
work starting tomorrow. You will be considered on paid leave until April 08, 1999.

You will likewise be paid separation pay in compliance with legal requirements (see attached), as well as other benefits accruing
to you under the law, and the CBA. We take this opportunity to thank you for your services and wish you well in your future
endeavors.

(Signed)
Stella J. Garcia19

This letter was similar to the memo shown to Culili by the union president weeks before Culili was dismissed. The memo was
dated December 7, 1998, and was advising him of his dismissal effective January 4, 1999 due to the Right-Sizing Program ETPI
was going to implement to cut costs and avoid losses.20

Culili alleged that neither he nor the Department of Labor and Employment (DOLE) were formally notified of his termination.
Culili claimed that he only found out about it sometime in March 1999 when Vice President Virgilio Garcia handed him a copy of
the March 8, 1999 letter, after he was barred from entering ETPI’s premises by its armed security personnel when he tried to
report for work.21 Culili believed that ETPI had already decided to dismiss him even prior to the March 8, 1999 letter as
evidenced by the December 7, 1998 version of that letter. Moreover, Culili asserted that ETPI had contracted out the services he
used to perform to a labor-only contractor which not only proved that his functions had not become unnecessary, but which also
violated their Collective Bargaining Agreement (CBA) and the Labor Code. Aside from these, Culili also alleged that he was
discriminated against when ETPI offered some of his co-employees an additional benefit in the form of motorcycles to induce
them to avail of the Special Retirement Program, while he was not.22

ETPI denied singling Culili out for termination. ETPI claimed that while it is true that they offered the Special Retirement Package
to reduce their workforce to a sustainable level, this was only the first phase of the Right-Sizing Program to which ETEU agreed.
The second phase intended to simplify and streamline the functions of the departments and employees of ETPI. The abolition of
Culili’s department - the Service Quality Department - and the absorption of its functions by the Business and Consumer
Accounts Department were in line with the program’s goals as the Business and Consumer Accounts Department was more
economical and versatile and it was flexible enough to handle the limited functions of the Service Quality Department. ETPI
averred that since Culili did not avail of the Special Retirement Program and his position was subsequently declared redundant,
it had no choice but to terminate Culili.23 Culili, however, continued to report for work. ETPI said that because there was no more
work for Culili, it was constrained to serve a final notice of termination24 to Culili, which Culili ignored. ETPI alleged that Culili
informed his superiors that he would agree to his termination if ETPI would give him certain special work tools in addition to the
benefits he was already offered. ETPI claimed that Culili’s counter-offer was unacceptable as the work tools Culili wanted were
worth almost a million pesos. Thus, on March 26, 1999, ETPI tendered to Culili his final pay check of Eight Hundred Fifty-Nine
Thousand Thirty-Three and 99/100 Pesos (₱859,033.99) consisting of his basic salary, leaves, 13th month pay and separation
pay.25 ETPI claimed that Culili refused to accept his termination and continued to report for work. 26 ETPI denied hiring outside
contractors to perform Culili’s work and denied offering added incentives to its employees to induce them to retire early. ETPI
also explained that the December 7, 1998 letter was never given to Culili in an official capacity. ETPI claimed that it really
needed to reduce its workforce at that time and that it had to prepare several letters in advance in the event that none of the
employees avail of the Special Retirement Program. However, ETPI decided to wait for a favorable response from its employees
regarding the Special Retirement Program instead of terminating them.27

On February 8, 2000, Culili filed a complaint against ETPI and its officers for illegal dismissal, unfair labor practice, and money
claims before the Labor Arbiter.

On April 30, 2001, the Labor Arbiter rendered a decision finding ETPI guilty of illegal dismissal and unfair labor practice, to wit:

WHEREFORE, decision is hereby rendered declaring the dismissal of complainant Nelson A. Culili illegal for having been made
through an arbitrary and malicious declaration of redundancy of his position and for having been done without due process for
failure of the respondent to give complainant and the DOLE written notice of such termination prior to the effectivity thereof.

In view of the foregoing, respondents Eastern Telecommunications Philippines and the individual respondents are hereby found
guilty of unfair labor practice/discrimination and illegal dismissal and ordered to pay complainant backwages and such other
benefits due him if he were not illegally dismissed, including moral and exemplary damages and 10% attorney’s fees.
Complainant likewise is to be reinstated to his former position or to a substantially equivalent position in accordance with the
pertinent provisions of the Labor Code as interpreted in the case of Pioneer texturing [Pioneer Texturizing Corp. v. National
Labor Relations Commission], G.R. No. 11865[1], 16 October 1997. Hence, Complainant must be paid the total amount of TWO
MILLION SEVEN HUNDRED FORTY[-]FOUR THOUSAND THREE [HUNDRED] SEVENTY[-] NINE and 41/100
(₱2,744,379.41), computed as follows:

I. Backwages (from 16 March 1999 to 16 March 2001)

a. Basic Salary (₱29,030 x 24 mos.) ₱696,720.96

b. 13th Month Pay (₱692,720.96/12) 58,060.88

c. Leave Benefits

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 1. Vacation Leave (30 days/annum) ₱1,116.54 x 60 days 66,992.40

2. Sick Leave (30 days/annum) ₱1,116.54 x 60 days 66,992.40

3. Birthday Leave (1 day/annum) ₱1,116.54 x 2 days 2,233.08

Rice and Meal Subsidy 16 March – 31 July 1999

(₱1,750 x 4.5 mos. = ₱7,875.00)

01 August 1991 – 31 July 2000

d.
(₱1,850 x 12 mos = ₱22,200.00)

01 August 2000 – 16 March 2001

44,700.00
(₱1,950 x 7.5 mos. = ₱14,625.00)

e. Uniform Allowance

14,000.00

₱7,000/annum x 2 years

₱949,699.72

II. Damages

a. Moral………… ₱500,000.00

b. Exemplary…… ₱250,000.00

III. Attorney’s Fees (10% of award) 94,969.97

GRAND TOTAL: ₱2,744,379.4128

The Labor Arbiter believed Culili’s claim that ETPI intended to dismiss him even before his position was declared redundant. He
found the December 7, 1998 letter to be a telling sign of this intention. The Labor Arbiter held that a reading of the termination
letter shows that the ground ETPI was actually invoking was retrenchment and not redundancy, but ETPI stuck to redundancy
because it was easier to prove than retrenchment. He also did not believe that Culili’s functions were as limited as ETPI made it
appear to be, and held that ETPI failed to present any reasonable criteria to justify the declaration of Culili’s position as
redundant. On the issue of unfair labor practice, the Labor Arbiter agreed that the contracting out of Culili’s functions to non-
union members violated Culili’s rights as a union member. Moreover, the Labor Arbiter said that ETPI was not able to dispute
Culili’s claims of discrimination and subcontracting, hence, ETPI was guilty of unfair labor practice.

On appeal, the NLRC affirmed the Labor Arbiter’s decision but modified the amount of moral and exemplary damages awarded,
viz:

WHEREFORE, the Decision appealed from is AFFIRMED granting complainant the money claims prayed for including full
backwages, allowances and other benefits or their monetary equivalent computed from the time of his illegal dismissal on 16
March 1999 up to his actual reinstatement except the award of moral and exemplary damages which is modified to ₱200,000.00
for moral and ₱100,000.00 for exemplary damages. For this purpose, this case is REMANDED to the Labor Arbiter for
computation of backwages and other monetary awards to complainant.29

ETPI filed a Petition for Certiorari under Rule 65 of the Rules of Civil Procedure before the Court of Appeals on the ground of
grave abuse of discretion. ETPI prayed that a Temporary Restraining Order be issued against the NLRC from implementing its
decision and that the NLRC decision and resolution be set aside.

The Court of Appeals, on February 5, 2004, partially granted ETPI’s petition. The dispositive portion of the decision reads as
follows:

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WHEREFORE, all the foregoing considered, the petition is PARTIALLY GRANTED. The assailed Decision of public respondent
National Labor Relations Commission is MODIFIED in that petitioner Eastern Telecommunications Philippines Inc. (ETPI) is
hereby ORDERED to pay respondent Nelson Culili full backwages from the time his salaries were not paid until the finality of this
Decision plus separation pay in an amount equivalent to one (1) month salary for every year of service. The awards for moral
and exemplary damages are DELETED. The Writ of Execution issued by the Labor Arbiter dated September 8, 2003 is
DISSOLVED.30

The Court of Appeals found that Culili’s position was validly abolished due to redundancy. The Court of Appeals said that ETPI
had been very candid with its employees in implementing its Right-Sizing Program, and that it was highly unlikely that ETPI
would effect a company-wide reorganization simply for the purpose of getting rid of Culili. The Court of Appeals also held that
ETPI cannot be held guilty of unfair labor practice as mere contracting out of services being performed by union members does
not per se amount to unfair labor practice unless it interferes with the employees’ right to self-organization. The Court of Appeals
further held that ETPI’s officers cannot be held liable absent a showing of bad faith or malice. However, the Court of Appeals
found that ETPI failed to observe the standards of due process as required by our laws when it failed to properly notify both Culili
and the DOLE of Culili’s termination. The Court of Appeals maintained its position in its September 13, 2004 Resolution when it
denied Culili’s Motion for Reconsideration and Urgent Motion to Reinstate the Writ of Execution issued by the Labor Arbiter, and
ETPI’s Motion for Partial Reconsideration.

Culili is now before this Court praying for the reversal of the Court of Appeals’ decision and the reinstatement of the NLRC’s
decision based on the following grounds:

THE COURT OF APPEALS DECIDED A QUESTION OF SUBSTANCE NOT IN ACCORD WITH THE APPLICABLE LAW AND
JURISPRUDENCE WHEN IT REVERSED THE DECISIONS OF THE NLRC AND THE LABOR ARBITER HOLDING THE
DISMISSAL OF PETITIONER ILLEGAL IN THAT:

A. CONTRARY TO THE FINDINGS OF THE COURT OF APPEALS, RESPONDENTS’ CHARACTERIZATION OF

PETITIONER’S POSITION AS REDUNDANT WAS TAINTED BY BAD FAITH.

B. THERE WAS NO ADEQUATE JUSTIFICATION TO DECLARE PETITIONER’S POSITION AS REDUNDANT.

II

THE COURT OF APPEALS DECIDED A QUESTION OF SUBSTANCE NOT IN ACCORD WITH LAW AND JURISPRUDENCE
IN FINDING THAT NO UNFAIR LABOR PRACTICE ACTS WERE COMMITTED AGAINST THE PETITIONER.

III

THE COURT OF APPEALS DECIDED A QUESTION OF SUBSTANCE NOT IN ACCORD WITH LAW AND JURISPRUDENCE
IN DELETING THE AWARD OF MORAL AND EXEMPLARY DAMAGES AND ATTORNEY’S FEES IN FAVOR OF
PETITIONER AND IN DISSOLVING THE WRIT OF EXECUTION DATED 8 SEPTEMBER 2003 ISSUED BY THE LABOR
ARBITER.

IV

THE COURT OF APPEALS DECIDED A QUESTION OF SUBSTANCE NOT IN ACCORD WITH LAW AND JURISPRUDENCE
IN ABSOLVING THE INDIVIDUAL RESPONDENTS OF PERSONAL LIABILITY.

CONTRARY TO APPLICABLE LAW AND JURISPRUDENCE, THE COURT OF APPEALS, IN A CERTIORARI PROCEEDING,
REVIEWED THE FACTUAL FINDINGS OF THE NLRC WHICH AFFIRMED THAT OF THE LABOR ARBITER AND,
THEREAFTER, ISSUED A WRIT OF CERTIORARI REVERSING THE DECISIONS OF THE NLRC AND THE LABOR
ARBITER EVEN IN THE ABSENCE OF GRAVE ABUSE OF DISCRETION.31

Procedural Issue: Court of Appeals'

Power to Review Facts in a Petition
For Certiorari under Rule 65

Culili argued that the Court of Appeals acted in contravention of applicable law and jurisprudence when it reexamined the facts
in this case and reversed the factual findings of the Labor Arbiter and the NLRC in a special civil action for certiorari.

This Court has already confirmed the power of the Court of Appeals, even on a Petition for Certiorari under Rule 65,32 to review
the evidence on record, when necessary, to resolve factual issues:

The power of the Court of Appeals to review NLRC decisions via Rule 65 or Petition for Certiorari has been settled as early as in
our decision in St. Martin Funeral Home v. National Labor Relations Commission. This Court held that the proper vehicle for
such review was a Special Civil Action for Certiorari under Rule 65 of the Rules of Court, and that this action should be filed in
the Court of Appeals in strict observance of the doctrine of the hierarchy of courts. Moreover, it is already settled that under
Section 9 of Batas Pambansa Blg. 129, as amended by Republic Act No. 7902[10] (An Act Expanding the Jurisdiction of the
Court of Appeals, amending for the purpose of Section Nine of Batas Pambansa Blg. 129 as amended, known as the Judiciary
Reorganization Act of 1980), the Court of Appeals — pursuant to the exercise of its original jurisdiction over Petitions
for Certiorari — is specifically given the power to pass upon the evidence, if and when necessary, to resolve factual issues. 33
72 | P a g e
While it is true that factual findings made by quasi-judicial and administrative tribunals, if supported by substantial evidence, are
accorded great respect and even finality by the courts, this general rule admits of exceptions. When there is a showing that a
palpable and demonstrable mistake that needs rectification has been committed 34 or when the factual findings were arrived at
arbitrarily or in disregard of the evidence on record, these findings may be examined by the courts. 35

In the case at bench, the Court of Appeals found itself unable to completely sustain the findings of the NLRC thus, it was
compelled to review the facts and evidence and not limit itself to the issue of grave abuse of discretion.

With the conflicting findings of facts by the tribunals below now before us, it behooves this Court to make an independent
evaluation of the facts in this case.

Main Issue: Legality of Dismissal

Culili asserted that he was illegally dismissed because there was no valid cause to terminate his employment. He claimed that
ETPI failed to prove that his position had become redundant and that ETPI was indeed incurring losses. Culili further alleged that
his functions as a Senior Technician could not be considered a superfluity because his tasks were crucial and critical to ETPI’s
business.

Under our laws, an employee may be terminated for reasons involving measures taken by the employer due to business
necessities. Article 283 of the Labor Code provides:

Art. 283. Closure of establishment and reduction of personnel. - The employer may also terminate the employment of any
employee due to the installation of labor saving devices, redundancy, retrenchment to prevent losses or the closing or cessation
of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title,
by serving a written notice on the workers and the Department of Labor and Employment at least one (1) month before the
intended date thereof. In case of termination due to the installation of labor-saving devices or redundancy, the worker affected
thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for
every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closures or cessation of
operations of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be
equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of
at least six (6) months shall be considered one (1) whole year.

There is redundancy when the service capability of the workforce is greater than what is reasonably required to meet the
demands of the business enterprise. A position becomes redundant when it is rendered superfluous by any number of factors
such as over-hiring of workers, decrease in volume of business, or dropping a particular product line or service activity
previously manufactured or undertaken by the enterprise.36

This Court has been consistent in holding that the determination of whether or not an employee’s services are still needed or
sustainable properly belongs to the employer. Provided there is no violation of law or a showing that the employer was prompted
by an arbitrary or malicious act, the soundness or wisdom of this exercise of business judgment is not subject to the
discretionary review of the Labor Arbiter and the NLRC.37

However, an employer cannot simply declare that it has become overmanned and dismiss its employees without producing
adequate proof to sustain its claim of redundancy. 38 Among the requisites of a valid redundancy program are: (1) the good faith
of the employer in abolishing the redundant position; and (2) fair and reasonable criteria in ascertaining what positions are to be
declared redundant,39 such as but not limited to: preferred status, efficiency, and seniority. 40

This Court also held that the following evidence may be proffered to substantiate redundancy: the new staffing pattern, feasibility
studies/ proposal on the viability of the newly created positions, job description and the approval by the management of the
restructuring.41

In the case at bar, ETPI was upfront with its employees about its plan to implement a Right-Sizing Program. Even in the face of
initial opposition from and rejection of the said program by ETEU, ETPI patiently negotiated with ETEU’s officers to make them
understand ETPI’s business dilemma and its need to reduce its workforce and streamline its organization. This evidently rules
out bad faith on the part of ETPI.

In deciding which positions to retain and which to abolish, ETPI chose on the basis of efficiency, economy, versatility and
flexibility. It needed to reduce its workforce to a sustainable level while maintaining functions necessary to keep it operating. The
records show that ETPI had sufficiently established not only its need to reduce its workforce and streamline its organization, but
also the existence of redundancy in the position of a Senior Technician. ETPI explained how it failed to meet its business targets
and the factors that caused this, and how this necessitated it to reduce its workforce and streamline its organization. ETPI also
submitted its old and new tables of organization and sufficiently described how limited the functions of the abolished position of a
Senior Technician were and how it decided on whom to absorb these functions.

In his affidavit dated April 10, 2000,42 Mr. Arnel D. Reyel, the Head of both the Business Services Department and the Finance
Department of ETPI, described how ETPI went about in reorganizing its departments. Mr. Reyel said that in the course of ETPI’s
reorganization, new departments were created, some were transferred, and two were abolished. Among the departments
abolished was the Service Quality Department. Mr. Reyel said that ETPI felt that the functions of the Service Quality
Department, which catered to both corporate and small and medium-sized clients, overlapped and were too large for a single
department, thus, the functions of this department were split and simplified into two smaller but more focused and efficient
departments. In arriving at the decision to abolish the position of Senior Technician, Mr. Reyel explained:

11.3. Thus, in accordance with the reorganization of the different departments of ETPI, the Service Quality Department was
abolished and its functions were absorbed by the Business and Consumer Accounts Department and the Corporate and Major
Accounts Department.
73 | P a g e
11.4. With the abolition and resulting simplification of the Service Quality Department, one of the units thereunder, the Customer
Premises Equipment Maintenance ("CPEM") unit was transferred to the Business and Consumer Accounts Department. Since
the Business and Consumer Accounts Department had to remain economical and focused yet versatile enough to meet all the
needs of its small and medium sized clients, it was decided that, in the judgment of ETPI management, the specialized functions
of a Senior Technician in the CPEM unit whose sole function was essentially the repair and servicing of ETPI’s
telecommunications equipment was no longer needed since the Business and Consumer [Accounts] Department had to remain
economical and focused yet versatile enough to meet all the multifarious needs of its small and medium sized clients.

11.5. The business reason for the abolition of the position of Senior Technician was because in ETPI’s judgment, what was
needed in the Business and Consumer Accounts Department was a versatile, yet economical position with functions which were
not limited to the mere repair and servicing of telecommunications equipment. It was determined that what was called for was a
position that could also perform varying functions such as the actual installation of telecommunications products for medium and
small scale clients, handle telecommunications equipment inventory monitoring, evaluation of telecommunications equipment
purchased and the preparation of reports on the daily and monthly activation of telecommunications equipment by these small
and medium scale clients.

11.6. Thus, for the foregoing reasons, ETPI decided that the position of Senior Technician was to be abolished due to
redundancy. The functions of a Senior Technician was to be abolished due to redundancy. The functions of a Senior Technician
would then be absorbed by an employee assigned to the Business and Consumer Accounts Department who was already
performing the functions of actual installation of telecommunications products in the field and handling telecommunications
equipment inventory monitoring, evaluation of telecommunications equipment purchased and the preparation of reports on the
daily and monthly activation of telecommunications equipment. This employee would then simply add to his many other
functions the duty of repairing and servicing telecommunications equipment which had been previously performed by a Senior
Technician.43

In the new table of organization that the management approved, one hundred twelve (112) employees were redeployed and nine
(9) positions were declared redundant.44 It is inconceivable that ETPI would effect a company-wide reorganization of this scale
for the mere purpose of singling out Culili and terminating him. If Culili’s position were indeed indispensable to ETPI, then it
would be absurd for ETPI, which was then trying to save its operations, to abolish that one position which it needed the most.
Contrary to Culili’s assertions that ETPI could not do away with his functions as long as it is in the telecommunications industry,
ETPI did not abolish the functions performed by Culili as a Senior Technician. What ETPI did was to abolish the position itself for
being too specialized and limited. The functions of that position were then added to another employee whose functions were
broad enough to absorb the tasks of a Senior Technician.

Culili maintains that ETPI had already decided to dismiss him even before the second phase of the Right-Sizing Program was
implemented as evidenced by the December 7, 1998 letter.

The December 7, 1998 termination letter signed by ETPI’s AVP Stella Garcia hardly suffices to prove bad faith on the part of the
company. The fact remains that the said letter was never officially transmitted and Culili was not terminated at the end of the first
phase of ETPI’s Right-Sizing Program. ETPI had given an adequate explanation for the existence of the letter and considering
that it had been transparent with its employees, through their union ETEU, so much so that ETPI even gave ETEU this unofficial
letter, there is no reason to speculate and attach malice to such act. That Culili would be subsequently terminated during the
second phase of the Right-Sizing Program is not evidence of undue discrimination or "singling out" since not only Culili’s
position, but his entire unit was abolished and absorbed by another department.

Unfair Labor Practice

Culili also alleged that ETPI is guilty of unfair labor practice for violating Article 248(c) and (e) of the Labor Code, to wit:

Art. 248. Unfair labor practices of employers. - It shall be unlawful for an employer to commit any of the following unfair labor
practice:

xxxx

c. To contract out services or functions being performed by union members when such will interfere with, restrain or coerce
employees in the exercise of their rights to self-organization;

xxxx

e. To discriminate in regard to wages, hours of work, and other terms and conditions of employment in order to encourage or
discourage membership in any labor organization. Nothing in this Code or in any other law shall stop the parties from requiring
membership in a recognized collective bargaining agent as a condition for employment, except those employees who are
already members of another union at the time of the signing of the collective bargaining agreement. Employees of an
appropriate collective bargaining unit who are not members of the recognized collective bargaining agent may be assessed a
reasonable fee equivalent to the dues and other fees paid by members of the recognized collective bargaining agent, if such
non-union members accept the benefits under the collective agreement: Provided, that the individual authorization required
under Article 242, paragraph (o) of this Code shall not apply to the non-members of the recognized collective bargaining agent.

Culili asserted that ETPI is guilty of unfair labor practice because his functions were sourced out to labor-only contractors and he
was discriminated against when his co-employees were treated differently when they were each offered an additional motorcycle
to induce them to avail of the Special Retirement Program. ETPI denied hiring outside contractors and averred that the
motorcycles were not given to his co-employees but were purchased by them pursuant to their Collective Bargaining Agreement,
which allowed a retiring employee to purchase the motorcycle he was assigned during his employment.

The concept of unfair labor practice is provided in Article 247 of the Labor Code which states:
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Article 247. Concept of unfair labor practice and procedure for prosecution thereof. -- Unfair labor practices violate the
constitutional right of workers and employees to self-organization, are inimical to the legitimate interest of both labor and
management, including their right to bargain collectively and otherwise deal with each other in an atmosphere of freedom and
mutual respect, disrupt industrial peace and hinder the promotion of healthy and stable labor-management relations.

In the past, we have ruled that "unfair labor practice refers to ‘acts that violate the workers' right to organize.’ The prohibited acts
are related to the workers' right to self-organization and to the observance of a CBA."45 We have likewise declared that "there
should be no dispute that all the prohibited acts constituting unfair labor practice in essence relate to the workers' right to self-
organization."46 Thus, an employer may only be held liable for unfair labor practice if it can be shown that his acts affect in
whatever manner the right of his employees to self-organize.47

There is no showing that ETPI, in implementing its Right-Sizing Program, was motivated by ill will, bad faith or malice, or that it
was aimed at interfering with its employees’ right to self-organize. In fact, ETPI negotiated and consulted with ETEU before
implementing its Right-Sizing Program.

Both the Labor Arbiter and the NLRC found ETPI guilty of unfair labor practice because of its failure to dispute Culili’s
allegations.

According to jurisprudence, "basic is the principle that good faith is presumed and he who alleges bad faith has the duty to prove
the same."48 By imputing bad faith to the actuations of ETPI, Culili has the burden of proof to present substantial evidence to
support the allegation of unfair labor practice. Culili failed to discharge this burden and his bare allegations deserve no credit.

Observance of Procedural Due Process

Although the Court finds Culili’s dismissal was for a lawful cause and not an act of unfair labor practice, ETPI, however, was
remiss in its duty to observe procedural due process in effecting the termination of Culili.

We have previously held that "there are two aspects which characterize the concept of due process under the Labor Code: one
is substantive — whether the termination of employment was based on the provision of the Labor Code or in accordance with
the prevailing jurisprudence; the other is procedural — the manner in which the dismissal was effected."49

Section 2(d), Rule I, Book VI of the Rules Implementing the Labor Code provides:

(d) In all cases of termination of employment, the following standards of due process shall be substantially observed:

xxxx

For termination of employment as defined in Article 283 of the Labor Code, the requirement of due process shall be deemed
complied with upon service of a written notice to the employee and the appropriate Regional Office of the Department of Labor
and Employment at least thirty days before effectivity of the termination, specifying the ground or grounds for termination.

In Mayon Hotel & Restaurant v. Adana,50 we observed:

The requirement of law mandating the giving of notices was intended not only to enable the employees to look for another
employment and therefore ease the impact of the loss of their jobs and the corresponding income, but more importantly, to give
the Department of Labor and Employment (DOLE) the opportunity to ascertain the verity of the alleged authorized cause of
termination.51

ETPI does not deny its failure to provide DOLE with a written notice regarding Culili’s termination. It, however, insists that it has
complied with the requirement to serve a written notice to Culili as evidenced by his admission of having received it and
forwarding it to his union president.

In Serrano v. National Labor Relations Commission,52 we noted that "a job is more than the salary that it carries." There is a
psychological effect or a stigma in immediately finding one’s self laid off from work. 53 This is exactly why our labor laws have
provided for mandating procedural due process clauses. Our laws, while recognizing the right of employers to terminate
employees it cannot sustain, also recognize the employee’s right to be properly informed of the impending severance of his ties
with the company he is working for. In the case at bar, ETPI, in effecting Culili’s termination, simply asked one of its guards to
serve the required written notice on Culili. Culili, on one hand, claims in his petition that this was handed to him by ETPI’s vice
president, but previously testified before the Labor Arbiter that this was left on his table. 54 Regardless of how this notice was
served on Culili, this Court believes that ETPI failed to properly notify Culili about his termination. Aside from the manner the
written notice was served, a reading of that notice shows that ETPI failed to properly inform Culili of the grounds for his
termination.

The Court of Appeals, in finding that Culili was not afforded procedural due process, held that Culili’s dismissal was ineffectual,
and required ETPI to pay Culili full backwages in accordance with our decision in Serrano v. National Labor Relations
Commission.55 Over the years, this Court has had the opportunity to reexamine the sanctions imposed upon employers who fail
to comply with the procedural due process requirements in terminating its employees. In Agabon v. National Labor Relations
Commission,56 this Court reverted back to the doctrine in Wenphil Corporation v. National Labor Relations Commission 57 and
held that where the dismissal is due to a just or authorized cause, but without observance of the due process requirements, the
dismissal may be upheld but the employer must pay an indemnity to the employee. The sanctions to be imposed however, must
be stiffer than those imposed in Wenphil to achieve a result fair to both the employers and the employees. 58

In Jaka Food Processing Corporation v. Pacot,59 this Court, taking a cue from Agabon, held that since there is a clear-cut
distinction between a dismissal due to a just cause and a dismissal due to an authorized cause, the legal implications for
employers who fail to comply with the notice requirements must also be treated differently:
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Accordingly, it is wise to hold that: (1) if the dismissal is based on a just cause under Article 282 but the employer failed to
comply with the notice requirement, the sanction to be imposed upon him should be tempered because the dismissal process
was, in effect, initiated by an act imputable to the employee; and (2) if the dismissal is based on an authorized cause under
Article 283 but the employer failed to comply with the notice requirement, the sanction should be stiffer because the dismissal
process was initiated by the employer's exercise of his management prerogative. 60

Hence, since it has been established that Culili’s termination was due to an authorized cause and cannot be considered unfair
labor practice on the part of ETPI, his dismissal is valid. However, in view of ETPI’s failure to comply with the notice
requirements under the Labor Code, Culili is entitled to nominal damages in addition to his separation pay.1avvphi1

Personal Liability of ETPI’s Officers

And Award of Damages

Culili asserts that the individual respondents, Salvador Hizon, Emiliano Jurado, Virgilio Garcia, and Stella Garcia, as ETPI’s
officers, should be held personally liable for the acts of ETPI which were tainted with bad faith and arbitrariness. Furthermore,
Culili insists that he is entitled to damages because of the sufferings he had to endure and the malicious manner he was
terminated.

As a general rule, a corporate officer cannot be held liable for acts done in his official capacity because a corporation, by legal
fiction, has a personality separate and distinct from its officers, stockholders, and members. To pierce this fictional veil, it must
be shown that the corporate personality was used to perpetuate fraud or an illegal act, or to evade an existing obligation, or to
confuse a legitimate issue. In illegal dismissal cases, corporate officers may be held solidarily liable with the corporation if the
termination was done with malice or bad faith. 61

In illegal dismissal cases, moral damages are awarded only where the dismissal was attended by bad faith or fraud, or
constituted an act oppressive to labor, or was done in a manner contrary to morals, good customs or public policy. 62 Exemplary
damages may avail if the dismissal was effected in a wanton, oppressive or malevolent manner to warrant an award for
exemplary damages.63

It is our considered view that Culili has failed to prove that his dismissal was orchestrated by the individual respondents herein
for the mere purpose of getting rid of him. In fact, most of them have not even dealt with Culili personally. Moreover, it has been
established that his termination was for an authorized cause, and that there was no bad faith on the part of ETPI in implementing
its Right-Sizing Program, which involved abolishing certain positions and departments for redundancy. It is not enough that ETPI
failed to comply with the due process requirements to warrant an award of damages, there being no showing that the company’s
and its officers’ acts were attended with bad faith or were done oppressively.

WHEREFORE, the instant petition is DENIED and the assailed February 5, 2004 Decision and September 13, 2004 Resolution
of the Court of Appeals in CA-G.R. SP No. 75001 are AFFIRMED with the MODIFICATION that petitioner Nelson A. Culili’s
dismissal is declared valid but respondent Eastern Telecommunications Philippines, Inc. is ordered to pay petitioner Nelson A.
Culili the amount of Fifty Thousand Pesos (₱50,000.00) representing nominal damages for non-compliance with statutory due
process, in addition to the mandatory separation pay required under Article 283 of the Labor Code.

SO ORDERED.

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G.R. No. 146206 August 1, 2011

SAN MIGUEL FOODS, INCORPORATED, Petitioner,

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

PERALTA, J.:

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

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

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

On August 31, 1998, Med-Arbiter Agatha Ann L. Daquigan issued an Order 5 directing Election Officer Cynthia Tolentino to
proceed with the conduct of certification election in accordance with Section 2, Rule XII of Department Order No. 9.

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

Cabuyao San Fernando Total

Plant Plant

Yes 23 23 46

No 0 0 0

Spoiled 2 0 2

Segregated 41 35 76

Total Votes Cast 66 58 124

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

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

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

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

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

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

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

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

Petitioner’s Partial Motion for Reconsideration15 dated August 14, 1999 was denied by the then Acting DOLE Undersecretary in
the Order16 dated August 27, 1999.

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

Petitioner’s Motion for Partial Reconsideration18 dated May 23, 2000 was denied by the CA in the Resolution 19dated November
28, 2000.

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

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

II.WHETHER THE COURT OF APPEALS DEPARTED FROM JURISPRUDENCE - SPECIFICALLY, THIS COURT'S
DEFINITION OF A "CONFIDENTIAL EMPLOYEE" - WHEN IT RULED FOR THE INCLUSION OF THE "PAYROLL
MASTER" POSITION IN THE BARGAINING UNIT.

III.WHETHER THIS PETITION IS A "REHASH" OR A "RESURRECTION" OF THE ISSUES RAISED IN G.R. NO.
110399, AS ARGUED BY PRIVATE RESPONDENT.

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

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

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

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

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

78 | P a g e
the employees in Cabuyao, San Fernando, and Otis 25 of Magnolia Poultry Products Plant involved in "dressed" chicken
processing and Magnolia Poultry Farms engaged in "live" chicken operations. Certain factors, such as specific line of work,
working conditions, location of work, mode of compensation, and other relevant conditions do not affect or impede their
commonality of interest. Although they seem separate and distinct from each other, the specific tasks of each division are
actually interrelated and there exists mutuality of interests which warrants the formation of a single bargaining unit.

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

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

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

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

confidential employees or those who by reason of their positions or nature of work are required to assist or act in a fiduciary
manner to managerial employees and, hence, are likewise privy to sensitive and highly confidential records.31 Confidential
employees are thus excluded from the rank-and-file bargaining unit. The rationale for their separate category and disqualification
to join any labor organization is similar to the inhibition for managerial employees, because if allowed to be affiliated with a
union, the latter might not be assured of their loyalty in view of evident conflict of interests and the union can also become
company-denominated with the presence of managerial employees in the union membership. 32 Having access to confidential
information, confidential employees may also become the source of undue advantage. Said employees may act as a spy or
spies of either party to a collective bargaining agreement.331avvphi1

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

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

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

It bears stressing that a certification election is the sole concern of the workers; hence, an employer lacks the personality to
dispute the same. The general rule is that an employer has no standing to question the process of certification election, since
this is the sole concern of the workers.37 Law and policy demand that employers take a strict, hands-off stance in certification
elections. The bargaining representative of employees should be chosen free from any extraneous influence of management. A
labor bargaining representative, to be effective, must owe its loyalty to the employees alone and to no other.38 The only
exception is where the employer itself has to file the petition pursuant to Article 258 39 of the Labor Code because of a request to
bargain collectively.40

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

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

SO ORDERED.

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G.R. No. 115949 March 16, 2000

EVANGELINE J. GABRIEL, TERESITA C. LUALHATI, EVELYN SIA, RODOLFO EUGENIO, ISAGANI MAKISIG, and
DEMETRIO SALAS, petitioners,
vs.
THE HONORABLE SECRETARY OF LABOR AND EMPLOYMENT and SIMEON SARMIENTO, JESUS CARLOS MARTINEZ
III, ALBERT NAPIAL, MARVIN ALMACIN, ROGELIO MATEO, GLENN SIAPNO, EMILIANO CUETO, SALOME ATIENZA,
NORMA V. GO, JUDITH DUDANG, MONINA DIZON, EUSEBIO ROMERO, ISAGANI MORALES, ELISEO BUENAVENTURA,
CLEMENTE AGCAMARAN, CARMELITA NOLASCO, JOVITA FERI, LULU ACOSTA, CAROL LAZARO, NIDA ARRIZA,
ROMAN BERNARDO, DOMINGO B. MACALDO, EUGENE PIDLAOAN, MA. SOCORRO T. ANGOB, JOSEPHINE ALVAREZ,
LOURDES FERRER, JACQUILINE BAQUIRAN, GRACIA R. ESCUADRO, KRISTINA HERNANDEZ, LOURDES IBEAS,
MACARIO GARCIA, BILLY TECSON, ALEX RECTO III, LEBRUDO, JOSE RICAFORTE, RODOLFO MORADA, TERESA
AMADO, ROSITA TRINIDAD, JEANETTE ONG, VICTORINO LAS-AY, RANIEL DAYAO OSCAR SANTOS, CRISTINA
SALAVER, VICTORIA ARINO, A.H. SAJO, MICHAEL BIETE, RED RP, GLORIA JUAT, ETHELINDA CASILAN, FAMER
DIPASUPIL, MA. HIDELISA POMER, MA. CHARLOTTE TAWATAO, GRACE REYES, ERNIE COLINA, ZENAIDA
MENDOZA, PAULITA ADORABLE, BERNARDO MADUMBA, NESTOR NAVARRO, EASTER YAP, ALMA LIM, FELISA YU,
TIMOTEO GANASTRA, REVELITA CARTAJENAS, ANGELITO CABUAL, ROBERTA TAN, DOMINADOR TAPO, GRACE
LIM GADIANE JEMIE, CHRISTHDY DAUD, BENEDICTO ACOSTA, JESUSA ACOSTA, MA. AVELINA ARYAP, EVELYN
BENITEZ, ESTERITA CHU, EVANGELINE CHU, BETTY CINCO, RICARDO CONNEJO, MANULITO EVALO, FRANCIS
LEONIDA, GREGORIO NOBLEZA, RODOLFO RIVERAL, ELSA SIA, CLARA SUGBO, EDGARDO TABAO, MANUEL
VELOSO, MARLYN YU, ABSALON BUENA, WILFREDO PUERTO, FLORENTINA PINGOL, MARILOU DAR, FE MORALES,
MALEN BELLO, LORENA TAMAYO, CESAR LIM, PAUL BALTAZAR, ALFREDO GAYAGAS, DUMAGUETE EMPLOYEES,
CEBU EMPLOYEES, OZAMIZ EMPLOYEES, TACLOBAN EMPLOYEES AND ALL OTHER SOLID BANK UNION
MEMBERS, respondents.

QUISUMBING, J.:

Before us is a special civil action for certiorari seeking to reverse partially the Order1 of public respondent dated June 3, 1994, in
Case No. OS-MA-A-8-170-92, which ruled that the workers through their union should be made to shoulder the expenses
incurred for the professional services of a lawyer in connection with the collective bargaining negotiations and that the
reimbursement for the deductions from the workers should be charged to the union's general fund or account.

The records show the following factual antecedents:

Petitioners comprise the Executive Board of the SolidBank Union, the duly recognized collective bargaining agent for the rank
and file employees of Solid Bank Corporation. Private respondents are members of said union.

Sometime in October 1991, the union's Executive Board decided to retain anew the service of Atty. Ignacio P. Lacsina (now
deceased) as union counsel in connection with the negotiations for a new Collective Bargaining Agreement (CBA). Accordingly,
on October 19, 1991, the board called a general membership meeting for the purpose. At the said meeting, the majority of all
union members approved and signed a resolution confirming the decision of the executive board to engage the services of Atty.
Lacsina as union counsel.

As approved, the resolution provided that ten percent (10%) of the total economic benefits that may be secured through the
negotiations be given to Atty. Lacsina as attorney's fees. It also contained an authorization for SolidBank Corporation to check-
off said attorney's fees from the first lump sum payment of benefits to the employees under the new CBA and to turn over said
amount to Atty. Lacsina and/or his duly authorized representative. 2

The new CBA was signed on February 21, 1992. The bank then, on request of the union, made payroll deductions for attorney's
fees from the CBA benefits paid to the union members in accordance with the abovementioned resolution.

On October 2, 1992, private respondents instituted a complaint against the petitioners and the union counsel before the
Department of Labor and Employment (DOLE) for illegal deduction of attorney's fees as well as for quantification of the benefits
in the 1992 CBA.3 Petitioners, in response, moved for the dismissal of the complaint citing litis pendentia, forum shopping and
failure to state a cause of action as their grounds.4

On April 22, 1993, Med-Arbiter Paterno Adap of the DOLE-NCR issued the following Order:

WHEREFORE, premises considered, the Respondents Union Officers and Counsel are hereby directed to immediately
return or refund to the Complainants the illegally deducted amount of attorney's fees from the package of benefits due
herein complainants under the aforesaid new CBA.

Furthermore, Complainants are directed to pay five percent (5%) of the total amount to be refunded or returned by the
Respondent Union Officers and Counsel to them in favor of Atty. Armando D. Morales, as attorney's fees, in accordance
with Section II, Rule VIII of Book II (sic) of the Omnibus Rules Implementing the Labor Code.5

On appeal, the Secretary of Labor rendered a Resolution6 dated December 27, 1993, stating:

WHEREFORE, the appeal of respondents Evangeline Gabriel, et. al., is hereby partially granted and the Order of the
Med-Arbiter dated 22 April 1993 is hereby modified as follows: (1) that the ordered refund shall be limited to those union
members who have not signified their conformity to the check-off of attorney's fees; and (2) the directive on the payment
of 5% attorney's fees should be deleted for lack of basis.

SO ORDERED.7

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On Motion for Reconsideration, public respondent affirmed the said Order with modification that the union's counsel be dropped
as a party litigant and that the workers through their union should be made to shoulder the expenses incurred for the attorney's
services. Accordingly, the reimbursement should be charged to the union's general fund/account. 8

Hence, the present petition seeking to partially annul the above-cited order of the public respondent for being allegedly tainted
with grave abuse of discretion amounting to lack of jurisdiction.

The sole issue for consideration is, did the public respondent act with grave abuse of discretion in issuing the challenged order?

Petitioners argue that the General Membership Resolution authorizing the bank to check-off attorney's fee from the first lump
sum payment of the legal benefits to the employees under the new CBA satisfies the legal requirements for such
assessment.9 Private respondents, on the other hand, claim that the check-off provision in question is illegal because it was
never submitted for approval at a general membership meeting called for the purpose and that it failed to meet the formalities
mandated by the Labor Code. 10

In check-off, the employer, on agreement with the Union, or on prior authorization from employees, deducts union dues or
agency fees from the latter's wages and remits them directly to the union. 11 It assures continuous funding; for the labor
organization. As this Court has acknowledged, the system of check-off is primarily for the benefit of the union and only indirectly
for the individual employees. 12

The pertinent legal provisions on check-offs are found in Article 222 (b) and Article 241 (o) of the Labor Code.

Art. 222 (b) states:

No attorney's fees, negotiation fees or similar charges of any kind arising from any collective bargaining negotiations or
conclusions of the collective agreement shall be imposed on any individual member of the contracting
union: Provided, however, that attorney's fees may be charged against unions funds in an amount to be agreed upon by
the parties. Any contract, agreement or arrangement of any sort to the contrary shall be null and void. (Emphasis ours)

Art. 241 (o) provides:

Other than for mandatory activities under the Code, no special assessment, attorney's fees, negotiation fees or any
other extraordinary fees may be checked off from any amount due to an employee without an individual written
authorization duly signed by the employee. The authorization should specifically state the amount, purpose and
beneficiary of the deduction. (Emphasis ours).

Art. 241 has three (3) requisites for the validity of the special assessment for union's incidental expenses, attorney's fees and
representation expenses. These are: 1) authorization by a written resolution of the majority of all the members at the general
membership meeting called for the purpose; (2) secretary's record of the minutes of the meeting; and (3) individual written
authorization for check off duly signed by the employees concerned.

Clearly, attorney's fees may not be deducted or checked off from any amount due to an employee without his written consent.

After a thorough review of the records, we find that the General Membership Resolution of October 19, 1991 of the SolidBank
Union did not satisfy the requirements laid down by law and jurisprudence for the validity of the ten percent (10%) special
assessment for union's incidental expenses, attorney's fees and representation expenses. There were no individual written
check off authorizations by the employees concerned and so the assessment cannot be legally deducted by their employer.

Even as early as February 1990, in the case of Palacol vs. Ferrer-Calleja 13 we said that the express consent of employees is
required, and this consent must be obtained in accordance with the steps outlined by law, which must be followed to the letter.
No shortcuts are allowed. In Stellar Industrial Services, Inc. vs. NLRC 14 we reiterated that a written individual authorization duly
signed by the employee concerned is a condition sine qua non for such deduction.

These pronouncements are also in accord with the recent ruling of this Court in the case of ABS-CBN Supervisors Employees
Union Members vs. ABS-CBN Broadcasting Corporation, et. al., 15 which provides:

Premises studiedly considered, we are of the irresistible conclusion and, so find that the ruling in BPIEU-ALU vs.
NLRC that (1) the prohibition against attorney's fees in Article 222, paragraph (b) of the Labor Code applies only when
the payment of attorney's fees is effected through forced contributions from the workers; and (2) that no deduction must
be take from the workers who did not sign the check-off authorization, applies to the case under consideration.
(Emphasis ours.)

We likewise ruled in Bank of the Philippine Islands Employees Union-Association Labor Union (BPIEU-ALU) vs. NLRC, 16

. . . the afore-cited provision (Article 222 (b) of the Labor Code) as prohibiting the payment of attorney's fees only when it
is effected through forced contributions from workers from their own funds as distinguished from the union funds. The
purpose of the provision is to prevent imposition on the workers of the duty to individually contribute their respective
shares in the fee to be paid the attorney for his services on behalf of the union in its negotiations with management. The
obligation to pay the attorney's fees belongs to the union and cannot be shunted to the workers as their direct
responsibility. Neither the lawyer nor the union itself may require the individual worker to assume the obligation to pay
attorney's fees from their own pockets. So categorical is this intent that the law makes it clear that any agreement to the
contrary shall be null and void ab initio. (Emphasis ours.)1âwphi1

From all the foregoing, we are of the considered view that public respondent did not act with grave abuse of discretion in ruling
that the workers through their union should be made to shoulder the expenses incurred for the services of a lawyer. And
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accordingly the reimbursement should be charged to the union's general fund or account. No deduction can be made from the
salaries of the concerned employees other than those mandated by law.

WHEREFORE, the petition is DENIED. The assailed Order dated June 3, 1994, of respondent Secretary of Labor signed by
Undersecretary Bienvenido E. Laguesma is AFFIRMED. No pronouncement as to costs.1âwphi1.nêt

SO ORDERED.

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G.R. No. 162025 August 3, 2010

TUNAY NA PAGKAKAISA NG MANGGAGAWA SA ASIA BREWERY, Petitioner,

vs.
ASIA BREWERY, INC., Respondent.

DECISION

VILLARAMA, JR., J.:

For resolution is an appeal by certiorari filed by petitioner under Rule 45 of the 1997 Rules of Civil Procedure, as amended,
assailing the Decision1 dated November 22, 2002 and Resolution2 dated January 28, 2004 rendered by the Court of Appeals
(CA) in CA-G.R. SP No. 55578, granting the petition of respondent company and reversing the Voluntary Arbitrator’s
Decision3 dated October 14, 1999.

The facts are:

Respondent Asia Brewery, Inc. (ABI) is engaged in the manufacture, sale and distribution of beer, shandy, bottled water and
glass products. ABI entered into a Collective Bargaining Agreement (CBA), 4 effective for five (5) years from August 1, 1997 to
July 31, 2002, with Bisig at Lakas ng mga Manggagawa sa Asia-Independent (BLMA-INDEPENDENT), the exclusive bargaining
representative of ABI’s rank-and-file employees. On October 3, 2000, ABI and BLMA-INDEPENDENT signed a renegotiated
CBA effective from August 1, 2000 to 31 July 2003.5

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

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

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

1. Managers

2. Assistant Managers

3. Section Heads

4. Supervisors

5. Superintendents

6. Confidential and Executive Secretaries

7. Personnel, Accounting and Marketing Staff

8. Communications Personnel

9. Probationary Employees

10. Security and Fire Brigade Personnel

11. Monthly Employees

12. Purchasing and Quality Control Staff 6 [emphasis supplied.]

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

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

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

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Accordingly, the subject employees were declared eligible for inclusion within the bargaining unit represented by BLMA-
INDEPENDENT.9

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

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

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

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

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

NO COSTS.

SO ORDERED.10

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

The petition is anchored on the following grounds:

(1)

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

(2)

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

(3)

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

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

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

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

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

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NAME DEPARTMENT IMMEDIATE SUPERIOR

C1 ADMIN DIVISION

1. Angeles, Cristina C. Transportation Mr. Melito K. Tan

2. Barraquio, Carina P. Transportation Mr. Melito K. Tan

3. Cabalo, Marivic B. Transportation Mr. Melito K. Tan

4. Fameronag, Leodigario C. Transportation Mr. Melito K. Tan

1. Abalos, Andrea A. Materials Mr. Andres G. Co

2. Algire, Juvy L. Materials Mr. Andres G. Co

3. Anoñuevo, Shirley P. Materials Mr. Andres G. Co

4. Aviso, Rosita S. Materials Mr. Andres G. Co

5. Barachina, Pauline C. Materials Mr. Andres G. Co

6. Briones, Catalina P. Materials Mr. Andres G. Co

7. Caralipio, Juanita P. Materials Mr. Andres G. Co

8. Elmido, Ma. Rebecca S. Materials Mr. Andres G. Co

9. Giron, Laura P. Materials Mr. Andres G. Co

10. Mane, Edna A. Materials Mr. Andres G. Co

xxxx

C2 BREWERY DIVISION

1. Laloon, Daisy S. Brewhouse Mr. William Tan

1. Arabit, Myrna F. Bottling Production Mr. Julius Palmares

2. Burgos, Adelaida D. Bottling Production Mr. Julius Palmares

3. Menil, Emmanuel S. Bottling Production Mr. Julius Palmares

4. Nevalga, Marcelo G. Bottling Production Mr. Julius Palmares

1. Mapola, Ma. Esraliza T. Bottling Maintenance Mr. Ernesto Ang

2. Velez, Carmelito A. Bottling Maintenance Mr. Ernesto Ang

1. Bordamonte, Rhumela D. Bottled Water Mr. Faustino Tetonche

2. Deauna, Edna R. Bottled Water Mr. Faustino Tetonche

3. Punongbayan, Marylou F. Bottled Water Mr. Faustino Tetonche

4. Saguan, Lennie Y. Bottled Water Mr. Faustino Tetonche

1. Alcoran, Simeon A. Full Goods Mr. Tsoi Wah Tung

2. Cervantes, Ma. Sherley Y. Full Goods Mr. Tsoi Wah Tung

3. Diongco, Ma. Teresa M. Full Goods Mr. Tsoi Wah Tung

4. Mabilangan, Evelyn M. Full Goods Mr. Tsoi Wah Tung

5. Rivera, Aurora M. Full Goods Mr. Tsoi Wah Tung

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6. Salandanan, Nancy G. Full Goods Mr. Tsoi Wah Tung

1. Magbag, Ma. Corazon C. Tank Farm/ Mr. Manuel Yu Liat

Cella Services

1. Capiroso, Francisca A. Quality Assurance Ms. Regina Mirasol

1. Alconaba, Elvira C. Engineering Mr. Clemente Wong

2. Bustillo, Bernardita E. Electrical Mr. Jorge Villarosa

3. Catindig, Ruel A. Civil Works Mr. Roger Giron

4. Sison, Claudia B. Utilities Mr. Venancio Alconaba

xxxx

C3 PACKAGING DIVISION

1. Alvarez, Ma. Luningning L. GP Administration Ms. Susan Bella

2. Cañiza, Alma A. GP Technical Mr. Chen Tsai Tyan

3. Cantalejo, Aida S. GP Engineering Mr. Noel Fernandez

4. Castillo, Ma. Riza R. GP Production Mr. Tsai Chen Chih

5. Lamadrid, Susana C. GP Production Mr. Robert Bautista

6. Mendoza, Jennifer L. GP Technical Mr. Mel Oña

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

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

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

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

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

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

Not being confidential employees, the secretaries/clerks and checkers are not disqualified from membership in the Union of
respondent’s rank-and-file employees. Petitioner argues that respondent’s act of unilaterally stopping the deduction of union
dues from these employees constitutes unfair labor practice as it "restrained" the workers’ exercise of their right to self-
organization, as provided in Article 248 (a) of the Labor Code.

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

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

No costs.

SO ORDERED.

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G.R. No. 146728 February 11, 2004

GENERAL MILLING CORPORATION, petitioner,

vs
HON. COURT OF APPEALS, GENERAL MILLING CORPORATION INDEPENDENT LABOR UNION (GMC-ILU), and RITO
MANGUBAT, respondents.

DECISION

QUISUMBING, J.:

Before us is a petition for certiorari assailing the decision1 dated July 19, 2000, of the Court of Appeals in CA-G.R. SP No.
50383, which earlier reversed the decision2 dated January 30, 1998 of the National Labor Relations Commission (NLRC) in
NLRC Case No. V-0112-94.

The antecedent facts are as follows:

In its two plants located at Cebu City and Lapu-Lapu City, petitioner General Milling Corporation (GMC) employed 190
workers. They were all members of private respondent General Milling Corporation Independent Labor Union (union, for
brevity), a duly certified bargaining agent.

On April 28, 1989, GMC and the union concluded a collective bargaining agreement (CBA) which included the issue of
representation effective for a term of three years. The CBA was effective for three years retroactive to December 1,
1988. Hence, it would expire on November 30, 1991.

On November 29, 1991, a day before the expiration of the CBA, the union sent GMC a proposed CBA, with a request
that a counter-proposal be submitted within ten (10) days.

As early as October 1991, however, GMC had received collective and individual letters from workers who stated that
they had withdrawn from their union membership, on grounds of religious affiliation and personal differences. Believing
that the union no longer had standing to negotiate a CBA, GMC did not send any counter-proposal.

On December 16, 1991, GMC wrote a letter to the union’s officers, Rito Mangubat and Victor Lastimoso. The letter
stated that it felt there was no basis to negotiate with a union which no longer existed, but that management was
nonetheless always willing to dialogue with them on matters of common concern and was open to suggestions on how
the company may improve its operations.

In answer, the union officers wrote a letter dated December 19, 1991 disclaiming any massive disaffiliation or
resignation from the union and submitted a manifesto, signed by its members, stating that they had not withdrawn from
the union.

On January 13, 1992, GMC dismissed Marcia Tumbiga, a union member, on the ground of incompetence. The union
protested and requested GMC to submit the matter to the grievance procedure provided in the CBA. GMC, however,
advised the union to "refer to our letter dated December 16, 1991."3

Thus, the union filed, on July 2, 1992, a complaint against GMC with the NLRC, Arbitration Division, Cebu City. The complaint
alleged unfair labor practice on the part of GMC for: (1) refusal to bargain collectively; (2) interference with the right to self-
organization; and (3) discrimination. The labor arbiter dismissed the case with the recommendation that a petition for certification
election be held to determine if the union still enjoyed the support of the workers.lawphi1.nêt

The union appealed to the NLRC.

On January 30, 1998, the NLRC set aside the labor arbiter’s decision. Citing Article 253-A of the Labor Code, as amended by
Rep. Act No. 6715,4 which fixed the terms of a collective bargaining agreement, the NLRC ordered GMC to abide by the CBA
draft that the union proposed for a period of two (2) years beginning December 1, 1991, the date when the original CBA ended,
to November 30, 1993. The NLRC also ordered GMC to pay the attorney’s fees.5

In its decision, the NLRC pointed out that upon the effectivity of Rep. Act No. 6715, the duration of a CBA, insofar as the
representation aspect is concerned, is five (5) years which, in the case of GMC-Independent Labor Union was from December 1,
1988 to November 30, 1993. All other provisions of the CBA are to be renegotiated not later than three (3) years after its
execution. Thus, the NLRC held that respondent union remained as the exclusive bargaining agent with the right to renegotiate
the economic provisions of the CBA. Consequently, it was unfair labor practice for GMC not to enter into negotiation with the
union.

The NLRC likewise held that the individual letters of withdrawal from the union submitted by 13 of its members from February to
June 1993 confirmed the pressure exerted by GMC on its employees to resign from the union. Thus, the NLRC also found GMC
guilty of unfair labor practice for interfering with the right of its employees to self-organization.

With respect to the union’s claim of discrimination, the NLRC found the claim unsupported by substantial evidence.

On GMC’s motion for reconsideration, the NLRC set aside its decision of January 30, 1998, through a resolution dated October
6, 1998. It found GMC’s doubts as to the status of the union justified and the allegation of coercion exerted by GMC on the
union’s members to resign unfounded. Hence, the union filed a petition for certiorari before the Court of Appeals. For failure of
the union to attach the required copies of pleadings and other documents and material portions of the record to support the

88 | P a g e
allegations in its petition, the CA dismissed the petition on February 9, 1999. The same petition was subsequently filed by the
union, this time with the necessary documents. In its resolution dated April 26, 1999, the appellate court treated the refiled
petition as a motion for reconsideration and gave the petition due course.

On July 19, 2000, the appellate court rendered a decision the dispositive portion of which reads:

WHEREFORE, the petition is hereby GRANTED. The NLRC Resolution of October 6, 1998 is hereby SET ASIDE, and
its decision of January 30, 1998 is, except with respect to the award of attorney’s fees which is hereby
deleted, REINSTATED.6

A motion for reconsideration was seasonably filed by GMC, but in a resolution dated October 26, 2000, the CA denied it for lack
of merit.

Hence, the instant petition for certiorari alleging that:

THE COURT OF APPEALS DECISION VIOLATED THE CONSTITUTIONAL RULE THAT NO DECISION SHALL BE
RENDERED BY ANY COURT WITHOUT EXPRESSING THEREIN CLEARLY AND DISTINCTLY THE FACTS AND THE LAW
ON WHICH IT IS BASED.

II

THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN REVERSING THE DECISION OF THE
NATIONAL LABOR RELATIONS COMMISSION IN THE ABSENCE OF ANY FINDING OF SUBSTANTIAL ERROR OR GRAVE
ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION.

III

THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN NOT APPRECIATING THAT THE NLRC HAS NO
JURISDICTION TO DETERMINE THE TERMS AND CONDITIONS OF A COLLECTIVE BARGAINING AGREEMENT.7

Thus, in the instant case, the principal issue for our determination is whether or not the Court of Appeals acted with grave abuse
of discretion amounting to lack or excess of jurisdiction in (1) finding GMC guilty of unfair labor practice for violating the duty to
bargain collectively and/or interfering with the right of its employees to self-organization, and (2) imposing upon GMC the draft
CBA proposed by the union for two years to begin from the expiration of the original CBA.lawphi1.nêt

On the first issue, Article 253-A of the Labor Code, as amended by Rep. Act No. 6715, states:

ART. 253-A. Terms of a collective bargaining agreement. – Any Collective Bargaining Agreement that the parties
may enter into shall, insofar as the representation aspect is concerned, be for a term of five (5) years. No petition
questioning the majority status of the incumbent bargaining agent shall be entertained and no certification election shall
be conducted by the Department of Labor and Employment outside of the sixty-day period immediately before the date
of expiry of such five year term of the Collective Bargaining Agreement. All other provisions of the Collective Bargaining
Agreement shall be renegotiated not later than three (3) years after its execution....

The law mandates that the representation provision of a CBA should last for five years. The relation between labor and
management should be undisturbed until the last 60 days of the fifth year. Hence, it is indisputable that when the union
requested for a renegotiation of the economic terms of the CBA on November 29, 1991, it was still the certified collective
bargaining agent of the workers, because it was seeking said renegotiation within five (5) years from the date of effectivity of the
CBA on December 1, 1988. The union’s proposal was also submitted within the prescribed 3-year period from the date of
effectivity of the CBA, albeit just before the last day of said period. It was obvious that GMC had no valid reason to refuse to
negotiate in good faith with the union. For refusing to send a counter-proposal to the union and to bargain anew on the economic
terms of the CBA, the company committed an unfair labor practice under Article 248 of the Labor Code, which provides that:

ART. 248. Unfair labor practices of employers. – It shall be unlawful for an employer to commit any of the following
unfair labor practice:

...

(g) To violate the duty to bargain collectively as prescribed by this Code;

...

Article 252 of the Labor Code elucidates the meaning of the phrase "duty to bargain collectively," thus:

ART. 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....

We have held that the crucial question whether or not a party has met his statutory duty to bargain in good faith typically
turn$ on the facts of the individual case.8 There is no per se test of good faith in bargaining.9Good faith or bad faith is an
inference to be drawn from the facts.10 The effect of an employer’s or a union’s actions individually is not the test of
good-faith bargaining, but the impact of all such occasions or actions, considered as a whole.11

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Under Article 252 abovecited, both parties are required to perform their mutual obligation to meet and convene promptly and
expeditiously in good faith for the purpose of negotiating an agreement. The union lived up to this obligation when it presented
proposals for a new CBA to GMC within three (3) years from the effectivity of the original CBA. But GMC failed in its duty under
Article 252. What it did was to devise a flimsy excuse, by questioning the existence of the union and the status of its membership
to prevent any negotiation.

It bears stressing that the procedure in collective bargaining prescribed by the Code is mandatory because of the basic interest
of the state in ensuring lasting industrial peace. Thus:

ART. 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. (Underscoring supplied.)

GMC’s failure to make a timely reply to the proposals presented by the union is indicative of its utter lack of interest in bargaining
with the union. Its excuse that it felt the union no longer represented the workers, was mainly dilatory as it turned out to be utterly
baseless.

We hold that GMC’s refusal to make a counter-proposal to the union’s proposal for CBA negotiation is an indication of its bad
faith. Where the employer did not even bother to submit an answer to the bargaining proposals of the union, there is a clear
evasion of the duty to bargain collectively. 12

Failing to comply with the mandatory obligation to submit a reply to the union’s proposals, GMC violated its duty to bargain
collectively, making it liable for unfair labor practice. Perforce, the Court of Appeals did not commit grave abuse of discretion
amounting to lack or excess of jurisdiction in finding that GMC is, under the circumstances, guilty of unfair labor practice.

Did GMC interfere with the employees’ right to self-organization? The CA found that the letters between February to June 1993
by 13 union members signifying their resignation from the union clearly indicated that GMC exerted pressure on its employees.
The records show that GMC presented these letters to prove that the union no longer enjoyed the support of the workers. The
fact that the resignations of the union members occurred during the pendency of the case before the labor arbiter shows GMC’s
desperate attempts to cast doubt on the legitimate status of the union. We agree with the CA’s conclusion that the ill-timed
letters of resignation from the union members indicate that GMC had interfered with the right of its employees to self-
organization. Thus, we hold that the appellate court did not commit grave abuse of discretion in finding GMC guilty of unfair labor
practice for interfering with the right of its employees to self-organization.

Finally, did the CA gravely abuse its discretion when it imposed on GMC the draft CBA proposed by the union for two years
commencing from the expiration of the original CBA?

The Code provides:

ART. 253. Duty to bargain collectively when there exists a collective bargaining agreement. – .... 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 [prior to its expiration date] and/or until a new agreement is reached by the parties.
(Underscoring supplied.)

The provision mandates the parties to keep the status quo while they are still in the process of working out their respective
proposal and counter proposal. The general rule is that when a CBA already exists, its provision shall continue to govern the
relationship between the parties, until a new one is agreed upon. The rule necessarily presupposes that all other things are
equal. That is, that neither party is guilty of bad faith. However, when one of the parties abuses this grace period by purposely
delaying the bargaining process, a departure from the general rule is warranted.

In Kiok Loy vs. NLRC,13 we found that petitioner therein, Sweden Ice Cream Plant, refused to submit any counter proposal to the
CBA proposed by its employees’ certified bargaining agent. We ruled that the former had thereby lost its right to bargain the
terms and conditions of the CBA. Thus, we did not hesitate to impose on the erring company the CBA proposed by its
employees’ union - lock, stock and barrel. Our findings in Kiok Loy are similar to the facts in the present case, to wit:

… 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 objection
thereto.14

Likewise, in Divine Word University of Tacloban vs. Secretary of Labor and Employment,15 petitioner therein, Divine Word
University of Tacloban, refused to perform its duty to bargain collectively. Thus, we upheld the unilateral imposition on the
university of the CBA proposed by the Divine Word University Employees Union. We said further:

That being the said case, the petitioner may not validly assert that its consent should be a primordial consideration in the
bargaining process. By its acts, no less than its action which bespeak its insincerity, it has forfeited whatever rights it
could have asserted as an employer.16

Applying the principle in the foregoing cases to the instant case, it would be unfair to the union and its members if the terms and
conditions contained in the old CBA would continue to be imposed on GMC’s employees for the remaining two (2) years of the
CBA’s duration. We are not inclined to gratify GMC with an extended term of the old CBA after it resorted to delaying tactics to
prevent negotiations. Since it was GMC which violated the duty to bargain collectively, based on Kiok Loy and Divine Word
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University of Tacloban, it had lost its statutory right to negotiate or renegotiate the terms and conditions of the draft CBA
proposed by the union.

We carefully note, however, that as strictly distinguished from the facts of this case, there was no pre-existing CBA between the
parties in Kiok Loy and Divine Word University of Tacloban. Nonetheless, we deem it proper to apply in this case the rationale of
the doctrine in the said two cases. To rule otherwise would be to allow GMC to have its cake and eat it too.

Under ordinary circumstances, 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 allowed to resort with impunity to schemes feigning negotiations by
going through empty gestures.17 Thus, by imposing on GMC the provisions of the draft CBA proposed by the union, in our view,
the interests of equity and fair play were properly served and both parties regained equal footing, which was lost when GMC
thwarted the negotiations for new economic terms of the CBA.

The findings of fact by the CA, affirming those of the NLRC as to the reasonableness of the draft CBA proposed by the union
should not be disturbed since they are supported by substantial evidence. On this score, we see no cogent reason to rule
otherwise. Hence, we hold that the Court of Appeals did not commit grave abuse of discretion amounting to lack or excess of
jurisdiction when it imposed on GMC, after it had committed unfair labor practice, the draft CBA proposed by the union for the
remaining two (2) years of the duration of the original CBA. Fairness, equity, and social justice are best served in this case by
sustaining the appellate court’s decision on this issue.

WHEREFORE, the petition is DISMISSED and the assailed decision dated July 19, 2000, and the resolution dated October 26,
2000, of the Court of Appeals in CA-G.R. SP No. 50383, are AFFIRMED. Costs against petitioner.

SO ORDERED.

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G.R. No. 165407 June 5, 2009

HERMINIGILDO INGUILLO and ZENAIDA BERGANTE, Petitioners,

vs.
FIRST PHILIPPINE SCALES, Inc. and/or AMPARO POLICARPIO, Manager, Respondents.

DECISION

PERALTA, J.:

Assailed in this petition for review under Rule 45 of the Rules of Court are the Court of Appeals (1) Decision 1 dated March 11,
2004 in CA-G.R. SP No. 73992, which dismissed the Petition for Certiorari of petitioners Zenaida Bergante (Bergante) and
Herminigildo Inguillo (Inguillo); and (2) Resolution2 dated September 17, 2004 denying petitioners' Motion for Reconsideration.
The appellate court sustained the ruling of the National Labor Relations Commission (NLRC) that petitioners were validly
dismissed pursuant to a Union Security Clause in the collective bargaining agreement.

The facts of the case are as follows:

First Philippine Scales, Inc. (FPSI), a domestic corporation engaged in the manufacturing of weighing scales, employed
Bergante and Inguillo as assemblers on August 15, 1977 and September 10, 1986, respectively.

In 1991, FPSI and First Philippine Scales Industries Labor Union (FPSILU) 3 entered into a Collective Bargaining Agreement
(CBA),4 the duration of which was for a period of five (5) years starting on September 12, 1991 until September 12, 1996. On
September 19, 1991, the members of FPSILU ratified the CBA in a document entitled RATIPIKASYON NG
KASUNDUAN.5 Bergante and Inguillo, who were members of FPSILU, signed the said document. 6

During the lifetime of the CBA, Bergante, Inguillo and several FPSI employees joined another union, the Nagkakaisang Lakas ng
Manggagawa (NLM), which was affiliated with a federation called KATIPUNAN (NLM-KATIPUNAN, for brevity). Subsequently,
NLM-KATIPUNAN filed with the Department of Labor and Employment (DOLE) an intra-union dispute7 against FPSILU and
FPSI. In said case, the Med-Arbiter decided8 in favor of FPSILU. It also ordered the officers and members of NLM-KATIPUNAN
to return to FPSILU the amount of ₱90,000.00 pertaining to the union dues erroneously collected from the employees. Upon
finality of the Med-Arbiter's Decision, a Writ of Execution9 was issued to collect the adjudged amount from NLM-KATIPUNAN.
However, as no amount was recovered, notices of garnishment were issued to United Coconut Planters Bank (Kalookan City
Branch)10 and to FPSI11 for the latter to hold for FPSILU the earnings of Domingo Grutas, Jr. (Grutas) and Inguillo, formerly
FPSILU's President and Secretary for Finance, respectively, to the extent of ₱13,032.18. Resultantly, the amount of ₱5,140.55
was collected,12 ₱1,695.72 of which came from the salary of Grutas, while the ₱3,444.83 came from that of Inguillo.

Meanwhile, on March 29, 1996, the executive board and members of the FPSILU addressed a document dated March 18, 1996
denominated as "Petisyon"13 to FPSI's general manager, Amparo Policarpio (Policarpio), seeking the termination of the services
of the following employees, namely: Grutas, Yolanda Tapang, Shirley Tapang, Gerry Trinidad, Gilbert Lucero, Inguillo, Bergante,
and Vicente Go, on the following grounds:14 (1) disloyalty to the Union by separating from it and affiliating with a rival Union, the
NLM-KATIPUNAN; (2) dereliction of duty by failing to call periodic membership meetings and to give financial reports; (3)
depositing Union funds in the names of Grutas and former Vice-President Yolanda Tapang, instead of in the name of FPSILU,
care of the President; (4) causing damage to FPSI by deliberately slowing down production, preventing the Union to even
attempt to ask for an increase in benefits from the former; and (5) poisoning the minds of the rest of the members of the Union
so that they would be enticed to join the rival union.

On May 13, 1996, Inguillo filed with the NLRC a complaint against FPSI and/or Policarpio (respondents) for illegal withholding of
salary and damages, docketed as NLRC-NCR-Case No. 00-05-03036-96.15

On May 16, 1996, respondents terminated the services of the employees mentioned in the "Petisyon."

The following day, two (2) separate complaints for illegal dismissal, reinstatement and damages were filed against respondents
by: (1) NLM-KATIPUNAN, Grutas, Trinidad, Bergante, Yolanda Tapang, Go, Shirley Tapang and Lucero 16 (Grutas complaint, for
brevity); and (2) Inguillo17 (Inguillo complaint). Both complaints were consolidated with Inguillo's prior complaint for illegal
withholding of salary, which was pending before Labor Arbiter Manuel Manansala. After the preliminary mandatory conference,
some of the complainants agreed to amicably settle their cases. Consequently, the Labor Arbiter issued an Order 18 dated
October 1, 1996, dismissing with prejudice the complaints of Go, Shirley Tapang, Yolanda Tapang, Grutas, and
Trinidad.19 Lucero also settled the case after receiving his settlement money and executing a Quitclaim and Release in favor of
FPSI and Policarpio.20

Bergante and Inguillo, the remaining complainants, were directed to submit their respective position papers, after which their
complaints were submitted for resolution on February 20, 1997.21

In their Position Paper,22 Bergante and Inguillo claimed that they were not aware of a petition seeking for their termination, and
neither were they informed of the grounds for their termination. They argued that had they been informed, they would have
impleaded FPSILU in their complaints. Inguillo could not think of a valid reason for his dismissal except the fact that he was a
very vocal and active member of the NLM-KATIPUNAN. Bergante, for her part, surmised that she was dismissed solely for being
Inguillo's sister-in-law. She also reiterated the absence of a memorandum stating that she committed an infraction of a company
rule or regulation or a violation of law that would justify her dismissal.1avvphi1

Inguillo also denounced respondents' act of withholding his salary, arguing that he was not a party to the intra-union dispute from
which the notice of garnishment arose. Even assuming that he was, he argued that his salary was exempt from execution.

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In their Position Paper,23 respondents maintained that Bergante and Inguillo's dismissal was justified, as the same was done
upon the demand of FPSILU, and that FPSI complied in order to avoid a serious labor dispute among its officers and members,
which, in turn, would seriously affect production. They also justified that the dismissal was in accordance with the Union Security
Clause in the CBA, the existence and validity of which was not disputed by Bergante and Inguillo. In fact, the two had affixed
their signatures to the document which ratified the CBA.

In his Decision24 dated November 27, 1997, the Labor Arbiter dismissed the remaining complaints of Bergante and Inguillo and
held that they were not illegally dismissed. He explained that the two clearly violated the Union Security Clause of the CBA when
they joined NLM-KATIPUNAN and committed acts detrimental to the interests of FPSILU and respondents. The dispositive
portion of the said Decision states:

WHEREFORE, premises considered, judgment is hereby rendered:

1. Declaring respondents First Philippines Scales, Inc. (First Philippine Scales Industries [FPSI] and Amparo Policarpio,
in her capacity as President and General Manager of respondent FPSI, not guilty of illegal dismissal as above
discussed. However, considering the length of services rendered by complainants Herminigildo Inguillo and Zenaida
Bergante as employees of respondent FPSI, plus the fact that the other complainants in the above-entitled cases were
previously granted financial assistance/separation pay through amicable settlement, the afore-named respondents are
hereby directed to pay complainants Herminigildo Inguillo and Zenaida Bergante separation pay and accrued legal
holiday pay, as earlier computed, to wit:

Herminigildo Inguillo

Separation pay ................ ₱22,490.00

Legal Holiday Pay........... 839.00

Total 23,329.00

Zenaida Bergante

Separation pay................. ₱43,225.00

Legal Holiday Pay........... 839.00

Total 44,064.00

2. Directing the afore-named respondents to pay ten (10%) percent attorney's fees based on the total monetary award to
complainants Inguillo and Bergante.

3. Dismissing the claim for illegal withholding of salary of complainant Inguillo for lack of merit as above discussed.

4. Dismissing the other money claims and/or other charges of complainants Inguillo and Bergante for lack of factual and
legal basis.

5. Dismissing the complaint of complainant Gilberto Lucero with prejudice for having executed a Quitclaim and Release
and voluntary resignation in favor of respondents FPSI and Amparo Policarpio as above-discussed where the former
received the amount of ₱23,334.00 as financial assistance/separation pay and legal holiday pay from the latter.

SO ORDERED.25

Bergante and Inguillo appealed before the NLRC, which reversed the Labor Arbiter's Decision in a Resolution 26dated June 8,
2001, the dispositive portion of which provides:

WHEREFORE, the assailed decision is set aside. Respondents are hereby ordered to reinstate complainants Inguillo and
Bergante with full backwages from the time of their dismissal up [to] their actual reinstatement. Further, respondents are also
directed to pay complainant Inguillo the amount representing his withheld salary for the period March 15, 1998 to April 16, 1998.
The sum corresponding to ten percent (10%) of the total judgment award by way of attorney's fees is likewise ordered. All other
claims are ordered dismissed for lack of merit.

SO ORDERED.27

In reversing the Labor Arbiter, the NLRC28 ratiocinated that respondents failed to present evidence to show that Bergante and
Inguillo committed acts inimical to FPSILU's interest. It also observed that, since the two (2) were not informed of their dismissal,
the justification given by FPSI that it was merely constrained to dismiss the employees due to persistent demand from the Union
clearly proved the claim of summary dismissal and violation of the employees' right to due process.

Respondents filed a Motion for Reconsideration, which was referred by the NLRC to Executive Labor Arbiter Vito C. Bose for
report and recommendation. In its Resolution 29 dated August 26, 2002, the NLRC adopted in toto the report and

93 | P a g e
recommendation of Arbiter Bose which set aside its previous Resolution reversing the Labor Arbiter's Decision. This time, the
NLRC held that Bergante and Inguillo were not illegally dismissed as respondents merely put in force the CBA provision on the
termination of the services of disaffiliating Union members upon the recommendation of the Union. The dispositive portion of the
said Resolution provides:

WHEREFORE, the resolution of the Commission dated June 8, 2001 is set aside. Declaring the dismissal of the complainants as
valid, [t]his complaint for illegal dismissal is dismissed. However, respondents are hereby directed to pay complainant Inguillo
the amount representing his withheld salary for the period March 15, 1998 to April 16, 1998, plus ten (10%) percent as attorney's
fees.

All other claims are ordered dismissed for lack of merit.

SO ORDERED.30

Not satisfied with the disposition of their complaints, Bergante and Inguillo filed a petition for certiorari under Rule 65 of the Rules
of Court with the Court of Appeals (CA). The CA dismissed the petition for lack of merit 31 and denied the subsequent motion for
reconsideration.32 In affirming the legality of the dismissal, the CA ratiocinated, thus:

x x x on the merits, we sustain the view adopted by the NLRC that:

x x x it cannot be said that the stipulation providing that the employer may dismiss an employee whenever the union
recommends his expulsion either for disloyalty or for any violation of its by-laws and constitution is illegal or constitutive of unfair
labor practice, for such is one of the matters on which management and labor can agree in order to bring about the harmonious
relations between them and the union, and cohesion and integrity of their organization. And as an act of loyalty, a union may
certainly require its members not to affiliate with any other labor union and to consider its infringement as a reasonable cause for
separation.

The employer FPSI did nothing but to put in force their agreement when it separated the disaffiliating union members, herein
complainants, upon the recommendation of the union. Such a stipulation is not only necessary to maintain loyalty and preserve
the integrity of the union, but is allowed by the Magna Carta of Labor when it provided that while it is recognized that an
employee shall have the right of self-organization, it is at the same time postulated that such rights shall not injure the right of the
labor organization to prescribe its own rules with respect to the acquisition or retention of membership therein. Having ratified
their CBA and being then members of FPSILU, the complainants owe fealty and are required under the Union Security clause to
maintain their membership in good standing with it during the term thereof, a requirement which ceases to be binding only during
the 60-day freedom period immediately preceding the expiration of the CBA, which was not present in this case.

x x x the dismissal of the complainants pursuant to the demand of the majority union in accordance with their union security
[clause] agreement following the loss of seniority rights is valid and privileged and does not constitute unfair labor practice or
illegal dismissal.

Indeed, the Supreme Court has for so long a time already recognized a union security clause in the CBA, like the one at bar, as
a specie of closed-shop arrangement and trenchantly upheld the validity of the action of the employer in enforcing its terms as a
lawful exercise of its rights and obligations under the contract.

The collective bargaining agreement in this case contains a union security clause-a closed-shop agreement.

A closed-shop agreement is an agreement whereby an employer binds himself to hire only members of the contracting union
who must continue to remain members in good standing to keep their jobs. It is "the most prized achievement of unionism." It
adds membership and compulsory dues. By holding out to loyal members a promise of employment in the closed-shop, it welds
group solidarity. (National Labor Union v. Aguinaldo's Echague Inc., 97 Phil. 184). It is a very effective form of union security
agreement.

This Court has held that a closed-shop is a valid form of union security, and such a provision in a collective bargaining
agreement is not a restriction of the right of freedom of association guaranteed by the Constitution. (Lirag Textile Mills, Inc. v.
Blanco, 109 SCRA 87; Manalang v. Artex Development Company, Inc., 21 SCRA 561.) 33

Hence, the present petition.

Essentially, the Labor Code of the Philippines has several provisions under which an employee may be validly terminated,
namely: (1) just causes under Article 282;34 (2) authorized causes under Article 283;35 (3) termination due to disease under
Article 284;36 and (4) termination by the employee or resignation under Article 285. 37 While the said provisions did not mention
as ground the enforcement of the Union Security Clause in the CBA, the dismissal from employment based on the same is
recognized and accepted in our jurisdiction.38

"Union security" is a generic term, which is applied to and comprehends "closed shop," "union shop," "maintenance of
membership" or any other form of agreement which imposes upon employees the obligation to acquire or retain union
membership as a condition affecting employment. 39 There is union shop when all new regular employees are required to join the
union within a certain period as a condition for their continued employment. There is maintenance of membership shop when
employees, who are union members as of the effective date of the agreement, or who thereafter become members, must
maintain union membership as a condition for continued employment until they are promoted or transferred out of the bargaining
unit or the agreement is terminated.40 A closed-shop, on the other hand, may be defined as an enterprise in which, by
agreement between the employer and his employees or their representatives, no person may be employed in any or certain
agreed departments of the enterprise unless he or she is, becomes, and, for the duration of the agreement, remains a member
in good standing of a union entirely comprised of or of which the employees in interest are a part. 41

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In their Petition, Bergante and Inguillo assail the legality of their termination based on the Union Security Clause in the CBA
between FPSI and FPSILU. Article II42 of the CBA pertains to Union Security and Representatives, which provides:

The Company hereby agrees to a UNION SECURITY [CLAUSE] with the following terms:

1. All bonafide union members as of the effective date of this agreement and all those employees within the
bargaining unit who shall subsequently become members of the UNION during the period of this agreement shall, as a
condition to their continued employment, maintain their membership with the UNION under the FIRST PHIL.
SCALES INDUSTRIES LABOR UNION Constitution and By-laws and this Agreement;

2. Within thirty (30) days from the signing of this Agreement, all workers eligible for membership who are not union
members shall become and to remain members in good standing as bonafide union members therein as a condition of
continued employment;

3. New workers hired shall likewise become members of the UNION from date they become regular and permanent
workers and shall remain members in good standing as bonafide union members therein as a condition of continued
employment;

4. In case a worker refused to join the Union, the Union will undertake to notify workers to join and become union
members. If said worker or workers still refuses, he or they shall be notified by the Company of his/her dismissal as a
consequence thereof and thereafter terminated after 30 days notice according to the Labor Code.

5. Any employee/union member who fails to retain union membership in good standing may be recommended for
suspension or dismissal by the Union Directorate and/or FPSILU Executive Council for any of the following
causes:

a) Acts of Disloyalty;

b) Voluntary Resignation or Abandonment from the UNION;

c) Organization of or joining another labor union or any labor group that would work against the UNION;

d) Participation in any unfair labor practice or violation of the Agreement, or activity derogatory to the UNION
decision;

e) Disauthorization of, or Non-payment of, monthly membership dues, fees, fines and other financial
assessments to the Union;

f) Any criminal violation or violent conduct or activity against any UNION member without justification and
affecting UNION rights or obligations under the said Agreement.

Verily, the aforesaid provision requires all members to maintain their membership with FPSILU during the lifetime of the CBA.
Failing so, and for any of the causes enumerated therein, the Union Directorate and/or FPSILU Executive Council may
recommend to FPSI an employee/union member's suspension or dismissal. Records show that Bergante and Inguillo were
former members of FPSILU based on their signatures in the document which ratified the CBA. It can also be inferred that they
disaffiliated from FPSILU when the CBA was still in force and subsisting, as can be gleaned from the documents relative to the
intra-union dispute between FPSILU and NLM-KATIPUNAN. In view of their disaffiliation, as well as other acts allegedly
detrimental to the interest of both FPSILU and FPSI, a "Petisyon" was submitted to Policarpio, asking for the termination of the
services of employees who failed to maintain their Union membership.

The Court is now tasked to determine whether the enforcement of the aforesaid Union Security Clause justified herein
petitioners' dismissal from the service.

In terminating the employment of an employee by enforcing the Union Security Clause, the employer needs only to determine
and prove that: (1) the union security clause is applicable; (2) the union is requesting for the enforcement of the union security
provision in the CBA; and (3) there is sufficient evidence to support the union's decision to expel the employee from the union or
company.43

We hold that all the requisites have been sufficiently met and FPSI was justified in enforcing the Union Security Clause, for the
following reasons:

First. FPSI was justified in applying the Union Security Clause, as it was a valid provision in the CBA, the existence and validity
of which was not questioned by either party. Moreover, petitioners were among the 93 employees who affixed their signatures to
the document that ratified the CBA. They cannot now turn their back and deny knowledge of such provision.

Second. FPSILU acted on its prerogative to recommend to FPSI the dismissal of the members who failed to maintain their
membership with the Union. Aside from joining another rival union, FPSILU cited other grounds committed by petitioners and the
other employees which tend to prejudice FPSI’s interests, i.e., dereliction of duty - by failing to call periodic membership
meetings and to give financial reports; depositing union funds in the names of Grutas and former Vice-President Yolanda
Tapang, instead of in the name of FPSILU care of the President; causing damage to FPSI by deliberately slowing down
production, preventing the Union from even attempting to ask for an increase in benefits from the former; and poisoning the
minds of the rest of the members of the Union so that they would be enticed to join the rival union.

95 | P a g e
Third. FPSILU's decision to ask for the termination of the employees in the "Petisyon" was justified and supported by the
evidence on record. Bergante and Inguillo were undisputably former members of FPSILU. In fact, Inguillo was the Secretary of
Finance, the underlying reason why his salary was garnished to satisfy the judgment of the Med-Arbiter who ordered NLM-
KATIPUNAN to return the Union dues it erroneously collected from the employees. Their then affiliation with FPSILU was also
clearly shown by their signatures in the document which ratified the CBA. Without a doubt, they committed acts of disloyalty to
the Union when they failed not only to maintain their membership but also disaffiliated from it. They abandoned FPSILU and
even joined another union which works against the former's interests. This is evident from the intra-union dispute filed by NLM-
KATIPUNAN against FPSILU. Once affiliated with NLM-KATIPUNAN, Bergante and Inguillo proceeded to recruit other
employees to disaffiliate from FPSILU and even collected Union dues from them.

In Del Monte Philippines,44 the stipulations in the CBA authorizing the dismissal of employees are of equal import as the
statutory provisions on dismissal under the Labor Code, since a CBA is the law between the company and the Union, and
compliance therewith is mandated by the express policy to give protection to labor. In Caltex Refinery Employees Association
(CREA) v. Brillantes,45 the Court expounded on the effectiveness of union security clause when it held that it is one intended to
strengthen the contracting union and to protect it from the fickleness or perfidy of its own members. For without such safeguards,
group solidarity becomes uncertain; the union becomes gradually weakened and increasingly vulnerable to company
machinations. In this security clause lies the strength of the union during the enforcement of the collective bargaining agreement.
It is this clause that provides labor with substantial power in collective bargaining.

Nonetheless, while We uphold dismissal pursuant to a union security clause, the same is not without a condition or restriction.
For to allow its untrammeled enforcement would encourage arbitrary dismissal and abuse by the employer, to the detriment of
the employees. Thus, to safeguard the rights of the employees, We have said time and again that dismissals pursuant to union
security clauses are valid and legal, subject only to the requirement of due process, that is, notice and hearing prior to
dismissal.46 In like manner, We emphasized that the enforcement of union security clauses is authorized by law, provided such
enforcement is not characterized by arbitrariness, and always with due process.47

There are two (2) aspects which characterize the concept of due process under the Labor Code: one is substantive––whether
the termination of employment was based on the provisions of the Labor Code or in accordance with the prevailing
jurisprudence; the other is procedural - the manner in which the dismissal was effected.

The second aspect of due process was clarified by the Court in King of Kings Transport v. Mamac,48 stating, thus:

(1) The first written notice to be served on the employees should contain the specific causes or grounds for
termination against them, and a directive that the employees are given the opportunity to submit their written explanation
within a reasonable period. x x x

(2) After serving the first notice, the employers should schedule and conduct a hearing or conference wherein
the employees will be given the opportunity to: (1) explain and clarify their defenses to the charge against them;
(2) present evidence in support of their defenses; and (3) rebut the evidence presented against them by the
management. During the hearing or conference, the employees are given the chance to defend themselves personally,
with the assistance of a representative or counsel of their choice. Moreover, this conference or hearing could be used by
the parties as an opportunity to come to an amicable settlement.

(3) After determining that termination of employment is justified, the employers shall serve the employees a written
notice of termination indicating that: (1) all circumstances involving the charge against the employees have been
considered; and (2) grounds have been established to justify the severance of their employment.

Corollarily, procedural due process in the dismissal of employees requires notice and hearing. The employer must furnish the
employee two written notices before termination may be effected. The first notice apprises the employee of the particular acts or
omissions for which his dismissal is sought, while the second notice informs the employee of the employer’s decision to dismiss
him.49 The requirement of a hearing, on the other hand, is complied with as long as there was an opportunity to be heard, and
not necessarily that an actual hearing was conducted.50

In the present case, the required two notices that must be given to herein petitioners Bergante and Inguillo were lacking. The
records are bereft of any notice that would have given a semblance of substantial compliance on the part of herein respondents.
Respondents, however, aver that they had furnished the employees concerned, including petitioners, with a copy of FPSILU's
"Petisyon." We cannot consider that as compliance with the requirement of either the first notice or the second notice. While the
"Petisyon" enumerated the several grounds that would justify the termination of the employees mentioned therein, yet such
document is only a recommendation by the Union upon which the employer may base its decision. It cannot be considered a
notice of termination. For as agreed upon by FPSI and FPSILU in their CBA, the latter may only recommend to the former a
Union member's suspension or dismissal. Nowhere in the controverted Union Security Clause was there a mention that once the
union gives a recommendation, the employer is bound outright to proceed with the termination.

Even assuming that the "Petisyon" amounts to a first notice, the employer cannot be deemed to have substantially complied with
the procedural requirements. True, FPSILU enumerated the grounds in said "Petisyon." But a perusal of each of them leads Us
to conclude that what was stated were general descriptions, which in no way would enable the employees to intelligently prepare
their explanation and defenses. In addition, the "Petisyon" did not provide a directive that the employees are given opportunity to
submit their written explanation within a reasonable period. Finally, even if We are to assume that the "Petisyon" is a second
notice, still, the requirement of due process is wanting. For as We have said, the second notice, which is aimed to inform the
employee that his service is already terminated, must state that the employer has considered all the circumstances which
involve the charge and the grounds in the first notice have been established to justify the severance of employment. After the
claimed dialogue between Policarpio and the employees mentioned in the "Petisyon," the latter were simply told not to report for
work anymore.

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These defects are bolstered by Bergante and Inguillo who remain steadfast in denying that they were notified of the specific
charges against them nor were they given any memorandum to that effect. They averred that had they been informed that their
dismissal was due to FPSILU's demand/petition, they could have impleaded the FPSILU together with the respondents. The
Court has always underscored the significance of the two-notice rule in dismissing an employee and has ruled in a number of
cases that non-compliance therewith is tantamount to deprivation of the employee’s right to due process. 51

As for the requirement of a hearing or conference, We hold that respondents also failed to substantially comply with the same.
Policarpio alleged that she had a dialogue with the concerned employees; that she explained to them the demand of FPSILU for
their termination as well as the consequences of the "Petisyon"; and that she had no choice but to act accordingly. She further
averred that Grutas even asked her to pay all the involved employees one (1)-month salary for every year of service, plus their
accrued legal holiday pay, but which she denied. She informed them that it has been FPSI's practice to give employees, on a
case-to-case basis, only one-half (½) month salary for every year of service and after they have tendered their voluntary
resignation. The employees refused her offer and told her that they will just file their claims with the DOLE.52

Policarpio's allegations are self-serving. Except for her claim as stated in the respondent's Position Paper, nowhere from the
records can We find that Bergante and Inguillo were accorded the opportunity to present evidence in support of their defenses.
Policarpio relied heavily on the "Petisyon" of FPSILU. She failed to convince Us that during the dialogue, she was able to
ascertain the validity of the charges mentioned in the "Petisyon." In her futile attempt to prove compliance with the procedural
requirement, she reiterated that the objective of the dialogue was to provide the employees "the opportunity to receive the act of
grace of FPSI by giving them an amount equivalent to one-half (½) month of their salary for every year of service." We are not
convinced. We cannot even consider the demand and counter-offer for the payment of the employees as an amicable settlement
between the parties because what took place was merely a discussion only of the amount which the employees are willing to
accept and the amount which the respondents are willing to give. Such non-compliance is also corroborated by Bergante and
Inguillo in their pleadings denouncing their unjustified dismissal. In fine, We hold that the dialogue is not tantamount to the
hearing or conference prescribed by law.

We reiterate, FPSI was justified in enforcing the Union Security Clause in the CBA. However, We cannot countenance
respondents' failure to accord herein petitioners the due process they deserve after the former dismissed them outright "in order
to avoid a serious labor dispute among the officers and members of the bargaining agent." 53 In enforcing the Union Security
Clause in the CBA, We are upholding the sanctity and inviolability of contracts. But in doing so, We cannot override an
employee’s right to due process.54 In Carino v. National Labor Relations Commission,55 We took a firm stand in holding that:

The power to dismiss is a normal prerogative of the employer. However, this is not without limitation. The employer is bound to
exercise caution in terminating the services of his employees especially so when it is made upon the request of a labor
union pursuant to the Collective Bargaining Agreement x x x. Dismissals must not be arbitrary and capricious. Due process
must be observed in dismissing an employee because it affects not only his position but also his means of livelihood.
Employers should respect and protect the rights of their employees, which include the right to labor."

Thus, as held in that case, "the right of an employee to be informed of the charges against him and to reasonable opportunity to
present his side in a controversy with either the company or his own Union is not wiped away by a Union Security Clause or a
Union Shop Clause in a collective bargaining agreement. An employee is entitled to be protected not only from a company which
disregards his rights but also from his own Union, the leadership of which could yield to the temptation of swift and arbitrary
expulsion from membership and mere dismissal from his job."56

In fine, We hold that while Bergante and Inguillo's dismissals were valid pursuant to the enforcement of Union Security Clause,
respondents however did not comply with the requisite procedural due process. As in the case of Agabon v. National Labor
Relations Commission,57 where the dismissal is for a cause recognized by the prevailing jurisprudence, the absence of the
statutory due process should not nullify the dismissal or render it illegal, or ineffectual. Accordingly, for violating Bergante and
Inguillo's statutory rights, respondents should indemnify them the amount of ₱30,000.00 each as nominal damages.

In view of the foregoing, We see no reason to discuss the other matters raised by petitioners.

WHEREFORE, premises considered, the instant Petition is DENIED. The Court of Appeals Decision dated March 11, 2004 and
Resolution dated September 17, 2004, in CA-G.R. SP No. 73992, are hereby AFFIRMED WITH MODIFICATION in that while
there was a valid ground for dismissal, the procedural requirements for termination, as mandated by law and jurisprudence, were
not observed. Respondents First Philippine Scales, Inc. and/or Amparo Policarpio are hereby ORDERED to PAY petitioners
Zenaida Bergante and Herminigildo Inguillo the amount of ₱30,000.00 each as nominal damages. No pronouncement as to
costs.

SO ORDERED.

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G.R. No. 76989 September 29, 1987

MANILA MANDARIN EMPLOYEES UNION, petitioners,

vs.
NATIONAL LABOR RELATIONS COMMISSION, and MELBA C. BELONCIO, respondents.

GUTIERREZ, JR., J.:

This is a petition to review on certiorari the National Labor Relations Commission's (NLRC) decision which modified the Labor
Arbiter's decision and ordered the Manila Mandarin Employees Union to pay the wages and fringe benefits of Melba C. Beloncio
from the time she was placed on forced leave until she is actually reinstated, plus ten percent (10%) thereof as attorney's fees.
Manila Mandarin Hotel was ordered to reinstate Beloncio and to pay her whatever service charges may be due her during that
period, which amount would be held in escrow by the hotel.

The petition was filed on January 19, 1987. The private respondent filed her comment on March 7, 1987 while the Solicitor
General filed a comment on June 1, 1987 followed by the petitioner's reply on August 22, 1987. We treat the comment as
answer and decide the case on its merits.

The facts of the case are undisputed.

Herein private respondent, Melba C. Beloncio, an employee of Manila Mandarin Hotel since 1976 and at the time of her
dismissal, assistant head waitress at the hotel's coffee shop, was expelled from the petitioner Manila Mandarin Employees
Union for acts allegedly inimical to the interests of the union. The union demanded the dismissal from employment of Beloncio
on the basis of the union security clause of their collective bargaining agreement and the Hotel acceded by placing Beloncio on
forced leave effective August 10, 1984.

The union security clause of the collective bargaining agreement provides:

Section 2. Dismissals.

xxx xxx xxx

b) Members of the Union who cease to be such members and/or who fail to maintain their membership in good
standing therein by reason of their resignation from the Union and/or by reason of their expulsion from the
Union in accordance with the Constitution and By-Laws of the Union, for non-payment of union dues and other
assessment for organizing, joining or forming another labor organization shall, upon written notice of such
cessation of membership or failure to maintain membership in the Union and upon written demand to the
company by the Union, be dismissed from employment by the Company after complying with the requisite due
process requirement; ... (Emphasis supplied) (Rollo, p. 114)

Two days before the effective date of her forced leave or on August 8, 1984, Beloncio filed a complaint for unfair labor practice
and illegal dismissal against herein petitioner-union and Manila Mandarin Hotel Inc. before the NLRC, Arbitration Branch.

Petitioner-union filed a motion to dismiss on grounds that the complainant had no cause of action against it and the NLRC had
no jurisdiction over the subject matter of the complaint.

This motion was denied by the Labor Arbiter.

After the hearings that ensued and the submission of the parties' respective position papers, the Labor Arbiter held that the
union was guilty of unfair labor practice when it demanded the separation of Beloncio. The union was then ordered to pay all the
wages and fringe benefits due to Beloncio from the time she was on forced leave until actual reinstatement, and to pay
P30,000.00 as exemplary damages and P10,000.00 as attorney's fees. The charge against the hotel was dismissed.

The Union then appealed to the respondent NLRC which modified the Labor Arbiter's decision as earlier stated.

A subsequent motion for reconsideration and a second motion for reconsideration were denied.

Hence, this present petition.

The petitioner raises the following assignment of errors:

THAT RESPONDENT NLRC ERRED IN NOT DECLARING THAT THE PRESENT CONTROVERSY
INVOLVED INTRA-UNION CONFLICTS AND THEREFOR IT HAS NO JURISDICTION OVER THE SUBJECT-
MATTER THEREOF.

II

THAT RESPONDENT NLRC SERIOUSLY ERRED IN HOLDING PETITIONER LIABLE FOR THE PAYMENT
OF PRIVATE RESPONDENT'S SALARY AND FRINGE BENEFITS, AND AWARD OF 10% ATTORNEY'S

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 FEES, AFTER FINDING AS UNMERITORIOUS HER PRETENDED CLAIMS OR COMPLAINTS FOR UNFAIR
LABOR PRACTICE, ILLEGAL DISMISSAL, AND DAMAGES. (Rollo, pp. 6-9)

On the issue of the NLRC jurisdiction over the case, the Court finds no grave abuse of discretion in the NLRC conclusion that
the dispute is not purely intra-union but involves an interpretation of the collective bargaining agreement (CBA) provisions and
whether or not there was an illegal dismissal. Under the CBA, membership in the union may be lost through expulsion only if
there is non-payment of dues or a member organizes, joins, or forms another labor organization. The charge of disloyalty against
Beloncio arose from her emotional remark to a waitress who happened to be a union steward, "Wala akong tiwala sa Union
ninyo." The remark was made in the course of a heated discussion regarding Beloncio's efforts to make a lazy and recalcitrant
waiter adopt a better attitude towards his work.

We agree with the Solicitor General when he noted that:

... The Labor Arbiter explained correctly that "(I)f the only question is the legality of the expulsion of Beloncio
from the Union undoubtedly, the question is one cognizable by the BLR (Bureau of Labor Relations). But, the
question extended to the dismissal of Beloncio or steps leading thereto. Necessarily, when the hotel decides the
recommended dismissal, its acts would be subject to scrutiny. Particularly, it will be asked whether it violates or
not the existing CBA. Certainly, violations of the CBA would be unfair labor practice."

Article 250 of the Labor Code provides the following:

Art. 250. Unfair labor practices of labor organizations. — It shall be unfair labor practice for a
labor organization, its officers, agents or representatives:

xxx xxx xxx

(b) To cause or attempt to cause an employer to discriminate against an employee, including

discrimination against an employee with respect to whom membership in such organization has
been denied or to terminate an employee on any ground other than the usual terms and
conditions under which membership or continuation of membership is made available to other
members. (Emphasis supplied)

Article 217 of the Labor Code also provides:

Art. 217. Jurisdiction of Labor Arbiters and the Commission — (a) The Labor Arbiters shall have
the original and exclusive jurisdiction to hear and decide ... the following cases involving all
workers, whether agricultural or nonagricultural;

(1) Unfair labor practice cases;

xxx xxx xxx

(b) The Commission shall have exclusive appellate jurisdiction over all cases decided by Labor
Arbiters. (Rollo, pp. 155-157.)

The petitioner also questions the factual findings of the public respondent on the reasons for Beloncio's dismissal and,
especially, on the argument that she was on forced leave; she was never dismissed; and not having worked, she deserved no
pay.

The Court finds nothing in the records that indicates reversible error, much less grave abuse of discretion, in the NLRC's findings
of facts.

It is a well-settled principle that findings of facts quasi-judicial agencies like the NLRC, which have acquired expertise because
their jurisdiction is confined to specific matters, are generally accorded not only respect but at times even finality if such findings
are supported by substantial evidence. (Akay Printing Press vs. Minister of Labor and Employment, 140 SCRA 381; Alba Patio
de Makati vs. Alba Patio de Makati Employees Association, 128 SCRA 253; Dangan vs. National Labor Relations Commission,
127 SCRA 706; De la Concepcion vs. Mindanao Portland Cement Corporation, 127 SCRA 647).

The petitioner now questions the decision of the National Labor Relations Commission ordering the reinstatement of the private
respondent and directing the Union to pay the wages and fringe benefits which she failed to receive as a result of her forced
leave and to pay attorney's fees.

We find no error in the questioned decision.

The Hotel would not have compelled Beloncio to go on forced leave were it not for the union's insistence and demand to the
extent that because of the failure of the hotel to dismiss Beloncio as requested, the union filed a notice of strike with the Ministry
of Labor and Employment on August 17, 1984 on the issue of unfair labor practice. The hotel was then compelled to put
Beloncio on forced leave and to stop payment of her salary from September 1, 1984.

Furthermore, as provided for in the collective bargaining agreement between the petitioner-the Union and the Manila Mandarin
Hotel "the Union shall hold the Company free and blameless from any and all liabilities that may arise" should the employee
question the dismissal, as has happened in the case at bar.

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It is natural for a union to desire that all workers in a particular company should be its dues-paying members. Since it would be
difficult to insure 100 percent membership on a purely voluntary basis and practically impossible that such total membership
would continuously be maintained purely on the merits of belonging to the union, the labor movement has evolved the system
whereby the employer is asked, on the strength of collective action, to enter into what are now familiarly known as "union
security" agreements.

The collective bargaining agreement in this case contains a union security clause — a closed-shop agreement.

A closed-shop agreement is an agreement whereby an employer binds himself to hire only members of the contracting union
who must continue to remain members in good standing to keep their jobs. It is "the most prized achievement of unionism." It
adds membership and compulsory dues. By holding out to loyal members a promise of employment in the closed-shop, it welds
group solidarity. (National Labor Union vs. Aguinaldo's Echague, Inc., 97 Phil. 184). It is a very effective form of union security
agreement.

This Court has held that a closed-shop is a valid form of union security, and such a provision in a collective bargaining
agreement is not a restriction of the right of freedom of association guaranteed by the Constitution. (Lirag Textile Mills, Inc. vs.
Blanco, 109 SCRA 87; Manalang vs. Artex Development Company, Inc., 21 SCRA 561).

The Court stresses, however, that union security clauses are also governed by law and by principles of justice, fair play, and
legality. Union security clauses cannot be used by union officials against an employer, much less their own members, except
with a high sense of responsibility, fairness, prudence, and judiciousness.

A union member may not be expelled from her union, and consequently from her job, for personal or impetuous reasons or for
causes foreign to the closed-shop agreement and in a manner characterized by arbitrariness and whimsicality.

This is particularly true in this case where Ms. Beloncio was trying her best to make a hotel bus boy do his work promptly and
courteously so as to serve hotel customers in the coffee shop expeditiously and cheerfully. Union membership does not entitle
waiters, janitors, and other workers to be sloppy in their work, inattentive to customers, and disrespectful to supervisors. The
Union should have disciplined its erring and troublesome members instead of causing so much hardship to a member who was
only doing her work for the best interests of the employer, all its employees, and the general public whom they serve.

WHEREFORE, the petition is hereby DISMISSED. The questioned decision of the National Labor Relations Commission is
AFFIRMED. Costs against the petitioner.

SO ORDERED.

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G.R. No. 135547 January 23, 2002

GERARDO F. RIVERA, ALFRED A. RAMISO, AMBROCIO PALAD, DENNIS R. ARANAS, DAVID SORIMA, JR., JORGE P.
DELA ROSA, and ISAGANI ALDEA, Petitioners,
vs.
HON. EDGARDO ESPIRITU in his capacity as Chairman of the PAL Inter-Agency Task Force created under
Administrative Order No. 16; HON. BIENVENIDO LAGUESMA in his capacity as Secretary of Labor and Employment;
PHILIPPINE AIRLINES (PAL), LUCIO TAN, HENRY SO UY, ANTONIO V. OCAMPO, MANOLO E. AQUINO, JAIME J.
BAUTISTA, and ALEXANDER O. BARRIENTOS, Respondents.

DECISION

QUISUMBING, J.:

In this special civil action for certiorari and prohibition, petitioners charge public respondents with grave abuse of discretion
amounting to lack or excess of jurisdiction for acts taken in regard to the enforcement of the agreement dated September 27,
1998, between Philippine Airlines (PAL) and its union, the PAL Employees Association (PALEA).

The factual antecedents of this case are as follows:

On June 5, 1998, PAL pilots affiliated with the Airline Pilots Association of the Philippines (ALPAP) went on a three-week strike,
causing serious losses to the financially beleaguered flag carrier. As a result, PAL’s financial situation went from bad to worse.
Faced with bankruptcy, PAL adopted a rehabilitation plan and downsized its labor force by more than one-third.

On July 22, 1998, PALEA went on strike to protest the retrenchment measures adopted by the airline, which affected 1,899
union members. The strike ended four days later, when PAL and PALEA agreed to a more systematic reduction in PAL’s work
force and the payment of separation benefits to all retrenched employees.

On August 28, 1998, then President Joseph E. Estrada issued Administrative Order No. 16 creating an Inter-Agency Task Force
(Task Force) to address the problems of the ailing flag carrier. The Task Force was composed of the Departments of Finance,
Labor and Employment, Foreign Affairs, Transportation and Communication, and Tourism, together with the Securities and
Exchange Commission (SEC). Public respondent Edgardo Espiritu, then the Secretary of Finance, was designated chairman of
the Task Force. It was "empowered to summon all parties concerned for conciliation, mediation (for) the purpose of arriving at a
total and complete solution of the problem."1Conciliation meetings were then held between PAL management and the three
unions representing the airline’s employees,2 with the Task Force as mediator.

On September 4, 1998, PAL management submitted to the Task Force an offer by private respondent Lucio Tan, Chairman and
Chief Executive Officer of PAL, of a plan to transfer shares of stock to its employees. The pertinent portion of said plan reads:

1. From the issued shares of stock within the group of Mr. Lucio Tan’s holdings, the ownership of 60,000 fully paid
shares of stock of Philippine Airlines with a par value of PH₱5.00/share will be transferred in favor of each employee of
Philippine Airlines in the active payroll as of September 15, 1998. Should any share-owning employee leave PAL,
he/she has the option to keep the shares or sells (sic) his/her shares to his/her union or other employees currently
employed by PAL.

2. The aggregate shares of stock transferred to PAL employees will allow them three (3) members to (sic) the PAL
Board of Directors. We, thus, become partners in the boardroom and together, we shall address and find solutions to the
wide range of problems besetting PAL.

3. In order for PAL to attain (a) degree of normalcy while we are tackling its problems, we would request for a
suspension of the Collective Bargaining Agreements (CBAs) for 10 years.3

On September 10, 1998, the Board of Directors of PALEA voted to accept Tan’s offer and requested the Task Force’s
assistance in implementing the same. Union members, however, rejected Tan’s offer. Under intense pressure from PALEA
members, the union’s directors subsequently resolved to reject Tan’s offer.

On September 17, 1998, PAL informed the Task Force that it was shutting down its operations effective September 23, 1998,
preparatory to liquidating its assets and paying off its creditors. The airline claimed that given its labor problems, rehabilitation
was no longer feasible, and hence, the airline had no alternative but to close shop.

On September 18, 1998, PALEA sought the intervention of the Office of the President in immediately convening the parties, the
PAL management, PALEA, ALPAP, and FASAP, including the SEC under the direction of the Inter-Agency Task Force, to
prevent the imminent closure of PAL.4

On September 19, 1998, PALEA informed the Department of Labor and Employment (DOLE) that it had no objection to a
referendum on the Tan’s offer. 2,799 out of 6,738 PALEA members cast their votes in the referendum under DOLE supervision
held on September 21-22, 1998. Of the votes cast, 1,055 voted in favor of Tan’s offer while 1,371 rejected it.

On September 23, 1998, PAL ceased its operations and sent notices of termination to its employees.

Two days later, the PALEA board wrote President Estrada anew, seeking his intervention. PALEA offered a 10-year moratorium
on strikes and similar actions and a waiver of some of the economic benefits in the existing CBA. 5 Tan, however, rejected this
counter-offer.

101 | P a g e
On September 27, 1998, the PALEA board again wrote the President proposing the following terms and conditions, subject to
ratification by the general membership:

1. Each PAL employee shall be granted 60,000 shares of stock with a par value of ₱5.00, from Mr. Lucio Tan’s
shareholdings, with three (3) seats in the PAL Board and an additional seat from government shares as indicated by His
Excellency;

2. Likewise, PALEA shall, as far as practicable, be granted adequate representation in committees or bodies which deal
with matters affecting terms and conditions of employment;

3. To enhance and strengthen labor-management relations, the existing Labor-Management Coordinating Council shall
be reorganized and revitalized, with adequate representation from both PAL management and PALEA;

4. To assure investors and creditors of industrial peace, PALEA agrees, subject to the ratification by the general
membership, (to) the suspension of the PAL-PALEA CBA for a period of ten (10) years, provided the following
safeguards are in place:

a. PAL shall continue recognizing PALEA as the duly certified bargaining agent of the regular rank-and-file
ground employees of the Company;

b. The ‘union shop/maintenance of membership’ provision under the PAL-PALEA CBA shall be respected.

c. No salary deduction, with full medical benefits.

5. PAL shall grant the benefits under the 26 July 1998 Memorandum of Agreement forged by and between PAL and
PALEA, to those employees who may opt to retire or be separated from the company.

6. PALEA members who have been retrenched but have not received separation benefits shall be granted priority in the
hiring/rehiring of employees.

7. In the absence of applicable Company rule or regulation, the provisions of the Labor Code shall apply. 6

Among the signatories to the letter were herein petitioners Rivera, Ramiso, and Aranas, as officers and/or members of the
PALEA Board of Directors. PAL management accepted the PALEA proposal and the necessary referendum was scheduled.

On October 2, 1998, 5,324 PALEA members cast their votes in a DOLE-supervised referendum. Of the votes cast, 61% were in
favor of accepting the PAL-PALEA agreement, while 34% rejected it.

On October 7, 1998, PAL resumed domestic operations. On the same date, seven officers and members of PALEA filed this
instant petition to annul the September 27, 1998 agreement entered into between PAL and PALEA on the following grounds:

PUBLIC RESPONDENTS GRAVELY ABUSED THEIR DISCRETION AND EXCEEDED THEIR JURISDICTION IN ACTIVELY
PURSUING THE CONCLUSION OF THE PAL-PALEA AGREEMENT AS THE CONSTITUTIONAL RIGHTS TO SELF-
ORGANIZATION AND COLLECTIVE BARGAINING, BEING FOUNDED ON PUBLIC POLICY, MAY NOT BE WAIVED, NOR
THE WAIVER, RATIFIED.

II

PUBLIC RESPONDENTS GRAVELY ABUSED THEIR DISCRETION AND EXCEEDED THEIR JURISDICTION IN PRESIDING
OVER THE CONCLUSION OF THE PAL-PALEA AGREEMENT UNDER THREAT OF ABUSIVE EXERCISE OF PAL’S
MANAGEMENT PREROGATIVE TO CLOSE BUSINESS USED AS SUBTERFUGE FOR UNION-BUSTING.

The issues now for our resolution are:

(1) Is an original action for certiorari and prohibition the proper remedy to annul the PAL-PALEA agreement of
September 27, 1998;

(2) Is the PAL-PALEA agreement of September 27, 1998, stipulating the suspension of the PAL-PALEA CBA
unconstitutional and contrary to public policy?

Anent the first issue, petitioners aver that public respondents as functionaries of the Task Force, gravely abused their discretion
and exceeded their jurisdiction when they actively pursued and presided over the PAL-PALEA agreement.

Respondents, in turn, argue that the public respondents merely served as conciliators or mediators, consistent with the mandate
of A.O. No. 16 and merely supervised the conduct of the October 3, 1998 referendum during which the PALEA members ratified
the agreement. Thus, public respondents did not perform any judicial and quasi-judicial act pertaining to jurisdiction.
Furthermore, respondents pray for the dismissal of the petition for violating the "hierarchy of courts" doctrine enunciated
in People v. Cuaresma7 and Enrile v. Salazar.8

Petitioners allege grave abuse of discretion under Rule 65 of the 1997 Rules of Civil Procedure. The essential requisites for a
petition for certiorari under Rule 65 are: (1) the writ is directed against a tribunal, a board, or an officer exercising judicial or
quasi-judicial functions; (2) such tribunal, board, or officer has acted without or in excess of jurisdiction, or with grave abuse of

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discretion amounting to lack or excess of jurisdiction; and (3) there is no appeal or any plain, speedy, and adequate remedy in
the ordinary course of law.9 For writs of prohibition, the requisites are: (1) the impugned act must be that of a "tribunal,
corporation, board, officer, or person, whether exercising judicial, quasi-judicial or ministerial functions;" and (2) there is no plain,
speedy, and adequate remedy in the ordinary course of law." 10

The assailed agreement is clearly not the act of a tribunal, board, officer, or person exercising judicial, quasi-judicial, or
ministerial functions. It is not the act of public respondents Finance Secretary Edgardo Espiritu and Labor Secretary Bienvenido
Laguesma as functionaries of the Task Force. Neither is there a judgment, order, or resolution of either public respondents
involved. Instead, what exists is a contract between a private firm and one of its labor unions, albeit entered into with the
assistance of the Task Force. The first and second requisites for certiorari and prohibition are therefore not present in this case.

Furthermore, there is available to petitioners a plain, speedy, and adequate remedy in the ordinary course of law. While the
petition is denominated as one for certiorari and prohibition, its object is actually the nullification of the PAL-PALEA agreement.
As such, petitioners’ proper remedy is an ordinary civil action for annulment of contract, an action which properly falls under the
jurisdiction of the regional trial courts.11 Neither certiorari nor prohibition is the remedy in the present case.

Petitioners further assert that public respondents were partial towards PAL management. They allegedly pressured the PALEA
leaders into accepting the agreement. Petitioners ask this Court to examine the circumstances that led to the signing of said
agreement. This would involve review of the facts and factual issues raised in a special civil action for certiorari which is not the
function of this Court.12

Nevertheless, considering the prayer of the parties principally we shall look into the substance of the petition, in the higher
interest of justice13 and in view of the public interest involved, inasmuch as what is at stake here is industrial peace in the
nation’s premier airline and flag carrier, a national concern.

On the second issue, petitioners contend that the controverted PAL-PALEA agreement is void because it abrogated the right of
workers to self-organization14 and their right to collective bargaining.15 Petitioners claim that the agreement was not meant
merely to suspend the existing PAL-PALEA CBA, which expires on September 30, 2000, but also to foreclose any renegotiation
or any possibility to forge a new CBA for a decade or up to 2008. It violates the "protection to labor" policy16 laid down by the
Constitution.

Article 253-A of the Labor Code reads:

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

Under this provision, insofar as representation is concerned, a CBA has a term of five years, while the other provisions, except
for representation, may be negotiated not later than three years after the execution. 17 Petitioners submit that a 10-year CBA
suspension is inordinately long, way beyond the maximum statutory life of a CBA, provided for in Article 253-A. By agreeing to a
10-year suspension, PALEA, in effect, abdicated the workers’ constitutional right to bargain for another CBA at the mandated
time.

We find the argument devoid of merit.

A CBA is "a contract executed upon request of either the employer or the exclusive bargaining representative incorporating the
agreement reached after negotiations with respect to wages, hours of work and all other terms and conditions of employment,
including proposals for adjusting any grievances or questions arising under such agreement." 18 The primary purpose of a CBA is
the stabilization of labor-management relations in order to create a climate of a sound and stable industrial peace. 19 In
construing a CBA, the courts must be practical and realistic and give due consideration to the context in which it is negotiated
and the purpose which it is intended to serve.20

The assailed PAL-PALEA agreement was the result of voluntary collective bargaining negotiations undertaken in the light of the
severe financial situation faced by the employer, with the peculiar and unique intention of not merely promoting industrial peace
at PAL, but preventing the latter’s closure. We find no conflict between said agreement and Article 253-A of the Labor Code.
Article 253-A has a two-fold purpose. One is to promote industrial stability and predictability. Inasmuch as the agreement sought
to promote industrial peace at PAL during its rehabilitation, said agreement satisfies the first purpose of Article 253-A. The other
is to assign specific timetables wherein negotiations become a matter of right and requirement. Nothing in Article 253-A,
prohibits the parties from waiving or suspending the mandatory timetables and agreeing on the remedies to enforce the same.

In the instant case, it was PALEA, as the exclusive bargaining agent of PAL’s ground employees, that voluntarily entered into the
CBA with PAL. It was also PALEA that voluntarily opted for the 10-year suspension of the CBA. Either case was the union’s
exercise of its right to collective bargaining. The right to free collective bargaining, after all, includes the right to suspend it.

The acts of public respondents in sanctioning the 10-year suspension of the PAL-PALEA CBA did not contravene the "protection
to labor" policy of the Constitution. The agreement afforded full protection to labor; promoted the shared responsibility between
workers and employers; and the exercised voluntary modes in settling disputes, including conciliation to foster industrial
peace."21
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Petitioners further allege that the 10-year suspension of the CBA under the PAL-PALEA agreement virtually installed PALEA as
a company union for said period, amounting to unfair labor practice, in violation of Article 253-A of the Labor Code mandating
that an exclusive bargaining agent serves for five years only.

The questioned proviso of the agreement reads:

a. PAL shall continue recognizing PALEA as the duly certified-bargaining agent of the regular rank-and-file ground employees of
the Company;

Said proviso cannot be construed alone. In construing an instrument with several provisions, a construction must be adopted as
will give effect to all. Under Article 1374 of the Civil Code, 22 contracts cannot be construed by parts, but clauses must be
interpreted in relation to one another to give effect to the whole. The legal effect of a contract is not determined alone by any
particular provision disconnected from all others, but from the whole read together. 23 The aforesaid provision must be read within
the context of the next clause, which provides:

b. The ‘union shop/maintenance of membership’ provision under the PAL-PALEA CBA shall be respected.

The aforesaid provisions, taken together, clearly show the intent of the parties to maintain "union security" during the period of
the suspension of the CBA. Its objective is to assure the continued existence of PALEA during the said period. We are unable to
declare the objective of union security an unfair labor practice. It is State policy to promote unionism to enable workers to
negotiate with management on an even playing field and with more persuasiveness than if they were to individually and
separately bargain with the employer. For this reason, the law has allowed stipulations for "union shop" and "closed shop" as
means of encouraging workers to join and support the union of their choice in the protection of their rights and interests vis-à-
vis the employer.24

Petitioners’ contention that the agreement installs PALEA as a virtual company union is also untenable.1âwphi1 Under Article
248 (d) of the Labor Code, a company union exists when the employer acts "[t]o initiate, dominate, assist or otherwise interfere
with the formation or administration of any labor organization, including the giving of financial or other support to it or its
organizers or supporters." The case records are bare of any showing of such acts by PAL.

We also do not agree that the agreement violates the five-year representation limit mandated by Article 253-A. Under said
article, the representation limit for the exclusive bargaining agent applies only when there is an extant CBA in full force and
effect. In the instant case, the parties agreed to suspend the CBA and put in abeyance the limit on the representation period.

In sum, we are of the view that the PAL-PALEA agreement dated September 27, 1998, is a valid exercise of the freedom to
contract. Under the principle of inviolability of contracts guaranteed by the Constitution, 25 the contract must be upheld.

WHEREFORE, there being no grave abuse of discretion shown, the instant petition is DISMISSED. No pronouncement as to
costs.

SO ORDERED

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G.R. No. 183335 December 23, 2009

JUANITO TABIGUE, ALEX BIBAT, JECHRIS DASALLA, ANTONIO TANGON, ROLANDO PEDRIGAL, DANTE MAUL,
ALFREDO IDUL, EDGAR RAMOS, RODERICK JAVIER, NOEL PONAYO, ROMEL ORAPA, REY JONE, ALMA PATAY,
JERIC BANDIGAN, DANILO JAYME, ELENITA S. BELLEZA, JOSEPHINE COTANDA, RENE DEL MUNDO, PONCIANO
ROBUCA, and MARLON MADICLUM, Petitioners,
vs.
INTERNATIONAL COPRA EXPORT CORPORATION (INTERCO), Respondent.

DECISION

CARPIO MORALES, J.:

Petitioner Juanito Tabigue and his 19 co-petitioners, all employees of respondent International Copra Export Corp-oration
(INTERCO), filed a Notice of Preventive Mediation with the Department of Labor and Employment – National Conciliation and
Mediation Board (NCMB), Regional Branch No. XI, Davao City against respondent, for violation of Collective Bargaining
Agreement (CBA) and failure to sit on the grievance conference/meeting. 1

As the parties failed to reach a settlement before the NCMB, petitioners requested to elevate the case to voluntary arbitration.
The NCMB thus set a date for the parties to agree on a Voluntary Arbitrator.

Before the parties could finally meet, respondent presented before the NCMB a letter 2 of Genaro Tan (Tan), president of the
INTERCO Employees/Laborers’ Union (the union) of which petitioners are members, addressed to respondent’s plant manager
Engr. Paterno C. Tangente (Tangente), stating that petitioners "are not duly authorized by [the] board or the officers to represent
the union, [hence] . . . all actions, representations or agreements made by these people with the management will not be
honored or recognized by the union." Respondent thus moved to dismiss petitioners’ complaint for lack of jurisdiction.3

Petitioners soon sent union president Tan and respondent’s plant manager Tangente a Notice to Arbitrate, citing the "Revised
Guidelines" in the Conduct of Voluntary Arbitration Procedure vis a vis Section 3, Article XII of the CBA, furnishing the NCMB
with a copy4 thereof, which notice respondent opposed.5

The parties having failed to arrive at a settlement, 6 NCMB Director Teodorico O. Yosores wrote petitioner Alex Bibat and
respondent’s plant manager Tangente of the lack of willingness of both parties to submit to voluntary arbitration, which
willingness is a pre-requisite to submit the case thereto; and that under the CBA forged by the parties, the union is an
indispensable party to a voluntary arbitration but that since Tan informed respondent that the union had not authorized
petitioners to represent it, it would be absurd to bring the case to voluntary arbitration.

The NCMB Director thus concluded that "the demand of [petitioners] to submit the issues . . . to voluntary arbitration CAN NOT
BE GRANTED." He thus advised petitioners to avail of the compulsory arbitration process to enforce their rights.7

On petitioners’ Motion for Reconsideration,8 the NCMB Director, by letter of April 11, 2007 to petitioners’ counsel, stated that the
NCMB "has no rule-making power to decide on issues [as it] only facilitates settlement among the parties to . . . labor disputes."

Petitioners thus assailed the NCMB Director’s decision via Petition for Review before the Court of Appeals 9 which dismissed it
by Resolution10 of October 24, 2007 in this wise:

xxxx

Considering that NCMB is not a quasi-judicial agency exercising quasi-judicial functions but merely a conciliatory body for the
purpose of facilitating settlement of disputes between parties, its decisions or that of its authorized officer cannot be
appealed either through a petition for review under Rule 43 or under Rule 65 of the Revised Rules of Court.

Further perusal of the petition reveals the following infirmities:

1. Payment of the docket fees and other legal fees is short by One Thousand Pesos (Php 1,000.00);

2. Copy of the assailed "Decision" of the Regional Director of the National Conciliation and Mediation Board has not
been properly certified as the name and designation of the certifying officer thereto are not indicated; and

3. Not all of the petitioners named in the petition signed the verification and non-forum shopping.11 (emphasis and
underscoring supplied)

Their Motion for Reconsideration12 having been denied,13 petitioners filed the present Petition for Review on Certiorari, 14 raising
the following arguments:

THIS PARTICULAR CASE XXX FALLS SQUARELY WITHIN THE PURVIEW OF SECTION 6, RULE IV, IN RELATION TO
PARAGRAPH 3, SUB-PARAGRAPH 3.2, SECTION 4, RULE IV, ALL OF THE REVISED PROCEDURAL GUIDELINES IN THE
CONDUCT OF VOLUNTARY ARBITRATION PROCEEDINGS.15

THE NCMB, WHEN EXERCISING ADJUDICATIVE POWERS, ACTS AS A QUASI-JUDICIAL AGENCY.16

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FINAL JUDGMENTS, DECISIONS, RESOLUTIONS, ORDERS, OR AWARDS OF REGIONAL TRIAL COURTS AND QUASI-
JUDICIAL BOARDS, LIKE THE NCMB, COMMISSIONS, AGENCIES, INSTRUMENTALITIES, ARE APPEALABLE BY
PETITION FOR REVIEW TO THE COURT OF APPEALS.17 (emphasis in the original)

LABOR CASES, AS A GENERAL RULE, ARE NEVER RESOLVED ON THE BASIS OF TECHNICALITY ESPECIALLY SO
WHEN SUBSTANTIAL RIGHTS OF EMPLOYEES ARE AFFECTED.18 (emphasis and underscoring supplied)

The petition fails.

Section 7 of Rule 43 of the Rules of Court provides that

[t]he failure of the petitioner to comply with any of the foregoing requirements regarding the payment of the docket and other
lawful fees, the deposit for costs, proof of service of the petition, and the contents of and the documents which should
accompany the petition shall be sufficient ground for the dismissal thereof. (underscoring and emphasis supplied)

Petitioners claim that they had completed the payment of the appellate docket fee and other legal fees when they filed their
motion for reconsideration before the Court of Appeals.19 While the Court has, in the interest of justice, given due course to
appeals despite the belated payment of those fees,20 petitioners have not proffered any reason to call for a relaxation of the
above-quoted rule. On this score alone, the dismissal by the appellate court of petitioners’ petition is in order.

But even if the above-quoted rule were relaxed, the appellate court’s dismissal would just the same be sustained. Under Section
9 (3) of the Judiciary Reorganization Act of 1980,21 the Court of Appeals exercises exclusive appellate jurisdiction over all final
judgments, decisions, resolutions, orders or awards of Regional Trial Courts and quasi-judicial agencies, instrumentalities,
boards or commissions.

Rule 43 of the Rules of Court under which petitioners filed their petition before the Court of Appeals 22 applies to awards,
judgments, final orders or resolutions of or authorized by any quasi-judicial agency in the exercise of its quasi-judicial functions.23

A[n agency] is said to be exercising judicial function where [it] has the power to determine what the law is and what the legal
rights of the parties are, and then undertakes to determine these questions and adjudicate upon the rights of the parties. Quasi-
judicial function is a term which applies to the action, discretion, etc. of public administrative officers or bodies, who are required
to investigate facts or ascertain the existence of facts, hold hearings, and draw conclusions from them as a basis for their official
action and to exercise discretion of a judicial nature. 24(underscoring supplied)

Given NCMB’s following functions, as enumerated in Section 22 of Executive Order No. 126 (the Reorganization Act of the
Ministry of Labor and Employment), viz:

(a) Formulate policies, programs, standards, procedures, manuals of operation and guidelines pertaining to effective
mediation and conciliation of labor disputes;

(b) Perform preventive mediation and conciliation functions;

(c) Coordinate and maintain linkages with other sectors or institutions, and other government authorities concerned with
matters relative to the prevention and settlement of labor disputes;

(d) Formulate policies, plans, programs, standards, procedures, manuals of operation and guidelines pertaining to the
promotion of cooperative and non-adversarial schemes, grievance handling, voluntary arbitration and other voluntary
modes of dispute settlement;

(e) Administer the voluntary arbitration program; maintain/update a list of voluntary arbitrations; compile arbitration
awards and decisions;

(f) Provide counseling and preventive mediation assistance particularly in the administration of collective agreements;

(g) Monitor and exercise technical supervision over the Board programs being implemented in the regional offices; and

(h) Perform such other functions as may be provided by law or assigned by the Minister,

it can not be considered a quasi-judicial agency.

Respecting petitioners’ thesis that unsettled grievances should be referred to voluntary arbitration as called for in the CBA, the
same does not lie. The pertinent portion of the CBA reads:

In case of any dispute arising from the interpretation or implementation of this Agreement or any matter affecting the relations of
Labor and Management, the UNION and the COMPANY agree to exhaust all possibilities of conciliation through the grievance
machinery. The committee shall resolve all problems submitted to it within fifteen (15) days after the problems ha[ve] been
discussed by the members. If the dispute or grievance cannot be settled by the Committee, or if the committee failed to act on
the matter within the period of fifteen (15) days herein stipulated, the UNION and the COMPANY agree to submit the issue to
Voluntary Arbitration. Selection of the arbitrator shall be made within seven (7) days from the date of notification by the
aggrieved party. The Arbitrator shall be selected by lottery from four (4) qualified individuals nominated by in equal numbers by
both parties taken from the list of Arbitrators prepared by the National Conciliation and Mediation Board (NCMB). If the Company
and the Union representatives within ten (10) days fail to agree on the Arbitrator, the NCMB shall name the Arbitrator. The
decision of the Arbitrator shall be final and binding upon the parties. However, the Arbitrator shall not have the authority to

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change any provisions of the Agreement. The cost of arbitration shall be borne equally by the parties. 25(capitalization in the
original, underscoring supplied)1avvphi1

Petitioners have not, however, been duly authorized to represent the union. Apropos is this Court’s pronouncement in Atlas
Farms, Inc. v. National Labor Relations Commission,26 viz:

x x x Pursuant to Article 260 of the Labor Code, the parties to a CBA shall name or designate their respective representatives to
the grievance machinery and if the grievance is unsettled in that level, it shall automatically be referred to the voluntary
arbitrators designated in advance by parties to a CBA. Consequently only disputes involving the union and the company shall be
referred to the grievance machinery or voluntary arbitrators.27(emphasis and underscoring supplied)

Clutching at straws, petitioners invoke the first paragraph of Article 255 of the Labor Code which states:

Art. 255. 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.

x x x x (emphasis and underscoring supplied)

To petitioners, the immediately quoted provision "is meant to be an exception to the exclusiveness of the representative role of
the labor organization/union."28

This Court is not persuaded. The right of any employee or group of employees to, at any time, present grievances to the
employer does not imply the right to submit the same to voluntary arbitration.

WHEREFORE, the petition is DENIED.

SO ORDERED.

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